PANAMA Trends and Developments Contributed by: Kharla Aizpurúa Olmos, Mónica Moreno and Eduardo Oteiza, Morgan & Morgan
strengthening its regional presence. This would send other countries a strong signal of stability and market openness, potentially attracting foreign investment and generating new employment opportunities for Panamanians. Alongside improved international optics from an AML perspective, Panama’s integration into Mercosur sig- nals a broader shift toward regional co-operation, modernisation, investment and long-term sustain- ability. Social Security Law Reform – Law 462 This year also marked a turning point for the future of employed Panamanians. For years, the social secu- rity system had been neglected, plagued by struc- tural deficiencies that brought it dangerously close to collapse, putting at risk the retirement prospects of younger generations currently in the workforce. These issues were especially magnified by demographic changes, low contributions, and high informality among the country’s working population. The increas- ing deficit of the social security system was consid- ered in the downgrade of Panama’s investment grade made by Fitch in March 2024. After several months of social unrest and a very extensive public consulta- tion period, reforms to the law governing the social security regime (“Law 462”) were effectively enacted, offering the bureau a temporary lifeline and helping to stabilise the system for now. Law 462 replaces the previous pension system by establishing a new Single Solidarity Capitalisation System. This system means that each worker has a personal account where their contributions, along with those of the employer, are accumulated and invest- ed. Upon retirement, these funds are used to pay the worker’s pension. In addition, the system includes a solidarity component, through which the state guaran- tees a minimum pension or supplements the income of those who were unable to save enough, based on the value of the contributions accumulated from the date of affiliation up to the date of the benefit applica- tion, and financed by mandatory contributions from affiliates to a “single solidarity fund”. This replaces the mixed subsystem, which combined defined ben- efits with individual capitalisation. This new system automatically applies to individuals who join after
the law’s enactment, as well as to contributors cur- rently enrolled in the Mixed Subsystem who are more than seven years away from retirement. Additionally, contributors affiliated with earlier systems may opt to transfer their pension to the new scheme. Starting in 2036, all contributors under the Mixed Subsystem will be transitioned to the Single Solidarity Capitalisation System. One of the most significant changes introduced by Law 462 relates to how pensions are calculated. Under the previous system, pensions were based solely on a percentage of the average salary and years of ser- vice. Law 462 adds a new element: an individual sav- ings account that each worker builds up throughout their career, which is then added to the basic pension amount. The main criticism of Law 462 is that it keeps the retirement age unchanged, suggesting that further reforms to the system may be necessary in the future. However, Law 462 allows a future review of retirement ages after six years, but it remains to be seen if such reviews will be enacted. From a business standpoint, employers will face a gradual increase of 3% in the contributions they must make to their employees’ pension plans, while the amount contributed by employees remains the same. This added financial burden from increased costs will be especially challenging for small businesses, although it will affect the entire system. Entrepreneurs and investors should take these changes into account when evaluating opportunities in the Panamanian mar- ket. Successful implementation of Law 462 will require further regulation, modernisation of virtual infrastruc- ture, social acceptance and most importantly, strict fiscal oversight from authorities and compliance by employers. Infrastructure and Project Finance Opportunities The route of the Panama-David railway – President Mulino’s flagship infrastructure initiative – was offi- cially unveiled in May 2025. While several major infra- structure projects are currently underway, including the construction of the fourth bridge over the Panama Canal, the third Metro line (featuring an underwater tunnel beneath the Canal), and a nationwide moderni- sation of roadways, this administration remains firmly committed to delivering the railway. This ambitious
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