BUSINESS PROFILE: PANAMA DIAMOND EXCHANGE
EREZ AKERMAN
Erez Akerman is the founding president of the Panama Diamond Exchange (PDE) that is set to open in October 2014 at the Panama Gem and Jewelry Center.
The exchange will serve the broader Latin American diamond and jewelry market, which has an estimated annual turnover of between $8 billion and $9 billion.
Rapaport: What is your background and how did you get into the industry?
EA: I was born in Israel but lived in San Diego for a few years. I came back to Israel to finish high school and my army service, and then I went into diamonds and studied gemology in Israel.
I worked for a short time as a sorter with two diamond dealers and then moved to Belgium for a few months doing basically the same thing but at a more advanced level. From there I moved to New York, where I worked in wholesale, selling diamonds and some jewelry.
While working in New York I traveled to many different markets in the U.S. concentrating on the Miami market, which caters to a lot of clients from Latin America.
But over the years, the market in Miami dropped off as demand weakened post-9/11. When that happened, I followed the business to Latin America, which brought me to Panama.
When I got to Panama, I started travelling around Central and South America, as well as to countries in the Caribbean.
I saw that the business hadn't disappeared but shifted away from the U.S. due to various policy changes in the U.S. regarding issues like immigration, the ease of transferring funds
Rapaport: How will you determine membership in the new diamond exchange?
EA: We have a core membership of regional companies, although we are not accepting international companies until the exchange opens in October.
In the meantime, we're processing a lot of applications and expect there will be several hundred members once we open.
Rapaport: What influenced your involvement in establishing a diamond exchange in Panama?
EA: When I came to Panama in 2006, I asked the local and regional players why the Latin American market was so underdeveloped and their answer was that no one had ever taken the initiative.
There was no major diamond trading center or educational structure for those seeking to enter the industry.
I suggested that they could remedy the problem by establishing a diamond exchange and they told me that if I did it, they would support me. That is how it started.
Latin America is a diverse region of 20 countries and 23 inhabited islands with over 600 million people; the region is home to a lot of mining, manufacturing and trading of all kinds of precious stones, as well as around 11,500 stores that sell diamonds or diamond jewelry.
In most parts of the region, the language spoken is Spanish, except for a few countries that speak Portuguese or French, which makes it easier to consider it one market. So it makes sense to have a diamond exchange for this large area.
Rapaport: Where does the development stand with the exchange and the Panama Gem and Jewelry Center?
EA: Construction is well underway within a free trade zone specially designated for the exchange.
Panama already has the second largest free trade zone in the world, the Colón Free Trade Zone, which serves as the distribution hub for all merchandise throughout Latin America
While there are a lot of jewelry and diamond dealers in the Colón Free Trade Zone,
it’s not a pleasant place to work because it’s mostly used for heavier merchandise that comes in from the Panama Canal.
Dealers suffer because they have to share space with these businesses.
We felt that the diamond exchange shouldn’t be built in the Colón free trade area. We wanted it to be close to the airport, near the main city and thought that it would need its own set of rules and regulations.
After many years and the enactment of several laws, we received a specifically designated free trade zone.
The zone is about 20,000 square meters in size and is being developed in stages over a five to seven year timeframe.
Phase 1 of the plan will be completed in October with the opening of the exchange in a temporary building. The building will have everything needed for the exchange but on a smaller scale compared to the final version.
There will be a trading floor, courier and vault services, security services, restaurants, gemological services, education services and offices for companies offered on a lease basis. There will also be a specific area set aside for 60 or so international companies’ offices.
Phase 2 is the development of a much larger building that will open in 2017. We have drawn from the experience of other diamond exchanges to decide what to do and what not to do. In the end, it will be the most advanced diamond exchange in the world.
Rapaport: What has your strategy been to market the exchange?
EA: It’s been a relatively easy sale, but for us it’s more important to explain to the different centers around the world how the exchange will work than to sell it to them.
Latin America is a different part of the world and things work differently there.
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