Panama Investor Blog

WSJ says U.S. officials gleeful over new tax treaty

According to this article from the Wall Street Journal U.S. officials are very pleased with Panama signing of the tax agreement today. "The agreement will permit the nations to seek information from each other on all types of national taxes in criminal and civil matters for tax years beginning Nov. 30, 2007." I would wager that access to U.S. banks will allow the current administration to seek tax information on previous leaders suspected of money laundering. After all, the U.S. is the worlds largest tax haven for politicians from all around the globe. Other than that it is of little direct benefit to Panama.

Here is how the WSJ put it.

The U.S. has won greater access to information about bank accounts in Panama, a step that COULD move the U.S. closer to ratifying a stalled trade deal with the Central American nation. U.S.. Treasury Secretary Tim Geithner and Panamanian Vice President Juan Carlos Varela signed the tax information exchange agreement Tuesday.

Panama has been labeled a tax haven by international organizations including the Organization for Economic Cooperation and Development.

It has previously inked a host of such information exchange deals with countries such as Belgium, the Netherlands, Spain and Mexico, in the hopes of being removed from the OECD's tax haven list.

Some Democrats in the U.S. Congress had said that Panama must make more progress in helping the U.S. catch tax evaders, before they are willing to let the trade agreement advance.

Congressional Republicans, who have been pressing for action on the trade deal, said Tuesday's announcement shows Panama's desire to cooperate with the U.S.

"The fact that we have now signed a Tax Information Exchange Agreement with Panama should remove any remaining hurdles to moving forward with this important trade agreement, something we should do as soon as possible," said Rep. Dave Camp (R., Mich.). Camp will assume the chairmanship of the Ways and Means Committee when Republicans take control of the House in January.

"This is a long-needed and welcome step," said a spokesman for Ways and Means Committee Democrats.

Geithner said the signing of the tax information exchange deal heralds "a new era of openness and transparency" between the nations.

The agreement will permit the nations to seek information from each other on all types of national taxes in criminal and civil matters for tax years beginning Nov. 30, 2007.

"Upon entry into force, the new [agreement] will provide the United States with access to the information it needs to enforce U.S. tax laws, including information related to bank accounts in Panama," the Treasury Department said.

What next? Pat downs and nude scanners for Panama?

While in the U.S. signing the infamous U.S. Panama tax treaty, Panamanian officials met with homeland security chief Nepolitano to sign another agreement regarding security between the countries. Panama is kowtowing to whatever demands the U.S. makes in order to get the coveted free trade agreement. The U.S, has not guaranteed they will sign the FTA, only that they will consider it. Apparently the Panamanian government considers it of such great importance that it is willing to risk much in order to MAYBE get it. Although I don't know all of the details, I don't see much benefit to Panama for any of these deals so it must have more to do with getting the funding for the many infrastructure projects underway in the country. MAybe the wikileaks could shed some light on  the subject. All of these changes are coming fast and furious and with little forewarning so hold on to your seats as it looks to be a wild and turbulent ride!

Machine translated from La Prensa,

Napolitano meets with leaders of the SICA

Janet Napolitano, Secretary of safety. PRESS / Maydée Romero1474738

ARCI OHIGGINIS JARAMILLO
oarcia@prensa.com

In addition to signing an agreement with Panama for the exchange of passenger information, the Secretary of Homeland Security United States (U.S.), Janet Napolitano, met with the commissioners Presidential Chancellery Security Integration System (SICA) .

The meeting discussed the Regional Security Initiative for Central America (Carsi, for its acronym in English), which plans to invest $ 130 million in the region by the year 2011, in addition to $ 100 million that the Merida available for fiscal year 2009-2010 in the region.

Security Initiative for Central America would focus on preventing youth violence and strengthening the judicial and prison system. It is recalled that the Merida Plan focused on combating violence caused by gangs, and therefore more investment and support given to the police.

At the meeting, which lasted two hours, also attended Napolitano, Foreign Minister, Juan Carlos Varela, the security minister, Jose Raul Mulino, director of Customs, Gloria Moreno de Lopez, the secretary general of SICA, Juan Daniel German and commissioners of the agency security.

Although everything was handled in total secrecy, German described as "historic" in Panama carrying out of this first meeting of the Coordinating Council of Democratic Security in the countries of SICA. "There is a regional strategy on security and all countries agree to carry it out," he added.

The next security meeting of SICA will be in the "International Conference in support of Central American security strategy" to be held in 2011 in Haiti.

It is expected that this meeting of SICA member countries to develop an initiative to counter problems like drug trafficking and terrorism in the region.

Panama City is really a labyrinth

In Greek mythology, the Labyrinth  was an elaborate structure designed and built by the legendary artificer Daedalus  for King Minos of Crete. Its function was to hold the Minotaur, a creature that was half man and half bull and was eventually killed by Theseus. Daedalus had made the Labyrinth so cunningly that he himself could barely escape it after he built it. Sounds familiar doesn't it?

If Panama is to move forward into the next 10 years as the Singapore of Latin America it needs to make some changes in it signage and addresses. The old way of giving directions by number of blocks past the bridge or big tree in the park won't cut it. All of these new high rises, the Cinta Costero and the coming metro would make one believe that Panama is heading towards being a first class city, but with the antiquated or non-existent system of addresses and directions it will only be a first class city in its advertising.

From La Prensa

The labyrinth called Panama City

Change the meaning of the streets, the nomenclature does not have a numerical sequence and rename it floods every five years.

ADDRESSES. Both local and foreign are easily lost in the floods. PRESS / File1473923

Edith Castillo Duarte
ecastillo@prensa.com

Manuel Ferreira, director of Economic Studies of the Chamber of Commerce, Industries and Agriculture of Panama, decided to withdraw from traditional speeches and talk about a problem that deducts points to Panama as a city of business and tourism.

In a recent forum organized by the Chamber of Commerce and the builders could not ignore the headache it poses to foreign investors navigate the city.

Attracted by the growth of approximately 6% in the first half of this year and are tax incentives and opportunities for wealth. But paradoxically, find themselves with a little friendly city where you can not move without major problems.

Every now and then rename it streets, often depending on the political affinities of the government. And besides, as noted architect and urban planner Andrión Rodrigo Mejia, while in European cities and in other parts of the world draws a classification with a numerical sequence, in Panama insists on using names.

Citadina culture is giving directions by reference to places close to the address you are looking for, and among traders, town planners and builders there is some concern about this situation, although long-standing may aggravate in the coming years.

There is talk of major infrastructure investments, a meter will cost thousand $ 500 million and which aims to change the way you move in the capital, however, nobody has said what the plan is to sort the names of the streets in the great "reorganization" of the city.

The municipality is the entity that should be responsible for all matters relating to signs, addresses or classifications, but the city engineer of the capital's mayor, Juan Manuel Vasquez, warns that no budget for hiring staff engaged in these duties.

"The nomenclature is as important as the other projects we have in the direction of Works, and we have not put aside, but we are addressing the urgency of the patient to heal after the wounds," he says.

In his view, the first thing to do is to order a plane to the streets to give the proper consistency. Subsequently, and with the help of other entities, enter the correct road signs, but will undergo changes as the city "does not seem right to invest resources in this time ... That are obviously both employers and Vasquez contends that a good date to start with this work is 2012. Although ink and no paper work schedule.

In the annual ranking conducted by the magazine América Economía, Panama came this year as the seventh best city for business.

According to the annual survey conducted by the magazine to a 37 cities in Latin America, the country recovered in 2010, having been in position 11 in 2009.

In interviews with foreign executives said Panama's strategic location and its facilities in infrastructure that allow easy and quick access to all locations in Latin America.

The advantages are worthy, well-earned, and no reason to ignore, but is unusual in a small town like ours, every day more often used a GPS to get to a place located a few blocks away.

---

A GPS for tourists

The Tourism Authority of Panama working on a program that will develop and implement interactive maps global positioning system (GPS) that includes the addresses of hotels, restaurants and tourist sites in the country.

The project could be completed within two years and have two phases. The first would be to create interactive maps that might be found on the Internet, while the second step would include the updated system with GPS directions in tourism offered by the rental car at the Tocumen International Airport. In the country there are several companies that sell GPS service and say business is growing.

The advantage of this system in a city like Panama is that makes locations with street names in existence, crossing intersections and streets, and if one seeks a point of particular interest.

Why so few entrepreneurs in Panama?

I have often wondered about the lack of young entrepreneurs in Panama. Most businesses are owned and operated by family and friends of the wealthy few in Panama. They got their positions through connections which explains a lot about the lack of business ethics and service orientation you find here. I thought it had more to do with lack of opportunity than desire on the part of the young person, but according to this article from La Prensa, most young people want the security of working for someone else. Schools teach students to be adverse to risk and for the most part are preparing people to become workers in established businesses rather than being the one who establishes the business. I think this is one of the real setbacks for Panama in developing a thriving middle class.

In the U.S. the school systems also churn out hordes of worker bees, but even so, there is a large number of young people with ideas and energy who want to start their own businesses. The first step in making a change is realizing there is a deficiency and this article clearly shows the government is aware of the issues and are making efforts to change it.

As a consummate entrepreneur myself, having started many businesses in my youth, I believe the blame is the school system just as the article points out. Students are not taught to think, but to memorize in an attempt to drill into them the knowledge accumulated in the past. Certainly there is a need for the basics, but this continues all the way through high school and into college. I was a poor student during my school years because I was always dreaming of doing something else other than sit and memorize. Fortunately I had a father figure who encouraged my desire to be creative.

In my many conversations with other successful people I have found most were like me in their lack of interest in formal education and a strong desire to get out and create something. Many who did have a degree, did not end up using what their degree declares they are proficient in.  For the most part we all forget most of the memorization we did in school and technology is changing so fast, what we thought we knew is outdated in just a few months. You can find out about any subject via the internet and when I want to start a new enterprise I spend hours digging through it to learn as much on the latest and greatest as possible.

Certainly if you want to become a professional such as a doctor, lawyer or engineer, there is only one way and that is through higher education and a degree. But for the young person who answers the question "what do you want to do when you grow up" with "to be rich like you" the higher educational route is not the most rapid way to accomplish that desire.

In my talks with my own children I find out a lot about the educational system in Panama. Although my kids are great students having memorized well they have not received any training in being creative or the reality of risk versus reward in school. I have to instill these values or they would not have them.

A dream that few people realize

68% of Panamanians want to build a business, but only 14% said they would dare to take that route in three years. Young people under 25 are the least likely to risk riding the wave.

1473726 Click to enlarge

Mary Triny Zea
mzea@prensa.com

At 28, Gabriel Rivas working on a technological invention that could be the solution to avoid wasting electricity.

His profession as an electrical engineer helped him to prepare a device through a software to detect the sites of major power consumption in a company. Thus expected that companies can maximize their resources and close the valves of waste.

Edison Romagna, 21, is micro ice cream from last year. Started with a capital of only $ 10 in your home and want to generate profits for your operation more productive.

Both young men belong to different social strata but have a common dream: long for their businesses thrive. Hundreds of Panamanians like Rivas and Romagna have a favorable view of entrepreneurship, however, few projects materialize.

Young people under 25 are the least involvement with the generation of wealth through entrepreneurship.

431 of 34,000 micro, small and medium enterprises (MSMEs) in operation and registered until October in the Micro, Small and Medium Enterprises (Ampyme) 3000 155 belong only to youth up to 25 years.

In addition, the 39 000 616 registered business ideas, only 6 000 179 belong to the youngest.

These figures reflect the poor level of entrepreneurship in youth, a reality not only for Panama but for most Latin American countries.

"One of the causes of the deficit of entrepreneurial spirit is that students are taught to be workers and not entrepreneurs." "Society gives a negative connotation to the risk," the report Decent Work and Youth in Latin America 2010, International Labour Organization.

Consequently, when young people complete their studies, the majority looks to belong to the group of employees. At this stage, make contacts and gain experience, positive features in the role of entrepreneurs, but the drama is that many never are seen as generating employment and wealth.

According to experts on the subject, is how many end up all their productive lives in the same condition as when they started the heavy career.

Philip Chapman economist is concerned to see the kind of undertaking that includes the survey "Global Entrepreneurship Monitor 2009 (GEM)" with little or no added value to the community ": opening of kiosks, inns or offering services such as taxi drivers while research and product development are lagging.

Shared Reality

The GEM analysis, a study by the City of Knowledge Foundation, with about two thousand people in the country, showed that only 9.6% of Panamanians are embarking on their business.

The Panamanian flag is lower than in Colombia with 22.4%, Peru (20.9%) and Guatemala (26.8%), although higher than U.S. (8%) and Italy (3.7%).

68% of respondents estimated that starting a business is desirable, 63% feel they have the skills to succeed, but only 14% think do it in the next three years, and only 4% do business with more than 42 months in operation .

"Good news for Panama is that the majority of entrepreneurs facing these initiatives by identifying opportunities and not by the absence of other options to generate your income," says Hugo Kantis, consultant to the Inter-American Development Bank Coordinator Entrepreneurial Development Program of the National University of Sarmiento in Argentina.

This contrasts with the reality of the countries of the region dominated by necessity entrepreneurs. The major challenge for Panama is to raise their rate of entrepreneurial activity, said Kantis, for it requires a comprehensive strategy that includes actions in education, innovation and financing.

In the country have opened several fronts to encourage young people in creating new businesses.

Gabriel Rivas is developing its software with support from the Business Accelerator of the City of Knowledge and earned funding through the National Secretariat for Science, Technology and Innovation.

The Business Accelerator free guidance to those interested in starting a business to achieve its development financially.

The Ampyme, on the other hand, has programs that seek to awaken the spirit entrepenershiip among twelfth grade students in public schools. Edison will receive from this institution Romagna seed capital to start their business.

Enabled him to provide good customer service and basic applied business math. In this way he realized that one of its products was not profitable.

For experts in this area, efforts are insufficient. "They must bring home from grade school on a regular basis and to grow with this mentality," said Linares Laru, project manager of the Business Accelerator. "The young Panamanians see the venture as something very distant." Rivas Romagna and now have the challenge of not giving up and being "very resilient and self-motivated, fundamental qualities of a successful entrepreneur, said Linares.

U.S. & Panama Tax agreement in English

I want to thank John H, one of my avid readers, for sharing this important information with us.

Below you will find a machine translation of the Tax agreement that is to be signed by Panama and the U.S. on the 30th of November. I have also included an article  from La Prensa with comments by the  Minister of Finance and other interested parties.

My understanding after reading these brief 12 articles is that it gives the U.S. complete access to any information it may request on any U.S. resident or citizen who it believes may hold assets in Panama.

Last week the minister of Finance and Economy stated that the U.S. would need to have a criminal investigation open on an individual before information could be requested, but I see nothing in this agreement that requires this. I have spoken to several senators this morning who were surprised that the agreement does not include that requirement and question whether it would be ratified by the assembly without it. We will have to see how the assembly handles it when they get back in session in January.

According to the agreement as it is currently written, the only limitation is that the U.S. cannot just ask for names of U.S. persons who may have assets in Panama. They have to have an individuals name and present it to the Panamanian authorities. I see nothing in the agreement preventing the U.S. from giving a list of names without limit. I see nothing in this agreement that would prevent the U.S. from requesting information on an individual that has done nothing more than traveled to or from Panama.

The requesting party only need contact the requested party with the name and reason for requesting the information (that it falls under tax investigation) and then the requested party is obligated to go to the banks, public registry, legal agents, and investment houses and see what that individual controls.  This falls in line with recent changes of the laws in Panama where the beneficial owners of all society anonymous must be on record and the authorities must have access to this information.

If you are a U.S. resident or citizen and are thought to have any monies or assets held in Panama, the U.S. government now has the right and the means to know about it and only needs to make a request to receive it.

Unless the assembly stops this from going forward, it appears that after November 30 2010 and ratification by the assembly, hunting season will be open.

I am providing a copy of the agreement in its original Spanish at the bottom.

 

AGREEMENT BETWEEN
THE GOVERNMENT OF THE REPUBLIC OF PANAMA
AND
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
FISCAL COOPERATION AND EXCHANGE OF INFORMATION WITH RESPECT TO TAXES

Whereas the Government of the Republic of Panama and the Government of the United States of America ("the Parties") wish to establish the terms and conditions governing tax cooperation and exchange of information relating to taxes;

Accordingly, the Parties have agreed as follows:

ARTICLE 1
SCOPE OF AGREEMENT

The competent authorities of the Parties shall provide assistance through exchange of information that might be relevant to the administration and enforcement of domestic legislation of the Parties concerning taxes covered by this Agreement, including information that may be relevant for identification, assessment, enforcement or collection of taxes with respect to persons subject to them, or for investigation or prosecution of criminal tax matters.

ARTICLE 2
JURISDICTION

The information is provided in accordance with this Agreement by the competent authority of the requested Party, regardless of whether the person to whom the information relates is a resident or if the information is held by a resident of a Party. However, the requested Party is not obliged to provide information that is not in its custody or possession or control of persons within its territorial jurisdiction. For purposes of the preceding sentence, "authorities" includes all government agencies, political subdivisions and local authorities.

ARTICLE 3
TAXES COVERED

1. This Agreement shall apply to the following taxes imposed by the Parties:

(A) in the case of the United States, all federal taxes, and

(B) in the case of Panama, all national taxes.

2. This Agreement shall apply equally to all identical taxes established after the date of signature of this Agreement to be added or to replace existing taxes. This Agreement shall also apply to substantially similar taxes that are imposed after the date of signature, to add or replace existing taxes if the competent authorities of the Parties so agree. The competent authority of each Party shall notify the other of any substantial change in taxation and in the information gathering measures covered by this Agreement.

3. This Agreement shall not apply to taxes imposed by states, municipalities or other political subdivisions, or possessions of the Parties.
 

ARTICLE 4
DEFINITIONS

1. In this Agreement the term:

(A) "competent authority" means, for the United States, the Secretary of the Treasury or his representative, and Panama, the Ministry of Economy and Finance or his representative;

(B) "criminal tax matters" means tax matters involving intentional conduct which is liable to prosecution under the criminal laws of the Requesting Party;

(C) "criminal laws" means all criminal laws designated as such by national law, irrespective of whether contained in the tax law, penal code or other laws;

(D) "information" means any act, statement, document or record in whatever form;

(E) "information gathering measures" means judicial, regulatory, criminal or administrative action to allow the requested Party to obtain and provide the information requested;

(F) "national" of a Party means:

i) any natural person possessing the nationality or citizenship of that Party;

ii) any legal person, partnership or association to obtain that status in accordance with the laws of that Party.


(G) "person" means a natural person, corporation or any other organization or group of persons;

 (H) "requested Party" means a Party to this Agreement who has been asked or has provided information in response to a request;

(I) "Party" means a Party to this Agreement submits an application or who has received the requested information, and

(J) "tax" means any tax covered by this agreement established a national or federal level by a party, not including customs duties.

2. For the purposes of determining the geographic area within which can be exercised jurisdiction to compel the delivery of information, the term "United States" means the United States of America, including Puerto Rico, the Virgin Islands, Guam, and any other possession or territory of the United States.

For the purposes of determining the geographic area within which can be exercised jurisdiction to compel the delivery of information, the term "Panama" means the territory of the Republic of Panama, according to its legal and international law.

3. Any term not defined in this Agreement, unless the context otherwise requires a different meaning, or the competent authorities agree on a meaning in accordance with the provisions of Article 9 of this Agreement, shall have the meaning attributed to it by law party seeking the application of this Agreement, any meaning assigned by the tax laws of that Party on the meaning given to that term in other laws of that Party.

 

ARTICLE 5
EXCHANGE OF INFORMATION ON REQUEST

 1. The authority of the Requested Party shall provide upon request of the competent authority of the requesting information for the purposes referred to in Article 1 of this Agreement. This information will be exchanged regardless of the requested Party may not need such information for its own tax purposes or the conduct being investigated would constitute a crime under the laws of the Requested Party if it had occurred on the territory of the requested Party . The competent authority of the requesting party may lodge a request for information under this Article when it is not able to obtain the requested information by other means, unless the use of such media lead to disproportionate difficulties.

 2. If the information held by the competent authority of the requested Party is not sufficient in order to comply with the request for information, the competent authority of the requested Party shall take all relevant information gathering measures to provide the party requesting the information requested , although the requested Party may, at that time, not need such information for its own tax purposes. Privileges under the laws and practices of the requesting Party shall not apply to the requested Party to execute a request for information and such matters are reserved for resolution by the requesting Party.

3. If specifically requested by the competent authority of the Party, the competent authority of the requested Party shall, to the extent possible under its domestic law

(A) specify the date and place for taking testimony or the production of books, documents, records and other tangible property;

(B) take an oath to the individual to give testimony or produce books, documents, records and other tangible property;

(C) protect the books, documents and original and unpublished records, and other tangible property;

(D) obtain or submit true and correct copies of books, documents and records original works

(E) to determine the authenticity of the books, documents, records and other tangible goods produced and provide certified copies of original documents;

(F) examine the individual submitting the books, documents, records and other tangible property in relation to the purpose and manner in which the respective element is or was maintained;

(G) to allow the competent authority of the requesting party to provide written questions to which the person making the books, documents, records and other tangible property is liable in relation to the items produced;

(H) any other act that is not in violation of the laws or administrative practice fight with the requested Party;

(I) certify the procedures as requested by the competent authority of the requesting Party were followed or that the procedures requested could not be followed by an explanation of the deviation and why were not followed.

4. Each Party shall ensure that it has the power to give effect to the provisions of Article 1 of this Agreement and, subject to Article 2 of this Agreement, to obtain and provide, through its competent authority and upon request:

(A) information held by banks, other financial institutions and any person, including nominees and trustees, acting in a representative or fiduciary, and

(B) information relating to the ownership of companies, partnerships, trusts, foundations and others, including the limitations set forth in Article 2 of this Agreement, the ownership information of all persons in an ownership chain , in the case of trusts, information on settlors, trustees and beneficiaries and in the case of foundations, information on founders, members of the board of trustees and beneficiaries.

However, as provided in subsection 4 (b) above, this Agreement does not impose an obligation for parties to obtain or provide information about publicly traded companies or public funds or collective investment schemes, unless such information can be obtained without incurring disproportionate difficulties.

5. All requests for information made by one party must be made with the highest degree of specificity possible. In all cases, such requests must specify in writing the following:

(A) the identity of the taxpayer whose taxes or criminal liability which is under investigation;

(B) the time period over which information is sought;

(C) the nature of the information requested and the manner in which the requesting Party would prefer to receive it;

(D) the matter under the tax laws of the requesting Party for which the information is requested;

(E) the reasons that they subscribe to the belief that the requested information may be relevant to the tax administration requested and the execution by it in relation to the person identified in subsection (a) of this paragraph;

(F) reasons for believing that the information requested in the requested Party or is in possession or control of a person within the jurisdiction of the Requested Party;

(G) to the extent they can be determined, the name and address of any person believed to be in possession or control of the information requested;

(H) a statement whether the requesting party may obtain and provide the information requested if a similar request was made by the requested Party;

(I) a statement that the requesting party has exhausted all reasonable means at their disposal in their own territory to obtain the information, except in cases this leads to disproportionate difficulties.

ARTICLE 6
POSSIBILITY TO REFUSE AN APPLICATION

1. The competent authority of the requested Party may refuse a request for assistance:

(A) when the application is not made in accordance with this Agreement;

(B) where the Party has not exhausted all reasonably available means in their own territory to obtain the information, except that resort to such means to rise to disproportionate difficulties, or

(C) if disclosure of such information is contrary to public policy of the requested Party.

2. This Agreement shall not impose upon any Party the obligation:

(A) provide the information under the laws of the requested Party is (i) subject to professional secrecy or (ii) contains any trade secret, industrial, commercial or professional secret or trade process, provided the information described in paragraph 4 (a) of Article 5 of this Agreement shall not be treated by that fact alone as a secret or trade process, or

(B) administrative measures at variance with its laws and administrative practices, provided that nothing in this paragraph (b) impair the obligations of a Party under paragraph 4 of Article 5 of this Agreement.

For purposes of paragraph 2 (a) (i), the term "information subject to professional secrecy" means information that would reveal confidential communications between a client and an attorney, when such communications are made to seeking or providing legal advice or intended to be used in existing or anticipated legal proceedings.

3. A request for information may not be refused on the grounds that the tax liability giving rise to the application is contested by the taxpayer.

4. The requested Party may refuse a request for information if the information is requested to administer or enforce a provision of tax law of the requesting Party, or any requirement connected to it, which discriminates against a national of the requested Party, compared with a national of the requesting Party under the same circumstances. Shall be deemed a tax provision or a requirement for it discriminates against nationals of a state required when, in similar circumstances, the standard becomes more onerous for them than it was for national of the requesting state. For the purposes of the preceding sentence, a national of the requesting Party that is subject to tax on their worldwide income is not in the same conditions as nationals of the requested Party, which is not subject to tax on their worldwide income. The provisions of this paragraph shall not be construed as preventing the exchange of information with respect to taxes imposed by the Parties on the profits of branches or on premium income of foreign insurers.

 5. The Party shall not be obliged to obtain and provide information to the requesting Party would not be able to obtain under its own laws in similar circumstances in order to administer or enforce its own tax laws or in response to a request by the party required under this Agreement.

6. The statute of limitations in the law of the requesting Party concerning taxes described in paragraph 1 of Article 3 of this Agreement, governing the application of information exchange. The expiration of the limitation period established by the laws of the requested Party relating to such taxes shall not prevent the requested Party to obtain and provide the requested information.

ARTICLE 7
CONFIDENTIALITY

Any information received by the requesting Party under this Agreement shall be treated as confidential and be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the requesting party responsible for the identification, collection, enforcement, prosecution or resolution of Appeals for the taxes to which this Agreement, or supervisory bodies to the extent necessary for individuals, authorities or bodies to fulfill their respective responsibilities. Such persons or authorities shall use this information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The information received by the requested Party, along with the request for assistance under this Agreement shall also be treated as confidential by the requested Party. The information will not be disclosed to any other person, entity or authority, or used for purposes other than those set forth in Article 1, except in cases where the requested party's prior written consent provided that the information can also be used to the purposes permitted in accordance with the provisions of the existing Mutual Legal Assistance Treaty in Criminal Matters between the parties, signed on April 11, 1991, under the same may be amended. In any case the information provided under this Agreement is disclosed to another country without the express prior written consent of the competent authority of the Party providing the information.

ARTICLE 8
COSTS

Unless the competent authorities of the Parties agree otherwise, the recurrent costs of assistance shall be borne by the requested Party and the extra costs incurred in providing assistance shall be borne by the requesting Party.

ARTICLE 9
MUTUAL AGREEMENT PROCEDURE

1. Where difficulties or doubts arise between the parties on the application or interpretation of this Agreement, the competent authorities will do their best to resolve the matter by way of mutual agreement.

2. The competent authorities may adopt and implement procedures to facilitate implementation of this Agreement, including additional forms of information exchange to promote more effective use of information.

ARTICLE 10
PROCEDURES FOR MUTUAL ASSISTANCE

If the competent authorities of both Parties deem it appropriate, may agree to exchange expertise, develop new audit techniques, identify areas of noncompliance, and jointly study areas of noncompliance.

ARTICLE 11
ENTRY INTO FORCE

The Parties shall notify to reciprocate when they have completed their internal procedures necessary for entry into force of this Agreement. This Agreement shall enter into force on the later of the dates of such notifications. Once the Agreement enters into force, it will have effect for applications to be made on or after the date of enactment, with respect to matters pertaining to fiscal years beginning on or after three years prior to signing this Agreement.

ARTICLE 12
TERMINATION

1. This Agreement is effective until terminated by either party.

2. Either party may terminate this Agreement by written notice to the other party. Such termination will be effective the first day of the month following the expiration of a period of three months after the date of receipt of notice of termination.

3. If either Party terminates this Agreement without prejudice to such termination, both Parties shall be bound to comply with the provisions of Article 7 of this Agreement with respect to any information obtained under this Agreement.

 
IN WITNESS WHEREOF the undersigned duly authorized for this act by the respective Parties, have signed this Agreement.
 
DONE at Washington, in duplicate, in English and Spanish languages, both texts being equally authentic, on November 30, 2010.

FOR THE GOVERNMENT OF THE REPUBLIC OF PANAMA FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA



JUAN CARLOS R. VARELA
Vice President and Minister of Foreign Affairs



Timothy Geithner
Treasury Secretary

Download COOPERACION_FISCAL_PANAMA_EUA 1

From La prensa:

Rafael E. R. Berrocal
Edith Castillo Duarte
negocios@prensa.com

Contrary to the apprehensions of some sectors, the Economy and Finance Minister, Alberto Vallarino, came out yesterday in defense of the agreement to exchange tax information with the United States will be signed next Tuesday.

The fear is that the deal put at a disadvantage to the Panamanian banking center for the benefit of banks operating from Miami, in the opinion of counsel Edward Morgan.

The Banking Association of Panama (ABP) declined yesterday to issue a position to better analyze the issue. But Vallarino no negative effects, but benefits that will help Panama in a white list of the Organization of Economic Cooperation and Development (OECD) as well as to attract higher income in the tourism sector.

After the signing in Washington, Panama will be only two covenants requiring minimum of 12 OECD to exclude a country from its list of tax havens. For the U.S., the benefit is that Panama should ensure their tax information to individuals or businesses. This means information held by banks, other financial institutions and any person.

Panama also undertakes, in a supplementary note to the agreement, to approve a bill to identify the holders of bearer shares.

The MEF said yesterday that the identification of the bearer shares and is part of a bill that is included in the nine agreements signed by Panama, which was prepared by the International Bar Association.

"Here is a background of other, as these same lawyers have applauded the double taxation treaties negotiated. We should ask if they are protecting a specific business, "said Vallarino.

With the agreement, Panama also obtained a decrease in the tax on remittances of about $ 50 million per year, representing about 50% of what it collects annually national treasury for this purpose, according to MEF.

Another point that emphasizes the institution is that the United States agreed on an additional note to agree that their citizens and businesses can deduct from income costs incurred while attending conferences or conventions in Panama.

REPORT TO THE BANK

Vallarino met yesterday with the ABP to explain the path to signing the agreement.

The president of the ABP, Moses Cohen, declined to comment until this body considers the issue in depth.

Industry sources said that what happens is that "no consensus", because depending on the nature of each bank, some may be affected and not others.

The lawyer and former ambassador of Panama in Washington, Eloy Alfaro, not clear yet what wins Panama, as the country does not require information on earnings of its nationals abroad.

"Nor is it clear whether the conclusion of this agreement responds to U.S. pressure or is rather an informal gesture by the Panamanian government to promote better environment to the approval of Trade Promotion Agreement (TPA) or if for other reasons "he said.

Another scenario

To counsel Carlos Cordero, the benefits themselves are clear in the agreement.

"The competitiveness of Panama in the provision of legal and financial services will not be diminished by the conclusion of this agreement. Evidenced by the fact that there are many countries and jurisdictions that compete with Panama, which have concluded such agreements with the United States and its competitiveness is not affected, but on the contrary, has improved, "said Lamb.

He noted that the agreement eliminates the notion that Panama is a tax haven holding conventions draw by American companies and help improve the environment for approval by the U.S. Congress of the CPC.

Panama, a leader in cross-border trade and logistics

From La Prensa:

Triny MARY ZEA
mzea@prensa.com

Panama, a small country in Central America is close to reaching the same level of leading nations of Europe and Asia to market processes.

This means that if you are a trader, just by being in this piece of land has an advantage over its competitors to put time their products in other markets.

This was demonstrated, the Panama occupy leading positions worldwide in the ranking of Border Trade, evaluating processes, time and cost to import and export goods starting with the contractual agreement between the two parties and ending with the delivery of goods.

The ranking of trade, as well as other comparative indices and a report of the Economic Commission for Latin America (ECLA) left Panama in the best locations in Latinamerica, preceded only by Chile and Argentina.

The document Diagnosis and proposals for the improvement of logistics and customs processes in Central America and Panama, published in April 2010, assesses the export logistics in Central America from the perspective of the employer to the micro, small and medium enterprises.

Procedures

Panama is the only country in the region that significantly reduced the number of documents to export from nine to three, close to France that called for just two in 2009.

As for imports, Panama is the country closest to the lower number of required documents worldwide with only four forms, for the two of France in the same year.

This issue becomes important because each new authorization must obtain an undertaking international trade is reduced by 4.2% according to Doing Business.

Meanwhile, all countries have reduced their time to prepare documentation for export and import but are still nine days away from requiring both paperwork in Panama.

Singapore, Denmark and Estonia lead the shortest time to prepare documentation for export, with five days, and Singapore only requires three days for the import paperwork.

"Every day of delay in export amounts to a cost of 1% of the volume of trade," the report said.

Costs

Panama had the lowest value in terms of costs associated with the export process in Latin America in 2009 with $ 729.

El Salvador registered the lowest cost of import processes $ 820.

Malaysia and Singapore were the most competitive globally, they report costs between $ 450 and $ 456 for export and $ 439 and $ 450 for import.

Meanwhile, the indicator of the World Bank's logistics performance, which measures the ability of countries to connect to global markets, highlighting Panama in terms of port logistics infrastructure throughout the hemisphere.

"The next step as a country should be scanning the documents and processes," said Eric Dormoi, international sales manager Selects Canned Panama, who says his company takes maximum two days to do the paperwork.

For its part, the report suggests improving delays at the borders of Central America and Panama recommends extending the opening hours of customs.

One would think that at this stage of exports of goods should be thriving, which is the opposite, it fell 6% from January to August compared to 2009.

"The report is based on procedures and costs, not only are the costs, other related things that are needed to stimulate the sector," said Fernando Marquez, president of the National Union of Small and Medium Enterprises.

The problem, according to Marquez, is that the bank is not financing for exports, and "you have to buy boxes, labels. If you do not have the resources are not exported, "he said. Another point is that insurance is needed to export.

Manuel Fernandez, president of the Panamanian Association of Exporters, said that the only delay you have is in port for customs clearance and shipping, where they have to wait on average about six hours to enter the container to the terminal.

For the union the problem of logistics, but Panama is not financial, weather and pests, which triggered a crisis three years ago and the authorities still do not have a strategy to lift the sector.

Status of Private Schools in Panama

I get many emails asking about private schools from folks looking at Panama as a place to bring their families. With the advent of many multinational companies moving nto the country the number and quality of private schools has grown at a fast rate and so has the cost. In Boquete we have about a half dozen small private schools with one of the best being the International Acadamy of Boquete. They currently go from prekinder through the 5th grade and charge between $60 and $110 a month per student. My son attents and we are very impressed with the quality of education. The article below is translated from La Prensa.

Aet Elisa Tejera C.
atejera@prensa.com

Digital libraries, storytelling, language laboratory classes, accommodations, clean showers at the gym, extensive grounds for the recess, computers for each student and teaching professionals with various specialties.

There are few schools that meet these characteristics in Panama, but this type of school is growing. Private education is going through a metamorphosis, is more varied, complete with international standards.

The growth of this circle is due to the arrival of a foreign population is increasing and at the right time for the local economy is going through, which makes it possible for more parents to invest up to $ 10 000 in a year of secondary education.

Schools such as the International School of Panama (ISP), Balboa Academy, Colegio Brader, Isaac Rabin, American Academy of Panama, Albert Einstein College. Lycee Francais as well as Paul Gauguin in Panama, Crossroads Christian Academy and the Metropolitan School of Panama (about to begin his first year), are one of the elite centers established in the country.

The strength of these schools is based on the teaching of two or three languages, based on English. In addition to Spanish, French, Mandarin and Hebrew.

The teaching method has nothing to do with repetition and memorization. A change is focused on analysis and creativity.

In addition, some of them are recognized internationally, facilitating the integration of students whose parents look for work on the need to constantly move from one country to another.

The quality of education and access to a variety of extracurricular activities play an important role. Exclusivity is another incentive. The high price guarantees comfort and social relations during the preparation process, are another attraction for parents to enroll their children in these schools.

High standard

A case of these is the International School of Panama, its graduates earn three titles: the one given by the Ministry of Education, an international baccalaureate diploma and the Southern Association of Colleges and Schools.

Having the international baccalaureate will not only allow students the opportunity to excel in college, but also acquire skills that will think globally and compete on par with students in the first world, said Linda La Pine, director of ISP .

Besides having a high prestige academic curriculum, its facilities will offer students alternatives to develop recreational activities. Basketball, soccer, tennis, amphitheaters, swimming pools, digital libraries and language centers.

In the educational estate of the City of Knowledge schools are Issac Rabin, Balboa Academy and the Metropolitan School of Panama, all governed by international standards.

U.S. Accredited Advanced ED (Southern Association of Colleges and Schools), the Balboa Academy allows its graduates to enter U.S. and European universities recognized.

"The vision of the school is to prepare students to compete in a globalized world," said Jean Lamb, director of the Balboa Academy.

This center is governed by the international calendar, which runs from August to June, an important factor for international students.

The Metropolitan School of Panama also work with the same schedule. "The goal of this new school in Panama is to develop best practices in education for students to reach their full potential for individual development," said Hugo Ramirez, a founding partner.

On the west side of the Canal in Panama Pacific Special Area in Howard, has installed a new academic offerings for the French community: the Lycée Francais Paul Gauguin in Panama.

Although most students are French, any Panamanian may choose to study at this campus that is born of a bilateral agreement on cultural cooperation, scientific and educational signed between France and Panama, said Piere Astier, director of the Lycee Francais Paul Gauguin.

Its curriculum is approved by the Ministry of Education of Panama and is modeled on the French Ministry of Education, which opens the doors to its graduates for direct entry to universities in France.

Parents also opt for private education because of lack of security that exists for students in public schools and service continuity.

In these private schools there is a diversity of languages, while public sector student fails the verb to be in learning English, said the mother Lisset Bathy.

Only 2.5% of students studying in the particular sector (108 000 144), go to these schools, considered the most expensive in the country.

Education figures

889 - Schools individuals.

108.144 - student enrollment.

20 - average students per class.

More multinationals come to Panama

Panama continues to attract multinational companies and this article from La Prensa tells us who they are.

Machine translated from La Prensa

Three new multinational companies have chosen Panama to establish their regional headquarters. It is Germany's Bosch and Kuehne + Nagel and Spanish Puig.

Bosch provides services and technology in sectors such as automotive, consumer goods and industry. With 300 subsidiaries and a presence in over 60 countries, the company posted sales in 2009 by 53 billion dollars.

Kuehne + Nagel is a logistics service provider. It has over 900 offices in 100 countries and 55 000 employees.

Since late last year the company has its management in Panama for Central America, staying in Buenos Aires headquarters for the entire region. A month ago he received a license from the Panamanian government as regional headquarters of multinational companies.

In addition to making decisions for America, the company also has to Panama as a distribution center for the company for the entire region.

"We chose Panama for its location, opening connections, by size of business," said Ricardo Ortiz, manager of Kuehne + Nagel Sales of America, which advances the idea of the company's medium term is to expand in the country, distribution activities.

The latest company to join the list of multinational companies in Panama has been the Spanish Puig, firm in the industry of perfumes, cosmetics and fashion brands such as Carolina Herrera, Nina Ricci, Paco Rabanne and Prada, said the Ministry of Commerce and Industries a statement.

The company, based in Barcelona, annual revenues of 300 million billion dollars in 2009 and generates 17% of its sales in Latin America.

With these three companies and are 43 multinationals have set up their regional headquarters in Panama under the umbrella of Act 41 of 2007, which provides tax benefits, immigration and labor to multinationals. In addition to the local employment generated and the image as a business platform that projects, these companies often move executives to the country, people of high purchasing power who buy or rent apartments and become, somehow, the driving forces the local economy.

Procter & Gamble, Maersk, Sinopec, Cemex, BMW, Nestle, Adidas, Caterpillar and Sanofi Aventis are among the multinationals that have their regional headquarters in Panama.

The downside of not having the U.S. dollar

In a previous post I talk about the inflation Panama is seeing because of being tied to the U.S. dollar and the negative impact on peoples lives as consumer prices increase. Now we can see the other side of the coin. Costa Rica uses their own currency called the Colone and it has been strenthening against a falling dollar and that is causing havoc in the tourism industry. This article from The Tica Times explains what is happening.

Tourism Industry Battered By Exchange Rate High Colón Hits Hotels

Posted: Friday, November 05, 2010 - By Adam Williams

The dramatic depreciation of the U.S. dollar has resulted in financial crisis for many members of the national tourism sector in 2010.

Harmony Reforma

Double Whammy: The falling value of the dollar coupled with the rising cost of doing business is putting the squeeze on Costa Rica’s tourism industry. Above, an empty beach near Montezuma, on the Nicoya Peninsula.

For Costa Rica’s tourism industry, the economic crisis of 2010 is the sinking and unpredictable exchange rate.

As the U.S. dollar loses value, the colón has appreciated, hovering near the ₡500 mark during the past three months. While the stronger colón has resulted in one of the smallest increases in consumer prices in the last decade (around 4 percent so far in 2010), economic sectors that are fueled by sales in U.S. dollars, but pay most expenses in colones, are taking a beating.

One of the most important of these sectors is tourism, an industry that accounts for around 7 percent of the nation’s gross domestic product (GDP) and generates annual revenues of around $2 billion.

Last Thursday, the Costa Rican National Tourism Chamber (Canatur) hosted a presentation to highlight just how severe the damage to the industry caused by the exchange rate has been. Amid the torrent of data and statistics put forth to demonstrate the financial strain placed on the sector in 2010, one fact stood out: in a Canatur survey, 66 percent of hotels and other tourism-related businesses reported being negatively affected by this year’s fluctuations in the exchange rate.

And that might be an underestimation.

“It’s changed the entire chain of the tourism industry from one end to the other,” said Boris Marchegiani, president of the Gaia Hotel and Reserve in Manuel Antonio, on the central Pacific coast. “It’s not just the hotel part of it. It’s affected the food that we provide, which we have to pay for in colones converted from dollars, it has affected the tour operators, because they charge in dollars and have to pay employees in colones, as well as the costs of amenities and all other operating costs. Just think of any element of the tourism industry, and the exchange rate is destroying it.”

A similar sentiment was shared by representatives of the sector in all corners of the country contacted by The Tico Times this week. Given that most revenues generated by the tourism industry are in U.S. dollars, the roughly ₡70 colón decrease in the value of each dollar over the past year has resulted in often traumatic losses. For example, if a family spends a few nights at a hotel and racks up a $1,500 tab, in 2009 that translated to around ₡862,500, whereas one year later, that same amount translates to ₡757,500, or about $200 less.

Increased operating costs, which are paid in colones, have brought further financial anguish to the industry. According to Canatur, in the past four years, average operating costs have increased 11 percent,  cost has risen 31 percent and minimum salary is up 46 percent. Employee salaries, for example, are paid in colones. If an employee makes ₡500,000 per month, in 2009 that salary was worth $870. In 2010, the same wage has a value of $990. 

“The Costa Rican Electric Institute (ICE) raised the price of commercial electricity 30 percent across the board,” said Dan Wise, the owner of the Río Colorado Lodge in Barra del Colorado. “Now, with the colón increasing about 15 percent, our electric bill went up 45 percent. There was the 30 percent increase plus an additional 15 percent increase because of the colón adjustment. My power bill is now up 45 percent compared to where it was a year ago.”

Wise said that the minimum wage for his employees had also increased significantly  despite his not granting any raises.

“Let’s say a salary has gone up $50 per month for a minimum wage employee,” Wise said. “If you have 50 employees making $50 more a month, that’s an additional $2,500 in expenses per month that you weren’t paying last year. And that’s without even giving a raise. It’s brutal.” 

Potential Fallout

 

At the conclusion of Canatur’s presentation last week, Juan Carlos Ramos, the organization’s president, was asked what he thought the future would hold for the tourism sector should the value of the U.S. dollar continue to depreciate.

After a slight pause, Ramos responded:

“There could be hotel closures. There are a lot of hotels having tremendous difficulties with the exchange rate fluctuations this year. If the value of the dollar doesn’t improve soon or there is no government or bank intervention, more hotels could close by the end of the year.”

According to Carlos Lachner, president of the Costa Rican Hotel Chamber (CCH), there have already been several hotel closures in 2010, including “three or four” in the La Fortuna area near Arenal Volcano in north-central Costa Rica. Lachner indicated that many other hotels are struggling to pay debts and could also go under if the dollar fails to recuperate.

Time for An Intervention?

 

Ramos said that various tourism industry associations – including the Costa Rican Tourism Board (ICT), the Costa Rican Tourism Professionals Association (Acoprot), the Costa Rican Restaurant and Hospitality Chamber (CACORE), CCH and Canatur – have held meetings with the Central Bank of Costa Rica (BCCR) and President Laura Chinchilla to discuss strategies to reduce the impact of the exchange rate’s volatility on the industry.

According to Ramos, the discussions hinged on the idea of reevaluating the system of exchange rate bands, whereby the value of the colón is allowed to fluctuate freely between established maximum and minimum values. Fluctuations generally occur in response to the supplies of colones and dollars in the Costa Rican market, as well as other factors, such as the value of the dollar against other currencies.

The bands system, which was installed in 2006, replaced the system of mini-devaluations, which assured a daily depreciation of the colón versus the dollar in small, predictable increments. When the mini-devaluations system was installed in 1984, a U.S. dollar was worth around ₡50.

In 2010, the bands system has fallen under intense scrutiny, as dollar-based economic sectors, such as tourism and exports, have been punished by the devalued dollar and the unpredictability of the exchange rate.

“The mini-devaluations made it much easier to plan your finances,” said Jean Waller, the owner of Casa Viva cabinas in Punta Uva, on the southern Caribbean coast. “You could budget ahead of time because you knew what the value of the dollar would be. With the current system, that just isn’t possible.”

A Casa Presidencial spokesman told The Tico Times that no official decision had been made on whether the government would take action to influence the exchange rate, which is a responsibility of the BCCR (the president and board of directors of the bank are appointed by the Executive Branch).

In an interview with The Tico Times in August, BCCR President Rodrigo Bolanos said that “the Central Bank is going to keep [upper and lower] limits that have been established where they are with the hope that the exchange rate continues to remain within those bands.

“Whenever the Central Bank has to intervene to control the fluctuation of the exchange rate, it weakens the natural activity of the monetary system,” he said. “I would say that my objective is to look for a way to monitor the exchange rate in case of external economic shocks and to attempt to limit the Central Bank’s intervention in adjusting the value of colones to dollars (TT, Aug. 13).”

A Weakening Muscle

 

While economic conditions are often cyclical, the pains of the tourism sector caused by the exchange rate arrive at a time when the industry is already limping. In 2009, the ICT reported that the number of tourists who visited Costa Rica fell 8 percent from 2008. While the ICT reports a 9 percent increase in the number of tourists in 2010, the drop in the exchange rate has worked to counteract any positive impact of the increase in visitors.

“The devaluing of the dollar came at the worst possible time for this industry,” Marchegiani said. “We have been warning the government that the exchange rate could break tourism for years now, and they haven’t reacted. But it’s not only the present, it’s the future as well. If someone is considering investing in Costa Rica or building a new hotel here, who would want to invest in a country with an unstable currency? I wouldn’t recommend it to anyone.” 

As the dollar continues to lose strength, vital pieces of the Costa Rican economy are weakening, even as other sectors – such as consumer prices – benefit. But if the dollar doesn’t recover soon, the tourism industry, one of Costa Rica’s biggest economic muscles, might lose quite a bit of its punch.

Panama inflation, ouch!

With the continued decline in the value of the U.S. dollar it is expected that there will be inflation. Bernanke can't just print money out of nothing without this consequence. Panama's dependency on the U.S. dollar has it benefits, but it also comes at the expense of the insane actions by the U.S. federal reserve. Now if Panama had its currency tied to gold, where would they be today over October 2009? Gold trade at approximately $1100 an once then and today it is at $1350. That's about 20% increase in value which would mean the cost of everything would be going down 20% instead of up 4%. Did you know that many pundits are predicting gold to surpass $2000 this year? What does that mean for inflation in Panama? Ouch!

Machine translated from La Presna

Consumer price index rises 4.1%

Raul A. Bernal
rbernal@prensa.com

Panamanian inflation continues to rise and according to experts, the trend is to continue.

The latest report by the Comptroller General of the Republic shows that the consumer price index (CPI) last October shows an increase of 4.1% compared to October 2009.

The rise somewhat disagrees with the predictions of the Ministry of Economy and Finance to talk about the year closed with a 3% inflation after the increase in prices of goods and services, while economists say that 2010 will close above 4%.

The CPI in October 2009 against similar shows increases in all divisions. In other goods and services is an increase of 6.8%, transport 5.6%, clothing and footwear, 4.3%, food and beverage, and health 4.0%, 4.1%.

The segments of furniture, household equipment and routine maintenance of the house rose 3.9%, housing, water, electricity and gas, 3.4% education, 2.2% and leisure, entertainment and cultural services, 2.1%.