Panama at the OECD: The Country Faces the Challenge of Reforming Without Losing Competitiveness

Panama’s potential accession to the Organization for Economic Cooperation and Development (OECD) brings to the forefront the debate over necessary structural reforms, the country’s competitiveness, and the impact of discriminatory international lists on the Panamanian economy.

During the 6th Transfer Pricing Conference, held last Thursday, May 21, national and international experts agreed that joining the organization does not automatically guarantee improvements for the country and warned that the process will require institutional changes, greater transparency, and a strategy aligned with national interests.

During the panel “Panama in the Mirror of the OECD,” moderated by José Luis Galíndez, president of the International Fiscal Association in Panama (IFA Panama), with the participation of specialists Marco Fernández, Ubaldo González (IDB), José Andrés Romero, and Laura Sanint (Colombia), the panelists agreed that Panama’s entry into the OECD should not be viewed solely from a tax perspective.

José Andrés Romero noted that Panama’s entry into the OECD is not a blank check and must be viewed with a critical eye. “It is not about joining a prestigious club, nor is it about rejecting the process out of fear of losing our identity. We must ask ourselves if this alignment can help us build a more competitive, reliable country with better opportunities,” he emphasized. He added that the OECD can be useful as a methodology. “It can help us assess ourselves better, compare ourselves with other countries, identify gaps, and set priorities. But the OECD does not replace political will or national capacity for implementation.”

For his part, economist Marco Fernández argued that Panama has a “dual institutional framework,” with solid structures such as dollarization and the Panama Canal, but also with weaknesses in certain areas. “I disagree with the characterization of us as a country with weak institutions,” he said. He believes the government should use the OECD as a lever for the reforms the country needs. “We have a tremendous fear of reform because the political economy of reform clashes with very powerful groups that oppose it.”

From the international perspective, Ubaldo González, a tax expert at the Inter-American Development Bank (IDB), clarified that the gray and black lists primarily reflect European Union criteria and not directly those of the OECD. He said that Panama currently faces a significant opportunity cost for remaining on discriminatory lists, due to the potential loss of international investment and business opportunities. González noted that the bill reforming the Tax Code to introduce the concept of Economic Substance, which is being debated in the National Assembly, seeks to align Panamanian tax policy with European requirements.

Laura Sanint, a Colombian expert in international taxation, shared her country’s experience in the process of joining the OECD, which began in 2011 and formally concluded in 2020, although regulatory adjustments continued through 2022. She recommended that Panama move toward international standards without losing sight of its own economic and fiscal interests. “Panama must have a clear, specific direction and a fiscal plan aligned with what is best for the country,” she said.

For his part, José Luis Galíndez emphasized that Panama has adopted the right roadmap for joining the OECD, which will strengthen the country in areas such as institutional capacity, governance, and best practices. “By adopting these policies, Panama will consolidate its economic development and enable a better quality of life for its citizens and a stronger democracy.” Galíndez added that Panama is beginning its process of joining the OECD, which takes time. The timeline for accession depends on the technical review the organization conducts regarding legislation and national practices.

He noted that Panama’s accession process to the OECD will generate recommendations regarding best fiscal practices. “Together with the implementation of the Economic Substance Law, the country is strengthening its alignment with international standards of consistency, substance, and transparency. Moving forward, it will be crucial to follow up on the guidelines regarding tax expenditures and tax administration; in the latter area, there is enormous potential, especially if it is oriented toward adopting the Tax Administration 3.0 model.”

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