Viewing cable 07PANAMA1166
Title: CBERA/CBTPA HAS NEGLIGIBLE EFFECT ON PANAMA'S

IdentifierCreatedReleasedClassificationOrigin
07PANAMA11662007-07-09 20:41:00 2011-08-30 01:44:00 UNCLASSIFIED Embassy Panama
VZCZCXYZ0015
RR RUEHWEB

DE RUEHZP #1166/01 1902041
ZNR UUUUU ZZH
R 092041Z JUL 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 0785
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS PANAMA 001166 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR 
STATE FOR WHA/CEN-TELLO 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EAGR PM
SUBJECT: CBERA/CBTPA HAS NEGLIGIBLE EFFECT ON PANAMA'S 
EXPORTS TO THE U.S. 
 
REF: STATE 65843 
 
SUMMARY: 
 
¶1.  (U)  This is a brief overview of the effect of Caribbean 
Basin Economic Recovery Act (CBERA)/ Caribbean Basin Trade 
Promotion Act (CBTPA) on foreign direct investment (FDI) and 
on Panama's exports to the U.S.  While there is limited FDI 
data, export data show that the majority of products from 
Panama enter the U.S. duty free under most favored nation 
(MFN) status.  However, the CBERA/CBTPA significantly 
benefits sugar and non-traditional fruit exports from Panama. 
The benefits Panama receives under the program would be made 
permanent and expanded upon ratification of the U.S.- Panama 
Trade Promotion Agreement (TPA) signed on June 28, 2007. 
 
¶2. (U)  While CBERA/CBTPA has a positive impact on certain 
Panamanian exports to the U.S. particularly for 
non-traditional fruits, Post, GOP agencies, and industry 
contacts are unable to identify new investment specifically 
tied to CBERA/CBTPA benefits.  The GOP neither maintains data 
on CBERA/CBTPA related investment activity, nor tracks FDI by 
company. GOP and industry contacts were unable to identify 
any CBERA/CBTPA specific investments during 2006. END SUMMARY 
 
 
---------------------------------- 
FOREIGN DIRECT INVESTMENT OVERVIEW 
---------------------------------- 
 
¶3.  (U) In 2006, Panama received $2.56 billion in FDI.  This 
represented a 149% increase from the 2005 amount of $1.02 
billion (source: Contraloria General of the Republic of 
Panama (www.contraloria.gob.pa/dec/))).  FDI is generally 
targeted to the banking sector and the Colon Free Zone.  The 
most recent country specific FDI data (2004) shows that U.S. 
FDI declined from $142 million in 2002 to $70 million in 
¶2004.  Despite this decline U.S. FDI to Panama was the third 
highest in 2004, and second highest during the three year 
period from 2002-2004 (Annex 1). 
 
--------------- 
COLON FREE ZONE 
--------------- 
 
¶4. (U)  Most products exported from the Colon Free Zone are 
textiles and electronics.  As U.S. is not a prime export 
market for these exports, the CBERA/CBTPA does not 
significantly affect these products. 
 
----------------- 
EXPORTS OVERVIEW 
----------------- 
 
¶5.  (U)  Panama's economy is about 75% services based. 
According to the Controller General of GOP, Panama's total 
exports for 2006 was $1.02 billion, of which $393 million 
(38%) were to the U.S. (Contraloria General of the Republic 
of Panama www.contraloria.gob.pa/dec/Comercio Exterior/ ). 
The U.S. and Panama figures differ due to differences in how 
each country calculates the value of and categorizes each 
product.  The trends, however, tend to move in the same 
direction (Annex 2).  This analysis uses the U.S. export 
figures because the tariffs goods face are based on U.S. 
classifications. 
 
¶6.  (U)  In 2006, Panama's exports to the U.S. totaled $337.6 
million according to U.S. trade statistics (United States 
International Trade Commission: US Imports for Consumption at 
Customs Value from Panama.)  Of the top three exports, valued 
at $212.7 million, $7.4 million would be subject to tariffs 
in the absence of the CBERA/CBTPA.  The top ten exports, 
valued at $289.40 million, comprised 85% of total Panamanian 
exports to the U.S.  Among the top ten exports, some $51.5 
million worth received duty free tariff privileges pursuant 
to the CBERA/CBTPA.  In the absence of the CBERA/CBTPA these 
products would have faced varying ad valorem or unit tariffs. 
 
------------------ 
TOP THREE EXPORTS 
------------------ 
 
¶7.  (U)  In order of rank, Panama's top three exports to the 
U.S. consisted of fish, exports of goods imported for 
repairs, and precious/semi-precious metals.  These categories 
combined represented 63% of the total value of exports from 
 
Panama to the U.S.  In rank order, the remaining seven 
exports were sugar, fruits/melons (non-traditional fruits), 
coffee/tea, aluminum, glassware, electrical 
machinery/equipment, and wood products. 
 
---- 
Fish 
---- 
 
¶8.  (U)  The top export, fish, was valued at $101.9 million 
and made up 30.1% of total exports.  Shrimp made up a 
significant portion of these fish exports (40%).  Most fish 
exports were duty free under Most Favored Nation (MFN) 
status.  However, one type of flat fish, with a value of 
$197,600 and representing 0.2% of fish exports, would have 
faced a unit tariff of 1.1cents/kg in the absence of the 
CBERA/CBTPA. 
 
--------------- 
Repaired Goods 
--------------- 
 
¶9.  (U)  This category largely represented exports of 
articles imported for repairs.  These goods totaled $75.7 
million (approximately 22.4% of exports).  Most items in this 
category  were exported duty free under MFN tariffs. 
However, $6.5 million (8.5%) of these goods were imported 
duty free pursuant to the CBERA/CBTPA and were exempt from 
tariffs equivalent to 50% of the cost of repairs. 
 
----------------------------- 
Precious/ Semi-precious Metal 
----------------------------- 
 
¶10.  (U)  Precious/semi-precious metals were not only the 
third largest exports to the U.S. but also the fastest 
growing category in 2006.  From 2005 to 2006, it had grown by 
 82% to a value of $35.1 million or 10.4% of exports.  The 
CBERA/CBTPA benefited $725,200 (2.07%) of this category that 
would have otherwise been subject to tariffs between 3% and 
13.5%. 
 
--------------------------------------- 
EXPORTS MOST AFFECTED BY CBERA/CBTPA: 
Sugar and Non-traditional Fruit Exports 
--------------------------------------- 
 
----- 
Sugar 
----- 
 
¶11.  (U)  All sugar products would face tariffs in the 
absence of CBERA/CBTPA.  It is the fourth highest export, and 
accounted for $23.5 million of total exports in 2006. Without 
the CBERA/CBTPA sugar would be subject to tariffs between 
0.94 cents/kg and 1.46 cents/kg. 
 
----------------------------- 
Non-traditional Fruit Exports 
----------------------------- 
 
¶12.  (U)  Non-traditional fruit exports are comprised of 
melons, papaya, pineapples, mangoes, and other fruit.  This 
category comprised $9.7 million of total exports, and 78% of 
which was affected by the CBERA/CBTPA.  These items would 
have faced ad valorem tariffs between 1.6% to 29%, or unit 
weight tariffs of 1.1 cents/kg.  Although these exports grew 
by 34% in 2006, they declined by 27% in the first quarter of 
2007 (compared to the first quarter of 2006). 
 
 
COMMENT: 
 
¶13.  (U)  While only 18% of Panama's top ten exports benefit 
from the CBERA/CBTPA, the benefits are not significant in 
dollar terms.  Also, while the CBERA/CBTPA is considered 
important in boosting the growth of non-traditional fruit 
exports, such exports to the U.S. are currently less than $13 
million per year (U.S. figures).  The recent June 28, 2007 
signing of the TPA will encompass and expand the benefits 
currently granted to Panama under the CBERA/CBTPA. 
 
END COMMENT 
 
 
--------------------------------------------- -- 
 
Annex 1: FDI by country (2002 -2004) 
(In millions of $USD) 
--------------------------------------------- -- 
                Year                      Rank 
Country         2002     2003     2004   2002-2004 
 
Spain            22.0    46.0    253.1      1st 
United States   142.1    85.0     70.8      2nd 
Japan           -23.4   108.0     61.2      3rd 
Switzerland       5.6    60.8     52.8      4th 
Hong Kong        -0.2    46.2     72.1      5th 
 
Global FDI       98.4   817.6    1,003.8 
 
(Source: Contraloria General of the Republic of Panama) 
 
 
---------------------------------------- 
Annex 2: Exports from Panama to the U.S. 
(in millions of $USD) 
---------------------------------------- 
 
 
              U.S. Source                 Panama Source 
 
              2005      2006   % Chg      2005   2006    % Chg 
Total         319.9     337.6  5.53%      419    392 
-6.44% 
Value 
of 
Exports 
 
Selected Products 
 
Fish          104.5     101.9   -2.49%    323     275 
-14.86% 
 
Repaired       68.1      75.7   11.16%    N/A     N/A     N/A 
Goods 
 
Precious       19.3      35.1   81.87%    3.54    11.01 
211.02% 
Metals 
 
Sugar          29.1      23.5   -19.24%   23.92   21.5 
-10.12% 
 
Non-traditional 9.3      12.5    34.41%   16.29   33 
102.58% 
(melons 
& other fruit) 
 
U.S. Source: 
United States International Trade Commission: 
U.S. Imports for Consumption at Customs Value from Panama 
( dataweb.ustic.gov) 
 
Panama Source: 
Contraloria of the Government of Panama: 
Panama's Exports 
(www.contraloria.gob.pa/dec/Comercio Exterior/) 
Eaton