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The positive trends I see in Panama

June 8, 2010
Panama City, Panama

I’ve been pleasantly surprised this week by some recent changes in Panama that continue to demonstrate this country’s positive momentum.

Yes, there is still corruption, squalor, pollution, and traffic amidst the soaring condominium towers and luxury car dealerships. But the larger point to capture is that Panama is clearly on an upward trend– month by month, it becomes better, nicer, more modern.

In contrast, the dying behemoths of western civilization are on an accelerating downward trend. Sure, Spain may be a nicer place than Panama at the moment, but given Panama’s steep rate of growth and Spain’s steep rate of collapse, it won’t be too many years before the two cross.

So how is Panama able to maintain its steady growth? By adhering to some core principles:

First, it continually improves and reinvests in its staple industries. For example, Panama’s major cash cow is its revenue from the Canal. Rather than suck out all the revenue and let the Canal go to waste, however, the country is currently undergoing an ambitious expansion project to modernize the waterway and keep up with industry demand.

Furthermore, the Canal authority is making constant investments in its efficiency in order to reduce transit times through the Canal. This provides substantial value to shippers worldwide.

Contrast this with a country like Mexico, which has substantial oil wealth but has failed year after year to make adequate investments in new exploration and extraction technology. Consequently, Mexico’s oil production is on a major slide, and it won’t be too long before the country becomes a net importer.

The second component of Panama’s success is its friendliness to foreigners– the government makes it easy for foreign businesses and individuals to relocate and invest in the country.

For individuals, there are a variety of simple programs whereby a foreigner can establish residency, ranging from the Italian bilateral treaty to the $1,000/month retirement program to the $80,000 reforestation investment to the $200,000 economic solvency visa.

Many of these residency programs lead to Panamanian citizenship after a five-year period. Furthermore, since the Panamanian government does not tax income earned outside of the country, it is an excellent place to plant a ‘tax residency’ flag for permanent travelers.

It’s also possible to live in the country without having to ever declare official residency. Panamanian immigration authorities grant extendable 90-day tourist visas to nationals of North America, Europe, and Oceania among others, which means you could stay indefinitely in the country on a tourist visa.

Once the 90-days is up, you could either extend the visa or leave the country for a short trip. The government recently made this practice even easier by dropping the requirement to purchase a $5 ‘tourist card’ at the border.

Lastly, one of the big keys to Panama’s success is its friendliness to business. In Panama, a business can be created almost instantly, and one can even purchase a shelf corporation with an existing bank account. In many other countries, this registration process can take weeks.

The government even has an English-language website to simplify the registration process of new corporate entities. (note: consult with a qualified tax advisor before undergoing a step like this)

For registered companies without income from Panamanian sources, there are no local taxes due and no reporting requirements. For Panamanian sourced income, the corporate tax rate was just reduced from 30% to 27.5%, and will be further reduced to 25% in 2011.

While there are some loopholes available, labor laws can be cumbersome for employers in Panama… regardless, though, there are still a few businesses that I would be interested in owning down here, and I will be discussing one of them tomorrow.

Lastly, I should mention that foreigners are given full consideration for government contracts in Panama, including for the Canal expansion project. The government recently introduced a new Spanish-language procurement website which includes bid solicitations for upcoming projects. Some of these may be of interest to you.

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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • Jack

    Any readers familiar with the Boquete area of Panama? Would be curious to hear your thoughts on the area in terms of prices, activities, restaurants, transportation, medical etc….

    • Dana

      There is tons on Boquete on the Internet. Cooler, small, prices not cheap anymore because lots of expats there already. Lacking in activities — most younger expats would find it dull after a while (I did). Transportation — taxis around town, a bus back to David every 30 min during the day. Medical — David 40 min away has what one needs. That’s Boquete in a nutshell. One blog specifically on Boquete I’m aware of:


  • Siri Singh

    Hi Simon,Thanks for sharing constantly.If I invest in the reforestation program ($40.000) and gain a second passport that way, will my wife and 18 year old son be also able to benefit from a second passport or they have to invest also $40.000 each?Thank youSiri

  • Henry

    Lastly, I should mention that foreigners are given full consideration for government contracts in Panama…
    Frankly, the reason for this is that the local businesses/citizens are more or less incompetent. It’s frustrating at times, but patience goes a long way.

    After 3+ years living here, there have been great improvements. I’ve witnessed the installation of traffic lights (there was literally only one downtown previously) and cross walks (none before).

    The future is bright here, but it will never be anything close to a “behemoth” of civilization.

    BTW, the $40k forestry visa, while it is written in law, is unattainable. The $40k must be used to purchase a certain amount of land, which does not exist at that price. The $80k is the actual residency amount. Ao don’t let one of these many confidence men pull one over on you.

  • Sing

    Down side I guess, from your previous post, is too much American government agent/agency presence. If American does get desperate, they could do something bad…

  • Guille

    I’ve visited Panama several times since 2001. The city is small but their buildings are growing at an amazing rate. According to locals, most of that real state business is based in money from Colombian drug dealers, who need to wash their bills.
    Locals are complaining about the big number of Colombians moving to Panama City, but they love to see Americans moving there.
    I agree with Henry about the lack of traffic lights and also sidewalks. During my first visit it took me more than 20 minutes to cross an avenue!
    Just like in every country of Central America you need to be very patient to deal with locals.

  • T.

    I believe that the tourist visa has just been extended to 6 months! Another step in the right direction.

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