PANAMA Law and Practice Contributed by: Roy C Durling, Arias, Fábrega & Fábrega
5.2 Foreign Investment Restrictions and Approvals in the Exploration and Mining Sectors As discussed in 5.1 Attracting Investment for Mining , the rules applicable to investments in mining ventures in Panama apply equally to for - eign and local companies, without restrictions on account of nationality, but the CMR prohibits foreign governments, nations or entities from holding mineral concessions. This restriction does not prevent foreign governments from owning participations in companies that hold mining concessions. 5.3 International Treaties Related to Exploration and Mining The Republic of Panama has entered into sever - al treaties concerning the treatment and protec - tion of investment (including BITs with the United States, Canada, Chile, the Czech Republic, the United Kingdom, France, the Netherlands, South Korea, Singapore and Spain, to name but a few). These treaties provide for a general protection regime, and generally provide for the possibil - ity of resorting to international arbitration in the event of disputes. 5.4 Sources of Finance for Exploration, Development and Mining Most exploration and extraction activities in Panama are carried out by foreign companies, which in most cases fund their operations from sources outside of Panama. In the case of exploration activities, companies typically fund their operations from their work - ing capital. These companies, in turn, fund their operations through the issue of securities in for - eign securities markets. In the case of extraction projects, companies seek financing from a variety of sources: project
financing extended by private lenders, govern - ment-owned financial entities and/or multilateral agencies, and/or issuing securities in foreign securities markets, etc. 5.5 Role of Domestic and International Securities Markets in the Financing of Exploration, Development and Mining The local securities market has little bearing on the financing of mining activities in Panama. Mining companies with operations in Panama have almost always resorted to international securities markets. 5.6 Security over Mining Tenements and Related Assets The following collateral security arrangements, among others, are available to creditors in min - ing projects: • Mining concessions may be mortgaged (which will require the prior approval of the Ministry of Commerce and Industries). • Surface rights may be mortgaged. • Minerals, once extracted, may be subject to security arrangements. • Shares and bank deposits may be pledged. • Movable assets may be either pledged or mortgaged. The type of security arrangement will depend on the type of collateral. Mortgages may turn out to be expensive security arrangements. Registration duties applicable to real estate mortgages are based on the principal amount secured, at the rate of USD3 for each USD1,000 or fraction thereof secured by the mortgage. In the case of chattel mortgages, the applicable duties are USD42 for the first USD20,000 and USD30 for each USD10,000 or fraction thereof secured by the mortgage. In addition, their regis -
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