Panama and its special relationship with Israel.

Panama has a strategic geopolitical situation. Located between Costa Rica and Colombia, it is known by its Canal that connects the Atlantic and the Pacific oceans. The Canal became an essential part of the country’s history since its construction in 1903 (and even before).

Map of Panama
Credit: en:User:Silverhelm [CC BY-SA (https://creativecommons.org/licenses/by-sa/2.5)%5D

Regarding the construction of the Canal, there were multiple attempts to build it by Compagnie Universelle du Canal Interocéanique, a French company, after winning a concession from the Colombian Government. Between 1881 and 1898, the company started with the construction, but they failed due to financial, technological difficulties as well as diseases. In 1902, the US Congress approved the Spinner Act, purchasing the assets of the company, and the new planning started. Finally, the Canal was inaugurated in 1914 and remained under US control, as per accorded with the independent Panamanian Government [2].

The Canal was under the United States part of the Canal administration until 1999, as agreed on the Torrijos-Carter agreement in 1977 [3]. Since then, the Canal is under full and sole Panamanian control and is a significant source of income to the Government. In 2016, the Canal was expanded, allowing more and bigger ships to enter and generate more profits to the country. In 2019, the country gained 1.7 billion USD from it [4].

Israel-Panama Relationship

Israel and Panama have an extraordinary relationship since the establishment of Israel in 1948. The Central American country became one of the first ones to recognize the State of Israel, and even established its Embassy in Jerusalem until 1980[5].

The relation prospered until 1974 when Panama started an international campaign to gain control of the Canal from the US. During that period, until 1977, the country supported anti-Israeli resolutions at international forums to gain the support of third world countries. Since then, bilateral relations flourished.

From 1968 until 1989, Panama was under the Government of military dictatorships. The first ruler was Torrijos, who, in 1977, came to Israel to achieve the support of the American Jews to the Torrijos-Carter agreement [6]. Afterward, General Noriega took control until 1989, when US forces expelled him after refusing to recognize an election result [7]. During his period, a former Israeli military man, Mike Harari, was considered as his security advisor and one of the most influential persons in the country [8]. Since 1989, Panama has a democracy with a one five years periods with no option to reelect.

In the last decades, Panama had a record of voting for and with Israel in many UN resolutions. In 2010, the country was one of the six countries that voted against a resolution to keep the Goldstone Commission report [9]. Two years later, the country voted again with Israel, this time against the recognition of Palestine as an observer member [10].

In the last years, multiple high-level delegations from Panama have visited Israel. In 2010 and 2014, President Martinelli visited the country and expressed his support for it as “the guardian of the world’s capital, Jerusalem.” The mandatary also recognized the role of the Jewish Community in the country and highlighted the fact that three of his ministers were Jewish [11].

In 2015, the Vice President and Foreign Ministry, Isabel de Saint Malo de Alvarado, realized a five days visit to the country to start to cooperate in multiples areas including, security, innovation, and agriculture. One year later, a delegation of four ministries arrived to develop cooperation projects on water [12].

In 2018, Juan Carlos Varela, President of Panama, visited the country and met with President Rivlin and PM Netanyahu. The first highlighted the close relationship between the countries. PM Netanyahu noted that Panama has “tremendous advantages, which involve world trade.” [13]

President Rivlin hosting former President of Panama Juan Carlos Varela at the Presidential Residence in Jerusalem, May 2018
Credit:Mark Neyman / Government Press Office (Israel) [CC BY-SA (https://creativecommons.org/licenses/by-sa/3.0)%5D

During Varela’s visit, a Free Trade Agreement was signed between Israel and Panama, and it entered in force on January 1, 2020. This agreement will improve the trade and investment environment. According to the Israeli Central Bureau of Statistics, the bilateral trade between both countries was around 19 Million USD in 2018, with 17 Million Israel exports to Panama and just 2 Million of Panamanians export to Israel[14].

To conclude, it is necessary to highlight that Panama is the only country in the region that did not recognize the existence of the State of Palestine and doesn’t have a representation in its territory [15]. Mexico, for example, does not officially recognize Palestine, but it has a diplomatic office in Ramallah [16].

The Jewish Community in Panama

Panama’s Jewish Community has about twelve to fourteen thousand members, making it the biggest one in Central America [17]. Despite their reduced number, they are an important part of the countries life. They have achieved multiples highlight positions both in the business world and in politics. In this regard, Panama is the only country besides Israel that had two Jewish presidents in the 20th Century (Max Delvalle Maduro in 1967, and Eric Arturo Cohen-Hernandez from 1985-1988)[18]. The actual President of Panama, Laurencio Cortizo Cohen, has a Jewish origin and he is very close to the Jewish community of the country.

The Jewish Community is mostly traditional. About 85% of the Community keeps kosher, and there are about 35 kosher restaurants, two full-service kosher supermarkets. There are also three synagogues and Jewish institutions as Maccabi, B’nai Brith, and Wizo that are active in the country [19]. Lastly, the Community had been receiving new members that have left Venezuela due to the crisis in this Latin American country.

Doing Business in Panama

According to the Doing Business Report for 2020, Panama is the best Latin American country to start a business ranking 51 globally, followed by Colombia (place 95). The number of procedures and times needed to open a business are similar or best that most OECD countries [20].

Also, the country is ranked among the best competitive countries in Latin America, reaching the 66th position at the Competitiveness ranking of the World Economic Forum. The report highlights the macroeconomic stability, the country has low unemployment (about 9%) and its moderate inflation [21] as great advantages. Also, the Panamanian GDP grew 4.3 % in 2019, and it is expected to continue to expand at a rate of 5.5% in 2020[22].

Panama City skyline at night
Credit: Photo by Yosi Bitran

The country also counts with six different investment regimes. Colon’s FTZ, which is located next to the Canal, has access to multiple maritime ports and offers various tax incentives. It focuses on logistic services, imports and exports, and the fabrication of goods, among others. Another regime is the Panama Pacifico, which became a world-class business, and a logistics center is home to numerous international companies [23]. Other investment regimes include the City of Knowledge (based on Biological Science, Human Development, ICT and R&D of Products), Panama Free Zone (for Hi-tech Manufacturing, Pharmaceutical, Assembly among others), and a particular plan for the movie industry.

The country also became a logistic hub, with 441 million tons of cargo passing through the Canal and with two of the most actives ports in Latin America [24], Colon ( over 4.3 million TEU), and Panamá Pacífico (over 2.5 million TEU).

Two of the most important sectors in the Panamanian economy are aviation and tourism. Both areas contribute about 14% of Panama’s GDP and employ more than 200 thousand people. The country has one of the most efficient airport systems (9th worldwide), being led by Tocumen airport who received more than 15 million people and about 174 thousand tons of cargo in 2017[25]. The country has excellent connectivity with the region traveling to 89 destinations in 38 countries. Copa, the national airline, is considered the most punctual in Latin America, and it’s among the top 5 worldwide during the last five years [26].

Opportunities for Business and Cooperation

The most significant agreement between Panama and Israel is, without any doubt, the Free Trade Agreement, which became active on January 1, 2020. The deal has a chapter regarding the services sector, and now it will become more accessible to Israeli companies in areas as software, communications, and R&D to enter the Panamanian Market[27].

Panama is also an excellent country for Agritech companies for many reasons. First of all, the country has a high amount of daylight hours and, with no extreme summers, ideal for tropical fruits, as well as coffee and meat [28]. The country size (with only 74 thousand km2) makes efficiency in the fields is crucial. Israel can provide the Panamanian companies with their expertise in the sector, especially in areas as drip irrigation, water management, field analysis, and more.

The Panamanian Minister of Industry , the Minister of Agriculture and the Executive Director of ProPanama, together with the Presidents of the Chamber of Commerce Israel- Latin America during a business seminar in Tel Aviv, Israel in January 2020.

To maintain its relevance as an international logistics hub, Panama needs to invest and implement new technologies to improve its efficiency. Israeli companies in the logistics and maritime sectors can bring solutions to Panama while taking part in the operations of one of the most critical naval routes worldwide (around 5% of all trade pass through the Canal).

There are many more areas to cooperate, such as finance, education, tourism, e-government, etc. Let’s hope that the FTA will enhance the relationship and the business opportunities for Israel and to Panama.

References

Uriel Hiskin Yuffe

On a Latin American experience

Panama and its special relationship with Israel.

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