Banking & Finance 2023 Comparisons

Last Updated October 12, 2023

Law and Practice


Alemán, Cordero, Galindo & Lee (Alcogal) advises many of the world’s largest and most sophisticated financial institutions on the full range of banking, securities and related regulatory matters in Panama. It is an acknowledged industry leader in the banking and finance sector and has been involved in some of Panama’s largest and most complex financial transactions. Alcogal represents many of the local and global leading financial institutions in both international and domestic bank financing, as well as in other forms of acquisition and project financing, including public tender offers, asset purchase financing and mezzanine financing. The lawyers advise clients on their ongoing regulatory and disclosure obligations with all the relevant local and foreign authorities and ensure that they are up to date on all legislative developments. The firm also represents financial institutions and/or intermediaries in obtaining government-issued licences to operate in Panama, in accordance with all banking and securities laws.

Prior to the COVID-19 outbreak, Panama had been fortunate in mostly avoiding the recent economic down-cycles in Latin America and beyond. From 2001 through 2013, Panama’s economy grew at an average of 7.2% per year. However, this rise dropped to 4.9% in 2016, before resurging to 5.5% in 2017 and 2018 and then dropping to 3% in 2019, ahead of an alarming COVID-19 downturn of -17.8% in 2020, followed by a 15.3% GDP growth rate in 2021, driven by copper mining, construction, manufacturing and commerce. 

During the height of the pandemic, the banking regulator issued temporary relief measures, which have now concluded; beyond that, the regulatory environment has so far not been affected in terms of the direction and trends in the loan market in Panama. Like many other economies in the region, the current interest rates seem to have caused a slowdown in large financial transactions, but the market is now adjusting to the new rates and transactional activity is picking up. 

The Ukraine war has not had a direct effect on the terms and trends of the loan market in Panama. 

The high-yield market is not an important source of finance in the emerging trends in Panama.

The loan market in Panama has not seen significant growth in alternative credit providers; Panama’s well-established banking centre continues to be the main source of credit for local credit transactions, by far. There has been a notable increase of private funds as alternative credit providers.

Banking and finance techniques are evolving every day, mainly in connection with tax efficiencies, to reflect the investor base and the needs of borrowers. In this respect, corporate financings are being structured by way of securities issuances, registered with the Superintendence of Capital Markets of Panama, and listed with the Latin American Stock Exchange (Latinex). 

Instead of granting traditional loans, banks are financing their major corporate clients by underwriting securities issuances, thereby providing their clients with innovative tax efficiencies.

There is an increasing trend of large Panamanian companies strengthening their ESG policies and practices, but sustainability-linked lending is not a common concept in Panama.

Both banks and non-banks may provide financing to a company organised in Panama. Foreign financial institutions may also provide financing, from abroad, to a company organised and domiciled in Panama. Typically, entities that provide financing on a regular basis in or from Panama would be required to be regulated by:

  • the Superintendence of Banks if they provide other banking services, especially deposit-taking activities;
  • the Superintendence of Capital Markets if they provide other brokerage services or investment advice; or 
  • the Ministry of Commerce in the case of financial entities that provide small personal loans.

Foreign lenders are not restricted from granting cross-border loans to companies in Panama.

The granting of security or guarantees to foreign lenders is not restricted or impeded.

Panama does not apply any restrictions or controls regarding foreign currency exchange and does not have a central bank. The US dollar has been legal tender in Panama since 1904 and it is pegged one-to-one with the Panamanian balboa.

Panama does not apply any restrictions on the borrower’s use of proceeds from loans or debt securities (assuming their use is for legal purposes). Regarding debt securities, the proceeds cannot be used to pay dividends to the shareholders of the issuer.

The agent concept is not explicitly regulated in Panamanian law but is something that is increasingly contractually regulated between lenders and borrowers in Panama, particularly for syndicated loans. Agency arrangements created under the laws of another jurisdiction are also recognised in Panama and are commonplace.

The trust concept has been legally recognised in Panama since 1984. Please note that a Panamanian trust is not a separate legal person, but rather a legal arrangement via which the settlor transfers assets to a trustee to be managed or disposed of as described in the trust deed, in favour of the beneficiaries of the trust. This arrangement separates the trust's assets from the assets of the settlor, shielding them from lawsuits and other proceedings brought against the settlor, but does not create a new legal person. The guaranteed trust is an oft-used collateral instrument in local credit transactions. Alternatively, local borrowers are often required to provide guarantees (personal and corporate), mortgages (real or chattel), assignments (eg, accounts payable) and pledges (over shares, bank accounts, assets, etc).

Most local loan agreements (and related security documents) typically have standard assignment clauses, allowing the lender to assign either the agreement as a whole, or the credits that result from the agreement. In the absence of such contractual language, Panama law requires consent from the borrower to implement a transfer of the agreement, and requires notice for the transfer of any credit arising from the agreement.

Debt buy-back by the borrower or sponsor is permitted; however, under Panama law, in the event of such a buy-back by the borrower, the debt would be considered extinguished.

There are no provisions with respect to public acquisition finance transactions in Panama.

There have been no recent legal or commercial developments that have required changes to Panama’s legal documentation, other than the changes seen worldwide in connection with the migration from LIBOR to SOFR and the inclusion of language for alternate reference rates in relation to changes to SOFR. However, it is now commonplace for anti-money laundering clauses and anti-financing of terrorism clauses to be boilerplate language in commercial loans.

In the case of commercial loans, there are no usury laws or other rules limiting the amount of interest that can be charged.

There are no rules and/or laws regarding the disclosure of certain financial contracts. 

The payment of interest, commissions and other charges to local lenders will not be subject to withholding tax but may be subject to income tax and other taxes, and should be included in the lenders’ tax returns. 

The payment of interest, commissions and other charges to foreign lenders will generally be subject to withholding tax, at a rate of 12.5%. However, this will not be the case if: 

  • the proceeds of a loan will not be used economically in Panama; 
  • the proceeds of a loan will not be used for the production of income of Panamanian source, as defined in Article 694 of the Fiscal Code of Panama; and 
  • any payments on interests, commissions and other charges will not be considered by any person as a deductible expense for Panamanian income tax purposes.

Credit facilities granted to companies that generate Panama source income are subject to a stamp tax in the Republic of Panama at a rate of USD0.10 for each USD100 of the value of any such document. Further, stamp tax is also payable in the event that an agreement is presented before a Panamanian tribunal or administrative entity.

Foreign lenders making loans to entities incorporated and domiciled in Panama should be aware that the credit agreement will be subject to stamp tax in the Republic of Panama at a rate of USD0.10 for each USD100 of the value of any such document, if presented before an administrative authority or court in the Republic of Panama as evidence.

In Panama, it is not possible to use a “security interest” as a generic and general guarantee. Panamanian law recognises personal guarantees and real guarantees. The most common real guarantees (in rem) are pledges, mortgages and antichreses. 

Pledges and Mortgages

A pledge is a type of real guarantee, which may be given over all kinds of movable assets. A pledge must be constituted with the same formalities as the agreement setting out the obligations it guarantees. However, it is essential that the pledged asset is delivered to the creditor or a third party as a depository for its protection. As such, Panama law does not permit non-possessory pledges. 

Intangibles such as credits and rights are considered movable assets under Panamanian law and can be the subject of a pledge if they are individually identifiable. Credits represented by negotiable instruments must be endorsed in pledge and delivered; this also applies to shares in companies. In general terms, the available structures for encumbering the shares of a Panamanian company would be to constitute either a pledge (under Panama law or the law of another jurisdiction) or a mortgage over the shares. If the shares are dematerialised and deposited in an investment account, the investment account could be pledged. 

The convenience of a pledge over a mortgage

Pledge agreements are usually executed in a private document and do not have to be registered, thus making them more time and cost-efficient. Mortgage agreements must be granted in a public deed and registered in the Public Registry of Panama. Furthermore, the mortgage structure and process also require that: 

  • a summary of the principal obligation (ie, the obligation guaranteed by the mortgage) is included in the public deed that contains the mortgage; 
  • the signatories of the mortgage must be physically located in Panama, as they must appear before the notary public; 
  • the mortgage and its related documents (eg, powers of attorney or corporate authorisations) must be issued in Spanish or immediately translated by an authorised Panamanian public translator; any documents executed abroad must also be duly apostilled at the beginning, to be incorporated into the public deed; 
  • the mortgage must be registered in the Public Registry of Panama, which entails paying registration fees based on the secured amount under the mortgage agreement, at a rate of USD42 for the first USD20,000 and USD30 for each additional USD10,000 or fraction thereof; furthermore, the public deed containing the mortgage agreement is subject to stamp tax at a rate of USD8 per page; 
  • registrations in the Public Registry of Panama are of public record which, in practical terms, means that the information pertaining to the principal obligation, as well as that of each holder of a mortgaged share, is publicly known (publishing the information of a company’s shareholders is not standard local practice, given that corporations in Panama are anonymous (sociedades anónimas) and the identities of their shareholders are not a matter of public record); and 
  • any changes or amendments to the mortgage agreement must also be granted in public deed and registered in the Public Registry. 

For a pledge agreement to be perfected, the pledge assets (the shares of the Panamanian company) must remain outside the control of the pledgor (the custodian can be any agreed-upon third party including, but not limited to, the lender) while, under a mortgage structure, the mortgaged assets usually remain under the control of the mortgagor. 

Judicial or extrajudicial execution of a pledge

Under a pledge agreement, the parties can agree to execute the pledge either judicially or extrajudicially. If a special method of execution is not agreed by the parties in the pledge agreement, Articles 820 and 821 of the Commercial Code of Panama provide a simple extrajudicial method for execution of the pledge, under which the pledgee must grant the pledgor 30 days’ notice for the sale or transfer of the pledge assets, the value of which will be determined by two expert witnesses named by the parties, or if there is a disagreement, by a third expert witness named by the first two expert witnesses or by a judicial authority. However, it is common for the parties to agree upon an extrajudicial method of execution in the pledge agreement itself. 

Judicial or extrajudicial execution of a mortgage

A mortgage will be judicially executed unless otherwise agreed by the parties (Article 43 of Law No 129 of 2013). However, even if the parties agree on an extrajudicial sale, the following proceedings must occur. 

  • The parties must name a representative or entity to carry out the required notifications (Article 46 of Law No 129 of 2013). 
  • The mortgagee must present an execution form to the Public Registry of Panama; thereafter, the mortgagee shall ask the representative to notify the borrower and the mortgagor. Furthermore, the mortgagee must notify any other registered mortgagees, if applicable, of the execution (Article 47 of Law No 129 of 2013).
  • Once notified, the borrower and the mortgagor may choose to deliver the mortgaged assets or oppose the execution. If the execution is opposed, the opposing party must file their opposition with a judge (sole instance) no later than eight days after being notified of the execution. Thereafter, the mortgagee has three days to answer the opposition. If the opposing party presents evidence, the judge will order the practice of that evidence. If the judge determines that the sale shall continue, they will order the apprehension of the mortgaged assets and their corresponding sale; if the judge determines that the sale shall not take place, the sale will be terminated, and the judge will instruct the Public Registry to annotate in its records that the execution has been terminated (Articles 50 and 51 of Law No 129 of 2013). 

Similarities between pledges and mortgages

Notwithstanding the above, there are some aspects of the pledge and the mortgage that are very similar and do not pose a particular advantage or disadvantage when comparing one form of security with the other. 

Under Panamanian insolvency, reorganisation and liquidation law, a duly executed pledge or mortgage will constitute a valid and legal obligation of the pledgee or mortgagee, enforceable against it, and the corresponding pledgor or mortgagor will enjoy a first-priority security interest over the pledged or mortgaged assets, which will not enter the bankruptcy proceedings unless the pledgor or mortgagor waives their preferential rights. However, it should be noted that, under Law No 12 of 18 May 2016, which came into full force and effect on 1 January 2017, if the pledgor or mortgagor is subject to a Panamanian reorganisation order, all its assets, including the pledged or mortgaged assets, will be subject to a six-month financial protection period, during which the corresponding pledge or mortgage cannot be executed unless the lender files a reasoned argument to the corresponding judge demonstrating that the execution of the corresponding pledge or mortgage would not affect either the operations of the pledgor or mortgagor or the pledgor’s or mortgagor’s possibility of completing its reorganisation. Once the judge approves the execution of the corresponding pledge or mortgage during the six-month financial protection period or after the six-month financial protection period has elapsed, the lender can execute the corresponding pledge or mortgage as agreed therein. Throughout the reorganisation or the liquidation proceedings, as applicable, the lender will continue to enjoy a first-priority security interest in the pledged or mortgaged asset. 

The pledge agreement or mortgage agreement, as a standalone structure, does not have any material tax considerations that need to be considered. The pledge agreement would be subject in Panama to stamp tax at a rate of USD0.10 for each USD100 of the value of the document if presented before a court or administrative authority in Panama as evidence. As the public deed containing the mortgage agreement would probably have incurred a registration fee higher than the resulting sum of the above-mentioned stamp tax, the stamp tax is waived for the purposes of the mortgage agreement. 

Since the shares of a Panamanian company are a private matter not subject to public record, in order to verify whether these are already pledged or mortgaged, the lender would have to request that the pledgor or mortgagor provide them with a copy of the corresponding share registry. 

The pledge agreement must be notarised; the mortgage is granted in a public deed and thus the notarisation process is implicit. 

Certain rights in contracts may be assigned but are subject to what the respective agreement may dictate on the matter. However, the general rule is that the acceptance of the other party is required, as is the case for most insurance policies, in which it is necessary to have the consent of the insurer for the assignment of rights over such policies. 

The enforcement of a pledge requires legal action before a competent court. However, it is possible to include in the agreement the possibility of the lender appropriating the pledged assets. In such cases, it is a matter of public policy to include in the respective pledge agreement a method to determine the fair value of the pledged assets. Otherwise, it is mandatory to follow the procedure established in the Code of Commerce, which calls for a valuation of the pledged asset by two experts, one appointed by each party. If the two experts cannot agree, they must appoint a third expert for a final determination. 

Bank accounts can be pledged, but this may present certain inconveniences when the account is used for cash flow of the business revenues, especially when dealing with banks that are very conservative. The pledging of accounts located outside Panama is subject to the laws of the country in which each account is held.


Since the structure of operations of this type plays a complex role in the structuring of guarantees, such guarantees are increasingly being executed through trusts. A trust is an independent and autonomous contractual arrangement, as opposed to a pledge or mortgage, which is an accessory agreement that depends on the principal agreement. Through the use of trust agreements, bank accounts can be managed by the trustee, and rights over real estate property and other rights over movable property can be held in trust. Since ownership rights over the trust assets are transferred to the trustee, the intervention of judicial authorities for enforcement of said rights is not necessary. 

In addition, certain types of assets can also be assigned as collateral through standard assignment agreements, either to the lender, a security agent or a trust structure.

The law in Panama does not permit a floating charge or other universal or similar security interest over all present and future assets of a company.

It is possible for entities in Panama to give downstream, upstream and cross-stream guarantees.

No restrictions are imposed on a target granting guarantees, security or financial assistance for the acquisition of its own shares.

No restrictions are imposed on a target granting guarantees, security or financial assistance for the acquisition of its own shares.

Depending on the type, security is most often released by mutual consent (in the case of a trust), registering a cancellation (in the case of a real property mortgage), and/or by the execution of a release document and return of pledged instruments (in the case of most pledge agreements).

The priority of competing security interests varies depending on the type and nature of the security. For example, Panama law allows for several ranking mortgages in the case of real and personal (movable) property, depending on the date of creation of such specific security and its recordation in the Public Registry. It also allows for mortgagees to vary their positions regarding their rank on a particular security. Contractual subordination is also fairly common and, in the absence of fraud on the part of an insolvent party, such provisions should survive the insolvency of a borrower incorporated in Panama.

There are no priming liens in Panama. 

Typically, a secured lender can enforce its collateral upon the occurrence of an event of default under the terms of the respective credit documentation. The traditional types of security and their enforcement mechanisms are outlined in 5.1 Guarantees and Security.

Under the laws of the Republic of Panama, the choice of a foreign law as set forth in the transaction documents is a valid choice of law, and the irrevocable submission of a Panamanian counterparty to a foreign jurisdiction, as set forth in those transaction documents, is legal, valid, binding and effective. A waiver of immunity would be upheld in Panama.

Final Judgments

Subject to the issuance of a writ of exequatur by the Supreme Court of Panama, any final judgment obtained against a party in a foreign court relating to a transaction document would be recognised, conclusive and enforceable in the courts of Panama without reconsideration of the merits of the case, provided that: 

  • the foreign court grants reciprocity to the enforcement of judgments of Panamanian courts; 
  • the party against whom the judgment was rendered, or its agent, was personally (not by mail) served in this action within that foreign jurisdiction; 
  • the judgment arises out of a personal action against the defendant; 
  • the obligation in respect of which the judgment was rendered is lawful in Panama and does not contradict the public policy of Panama; 
  • the judgment is properly authenticated by diplomatic or consular officers of Panama or pursuant to the 1961 Hague Convention Abolishing the Requirement of Legalisation of Foreign Public Documents; and 
  • a copy of the final judgment is translated into Spanish by a licensed translator in Panama.

Arbitral Awards

In the case of an arbitral award, any foreign final award rendered against a party by an arbitration panel or arbitrator duly appointed and empowered in accordance with the terms of any of the transaction documents to which that party is a party, rendered in connection with an international arbitration, would be recognised and enforced against each party by the competent courts of Panama without re-examination of the merits, pursuant to the 1958 New York Convention on the Recognition of and Enforcement of Foreign Arbitral Awards or the Panama Inter American Convention on International Commercial Arbitration of 30 January 1975, as applicable, or, if both conventions are equally applicable, in accordance with the provisions of the convention that is more favourable to the party seeking recognition or enforcement of the foreign final award. For the purposes of this decision, an arbitration is deemed international if: 

  • at the time of execution of the arbitration agreement or of the agreement that includes the arbitration clause (the "Arbitration Agreement"), the parties thereto are established in different states; 
  • the seat of the arbitration panel, if determined in or pursuant to the Arbitration Agreement, or the place of performance of a substantial part of the obligations that are the subject matter of the arbitration dispute, is located or is to be performed outside the state where any of the parties to the arbitration proceeding has its establishment; 
  • the parties to the Arbitration Agreement have expressly agreed that the matter subject to the arbitration proceedings is related to more than one state; or 
  • the subject matter of the arbitration proceedings relates to the provision of services or the sale or disposition of assets or resources on a cross-border basis.

There are no other matters that might specifically impact a foreign lender’s ability to enforce its rights under a loan or security agreement, but a case-by-case analysis of the relevant transaction will be required to make this determination, particularly in the case of borrowers and/or collateral related to public concession agreements, or those that require any sort of regulatory or government approval.

There are two types of insolvency proceedings contemplated under Law No 12 of 19 May 2016 (the "Law on Insolvency Proceedings"), namely liquidation and reorganisation. 


Under a liquidation proceeding, the creditors’ right to engage individually in enforcement actions is suspended. However, creditors with a pledge, mortgage or other real security right may continue enforcement actions individually or may opt to do so within the liquidation proceeding. 


Under a reorganisation proceeding, an "insolvency financial protection" (protección financiera concursal) shall apply from the time the reorganisation proceeding is declared open until the time when an agreement of reorganisation, agreed to by the General Assembly of Creditors, is confirmed by the corresponding bankruptcy judge. This also has the effect of suspending (staying) enforcement actions. 

However, the creditors’ right to enforce pledges or mortgages will be considered automatically re-established if:

  • the agreement of reorganisation is not approved by the General Assembly of Creditors;
  • the agreement of reorganisation is not confirmed by the judge;
  • the agreement of reorganisation is breached; or 
  • six months pass from the time the insolvency financial protection started.

The general rules of preference and their order of payment are established in the Civil Code. 

Movables (Personal Property)

The following credits have preference within certain movable assets: 

  • credits for work, reparation, conservation or sales price, regarding movables possessed by the debtor; 
  • credits secured by a pledge, regarding movables possessed by the creditor; 
  • credits secured by surety (fianza) relating to commercial effects or securities, granted in a public or commercial establishment; 
  • credits relating to transport, regarding movables transported, for the price, expenses and rights of transport and conservation up to the time of delivery and up to 30 days afterwards; 
  • credits relating to lodging, regarding movables of the debtor at the place of lodging; 
  • credits relating to seeds and cultivation expenses, regarding the related goods that are being harvested; and 
  • credits relating to leases of one year, regarding movables of the debtor on the leased property. 

For two or more credits within this category, the following rules apply: 

  • credits secured by pledge exclude others up to the value of the pledged asset; 
  • regarding surety, if duly granted to more than one creditor, preference shall be determined by the date when the guaranteed obligation was assumed; and 
  • credits relating to seeds and cultivation expenses shall be preferred over those relating to leases. 

Immovables (Real Property)

The following credits have preference within certain immovable (real) assets: 

  • the State’s credits, on the real estate assets of the taxpayers, for the taxes that weigh on them; 
  • the insurer’s credits on the insured real estate for two years of premiums and, if it were mutual insurance, for the last two dividends that have been distributed; 
  • mortgage and antichretic credits over mortgaged real estate registered in the Public Registry; and
  • credits preventatively annotated in the Property Section of the Public Registry, due to judicial orders, including embargoes, seizure of assets or execution of judgments over the annotated real estate property, and only in connection with subsequent credits. 

For two or more credits within this category, the following rules apply: 

  • the first two types of credits indicated above shall have preference over the latter two types; and
  • preference for mortgage credits and credits annotated in the Property Section of the Public Registry (regarding immovables annotated by judicial order, seizure of assets or execution of judicial decisions) shall be determined by date of filing and annotation in the Public Registry. 


The following other credits have preference: 

  • tax credits of municipalities, as well as credits related to judicial expenses or administration of insolvency, duly authorised or approved;
  • credits regarding a debtor’s funeral; and
  • credits regarding: 
    1. a debtor’s last illness expenses; 
    2. stipends or salaries of a debtor’s dependants or house employees, corresponding to the last year; 
    3. advance payments made by the debtor, for themselves or their family, for food and clothing during the last year; and
    4. alimony. 

For two or more credits within this category, the following preferences apply: 

  • the order in which these credits are listed in its own records; and
  • if they are listed at the same level, in date order.

The duration of insolvency proceedings in the Republic of Panama depends on an array of factors, such as the complexity of the case, including the number and classes of creditors and the diversity of non-liquidated assets. Note, however, that generally, the duration of an insolvency proceeding could take from one to two years, without including appeals or other submissions by creditors. As to the success of recovery, specific circumstances of the insolvent company could determine whether creditors can recover. For instance, whether the insolvent company has any assets, whether the creditors have a secured interest, and/or whether they have priority.

There are no rules specifically establishing an out-of-court process for rescue or reorganisation in the Republic of Panama, nor any voting requirements associated therewith. 

Debt restructuring efforts between a debtor and its creditors will mostly be governed by general rules of contract and obligations, and the agreement of other creditors may not be imposed on an individual creditor without consent. 

In situations where a debtor has several creditors willing to negotiate with the debtor as a group, however, the creditors will usually enter into a standstill agreement, whereby they agree not to enforce any rights of execution against the debtor during negotiations. 

The negotiations will be aimed at reaching an agreement between the creditors themselves, and between the group of creditors and the debtor, to balance the operational needs of the debtor with the obligations owed to creditors. 

If negotiations are successful, these will most likely involve amendments to the individual contracts between the debtor and the creditors involved. 

It is important to note that any creditors who are not part of negotiations, or who decide not to enter into an agreement with the other creditors or the debtor, will not be affected in any of their rights or privileges as creditors. Furthermore, any liens or encumbrances over the assets of the debtor will remain unaffected. 

It is also important to keep in mind during negotiations that certain claw-back provisions established in the Law on Insolvency Proceedings may retroactively affect the validity of acts or contracts if insolvency proceedings are later commenced, with the following timeframes. 

  • Up to one year before: 
    1. acts or contracts for which no consideration has been received, or which may be considered gratuitous even where consideration has been received; 
    2. pledges, mortgages or other acts that may establish a preference over other credits; 
    3. payment of debts that are not due; and
    4. amendments to the articles of incorporation that affect the capital of the company. 
  • Up to four years before: 
    1. acts or contracts for which no consideration has been received, in favour of partners, shareholders, administrators, directors, officers, liquidators and general attorneys-in-fact. 
  • No time limit: 
    1. acts where there has been simulation of facts, or fraud; or
    2. transfers made with the purpose of avoiding creditors.

If the borrower becomes insolvent and the security provider or guarantor becomes insolvent, the guaranteed obligations will be at risk of non-payment. 

This may not be a concern where the amount owed is secured with a pledge, a mortgage or other type of real right security, and the value of the collateral is sufficient to secure full payment. However, to the extent that the collateral is not sufficient to satisfy payment in full, the lender will still be at risk of non or partial payment, although presumably the risk will be lower. 

Furthermore, if insolvency proceedings are commenced and the lender has no credits secured with a pledge, a mortgage or other type of real security, the enforcement rights of the lender would be suspended, and the lender's credit would be included in the mass of credits within the corresponding insolvency proceeding that would result. 

It is also important to consider the risk of retroactively invalidating certain acts, contracts and transfers that may favour the lender, to the extent that these may be deemed to fall under a claw-back provision of the Law on Insolvency Proceedings.

Project finance activity is particularly active in the energy sector in Panama and in large governmental infrastructure projects. It is worth noting that in 2019, Panama enacted Law No 93 of 2019 (the “APP Law”), which establishes the legal framework for public private partnerships (PPPs) in the country (see 8.2 Public-Private Partnership Transactions for further detail). The APP Law is an important step in the efforts to attract private investments in infrastructure projects in Panama. 

PPPs are increasingly gaining traction in Panama and no specific legislation applies to them. However, certain Panamanian companies in the distribution and energy sector are of mixed ownership between the government and private entities, resulting primarily from the privatisation of public utility companies in the 1990s. In 2019, Panama enacted Law No 93, regulated by Executive Decree No 840 in December 2020, through which PPPs are regulated. Executive Decree No 840 authorises the use of PPPs for the development of transportation, logistics, energy, communications, irrigation, urban infrastructure, public buildings, social housing, infrastructure for recreational services, garbage collection and/or treatment, agricultural development, and the administration and management of state-owned assets.

Government institutions such as IDAAN (Water Authority), the Panama Canal Authority, the Social Security Office (Caja del Seguro Social), the National Bank of Panama (Banco Nacional de Panamá), the Panama Savings Bank (Caja de Ahorros), the Superintendency of Capital Markets and the Superintendency of Banks are expressly excluded, as are public security services, medical health, public education and the extraction of metallic minerals. Nevertheless, Executive Decree No 840 states that the provision of infrastructure and equipment, as well as the replacement, upkeep and maintenance in such areas, may be subject to PPPs. 

PPPs may be self-financed or co-financed. Despite the regulation being two years old, as far as is known no PPP project under the specific regulation is currently in the execution phase in Panama.

In general, there are no requirements for project documents to be governed by local law and disputes resolved in local courts or the courts of another specific jurisdiction, unless it is contractually mandated as part of the tender process. 

There are few restrictions on the ability of foreign entities (companies) owning property in Panama. However, there is a constitutional restriction that foreign entities (or entities whose capital is foreign) cannot own land established within 10 km from the respective borders. Further, there are constitutional restrictions on foreign governments owning land directly in Panama. 

Generally, there are no restrictions on foreign investment in Panama, except for certain activities in which foreign governments (or government-owned entities) may be limited. There may also be relevant tax treaties that provide for a more favourable tax treatment. Typically, the project companies are corporations (sociedades anónimas), except for situations in which a shareholder of the project company is a US person, in which case, for US tax considerations, the project companies are typically structured as limited liability companies (sociedades de responsabilidad limitada).

The typical financing sources are banks and multilateral institutions, although various transactions have also been financed through export credit agencies. Project bonds are typically used in a take-out or refinancing of a project, and not at a green-field stage.

There are no issues or considerations associated with the acquisition and export of natural resources in Panama.

The principal rules and regulations are set out in Law No 41 of 1998 (General Environmental Law) and Executive Decree No 123 of 14 August 2009, which regulates that Law. Compliance and regulation of the sector are within the purview of the Ministry of the Environment, including oil and gas, power and mining activities, in so far as they are environmentally sensitive activities. 

The Criminal Code of Panama also plays a role in these activities regarding the sections that pertain to environmental crimes, and where compliance with these sections is within the purview of the relevant public attorneys and judges. 

In addition, the Sanitation Code and the Labour Code include rules regarding the applicable health and safety norms, with the Ministry of Health and the Ministry of Labour being the respective government authorities in charge of compliance with these rules. 

Alemán, Cordero, Galindo & Lee

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Law and Practice in Panama


Alemán, Cordero, Galindo & Lee (Alcogal) advises many of the world’s largest and most sophisticated financial institutions on the full range of banking, securities and related regulatory matters in Panama. It is an acknowledged industry leader in the banking and finance sector and has been involved in some of Panama’s largest and most complex financial transactions. Alcogal represents many of the local and global leading financial institutions in both international and domestic bank financing, as well as in other forms of acquisition and project financing, including public tender offers, asset purchase financing and mezzanine financing. The lawyers advise clients on their ongoing regulatory and disclosure obligations with all the relevant local and foreign authorities and ensure that they are up to date on all legislative developments. The firm also represents financial institutions and/or intermediaries in obtaining government-issued licences to operate in Panama, in accordance with all banking and securities laws.