U.S. Business Sector Still Unable To Take Advantage of Colon Free Trade Zone

Despite the fact that the Colon Free Trade Zone, situated near Panama, has been in existence for the past sixty years, companies of the United States are yet to reap full advantage from operating in the area. The free trade zone is an area with three container ports, active railroad lines and an intersected and storied canal. The wholesale center is situated on a piece of real estate in this area, hence, taking advantage of the several means of trade. And the fact that the free trade zone is the second grandest in the world, after Hong Kong, is due to its location.

The amount of commercial activity taking place in the Colon Free Trade Zone is increasing day by day. Last year the amount of money dealt with by doing business in the area was sixteen million dollars compared to fourteen million dollars in the year 2006 and twelve million dollars back in 2005. The free trade zone provides employment to a population of about twenty thousand people. Credit also goes to the free trade zone for 12.6 percent of the nineteen billion dollar GDP (Gross Domestic Product) of the country that was calculated in 2007.

An expansion worth of 5.25 billion dollar is still to make its way for the Panama Canal. The flow of trade was already increasing steadily with time and with the new expansion to make way, a pressure is likely to be caused on the infrastructure of the city. Due to the expansion plan, more and more companies from around the world are joining the already existent companies in the area, to take advantage of the Colon Free Trade Zone.

Since a pressure being caused on the infrastructure of the city, in the future, is evident, a highway is to be built that will serve to clear up the traffic jam between Colon and Panama City. Also, plans have been made to increase the storage capacity in the free trade zone, within the coming years.

U.S. companies have been lagging behind in taking advantage of the free trade zone is due to the fact that their view point of their opportunity in the area is not similar to that of their view point of their opportunity in countries such as Singapore. The Colon Free Trade Zone particularly suffers from having a low profile among the people of the world, even though that it has been in existence for six decades. This could be a result of the fact that the area deals with a very unique line of goods. The products that are imported mostly come from China and Hong Kong and most are sent to the Caribbean and Latin American countries such as Colombia, Ecuador and Venezuela. Only 3.6 percent of the goods imported are left for the U.S.

The Colon Free Trade Zone is an advantage for only certain types of companies, as the tax-free environment only helps protect companies that manufacture certain products. This need for protection is usually caused if the company feels unsure of the market condition of the surrounding countries.

Greg Andrews, of the Georgia Institute of Technology, had said that it is unnecessary for a U.S. company to situate itself in Panama unless it is manufacturing or distributing its goods in the area. He also said that the U.S. free trade system is convenient enough for the companies operating in the U.S.

However, it is very much sensible, for companies such as Wal-Mart Stores Inc. and Home Depot Inc. to locate themselves near Panama as their main source of import is China. Hence, they would be benefited by the Colon Free Trade Zone, which specially imports from China. They would also be benefited for the purpose of reaching an international distribution market by locating themselves in the area.

Goods that are imported into the Colon Free Trade Zone are free of all taxes because, technically, the goods never even have to enter the borders of Panama. And, operating in the area is particularly very convenient because the company does not even need to be in the country to begin functioning and land and warehouse costs in the area are comparatively, rather low.

J. Cain And Co. has been taking advantage of the free trade zone since the year it first became operational, and the company is growing even to this day. J. Cain And Co. was also among the first to receive a fifty-year land lease from the Panama government in an area that was marked for redevelopment.

Quite recently, J. Cain And Co. has cleared some of their land for building more similar warehouses with slanting rooftops. Even though the new building shape decreases the warehouse capacity, it is very much necessary to adjust to the tropical climate of Panama, as stated by Luis Carlos Motta who is the general manager of the company.

U.S. brands are very much popular in Latin America, however, American companies do not take advantage of it because they consider the market to be weak and “not worth it”, whereas, their opinion is completely wrong. David Cohen Solis, president of the Colon Free Zone User’s Association, agrees with the statement that U.S. companies are not utilizing their opportunity in Latin America to the fullest. However, he also agrees with the statement that the area is prone to corruption and trading of fake and illegal goods, but then again, he has also been kwon to have said that bad people form a minority in the area.

Surse Pierpoint, the second president of the Colon Free Zone User’s Association, has said that companies should first and foremost come and see the free trade zone before developing any opinions of the area. And, with the companionship of good people and the use of correct advice, a company can easily avoid general obstacles.

A commercial officer in Panama, of the U.S. Embassy, is to hold a seminar in the internet to guide companies on how to start operating in the area, because, according to him, enough is not being done to give rise to awareness among the U.S. companies.