Panama Investor Blog

Playing Panama Canal's Expansion via Bladex

A number of readers have asked me how they might invest in Panama and the canal expansion and when this article came across my desk I thought it worthy of posting. It seems there are indirect ways to invest without the risk of starting your own business in Panama.

From Seekingalpha.com

www.violentcapitalist.com Asset Management
Portfolio Management
Research

Bladex (Banco Latinoamericano de Comercio Exterior S.A.) (BLX) is a trade finance bank headquartered in Panama. Being a trade bank means they only operate with short term loans, predominantly financing international transactions (i.e. letters of credit). They have some other commercial lending and asset management businesses, and the latter has been the source of much of their problems in their inability to generate meaningful income the past few quarters. The other problem has been the fact that they have been unable to grow their loan book. As of Q1, they have over $300M cash deposits and about $1.8 billion in debt. Book value stands around $700M. Market Cap is about $450M. Normalized earnings for the year should total about $50M. Therefore the PE ratio stands at about 8.5x and its Market Cap to book value is .55. It looks like book value has declined slightly in Q2, so it's probably closer to .6 as of today. The stock also has a 4.5% dividend yield. Its capital ratios stand above 20%, and writeoffs for losses are paltry.

Regardless, the earnings power of Bladex is probably upwards of $70M, and especially as interest rates rise and trade with Central and South American continues to grow I think it'll get closer to $100M, possibly making them worth in the mid $20's. It wouldn't hurt if the bank can start generating some positive income from the asset management business as well (mostly short-term mark to market losses anyways). The bank currently now depends mostly on Brazil, which covers about 50% of the loan book. However, they are looking to expand their footprint. Peru and Chile accounted for $60M in loans in 2008, in 2008 that number has grown to almost $400M.

The catalyst here in my opinion is the strength of the Panamanian economy (Panama has not had a recession since the fall of Noriega and is a USD-based economy) and the expansion of the Panama Canal. The canal is set to expand its capacity 100% over the next few years, providing steady growth for Panama and opportunity for all trade finance-related operations to grow their businesses. Panama itself is a very interesting country. It's main industries are in banking/finance/trade, whereas a lot of outsiders will probably assume that it would probably be more akin to its neighbors' strengths in tourism/commodities/manufacturing. Regardless, Panama, being the owner of the Panama Canal, gets to play on all these factors as global trade expands.

On face value, Bladex should at minimum be worth book value or about $18.50/share. As the world economy stabilizes and Central/South America expand, along with the expansion of the Panama Canal, it should see steady growth for the next few years. A concentration on short term lending insulates it from many of the problems larger banks have faced, and a USD-based currency takes out currency risks for US investors.

Tell me what US bank has a better risk-adjusted investment case.

Conservative Fair Value: $18.50
Strategy: Buy 1/3 of a position at $12, 55% potential gain + 4.5% dividend yield, 5 year total return expected to be about 100%

Disclosure: Outstanding order to purchase at about $12/share

Panamanian paychecks are on the rise

General wages in Panama have increased significantly and this time it is not due to government minimum wage increases. This is market driven wage increase as demand for labor outstrips supply and those with skills are rewarded with higher pay. Everyone wants higher pay, but it is always the demand that sets the wage in a free market.  In a recent study conducted by Price/Waterhouse/Cooper they show a 14.3% increase over 2008 wage rate. According to the study transnational companies are responsible for the highest increase with nearly 10% over 2009. Increase wages mean increase spending and everyone wins especially when the increase is from an outside source.

Low unemployment and higher wages go hand in hand and there is no doubt that Panama is doing well in these areas. As more international companies come into the country demand will continue to increase and so will wages. Now what is needed is an educational system to help Panamanians acquire better skills and a more open immigration policy that will bring additional know-how and competition into the labor market.

New Panama National ID Card

Panama has always had a national ID card they call a cedula and according to a recent article in Tradingmarkets.com Panama will be getting new ones made by 3M that are apparently more hi-tech and difficult to forge. They will even have one for us foreigners living in the country. It is amazing how often Panama authorities check your ID to be sure you are in the country legally and how in the U.S. many are opposed to the checking of ID as an infringement of our rights. I hear Americans complain about being stopped and checked for their ID here in Panama and I initially found it to be distasteful, but with the problems brought about by illegal immigration both here and in the U.S. I am more inclined to believe it is a necessary evil in this crazy world we live in.

Jul 29, 2010 (M2 EQUITYBITES via COMTEX) --

Diversified technology company 3M (NYSE: MMM | PowerRating) announced on Wednesday that its 3M security Systems Division has been awarded a contract to produce a new Panama national ID card.

3M said that it has created a new centralised personalisation facility in Panama, including all necessary equipment, and will provide the materials to produce half a million cards per year.

In addition to the national ID card, the Electoral Tribunal of Panama also contracted 3M Security Systems to produce minor ID cards and foreigner ID cards.

The one-year contract with 3M also gives the Electoral Tribunal the option to extend it through 2015.

Under the contract, financial details of which were not disclosed, 3M Security Systems will print and deliver sheets of Teslin-based card material pre-printed with a number of security printing features, the most notable of which is 3M Colour Floating Image Security Laminate.

3M's new centralised personalisation facility in Panama will provide 3M personalisation software, printers and high-speed die-cutting and laminator equipment.

In addition, 3M will also provide operational training support and maintenance.

3M Security Systems has been a supplier of personalisation materials and equipment systems for Panama's national ID card production since 2003.

Has Panama comprimised its bank secrecy laws with the double taxation treaties?

Panamanian banks are walking a fine line between confidentiality, which is guaranteed by law, and disclosure to other countries regarding their citizens accounts in Panama banks. It appears that Panama may have negotiated ten bilateral agreements regarding double taxation that could compromise their bank secrecy laws and cause a lot of foreign capital flight if a clear protocol is not put into effect. A recent meeting of the major Panama banks, and reported on by La Prensa, has brought some of this to light.

From comments made by bank management it appears that there may be some ambiguity in the way requests for banking information is to be handled. One glaring problem is that the overseeing body in Panama for requests made by foreign countries is the DGI (Panama's IRS). What incentive does a taxation authority have to withhold any information requested by a foreign entity regarding one of their citizens? None that I can think of.

From the remarks quoted by Eduardo Morgan it appears that there is a requirement in place  where the country making a request must produce proof of tax fraud of the bank client, but there seems to be concerns about what degree of proof must be submitted. If this is not made extremely clear and protected by law you can bet there will be a lot of fishing expeditions by high tax jurisdictions. What will be the value of having bank accounts in Panama if there is no bank secrecy? Where will the politicians hide all of their ill gotten gains?

Machine translated from La Prensa

EDITH CASTILLO DUARTE
ecastillo@prensa.com

There are two issues now that focus the discussion of the meetings of the Banking Association of Panama (ABP): The effects on the financial system with signed treaties to avoid double taxation (DTT) in the exchange of tax information, and potentially over-regulating the activity with the intention of the authorities of other countries.

The ABP recognizes that getting off the "gray list" of the Organization for Economic Development will have a positive effect for Panama and the financial system, but it remains concerned that one of the main clauses of the treaties being negotiated and signed for this purpose provide for the exchange of information and this could affect banking confidentiality.

Regulation and consultation

The topic of regulatory management dominated the panel on competitiveness and prospects of the international banking center in Panama that took place during the nineteenth banking convention which was attended, by the president of the ABP, Moses Cohen, the manager of HSBC, Ernesto Fernandez, Jorge Salas, Banesco, Ariel San Martin, Delta Bank, Miguel Valls, Andorra Credit Bank (Panama) and Rolando de Leon, Metrobank among others.

De Leon, who spoke as his former role as a regulator and not a banker, as he was commissioner of the National Securities Commission, recalled that currently they are in the process of adjusting the regulation  given the financial meltdown in the capital markets and urged the Superintendent of Banks to "avoid falling into the over-regulation," by trying to adopt rules of other countries that were affected by this crisis.

"This country and its banking system was able to circumvent the global financial crisis  because we  as bankers  were cautious at that time of doing business," he said.

De Leon called for a broad consultation process of the agreements intended to be adopted.

Speaking before the panel, the superintendent of banks, Alberto Diamond, spoke about what  effect the 10 new agreements will have on the  entity, including integrated credit risk, markets and derivatives.

In the United States, a country where the financial sub-prime crisis originated, they just adopted a new financial reform that deals with similar issues. It is very important that regulators take into consideration what is important to the process of consulting agreements, he said.

The TDT (double taxation treaty) and DGI

With respect to agreements to avoid double taxation, the president of the ABP,  stressed his concern about the impact they have on the banking confidentiality.

The greater concern lies in the fact that this exchange of information available to DTT will be through administrative channels of the Directorate General of Revenue (DGI) and not through the courts.

Taxes and protection

The DGI is the entity responsible for receiving requests for information requested by the countries of foreign clients with accounts in Panamanian banks, and they are bound by the treaty to give it.

"This is information management at the hands of a political and not judicial body and that worries us," said Cohen. Law 33 of June 2010 added a chapter to the Tax Code on Standards of adequacy for the TDT and conferred DGI responsibility in all matters related to this topic.

Attorney Edward Morgan, an expert in these matters and who was present at the panel, explained that such treaties have a protocol on the protection and obligations on the exchange of information and it states that the country requesting the information has to meet certain requirements when they submit the request for information.

"I think the best protection for our financial center is that a protocol is incorporated, when requests are made to the DGI for bank details,  to accompany this application with the documents justifying the request for the same," said the lawyer.

The country requesting information must prove that it is a tax fraud, he said, while recommending that the treaty be transferred if the bank is not satisfied with the way the DGI is requesting the information and insists in the order, may appeal to a superior entity to resolve the case.

"We have to seek protection. If you want information you must have documentation to prove it, and you also have to be sure that Panama does not give information which has been fraudulently obtained, "he said.

U.S. government soon to know who buys gold and where they live

I'm sure many of my readers already are aware of this new law that is to take affect in January 2012, but for those who aren't aware and are  living in the U.S. it should be of interest. It is just another example of just how desperate that government is and to what lengths they will go to try and track every dime you spend and every move you make.  Those who buy gold believing that it is the ultimate protection in the event of a currency melt down may find they will be targeted just when they need it the most. What does this have to do with Panama? They don't have such reporting requirement here.

What makes matters worse is that this law was buried in the 906 page health care law and no one had an opportunity to review or debate it. As discussed in this report from Bob Bauman, gold purchases will be reportable making this one last area of freedom no longer viable. Best to load up before it takes affect!

From Bob Bauman;

Americans are already outraged by President Obama's new health care law. And now, many are up in arms about a little-noticed provision buried deep in the 906 pages of that law.
“The 2010 Patient Protection and Affordable Care Act” (Health Care Act, P.L. 111-148) contains a sneak provision (IRC §6041(h)) that is set to directly impact you.

This law requires any person engaged in a trade or business to file an IRS Form 1099, reporting all payments totaling $600 or more in a calendar year to any single person, other than a tax-exempt corporation (non-profit). No, they don’t care to know who donated $600 to a local animal rescue. Only that Joe Schmo sold you an old pick-up truck for $750 for your lawn service company.

He’d better pay tax on that transaction! And you are responsible for getting him the forms and, at the same time, submitting them to the IRS. And when you mail off your rent check for your equipment bay, guess what…Time to send the old 1099s to the IRS and your landlord.

But that’s not all! Even corporations are affected. That’s right. That John Deere lawnmower you just bought? Again, you’ll need to mail a 1099 to the IRS and John Deere.

Until now, IRS 1099 forms have been used to track and report miscellaneous income paid for services of independent contractors or self-employed individuals. Under current U.S. law, payments to corporations -- except those for medical or health care services -- are not required to be reported to the IRS. Now almost all corporations will be affected.

Small Businesses Outraged. Rightfully So.

Pat Heller, owner of Liberty Coin Service in Lansing, Mich., is mad, according to ABC News. He said, “I'll have to hire two full-time people just to track all this stuff, which cuts into my profitability.”

And you know what less profitability means for the IRS? Less tax revenue.

Just think for a minute about every financial transaction between businesses and individuals or other businesses which exceed $600… That’s a whole lot of paperwork!

Hard on small business, hard on big business. That translates to, “hard on the economy.” Is this really the time to be creating extra hassles for small businesses struggling to stay afloat?

Every U.S. business, and individuals as well, will be forced to obtain the tax ID number and/or the Social Security number of everyone with whom they do more than $600 worth of business in a year. It takes effect on Jan. 1, 2012 -- and it applies to all U.S. business and private transactions.

Based on 2009 IRS data, about 40 million businesses and other entities will be subject to this 1099 debacle, at greatly increased cost and trouble. There’s only one word to describe the paperwork and reporting requirements: Draconian. Small-business owners are already complaining that the time and effort it will take to obtain this documentation will be a drag on business. That’s assuming that a lot of small transactions aren’t driven to the black market!

America: Land of the … Tax Evader

This provision is based on the IRS’s unproven belief that millions of Americans are evading taxes.The bureaucrats’ idea is that IRS computers can process hundreds of millions of Form 1099s, comparing them against each buyer’s Form 1040, to see if reported income and purchase numbers match.

Of course, this onerous restriction was never explained during the health care debate in Congress -- and if it had been it would have likely been defeated. But that’s what you get when you can’t determine what’s in a spending bill until it becomes law. Shame on Congress.

This is yet another example of legislators using sneak provisions in an inches-thick bill to impose policies that would otherwise have been rejected. The same tactic was used in March when the “HIRE Act” was adopted containing a potential 30% tax on offshore banking transactions by U.S. persons.

An exercise in total fiction: Sponsors claimed the Form 1099 provision will expose what the IRS thinks is a vast ocean of uncollected income taxes … and will supposedly help to pay the trillions the health care law will cost. Without any proof, they predict the 1099 requirement will raise $17 billion over the next 10 years. And this was the law that Obama insisted would impose no new taxes.

But Now for the Really Scary Part…

Precious metals such as coins and bullion fall into this new 1099 category and U.S. coin dealers are among those most outraged by the new law. And it’s on privacy buffs’ and freedom lovers’ radars for another reason.

Those who remember history recall that Americans’ freedom to own gold (except for jewelry, dental, and numismatics) was made illegal after 1933, when President Franklin D. Roosevelt issued an executive order prohibiting gold ownership. Those who value their right to own gold note the obvious:

The 1099 reporting rule will tell IRS agents who owns gold and where they live.

Bob Bauman
Legal Counsel
The Sovereign Society

How the canal expansion may affect Austrailia mining?

I found this article from The Australian.com interesting as it points out facts about shipping bulk products like coal and iron ore that most of us don't think about. It is a bit "inside baseball", but it gives us insight into the way shipping companies are thinking about the canal expansion and  that is a very important subject to those of us in Panama. We need the canal to be very successful once the expansion is complete so that the debt of constructing it can be repaid rapidly. The more income the state derives from its resources the less we businessmen are considered a revenue resource for the state!

AUSTRALIA'S iron ore exporters are going to have to start dealing quite soon with the implications of the upgrade to the Panama Canal.

AS if Australia's iron ore exporters didn't have enough excitement looming with the minerals resources rent tax, a new set of locks at each end and a dredging program in the Gatun Lake that makes up much of the 80km canal will allow significantly heavier ships to pass through than the current Panamax size.

Panamax is a definition of what are effectively middle-sized carriers with a maximum deadweight of around 80,000 tonnes and a maximum carrying capacity of around 52,000 tonnes. That's been creeping up in recent years as ship design has become more sophisticated, but that's just a bit over half the size of the Capesize bulk carriers that look after most of the world's seaborne iron ore and coal trade, and which are now anchored outside Australia's east coast coal ports in large numbers.

The upgrade won't happen straight away: the five-year $US5.25 billion ($5.86bn) contract won't be complete until 2015, but corporates must already be planning for the consequences.

It's not exactly clear how big the ships will be in tonnage terms, but the bigger ones will be the same size as some of the smaller Capesize bulk carriers currently working the Australia-China trade.

To give you some examples, the existing Panama locks allow ships up to 294m long with a maximum draft of 12.5m. The upgraded canal with its much bigger locks will take ships up to 366m long with a draft of 18.3m. The lake's also been dredged and will have its surface lifted by 1.5m, not least because ships sit lower in fresh water than they do in denser salt water. It's the draft that is particularly important in calculating capacity increases, and the planners are catering for a 46 per cent increase in maximum draft.

That bigger capacity will accept a good number of Capesize ships, which will therefore at least double the size of the cargoes that Vale and other Atlantic-based producers can send straight through to China. Bear in mind that while Australia enjoys a geographical advantage over Brazil as an iron ore supplier to Asia, Vale's iron ore is of slightly higher quality, so competition to ship ore into China is going to heat up.

The biggest ships will still have to go the long way round from Brazil past Cape Town and the Cape of Good Hope. It takes around 46 days for a ship to travel from Brazil to China around Africa, the usual route, which is about a week longer than using Panama. The upgrade would mean an iron ore cargo of close to 100,000 tonnes from Vale's loaders in the south Atlantic could go straight through the upgraded canal to a Chinese port.

Shipping's only a part of the iron ore business and different producers have different arrangements, some leaving it entirely up to the buyer to arrange shipping, but any overview of the industry has to include shipping cost, and in that instance our exporters will have lost a comparative advantage.

But a Panama upgrade is not all bad news for Australia. Most of the drive to raise the canal's capacity has come from the container ship industry, which measures capacity not in tonnes but in TEUs or Twenty Foot Equivalent units. The imperial measurement system dies slowly in the shipping business and that's the length of your standard shipping container.

Shipping sources say the Panama upgrade will almost triple the maximum capacity of the container ships or "box boats" using it from 5000 TEUs to around 12,000 or 13,000 TEUs.

Another thought is that Australian mining companies don't only export from Australia. For instance, Rio's so far undeveloped Simandou iron ore deposit in the west African state of Guinea would greatly benefit from the Panama upgrade, given that the major buyers are in the Pacific.

BHP Billiton, meanwhile, owns a one-third share in the world's biggest open-cut coalmine at Cerrejon, which is on the Atlantic side of Colombia. Any increase in the size of ships servicing the China trade via the canal will have a "double whammy" benefit in terms of not only reducing unit transport costs, but also getting what's historically been a higher price for the coal than that offered in Europe, which is actually much closer.

And there are a raft of other elements of bulk and container trade that Australian companies are involved in -- such as the containerised high-quality wheat trade into Europe -- that would also enjoy the economies of scale being offered by the upgrade. And how about the bigger size of passenger liners that will now be able to come through the canal en route to Pacific destinations, including Australia? Suddenly the arithmetic is starting to look like a boost to trade all round. We just have to be ready for it.

read the story here

More currency controls on the way

Thanks to Coley for sending me this house bill that is being proposed by  democratic congressman Pete Stark. The currency exchange tax will help with everything from global warming to HIV and child care. This should make the U.S. dollar even more competitive. Sign me up! Read the whole lame mess here.

The name:

Investing in Our Future Act of 2010

Why we need it;

Findings- Congress finds the following:

(1) While Wall Street continues to reap massive profits, the 2008 global economic crisis they helped cause has destabilized economies and impacted the budgets of the United States and impoverished nations, compromising the ability of governments to address pressing needs.

(2) Currency speculation has destabilizing impacts on the real economy and can contribute to financial crises.

(3) Millions of people around the world have been pushed into poverty because of the global financial crisis, through no fault of their own.

(4) The impacts of climate change, disease, and ill health undermine the economies of developing nations and their ability to contribute to a secure, stable world.

(5) Predictable, adequate, sustainable, long-term funding to address global health and climate change in developing countries at the scale needed does not currently exist.

(6) The United States has been a world leader in fighting against HIV/AIDS, Tuberculosis and Malaria and new science has shown that success against these major killers is possible within a generation, yet a greater commitment of resources is needed to save more lives.

(7) Additional investments are needed to increase the global health workforce and improve maternal and child health, reproductive health, and combat neglected tropical diseases in impoverished nations.

(8) Developing countries bear little responsibility for causing climate change, but they will be the most negatively impacted and lack the resources to adapt to and mitigate climate change.

(9) According to the Department of Defense’s Quadrennial Defense Review, global climate change could accelerate instability and conflict around the world and become a security threat for the United States.

(10) Global climate change has already begun to displace people and exacerbate competition and conflict over natural resources, increasing hunger, poverty and social inequities in developing countries.

(11) The Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC) has estimated that by 2030 developing countries will require $176 billion annually in additional investment for climate change mitigation and the World Bank estimates that $75 to $100 billion is needed per year by 2050 for adaptation in developing countries.

(12) At the December 2009 UNFCCC climate negotiations in Copenhagen, the United States made a commitment to work with other nations to mobilize $100 billion a year by 2020 to help developing countries adapt to the impacts of climate change and mitigate emissions from climate change.

(13) There are approximately 15.3 million children in the United States under the age of 6 who require childcare while their parents work.

(14) Only one in seven children who are eligible for Federal, direct childcare assistance receives it.

(15) In the majority of States, the cost of childcare for a year is more than tuition at a four-year public university.

(16) Affordable and quality childcare is essential for working parents and is necessary for continued economic growth in the United States.

(17) Wall Street is enjoying a resurgence in profits and executive bonuses following the $700 billion Troubled Asset Relief Program bailout.

(18) In 2008, $4 trillion in daily currency transactions were undertaken, nearly 80 percent of which by a few major banks, without taxation.

(19) A small levy on currency would curb some speculative transactions, bringing greater stability into the currency market.

(20) To address the global impacts of the economic crisis, revenue from a small currency transaction tax should be invested to provide predictable, sustainable funding to address global health, climate change, and the lack of affordable childcare in the United States.

(21) Collection of a small tax would not disrupt legitimate trading in the currency trading markets and would have no significant impact on individual travelers or United States corporations doing business.

(22) The Secretary of State, Secretary of the Treasury, and the nations in the Organization for Economic Cooperation and Development should work together to implement a broader currency transaction tax to fund global health, poverty, and climate change initiatives.

Read the rest here;

Foreign banking for U.S. citizens just got a lot more dfficult

The new Wall Street reforms implemented by the U.S. government are certain to make banking in Panama (and everywhere else) for U.S. citizens a lot more difficult. I have not yet confirmed this report, but based on this article in La Prensa today, the local banks are taking it seriously. The issue for them is the cost of compliance. If they must withhold 30% of all funds transferred out of their bank and report it to the U.S. government, it costs time and money and for small account holders such as U.S. retired folks, it just may not be worth it. There may be a rash of account closings and gnashing of teeth by disgruntled U.S. account holders and I don't blame them. From the photo of the democrats at the signing of the bill, they seem very pleased with it.

U.S. reforms expected to have local impact

Financial reforms in the United States could disrupt credit markets and investment in Panama, according to local industry officials.

The reforms was one of the topics discussed yesterday at the closing of the 19th National Banking Convention.

Raul Guizado, vice president of Security and Compliance with Banco General, spoke about the scope of the changes. He said that the new regulations impose certain restrictions on foreign financial institutions that have U.S. clients.

Foreign banks with these account holders have to retain 30 percent of all outgoing capital and report these transactions to the U.S. Internal Revenue Service. Guizado said that Banco General's lawyers have said that if the 30 percent is not retained, the bank will be forced to provide detailed information about the holders of the accounts.

Metrobank Vice President of Operations Rolando de Leon warned that the impact of this regulation is that it could be used as a model for other countries. He recommended that local regulators take into account the differences between the U.S. and Panamanian banking systems before proposing any similar reforms here.

Direct flights Tocumen-David-Bocas Del Toro

For those of us who live or have businesses in Chiriqui or Bocas Del Toro, the expense and hassle of getting there may be mitigated early next year if the tourism manager has his way. I have reported on this before, but the tourism authority has been in the papers again  and I think it is important that the good news continues to be spread. 

The cost of travel for tourists to the interior of the country is greatly increased when you consider that most visitors have to stay overnight in the city both coming and going. They have additional costs of ground transportation and then the very expensive per minute cost of regional airfare to contend with. All in all it can cost the tourist more after they arrive in the country to get to our province than it does to get to Panama from abroad. When you add it up it is just plain prohibitive to visit the best parts of Panama. Connecting flights from Tocumen will greatly reduce the inconvenience and costs and will help expand tourism into the interior of the country.

Machine translated from La Estrella

PANAMA. Travel from Buenos Aires to the province of Bocas del Toro, Panama, is not so far from reality, as the Tourism Authority of Panama (ATP) aims to introduce low-cost semidirect flights from anywhere in Latin America, even from States USA.

This was confirmed by the consultant of the ATP, Ernesto Orillac, who said the flight could be introduced to the country by the end of 2010 through the airlines wishing to join.

According to Orillac, the mechanics would be for passenger charter flights, which do not have a set schedule, from any city or country: Bogotá, Buenos Aires or Canada, can reach the Tocumen Airport and immediately board another plane to take them the airports of David, Chiriqui and Bocas del Toro.

"The five million tourists coming through Tocumen Airport a year would not have to waste time on the contrary, with this will be saving time and money," said the adviser of the ATP.

This, according Orillac because arriving at Tocumen take a couple of minutes to transfer from one plane to another and so go to Bocas del Toro and David, as the airline sells airfare to Panama in one package to the destination choose the traveler.

'For starters, begin with the airports of Bocas del Toro and David, but we are waiting to give us the order than at the new airport of Howard, which is ready "he said.

AIRPORT HOWARD

Regarding the newly constructed track at Howard, Orillac said the jobs are ready, even already installed the control tower and all that remains is to start operating, which could be before year end 2010.

Across the airstrip at Howard, was Orillac, tourists come faster to the beach hotels, which are popular within the country.

WHAT HAPPENS IN THE INTERIOR?

On Monday, Minister of Economy and Finance, Alberto Vallarino said we do not have enough good airports within the country which negatively affects tourism.

For Panama  to be considered a tourist destination, they must have air connectivity.

Therefore, the ATP seeks to promote tourism through new travel connections, in addition to the more than 60 direct flights that already has in the country as to Costa Rica, Colombia and even the Asian continent, he said.

Panama, Tax Reform, Act 8 of 2010 Part I

Rodrigo Mulino does a nice job of spelling out some of the details of the new tax reform. As this week I have a number of posts related to taxes, I thought this might be appreciated.

Rodrigo Julio Molina O
rjm@moliasoc.com
www.panamaoffshorecenter.com

With the enactment of Law No.8 of 2010, new rates will take effect on income tax for both legal entities and for individuals. Note that the application of these rates is retroactive, so their entry into force is from January 1, 2010. In addition, it includes tariff changes regarding ITBMS (similar to the VAT), ISC and Stamps, which take effect from July 1, 2010.


Income Tax – Juridical Persons

For telecommunications companies established in the country, their net income arising from international telecommunication services are deemed local income.

Included as local income is income from freight, charges, fares, cargo and other services rendered by international shipping companies whose origin or final destination is Panama, except where such income results from freight, charges, fares and services for passengers or cargo that are transiting, and companies that operate cruise ships that have their base or home port in the Republic of Panama.

Excluded from the concept of local income is the distribution of dividends or interests in companies that do not require a Notice of Operations or those not generating taxable income in Panama.

New General Rates

For fiscal year 2010 (January to December) the income tax rate will be 27.5%. For subsequent years, the rate will be 25%.

New Special Rates

Companies engaging in the following activities shall pay income tax based on the 30% rate through 2011, 27.5% from 2012 to 2013 and 25% from 2014 onwards, to wit: power generation and distribution, telecommunication services in general, insurance and reinsurance activities, financing activities regulated under Act 42 of 2001, cement manufacture, the operation and management of games of chance and gambling, mining in general and the banking business in Panama.
As for juridical persons whose income exceeds one million five hundred thousand dollars (B/.1, 500,000.00), they shall calculate based on the method that is higher between the application of the respective rate to their taxable income or 4.67% applicable to their total taxable income.

Special Regimes
Disposal/Sale of real estate: Regular Dispatch of Business

For the disposal of immovable property which is part of the ordinary course or dispatch of business, the income tax will be calculated at a definitive rate of 3.75%.

Logistics and other operations in the Colon Free Zone and other zones

In the case of businesses established in any free trade area, the disposal, sale or transfer of immovable property or the rendering of services are subject to the rates provided for in Articles 699 and 700 of the Fiscal Code. However, logistics, storage and wine cellar operations, as well as the internal movements of goods and cargo, billing services, repacking and similar activities that are directly related international, are considered to be foreign or export operations.

Interest and commissions remitted abroad by way of loans or financing will be taxed at the general rate set forth in Articles 699 and 700 of the Fiscal Code, over 50% of the amount paid or credited.

ABOUT THE AUTHOR: Rodrigo Julio Molina Ortega
Molina & Co. is one of the leading consulting and law firms in the Republic of Panama. Our partners combine over 20 years of professional experience. We are corporate and legal consultants who will organize and manage your project or offshore company.

Copyright Molina & Co.
More information about Molina & Co.