Panama Investor Blog

Noose to tighten on U.S. citizens with foreign bank accounts

The Obama administration is making it clear that they will do everything they can to keep money from the leaving the country and this latest maneuver may just end the ability for U.S. citizens to use offshore bank accounts entirely. Not because there will be a law against it, but because the penalties imposed on foreign banks for refusing to disclose beneficial account holders will be so punitive that no bank will want any U.S. citizens as customers.

You do not need a crystal ball to know that the future for the U.S. taxpayer with more than most will be "asked" to pay more than their fair share in order to spread the wealth through the administrations tax and spend policies. If banks won't accept U.S. clients then all monies held outside the U.S. would have to be repatriated. 

Bob Bauman gives a good overview of the latest attack on individual sovereignty on his blog.

Excerpt;

As is well known, for several years offshore tax havens and Americans who dare to exercise their right to engage in legal offshore financial activity, have been under continuing attack by left wing, redistributionist Democrats, including then senator, now President Barack Obama.

Now, with Obama's personal blessing, congressional Democrats have introduced a radical legislative proposal that would give the U.S. Internal Revenue Service (IRS) new weapons to "detect, deter and discourage" the use of foreign bank and other financial accounts that might be used for avoiding U.S. taxes.

The questionable basis for this latest leftist assault on Americans' personal and financial privacy is the unproven allegation that millions of Americans are evading billions of dollars in taxes by hiding cash and activities offshore.

Read the rest of the story here...

Dirty Diamonds in Panama?

Last month I posted several articles from the local press praising the opening of a new diamond center here in Panama. On the surface it looks like another good thing to come to the country, but according to an article in International Relations and security network, it could turn into another black eye for the country. The article goes into detail about the illegal diamond trade in Latin America and the connections to Chavez and Iran.

Excerpts: Leaders from the global diamond trade met in Panama City on 13 October to persuade President Ricardo Martinelli to establish a tax-free zone for Latin America’s first regional diamond exchange. The lobbyists won over Martinelli, who by 19 October had publicly committed to support legislation in the Panamanian National Assembly designed to give free trade zone status to the Panamanian Diamond Exchange (PDE).

Panama will also work to pass the necessary legislation to join an international diamond trading regulatory regime known as the Kimberley Process, Martinelli said.

But observers worry that Panama’s role in laundering illegal diamonds mined in South America might only grow as the Central American country becomes a regional hub of the Latin American diamond trade.

Read the rest of the story here...

Credit drives construction

Construction continues to grow in Panama mostly due to the increase spending on public housing and infrastructure projects by the state according to La Prensa.

La Prensa

Domestic credit to private sector amounted to 21 thousand 559 million dollars by the end of August, an increase of 3.3% compared to the same period a year earlier.

  Credit for construction maintains a sustained growth driven by increases in the rows of public housing, which through August totaled $ 1.172 billion, an increase of $ 408.4 million or 53.5% over the same period in 2008, when it stood at $ 764 million, according to the Superintendency of Banks.

  Last December, these loans were $ 995.8 million, which analysts say means that the bank maintains its policy of paying for construction projects in progress.

  Banks are more cautious yes to fund new projects, which do not have a significant percentage of sales, according to various industry sources.

  In the field of infrastructure loan portfolio reaches $ 268.18 million, an increase of 77.9%, compared with August last year.

  Meanwhile, mortgage financing has a positive momentum driven by increases in home mortgage lines (10.5%) and mortgage store (10.6%).

Cero Punta, the toxic capital of Panama

It is unfortunate that one of the most beautiful areas of the country is also one of the most toxic according to this article in La Prensa. " "In Cerro Punta people bathe daily with pesticides, exposing themselves to risk predictions reserved" he said.  Carranza concerns that when people use agrochemicals is exposed to large doses of these hazardous substances."

And what of the people who consume these products? "Among the pesticides that are seeking to ban lindane, paraquat, malathion and carbofuran, widely used in agricultural production in the country, especially in the highlands of Chiriqui, from which over 60% of vegetables and vegetable consumed in Panama."

According to the article only 5% of the vegetables in Panama are organic because the farmers don't want to spend the money needed to produce them. And of course the consumer is not educated to the dangers in of eating these contaminated products and if they were, would they be able to afford them?

Ministry promises "fair" prices for ROP land

The battle over ROP land along coastal areas has heated up as many gathered at the ministry yesterday to air their concerns about the new law. Although there are many details involved, the bottom line for the state is money and how much they can  charge per hectare to those who want to retain and title the land. For many foreigners who purchased ROP from local farmers this comes as a complete shock as they did not expect to have to pay more than they already have. For many it could mean the end of their dreams of retirement in Panama as they may not have funds enough to buy the property from the state. Many investors who bought ROP as speculation may also find it difficult especially in these tough real estate times. Although the Ministry of Finance promises to be fair in the pricing structure, one has to wonder what "fair" means to them. If they want to charge fair market value for the properties it cold be devastating to those who have already paid once for the property. If the ministry does make the payment small so as not to adversely affect the local farmers they will surely put in place an evaluation for the property that will be much higher in order to begin taxing the property on a yearly basis. After all, this is the real reason ROP land is being titled, IMO. In any case, we should find out pretty soon what the price structure will be.

La Prensa:

José González Pinilla
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  The draft law regulating the title, in coastal areas will be modified.  Deputy Finance Minister, Dulcidio Guard announced yesterday that presented to the Assembly a draft reform package, which had passed the first debate, which has been questioned by locals and investors.

Among the changes is the establishment of a date for conducting a public consultation in order to pass a table of prices for the purchase of land with possessory rights.

  The price table is the main concern of local people and investors, who yesterday attended a forum organized by the Ministry of Economy and Finance (MEF).

  This event was attended by investors and retirees of the United States, Canada and other countries, who defended their right to the land owner who bought in the form of possessory right in coastal areas.  "I want to know how much more I have to pay," she said.

 As the land have no title but possession rights, must be purchased at State, Publius said Cortes, director of the Cadastre of MEF.

  For foreign investors, most have bought land with possessory rights to the locals.

  Cortés explained that in order not to affect them, the MEF aims to recognize the purchase by foreigners as well as the years locals have lived on the site, so that prices are fair.

  During the forum, Vice Minister reiterated that seeks to stop the land grab.

  A report by the Directorate of Land Registry points out, for example, that in Bahia Honda in Veraguas, some 700 hectares with possessory rights were bought at bargain prices: a one cent per square meter.

Panama education ranked near the bottom in Latin America

Panama spends a great deal of its budget on health and education, but unfortunately it does not pay off. This was made acutely aware by a recent study by UNESCO. Panama ranked 8th out of 11 countries evaluated. Who is to blame? Certainly it is the qualifications of the educators as well as the acceptance of cheating as a way to get ahead in this society. Cuba's ranking at the top may make some point to that communist country as the way to a better future, but I believe it is  better to be stupid and free than smart and enslaved!

La Estralla

Most Panamanian students have serious shortcomings in math and Spanish, that's what threw the second Regional Comparative and Explanatory Study of the Quality of Education in Latin America (SERCE) report released yesterday by the Ministry of Education.

The evaluation was organized by UNESCO, was practiced at the national level to about 13.011 students in third and sixth grade during 2005 to 2007.

  Arturo Rivera, National Director of Educational Evaluation, explained that the shortcomings are more noticeable in mathematics where only 4% of students managed to get the maximum points, but another 8.5% did not reach the minimum required because they generally do not dominate the geometry and find it difficult to solve math problems with two variables.  In Spanish, the main obstacle is the understanding of reading, only 6% of students obtained the highest level of qualification, but 12% did not reach the minimum.

 Similarly in science, just get the 0.77, in some countries competed this specialty, but also left Panama favored. Rivera recommended increased experimentation in the classroom.
 Panama eleven countries reviewed was the eighth, leaving as one of the worst.

Cuba won the first place, followed by Costa Rica, Chile, Argentina, Colombia, El Salvador and Peru.  Only three countries scored below such as Panama, Guatemala, Nicaragua and Dominican Republic.

  There are good schools
. El Colegio Brader (particular) and Nicanor Villalaz school located in Los Santos were among the schools that got results. . His students took higher scores than the averages for Latin America.. The assessment also includes the views of teachers teaching which calls for greater support.

  Lucy Molinar, Education Minister said the results do not surprise anyone, since it is well known, but they are an opportunity to identify areas that need reinforcement.

  Some plans included is incorporated into the bid book to those texts used in schools whose performance in the test was satisfactory.

  In addition teachers will strengthen in the areas of Spanish, mathematics and science through summer courses.

  Rivera added that the study found that teachers who use the dictionary every day in classes that their students have achieved high returns and this feature is achieved within the Republic. In addition it was determined that teachers require to memorize definitions math, "math is practice not theory," Rivera countered.Another important variant is that there must be a school climate conducive to the normal development of learning.

"I'm so sad," said Aixa Rodriguez, president of the parents, who ask what can we do?

  Rodriguez hopes that teachers be trained so that raising the quality of education.

  He added that some teachers were excused because students did not know the system, that argument was not accepted as valid.

$1000 makes a $100,000 tax bill disappear

Such a deal! For those of us who live in Panama, stories such as these come as no surprise and most of the populace just accept it as the way things are.

From La Prensa

The lack of controls to access the database of the Department of Revenue (DGI) left a window open to alter the accounts that taxpayers have with the state.

  The CEO of Revenue, Luis Cucalón, said on arrival at the institution in July found a database vulnerable to the discretion of some officials to "downgrade accounts and alter them, possibly in exchange for money."  In the DGI had created a barter system, "Give me a thousand dollars and 100 thousand U.S. dollars delete you and no one notices.  The way to know who that was incurred in reviewing the motions of the 620 staff of the DGI by a certain date, and no time to do that, we must be realistic, "he said Cucalón.

"As no trace of the transaction, it is difficult to test this situation," he said.

 In this context, the DGI now justifies the direct recruitment of the Panamanian company Risco, SA, which will strengthen the security arrangements for a payment system of 54 thousand dollars.  According Cucalón no time to wait six months a bid.

  Under the previous administration bought two technology programs, a collection and control "FISCO massive", with a total value of half a million dollars, which were financed by the IDB.  But according Cucalón, these do not work.

  Indeed, currently working with the test program "FISCO massive".

  Gisela Alvarez de Porras, former head of the DGI, said the system has internal accounting controls to detect data manipulation.

  However, Cucalón said there is no real audit method for calculating what they could have been stopped charging $ 200 million in recent years, according to the experience of analysts.

According to Porras, is foolhardy "to refer to such a large sum and make it as true."  "I assume that the DGI has no management information at this time".

Deposits in Panama banks grow 25% to $15 billion

There are several factors working in favor of Panama banks attracting such a significant increase in capital. Much of it is  probably a pull out of investments and into cash as the economy continues to worsen. Also Panama has still not signed on to information exchange with the OECD and Panama banks are a lot safer for peoples of Latin countries with leftist rulers.

1285975 EDITH CASTILLO DUARTE EDITH CASTILLO 1285975 DUARTE
[email protected] [email protected]

 Even in crisis, Panama is an attractive place for foreigners.  Abstractions or private foreign deposits recorded a balance of 14 thousand 996 million dollars by the end of August this year, an increase of 25% compared to the same period of 2008.

  This substantial increase, but surprised analysts, according to bankers is the sign that confidence is returning and that markets have stabilized.

  Panama also is benefiting from being the only country in the region which retains its growing economy.  70% of these deposits comes from Latin America, especially Venezuela and Ecuador, two countries with greater instability in the continent.  Financial integration of the system allows greater access to external funds.

Over 17,000 new business registered in Panama this year, but....

Considering the population of the country this seems like a large number of new businesses and it indicates a strong entrepreneurial spirit among the inhabitants. It includes every type of business from the small kiosk to the large conglomerates. As the article points out, the number of new businesses registered is greater, but their capital investment is 50% lower than in 2008, reflecting a slowing  economy. The portal for registering companies is seen as a major advantage in the registering of the companies, but the ministry of commerce says that it has canceled over 4000 permits due to lack of payment or false data provided during registration. I sounds like some folks in Panama are using the registry portal as they did the 911 emergency number just to agitate the state.

La Prensa

Ettrick light
[email protected] [email protected]

  Through the electronic portal PanamaEmprende this year there have been created 17 thousand 696 new companies with investment plans that reach a one billion 235 million dollars.

Panama is the province that is leading the charge in relation to the creation of new enterprises.  It is followed further back Chiriqui and Colon.

  The operating permits processed during the first nine months of 2009 are higher than those recorded last year, but the amount of reported investment fell 49%.

  Perhaps this answers the precautionary climate that prevailed in making business decisions during the past year due to the global crisis.

For William Gonzalez, director general of Internal Trade, Ministry of Commerce and Industry (Mici), an agency that administers PanamaEmprende, the drop in investment was declared last year as it processed the entry of larger companies with greater capital.

Gonzalez says the tourism sector is one of the most dynamic features. Several companies offer the service of tourist guides and tour operators have requested notice of operation to meet demand that is generated in the market.

  Some industries also have new members. "This shows that certain businesses are relocating," said first deputy chairman of Union of Industrialists, Ricardo Sotelo.

The employer believes the new industrial development bill currently being discussed in the National Assembly will help this sector to create new businesses and jobs.

 Cancellation

  While generating new business, Mici has also canceled operating permits.

  To date, the institution has canceled  4,335 operations for various reasons.  Among the most frequent violations is the registration of false information in the system.

 Cancellations are also related to clarification of the data, because sometimes there exist in the system business registrations which never began operations.

Understanding the new Panama property taxes

The new Panama tax laws #49 were implemented in September and I have been waiting for someone with a good understanding of Panama Tax law to give me a write up in English. The law firm of ICAZA,  Gonzalez-Ruiz & Aleman have done a great job of doing it. I have used this law firm for about 10 years and very reputable and capable.

The bottom line is that the government is moving to tax all property in the country and although there have been tax exemptions for improvements on the land (homes and other construction) as an incentive to build and buy, the land itself is not exempt and will be subject to a rather high mil rate by comparison to other countries, both in the first and third worlds. Although the income tax rate on the sale of properties has been clarified and lowered it still is significant when coupled with the 2% transfer tax at the public registry. Like countries everywhere in the world Panama has determined that property taxes are the easiest and most efficient way of generating revenue for the state.

Personally I abhor this kind of tax for two reasons. First of all, what happens if you don't pay the tax? Usually your property can be sold by the state to pay it. Although I have not seen this in the Panama tax code yet, if it can happen then you really don't own the property and are in essence just leasing from the state. Don't pay the rent and you get thrown out! Secondly it becomes very easy for the government to increase the mil rate as they find they need more revenue which is ALWAYS the case. In other words, once the camel's nose is under the tent, he will soon be sleeping with you.

This is a PDF file of 6 short easy to understand pages.

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