Free Trade Zone

The Panamanian Free Trade Zone in Colón, established in 1948, is the largest free-trade zone in the world after Hong Kong. It handled $4.7 billion in imports and $5.5 billion in exports in 1996, primarily electronics, clothing, textiles, shoes, jewelry, and watches. About 60% of imports come from Hong Kong, Japan, South Korea, and Taiwan; exports are generally destined for Latin America and the Caribbean. In an effort to maintain its competitive advantage in an era of falling tariffs, the zone has modernized its infrastructure and begun to crack down on money laundering. Business in the zone increased more than 15% in 1997. The return of the canal itself provided new economic opportunities. In 1999, Panama signed an accord with Cuba designed to promote bilateral investment. This accord violated the provisions of the 1996 U.S. "Helms-Burton bill," which declared foreign investment in Cuba illegal. By 2001, Panama had also positioned itself to serve as the digital center of South and Central America by providing fiber-optic links to several networks connecting the region to Asia, the United States, and Europe.