PANEL FREE TRADE ZONES AND TRANSNATIONAL CRIME - Mr. Giovanni Ferrari

And it's important for them to be here and to say what the free trade zone is doing to stop everything the husband mentioned. Giovanni, the floor is yours. Buenas tardes. Good afternoon everyone. I have been working for the past 40 years in the free and every time I must talk about the free trade zone, there's always previous or prior comments where people doubt the viability of a free trade zone or why do countries need free trade zones. I think that some of the comments that we previously heard, not only from the previous speaker, sometimes those comments would make us question why we should have certain free trade zones. I think it's a very valid comment, but first I think we should think of who defines creating a free trade zone in any part of the world and the government. It's actually the government who provides the charter or the mandate to be able to establish in a part of the world the specific activity. So who first should weigh upon the level of the viability of establishing a free trade zone in any part of their domestic territory and if it holds the right business model to ensure that there is an honest, correct, traceable activity to ensure that it makes sense and that it can provide or promote resources to the state? It's the government. I think that in 1948 when the government started this, they did not do this on their own. They did it with the advice and the support of the United States of America and its government, which with a very good formula was able to provide the base to start the Cologne free trade zone. I'm sorry I'll remove my face mask to ensure that you're able to understand me better. I'll start by providing general information in regards to statistics of the free trade zone. Like I said, it was founded on June 17th of 1948 under the president Enrique Jiménez after the advice of the government of the United States, after the local economic crisis, after the end of the World War II. So what were just a few square blocks of land has continued to grow and now it's over a thousand hectares of land, like it was mentioned by your friend Aleko, which makes us the biggest free trade zone in the continent and considered the second largest worldwide. Within the free trade zone we have over 2,600 companies and organizations with logistics and trade activities. And I think it's where I'd like to talk about my specific comment in regards to the business model or the logic in regards to the Cologne free trade zone. It bases itself on its geographical position being close to the Panama canal through which six percent of global trade which transit through the canal and where we have a transport logistic cluster for multi-modal transport, whether it's maritime, air or even land through Central America. Meaning that we have all the features in regards to effective cost of transport and the frequency of transport that is necessary was able to achieve the greatest benefit, which is to ensure that the product is received in the right amount at the time that is needed and at the right price. And I think that this is the winning formula for any free trade zone. The very distinguished director of Casas Honduras, he asked this question. I did not raise my hand. I have an outdated number but I did have an answer. But I understand that in the continent of America there is over 500 free trade zones and worldwide there were over 3,500 at some point. Now I have as a homework to see if those numbers are up to date or not. But it allows us to understand the dimensions of a phenomenon which is quite extensive not only here in our specific region but rather worldwide. I'd like to continue with more statistics in regards to the Cologne free trade zone. Today this activity is able to generate, and even though the pandemic has taken its toll, over 1,500 direct jobs along with another 25,000 jobs which are auxiliary positions or indirect jobs would make 40,000 jobs which are able to support 100,000 persons because there are families with several dependents, meaning that we are a very important component of the economy in the city of Cologne. To be able to compare these numbers, the Panama Canal, as I mentioned, is able to move 6% of global trade through it, has 9,000 direct jobs. Re-exporting from the Cologne free trade zone into all the countries in the region during the year of 2020, which was a pretty bad year due to the pandemic, reached a number of 7.9 billion dollars, taking into account that half of the companies had closed down for at least six months due to the health emergency and due to the lack of activity within the entire region. These numbers, the 7.9 billion, is made up by many different goods, not only commodities but also luxury items. Now, after my prologue, I would like to go into the issues of security and risk, which are the main topics for this forum, and I'll be glad to share these points with you. It is not a secret that the Cologne free trade zone has been pointed at as a source of illegal trade like money laundering and contraband, and I have different statistics that I'd like to share. We've seen a case of cigarettes, and when we talk about the heading of cigarettes, it's 0.7% of all our re-exportations, so it's not one of the main headings that we work with. As a state agency and the management of the Cologne free trade zone, and I'd like to say that the Cologne free trade zone, it's one of the few zones where the land and its administration are actually public, meaning that its administration has public servants, which is quite different to other countries where free trade zones are private entities that have a charter on behalf of the government to be able to exercise those activities with benefits. However, us as a free trade zone are one of the few that worldwide are 100% public. However, we are aware of the need to be able to coordinate activities where we are able to supervise at a national and international level. I'd like to mention some of the activities that, in accordance to the different risk areas that we have found, and I would like to summarize this into seven different headings. The first, verifying companies that seek a space position within the free trade zone. To be established within the free trade zone, you need to send in an application through forms that we can use for background checks with international databases of all the members of the boards, but also of the managers. This is a function that is not carried out by the Cologne free trade zone, but actually the law enforcement agencies of our country carries out this specific task, and it's very important. And I think no free trade zone in any part of the world should not have this independent screening to ensure that criminal organizations are unable to work within it. Employees, providers, and vehicles that require access into our area need to go through an application process, where we are able to provide passes and regulate the transit inside the free trade zone. Second heading, the flow of sensitive products within the free trade. We've identified a sensitive cigarettes, liquor, medications, and food. They are all used, ingested, or consumed by humans, so all the companies that decide to trade in these products should apply or need to apply for a special permit for traceability. We've started the new modality of registering all companies that provide storage and transportation, even though they do not participate in the trade process. We need to have a level of visibility of anybody that's able to add value to the distribution of those specific products. My third heading, originality of the product. We have our own office for intellectual property. We interdict any forgery and other parallel markets that do not comply with the policies of the owners of the brands, which could be unauthorized trading of merchandise, all the way to having the right storage facilities. Number four, traceability of mobility and transport. Even though we have a robust digital platform, we need to improve identifying the flow of specific mobility. There is data confidentiality that still needs to be solved, but it's a trend that should continue to ensure that we're able to monitor and further risk analysis. We are committed to continue to modify our data management system to ensure that we could include very important points. Number five, transaction payments. Even though there is the movement of merchandise that do not generate banking transactions within the national banking system, and it's because global companies that manage their sales and handle all of this outside of Panama and outside of the Panama Free Trade Zone, or maybe the payments are through wires that are received in Panama and they have all their documents that are supported, the Free Trade Zone is quite aware of all the problems of cross-border flows of cash for the specific purchasing and sales within our area. As a matter of fact, I must say that we are pleased to see the presentation that was shared yesterday in regards to digital currency, which would certainly solve all of these issues, where we would facilitate operators where they do not have to travel with cash and do not have to pay high cost for international wires and transfers. While we'll wait for all of this to become a reality, in regards to local legislation, there's already a draft law of the National Assembly that's able to regulate the procedure of cash flows into the country. Number six, risk management. The Free Trade Zone and the Custom Authority have a risk analysis management where they're able to focus on specific tasks of intelligence, gathering data and intervention. This is still in the early stages, but it will be an additional tool for the joint management of the risk amongst both institutions. But just to give you an idea of the magnitude of the work for suspicious activity, in 2020, which was a bad year for the Colomb Free Trade Zone, there was 487,587 trans-transports and re-exports, almost half a million transactions of international trade operations. Seventh point, coordination with government agencies. At the Free Trade Zone, we have identified the potential and close collaboration with the following agencies, Customs Authority, Ministry of Security, the bank superintendency, the superintendency of the DNFBP, FIU, National Police and Public Ministry. Without this coordination, we would dilute the work of the different agencies that start processes that could take too long or because they're unable to gather enough information, cannot move forward. Consolidating all seven areas that I've mentioned together, place the Colomb Free Trade Zone, in a position of leadership with high standards. But it's very important to highlight that this level of control cannot be the prerogative of our Free Trade Zone only, or even of those that do not want to allow for illicit trade to operate in the territory. If there are any other Free Trade Zones with lax or inexistent controls, there will be fertile ground so that criminal organizations can relocate where they're not bothered. If I can follow up on the words of Mr. Piotr, this is a call to ensure that the standard of a regulatory framework for risk management should be a strict compliance of the Free Trade Zones in the regions, but also worldwide. And here I would like to wrap up my presentation. Thank you so much for your time, and I'll be here for any other questions. Thank you.