What are the offshore advantages of Panama?
The Republic of Panama is perhaps the ideal destination for
anyone looking for serious financial privacy and no taxes,
corporate or personal. Its proximity to the growing Latin
market makes it a natural base for world business
operations and, in spite of its history, it isn't directly
under the thumb of either the U.S. or (unlike Bermuda and
the Cayman Islands) the U.K.
Nearly every major world bank has a full-service branch
office in Panama, with representation from Japan, Germany,
Brazil, and the U.S. As in Wall Street or the City in
London, Panama City's business district high-rises bear the
logos of Chase, Lloyds, Dai-Ichi Kangyo, Swiss Bank Corp.,
Republic National, Credit Lyonnais, and Dresdner.
Derek Sambrook, an international bank regulator and trust
expert based in Panama, points out: "Brass plate banks
represented by a law firm, for example, are not permitted
in Panama, and the 102 banks that do operate are fully
staffed and functional. Compare that with the Cayman
Islands, which has more than 500 banks, but fewer than 10
that are full-service retail banks."
Admittedly, it's taken time for the banking sector's
reputation to recover from the aftermath of the 1988 U.S.
military invasion. That left nearly every financial
institution in Panama under suspicion of drug money
activity. Under the direction of DEA and FBI agents,
invading U.S. troops hauled away bank records alleged to
show criminal conduct by the deposed president Noriega and
his regime accused of drug trafficking.
Since then, Panama's bankers have been anxious to reassert
the sanctity of their banking secrecy laws...which have a
long history in this country. Along with Luxembourg and
Liechtenstein, Panama adopted specific tax haven
legislation in the 1920s.
A central part of that long tax haven tradition has been
statutory guarantees of financial privacy and
confidentiality. Violators can suffer civil and criminal
penalties. There is no requirement to reveal beneficial
trust or corporate ownership to Panama authorities. Bearer
shares are permitted. And Panama has no double-taxation
agreements and no tax information exchange agreements with
While "dollarization" is debated as a novel concept
elsewhere in Latin America, the U.S. dollar has been
Panama's official paper currency since 1904. (The local
equivalent is the balboa, and there are Panamanian coins
that circulate along with U.S. coins).
Panama has no central bank to print money, and, as Juan
Luis Moreno-Villalaz, an economic adviser to Panama's
Ministry of Economy and Finance, recently noted, "In
Panama...there has never been a systemic banking crisis.
Indeed, in several instances, international banks have
acted as the system's lender of last resort. The Panamanian
system provides low interest rates, around 9% on mortgages
and commercial loans. Credit is ample, with 30-year
mortgages readily available. These are unusual conditions
for a developing country and are largely achieved because
there is no exchange-rate risk, a low risk of financial
crises, and ample flow of funds from abroad."
Panama grew as an international financial center after
enactment of Decree No. 238 in July 1970, a liberal banking
law that also abolished currency controls. The law exempts
offshore business in Panama from income tax and from taxes
on interest earned from domestic savings accounts and
offshore transactions. Since February 1999 a new
comprehensive Banking Law has been in place, which could
prove to be the legal structure that will confirm Panama as
a leading world offshore finance center.
Panama's growing financial sector also includes its active
Stock Exchange, captive insurance and re-insurance
companies, and financial and leasing companies. At the
Atlantic end of the Canal is the Colon Free Zone, a
tax-free transshipment facility for world trade.
However suspect it may have been in the past, Panama is
fast becoming one of the world's major financial
crossroads. Base your business there and you're connected
Recent quotes from articles:
The May/June 2001 issue of Modern Maturity (the largest consumer
magazine in the world, with more than 20 million readers) rated Boquete
Panama first-best retirement destination in the western hemisphere,
number four in the world, following such developed favorites as the
Costa del Sol in Spain, Cinque Terre in Italy, and Provence, France.
As the article reported:
"If you love tropical lushness and don't need big-city stimulation,
this lively little community near the Costa Rican border may be calling
your name. The town's European and American ex-pats appreciate the
stable political scene, the mercifully modest cost of living (you'll
need about 25% less to live here than in a suburb in a medium-size
U.S. city), the clean air, and the outdoorsy activities: river rafting,
tennis and golf. Boquete is tucked into a fertile landscape of coffee
plantations and orange groves where you can escape the heat of the
"Panama is an undiscovered tourist paradise," The Boston
"Panama is the most beautiful retreat in the world and almost
undiscovered," claimed a recent article in Harper's Bazaar.
"Known mostly for its canal, Panama is, in fact, an undiscovered
tourist paradise," stated a recent travel article in the Boston
National Geographic has also included long travel articles this year
praising the undiscovered delights Panama has to offer.