February 15, 2011
Panama City, Panama
One of the things that always intrigued me about Panama is how quickly this place moves… it was among the first things that I noticed when I first started coming here almost 10-years ago– there’s always something major happening.
Landing at Tocumen airport last night, right off the bat I noticed some recent upgrades since my last trip here several months ago. Most obvious– Panama’s airport has gone trilingual. All the signs are in English, Spanish… and now Portuguese as well.
While I was waiting in the VIP lounge for the porter to find my luggage, I was also struck by how many staff had learned basic Mandarin in order to cater to the Chinese businessmen who were sharing the lounge with me.
All of these are indicative of Panama’s general approach towards foreigners: figure out what will attract foreigners to Panama, and do it.
To give you an example, there has been a long dearth in Panama for top-notch business class hotels. The Marriott is too old, the Radisson Decapolis is too clubby, and the luxurious Bristol hotel is too small.
Enter the newest additions to Panama City’s already sprawling skyline, the Hotel RIU Panama Plaza and Le Meridien. These hotels are absolutely exquisite, worthy of international conventions and conferences.
There’s a large maritime conference going on right now at one of them, and this morning, I was speaking to a few delegates about it. The big buzz here at their conference is that the US/Panama free trade agreement (FTA) is back on the table after being stalled for years… that means a lot to their sector.
Surprise, surprise. After Panama laid down in traffic for Tim Geithner last quarter and completely did away with its banking privacy, suddenly the US now seems willing to push the treaty through its bureaucracy.
US Trade Representative Ron Kirk testified in front of Congress last week, indicating that the Obama administration is resolving the problems with the Panama FTA and “looks forward to working with [Congress] to secure its approval this spring…”
For the life of me, I can’t understand why the government of Panama prostituted itself so disreputably, effectively giving up all of its advantage as an international financial center.
Banking in Panama has always been cumbersome… when you open an account, they want you there in person (most of the time), they want letters of reference, proof that your funds are legitimate, and about 10,000 signatures. It’s an incredibly bureaucratic process.
But the fun doesn’t stop there. Even after the account is open, unless you have a great relationship with your banker, they’ll frequently expect you to provide documentation that evidences the legitimacy of transactions in/out of your account.
Simply put, it often feels like you’re working for them, not the other way around. You have to constantly prove that you’re not a terrorist or drug lord.
Foreigners have always been able to get over the hassle, accepting the consequences of banking in Panama, simply because the benefit (strict secrecy) outweighed the cost (bureaucracy). Now that secrecy is gone, it’s just not worth the hassle.
My guess is that over the coming months, there’s going to be a huge sucking sound coming from Panama’s banks as many of the foreigners move their money to other, easier jurisdictions.
Since Panama is so quick to change, though, I think the banking system will adapt and begin offering better, more diversified services in order to attract foreigners back to the market. This is something that Panama excels at.
As such, I wasn’t surprised when I found out this morning that a few banks here, including MultiBank, are offering accounts denominated in Chinese renminbi. This is pretty forward thinking.
Given the extremely one-sided US/Panama tax information exchange agreement, though, I definitely think the onus is on Panama to prove to foreigners that it is worthy of their trust and capital. This will take time.
Meanwhile, I’d suggest looking to other jurisdictions to bank. There are dozens of great possibilities all over the world– Singapore, Hong Kong, spots in the Caribbean, Europe, and even South Pacific. More on this later.