The Panama Diamond Exchange: A Gateway for South American Diamonds
September 06, 08
On a strip of land, slightly smaller than the U.S. state of South Carolina, at the convergence of Central and South America, lies Panama, home to the region’s very first diamond exchange, and the only diamond exchange in the Western Hemisphere outside of the United States.
The Panama Diamond Exchange was formed in 2006 by a group of diamond dealers based in the country. According to Exchange President Erez Akerman, the idea was born out of a very “practical view.”
There was an extreme need, he explains, for a hub of sorts to serve the diamond and jewelry infrastructure built up throughout the landmass south of the Rio Grande. Because of the lack of such a center, South and Central American diamond traders and jewelry professionals who want to do business in the nearest bourse have been forced to travel long distances to Miami and New York. The shipping and traveling costs, not to mention the hassle of regular long-distance travel, tend to make doing business outside of the region quite a headache.
The diamond and jewelry industry in South America is very developed, Akerman says, adding that the exchange is servicing a preexisting trade that lacks both structure and a central hub through which to run business.
He also says that although countries such as Colombia, Panama and Argentina are technically emerging markets, they are already built up, with approximately 12,000 fine jewelry stores and a strong and solidly growing middle class, which is showing increasing demand for diamonds and diamond jewelry.
Its progenitors envisage that the Panama Exchange will serve as the gateway to the industries in South and Latin America, for both rough and polished diamonds, precious gems, jewelry materials, manufacturing technologies and other various services to the industries. These sectors will all have office space in the soon-to-be-constructed exchange building.
Construction on the building housing the exchange is expected to begin in the next few months, with entry to the building to begin in about two years. The 50-story building, in which the exchange, including offices and a trading floor, will be one tenant, will be located in a new financial district of Panama City, which is set to include services to the trade, restaurants and a hotel/casino.
The one question asked most often about the endeavor is ‘Why Panama?’ There are a number of reasons, including the country’s existing status as a trade and financial hub for the entire region from Mexico to Argentina, which is bolstered by what has been called the country’s “geographic destiny” – the Panama Canal. Another reason is the Free Trade Zone in Panama City, which is second in size only to Hong Kong. Free trade benefits have been extended to the diamond exchange, meaning that its members will be exempt from all import, export and income taxes, making trade through the center a lucrative option.
Akerman says that the Exchange has set a goal of signing more than 150 new members in the next year. The exchange currently has 37 member firms and is processing 50 more. “We want to have over 200 members within a year from now,” Akerman told IDEX Magazine in July, adding that the exchange has seen rapidly rising interest from trade members in the region following its acceptance into the World Federation of Diamond Bourses (WFDB) in May.
“This was a very significant step for us, both with how we were viewed by the government of Panama and in the rest of the region. Following the acceptance of our membership application, over 250 businesses from the region approached us, some who wanted more information, many who were interested in joining,” Akerman explains, making it clear that the aim of the exchange is to “serve something that’s already there.”
Goals for the exchange for the coming year include launching an extensive website to provide news and information for the region and about the region, in English, Spanish, Portuguese and perhaps even Hebrew, as well as a comprehensive contact list for all the jewelers and diamond dealers in the region.
In addition, the exchange has employed the services of a large marketing firm in South America to launch a “PR attack on the entire region,” promoting the PDE to the thousands of diamond and jewelry businesses in the area, many of whom may be unaware that the first diamond exchange in the region is up and running in Panama.
For this, they are working also with the World Jewellery Confederation (CIBJO) and regional governments and foreign ministries. Akerman notes that the website, the marketing campaign and a slew of planned networking events address one of the biggest challenges for the endeavor at this stage – the mammoth task of turning something so new into the single meeting point for the diamond and jewelry industries in South and Central America.
Panama is expected to complete its membership process with the Kimberley Process in the coming months. The exchange is currently negotiating a trade agreement with the Israel Diamond Exchange that will “provide specific benefits to each exchange and its members” in the areas of trade and cooperation, Akerman says.