Financing of vessels, an opportunity that Panama must promote

According to data provided by Dr. Stephen Girvin, Director of the Maritime Legal Center of the Singapore National University, during his participation in the Panama Maritime XIV, around 94 thousand vessels are financed in a global level, covering almost 75% of its appraisal value. 

Financing vessels is considered high risk for banks, as their values fluctuate, their incomes are not automatic, and the expenses not cease even if they are not operating.

For example, the financial entities of Singapore and the United Kingdom have the power to appropriate any registered vessel, in case the owner cannot continue assuming the debt.

The financial services providers offer all sort of options to the maritime sector, such as personal credit, ship mortgage, leasing or nautical renting. The latter is for the acquisition of smaller vessels.

The personal credit allows to purchase a vessel, splitting the payment in monthly installments with an interest agreed. In the case of a mortgage, the vessel serves as a guarantee; however, it does not have the same conditions as a residential mortgage and the finance cost is usually higher. The nautical leasing facilitates the option of long-term purchase while the nautical renting applies to the purchase of smallest and cheapest vessels, splitting the payment in monthly installments.

In any of the cases, the loan agreement requires a process of evaluation and analysis of its details. Dr. Girvin explained that -the bank can speed out the process, cancel the loan agreement in case of not payment or restructure it.

Dr. Enrique De Alba, Senior Partner of Morgan & Morgan, points out- that the Panamanian Banking Center makes efforts for financing vessels. They seek to create a platform that facilitates the maritime service pro the maritime trade through the Law 50 of June 28, 2017, which creates a special legal system for local and international financing operations in the maritime sector and provides tax, labor, and migration incentives for companies which carrying out such operations from the Republic of Panama.

As benefits, there are underscore the exoneration of income taxes, as well as the insurance and reinsurance to those companies that establish their operations in our country to create shipbuilders for the transportation of merchandise, passengers or companies dedicated to maritime projects.

“The Korea Banks are an example. They fund more than 200 vessels”. It is expected that the President of the Republic of Panama sign tax incentives with Asia, to attract more business, more employment opportunities and update our competitiveness exploiting our privileged geographical position – points out Dr. De Alba.

The success or failure of the activities, influences the way in which the system is implemented and the not creation of bureaucratic obstacles that signify a stagnation of the maritime sector.

Translation: Marielys Barrera +507 6207- 6595

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