Panama Investor Blog

White House Offers ‘Ridiculous’ FTA Excuse

Remember that Panama has signed the tax exchange agreement with the U.S. in "hopes" that they will get the free trade agreement, but it looks as though this was just a carrot dangled and may not accomplish the desired results. From the Enterprise blog:

In a hard-hitting editorial, the Washington Post derided the Obama administration’s “equivocation” over the pending Colombia and Panama free trade agreements (FTAs). It quoted White House Spokesman Robert Gibbs as claiming that the reason the president won’t be sending up the FTAs any time soon is that (even in the new Republican-controlled House in the next Congress) “they don’t command majority support.”

The Post is too polite to say it, but Gibbs’ statement is patently false and a cynically deceptive explanation. During and since the 1990s (even with Bill Clinton, whom they detested as president) between two-thirds and three-quarters of House Republicans could be counted as supporting new FTAs. In the new Congress, incoming Republican Ways and Means Committee trade leaders, Representatives Dave Camp (R-Michigan), and Kevin Brady (R-Texas) have vowed to move all three pending agreements—Korea, Colombia and Panama.

Doubters regarding the votes for Panama and Colombia refer vaguely to alleged anti-globalization, anti-trade attitudes of the incoming Tea Party freshmen.  No doubt a few new Republicans will be trade skeptics, though more from their geographic base (Southern districts still dependent on textile manufacturing) than from Tea Party dogma. Ways and Means Committee Chairman Camp stated recently, however, that he had canvassed a number of these freshmen and had found no large-scale animus against trade.

Interestingly, also, out of nowhere, in her letter to Republican freshmen, Sarah Palin not only espoused free trade as a principle but also urged the new congressmen to support all three pending FTAs.

With a 242 majority, House Republicans could drop 20 or so votes from their caucus and still prevail on the FTAs, and this doesn’t count the remaining members of the New Democratic Coalition, who have expressed support for the agreements (the NDC lost 20 of 70 signed-up members).

The bottom line is that no one can force the president to send the two FTAs for a congressional vote—but the administration should not be allowed to hide behind a trumped-up, “ridiculous” excuse.

Panama denies WikiLeaks report of canal trouble

Wikileaks, noooo problem, just politics!

From Yahoo news:

Updated Fri Dec 24, 2010 3:08am AEDT

Panamanian President Ricardo Martinelli says he had total confidence in the expansion of the critical Panama Canal, denying it was a "disaster," as a US ambassador said in a diplomatic cable released by WikiLeaks.

"We are here to show our support for all the work that has been done to date by the Canal Administrator and his entire team. This is a project that will benefit the country and the entire world," Mr Martinelli said in a statement issued after a visit to the site.

His comments were the first government reaction to a leaked diplomatic cable in which then-US ambassador to Panama Barbara Stephenson described the vice president's deep concerns over the project.

According to a January 2010 memo, Vice President and Foreign Minister Juan Carlos Varela told the US representative: "The canal expansion project is a disaster."

"In two or three years, it will be obvious this was all a failure," he said, adding he was worried about the financial stability of the consortium expanding the canal.

Ms Stephenson also reported that Mr Martinelli himself had "grimaced" when asked how the project was going and had indicated he was worried the construction bid had been tipped to a group that included the canal administrator's cousin.

An international consortium, led by Spain's Sacyr, won a $3 billion bid in 2009 to expand the canal's locks.

Wikileaks a diplomatic "disaster" for Panama

Things have not been going very well for the Martinelli administration this past month and the leaks from the U.S. embassy are not making it any easier.

This from BLOOMBERG

Panamanian Vice President Juan Carlos Varela called the Panama Canal expansion a “disaster” after a group led by Spain’s Sacyr Vallehermoso SA won a $3.1 billion contract to accommodate larger ships, a confidential U.S. diplomatic cable said.

The cable, released by WikiLeaks and published today in Madrid’s El Pais newspaper, said that Varela expressed concerns that Sacyr is in “deep financial trouble” and may not be able to complete the work.

“The Canal expansion project is a disaster,” the cable cited Varela as saying at a lunch with U.S. Ambassador Barbara Stephenson on Dec. 29, 2009. “In two to three years, it will be obvious this is all a failure.”

The ambassador’s office had “provided relentless advocacy” for Bechtel Group Inc., the largest U.S. engineering company, in its failed bid to win the largest contract for the $5.25 billion canal expansion, according to the cable.

Sacyr is working with Italy’s Impregilo SpA to build a third set of locks that will allow bigger ships to traverse the canal by 2014. The contract was awarded in July 2009.

The El Pais article had no response from Sacyr on the cables. In August, the company called the canal bidding process “exemplary,” according to today’s El Pais story. Calls and e- mails by Bloomberg News seeking comment from Sacyr and Varela’s offices outside of business hours weren’t returned.

The Panama Canal Authority, in an e-mailed response to the article, said as the waterway’s operator it “shields” itself from any outside pressure.

Expansion of the 80-kilometer (50-mile) canal, which connects the Pacific and Atlantic oceans, remains on schedule after heavy rains caused the waterway’s first closure in more than 20 years, Alberto Aleman, the canal’s chief executive officer, said in an interview on Dec. 13.

Chavez loses $8 Billion debt battle to Panama Corp.

A much deserved judgment against the dictator may cost him all Venesuela assets in the U.S.. Got to love it!

Venezuela leader loses long bond debt battle

By PAUL THARP

Last Updated: 4:41 AM, December 18, 2010

Posted: 11:37 PM, December 17, 2010

After a six-year legal battle, Venezuela strongman Hugo Chavez finally struck out in federal court this week and must honor an $8 billion bond debt his government ran up -- or face seizure of his 14,000 nationally owned Citgo gas stations in the US.

The flap began when Chavez was sued in 2005 by a group of Ohio investors who claimed he and his government refused to make payment on quarter-century-old bonds, despite certification and guarantees by Venezuela's oil-rich Treasury.

The Chavez administration started a dirty-tricks stonewalling campaign to cheat investors, a federal lawsuit charged at the time. After two years of litigation, Federal Judge John Holschuh agreed with the investors and ordered Venezuela to make good on the $6 billion in bonds -- plus interest.

Instead of paying, Chavez mounted a counter-attack and, working his way through at least five law firms, spent $40 million and tied up the courts for four more years in a bitter -- and ultimately unsuccessful -- appeals fight.

That appeals battle ended this week when a decision handed down by the Sixth Circuit Court of Appeals shut the door on Chavez's appeal. And it was unanimous. All 23 judges in the appeals court gave a thumbs-down to Chavez's effort to move the case up to the US Supreme Court.

"Mr. Chavez is now over a barrel," said David Richards, a lawyer and managing director of the Ohio investment group Skye Ventures. "With the entire Sixth Circuit unanimously against further appeals, the US Supreme Court won't even think of taking on the case," he said.

A lawyer for Venezuela, James Wright, didn't reply to requests for comment.

Skye Ventures had done routine due diligence on the securities before buying them and obtained a 54-page report from Venezuela's then-Attorney General Marisol Plaza that they were guaranteed by her country's oil-rich Treasury, court papers show.

But when the investors later sought to redeem their bonds, Chavez abruptly fired AG Plaza -- a close ally and friend -- to discredit her, court papers said.

Chavez replaced her as AG with another friend and ally, Gladys Guttierez, who issued a new three-page report calling the bonds fraudulent and not guaranteed by Venezuela. Based on forensic evidence, the judge tossed her report.

Skye's 50 investors own about $1 billion of bonds, including interest -- nearly 13 percent of the $8 billion now owed on the bonds.

The rest is owned by a Swiss investment group registered in Panama, Venospa LLC, which earlier had joined Skye's suit but was directed by the judge to file its claims separately.

Richards expects a formal order in the coming weeks to start seizure actions on Venezuela's assets in the US. They include 14,000 Citgo gas stations, three Gulf Coast refineries and a fleet of oil tankers docked in Houston.

Investors at Venospa LLC likely could seek seizures. Its officers couldn't be reached for comment.

Read more: http://www.nypost.com/p/news/business/chavez_fuel_tab_e4ZIy9G4T0giblqInuldZM#ixzz194JiA0Vw

Why dual citizens are worried about the tax treaty

Although it is not clear just why the Panama ambassador to the U.S. would resign so suddenly, it comes at a time of the signing of the tax exchange agreement and many speculate it is related. Many Panamanians in high level government positions as well as the private sector are concerned about the ramifications of the treaty both on foreigners and Panamanians, many of whom have dual citizenship.

Few dual citizens file tax returns in the U.S. even though the U.S. law states that failure to do so can be penalized with up to five years in prison. Some might say that this would not be put into force, but the fact is that failure to file was what landed Blade star Wesly Snipes in the pen.

Even though these Panamanians may pay taxes in Panama, they must also file tax returns and other documents with the IRS that go beyond just a statement of income such as bank account holdings and foreign corporation in which they are shareholders. Along with that much sought after privilege of holding dual citizenship comes the real possibility that they can be charged with tax evasion and other crimes for which until now they were shielded by Panama's privacy laws.

The fact is that the new law will criminalize many dual citizen Panamanians while at the same time putting a black mark on Panama in the eyes of anyone considering banking here. The country has broken its commitment to protect the privacy of depositors in Panamam banks. If they have thrown their own citizens into such a situation they certainly will not think twice about foreigners. That is already the case with U.S. citizens, but many other nationalities will think twice before banking here as they may be next on the tax information exchange list.

How can Panama solve this crisis while still signing the tax information exchange agreement? It would seem more prudent and fair to make the agreement effective only from the date it is signed or sometime in the future as all other tax exchange agreements have been. By going back three years it opens up Panama to all kinds of potential problems that could be avoided simply by eliminating the retroactive aspect of the agreement.

Dual citizen Panamanians can begin filing their tax returns along with disclosure of all their holdings and if foreigners want to continue to use Panama banks for their funds they may do so and those who want to leave quietly may do so without the concern of being prosecuted for failing to report a bank account in the past.

Some will say that they deserve what they get for not obeying the letter of the the law, but I contend that most are account holders for the protection of the money they have paid taxes on rather than trying to evade taxes. Under the current U.S financial situation and the litigious state of that Union, there is no question that keeping ones hard earned savings hidden is prudent and even necessary for future survival. To make criminal out of good people who are trying to protect what is rightfully theirs is un-justified IMO. With the new death tax being implimented,  U.S. citizens and Dual Citizen Panamanians can look forward to paying 35% of their assets to the state when they die as well. In reality it waybe that the prized dual citizenship is more a liability than a benefit.

Another mega project for Panama

Superman had Metropolis and Panama now has a Megalapolis (hotel) and now a Panatropolis  advertised as the "global hub of the new world".  All are meant to sound big and on the normal scale of things they are. I first heard about this project from one of the developers about 6 years ago. Back then it struck me as a viable idea because they were putting in showrooms similar to what they have in the Colon free zone so that buyers would only need to fly into the International airport and shuttle over to the nearby showrooms to make their purchases. This would save a lot of drive time traveling to Colon where there are few hotels and restaurants to accommodate clients. Of course this will further dash the hopes of Colon ever becoming a vibrant city as been hoped by so many administrations.

From this video we learn that the Panatropolis is to encompass residential and commercial along with hotels, a golf course an many other amenities. A virtual city will be built near the Tocumen international airport. Many things have changed since that first look such as a world economic recession and the announcement of about $15 billion in infrastructure into the country. It will take a number of years to build this project out and only time will tell if the idea for a Panatropolis is a good one. See youtube video here.

 

Why did Panama do it?

Why did Panama enter into a what appears to be a one sided tax information exchange with the U.S.? These and other questions were put to Panama's Vice Minister of Economy and Finance by my friend Bob Bauman at a meeting late this afternoon. Here is his report.

Why Did Panama Do It?

Bob Bauman (December 3, 2010)

REPORTING FROM PANAMA CITY, PANAMA:

The official answer to why the government of the Republic of Panama abandoned many decades of bank secrecy and signed a Tax Information Exchange Agreement (TIEA) with the United States was provided to me this afternoon in a personal interview with Hon. Frank DeLima, Panama’s Vice Minister of Economy (shown below).

I spent more than an hour in his office at the Ministry. In a candid talk Sr. DeLima said that President Ricardo Martinelli had made this decision in order to advance Panama’s economic world standing and to shed the blacklist status arbitrarily assigned the country by the U.S. and the OECD.

Off the Black List?

One of the major and repeated criticisms of Panama has been its (until now) iron clad law protecting financial privacy and bank secrecy, including a refusal to share tax information.

I also learned that Obama administration officials have suggested that signing the TIEA with Washington will go a long way towards achieving U.S. Senate approval of a 2007 U.S.-Panama Free Trade Agreement, a business deal very much wanted by Panama business interests.

Until now President Obama has given lip service support for the Panama FTA, but has done little to overcome opposition from U.S. unions and anti-offshore leftist politicians such as Michigan Sen. Carl Levin.

Panama in Control?

Mr. DeLima was joined in our meeting by Luis Alberto Laguerre, one of the official TIEA negotiators with Washington. Both insisted that the TIEA as signed, and the accompanying declaration, gives the upper hand to Panama in administering its terms.

However, a literal reading of both documents does not exactly support that claim.

I was told Panama rejected IRS demands to allow IRS agents to be placed in Panama and conduct investigations. That will be done only by Panamanian officials who will control each tax probe.

DeLima also said that independent of the TIEA, Panama has decided administratively to allow all persons subject to IRS request for tax information to be notified of that fact. He also suggested that the requirements for the IRS to submit specific names, particular bank accounts and bank identification would be strictly enforced.

No Appeal

However, unlike procedure under a similar TIEA between the U.S. and Switzerland, Panama’s rules will not permit a judicial appeal by those subjected to an IRS information request.

“I can guarantee that no IRS ‘fishing expeditions’ with lists of names will be allowed,” DeLima insisted.

He added: “I do not think that anyone in Panama who is obliged to comply with US tax laws and who has done so has anything to worry about with this treaty and the way in which we will enforce it.”

The Minister said that while some changes in Panamanian law may be needed they will be limited to assuring beneficial ownership of all legal entities is known and available to the government, including a requirement that owners of bearer shares must be known.

I told Mr. DeLima that many astute Americans were well aware that the PATRIOT Act and other laws had abolished financial privacy in the U.S. – that they looked to Panama as a haven not for tax evasion, but for true financial privacy.

To that observation the Minister had no response.

Public Relations

Asked if the TIEA was in fact a “one-sided deal” that benefited only the U.S., the Minister admitted that the IRS has more to gain since Panama’s territorial tax system does not tax offshore earning.

Nevertheless, DeLima insisted that the increased world standing that Panama will supposedly now achieve, together with the possible approval of the US-Panama trade agreement, is worth abandoning bank secrecy.

“The only ones who should be disturbed are the law breakers,” he insisted. He predicted no real economic harm to Panama from the TIEA.

We should know soon enough whether President Martinelli’s TIEA gamble pays off.

In any case, this is an historic change of course for Panama — and a victory for the tax hungry major deficit spending governments led by the Obama administration.

THE MADNESS OF A LOST SOCIETY- Must see video

This video is extremely powerful and left me numb for a long time after watching. This is what happened on Black Friday just  last week and is a sample of what the U.S., if not the entire world, may experience in the near future. The U.S. leadership is taking us straight down this road by devaluing our currency and when people can no longer buy the basics they will react even more insane and violent than when they are trying to buy cheap crap from China that they don't need. I encourage all of you to watch this and to take individual action to protect yourselves and your families from what you may have to experience some day. May God help us! Hat tip Ty b. For some important advice on what you can do to prepare, pay a visit to this interesting website.

 

Tax (IN) Justice Networks does not like the Tax treaty

The Tax Justice Network is a group that works towards global tax transparency which of course means higher taxes for all.Here is there mission statement: The Tax Justice Network (TJN) is an international, non-aligned coalition of researchers and activists with a shared concern about the harmful impacts of tax avoidance, tax competition and tax havens. www.taxjustice.net

Their name is a complete misnomer IMO which is why I always refer to them as the Tax Injustice Network. I was happy to read their comments regarding the new treaty because they don't like it. If they don't like I am sure I and many of my readers will like it. I have arranged a meeting between my friend Bob Bauman and the Vice Minister of Economy and Finance, Frank De Lima, this afternoon and will be reporting on the details tomorrow, so stay tuned. Hopefully we will get all the facts straight, if that is possible in Panama.

Here is some excerpts from the Tax injustice folks and you can get the whole post here.

"An interesting aspect of the US-Panama TIEA is that Panama is not obliged to provide information if the US could not provide such information in comparable circumstances. It is well known that the US has little ability to determine the beneficial owners of corporations organized in many US states, notably Delaware, Nevada, and Wyoming (Wyoming, like Panama, allows bearer shares).

The TIEA requires Panama to adopt legislation banning bearer shares and giving the Panama government the power to get bank and fiduciary information. But there is no comparable obligation on the US. So Panama will have an easy “out” if the US were to ask for information on beneficial owners."

Looks like another smokescreen. And our correspondent also notes something that we have long been complaining about:

Of course, the TIEA, like the Swiss version, basically requires only exchange on request, with the requesting party having to provide so much information that few requests can be made (to quote myself, “you have to know what you are asking for before you can ask”).

This OECD-styled "on request" arrangement, by appearing to deliver transparency while probably delivering very little or no transparency, will probably do more harm than good.

Read more about this organization and their take on the treaty here.

 

From the U.S. department of Treasury regarding the Tax Agreement

Here is some additional information rpovided by the U.S. government website on the tax treaty. There is an additional document called the U.S. Panama joint declaration and the Tax agreement you will find at the bottom of the treasury web page. The links are to down load PDF files. Below is information from the U.S. treasury website.

 

November 30, 2010
TG-982

U.S., Panama Sign New Tax Information Exchange Agreement

WASHINGTON – In a ceremony at the U.S. Department of the Treasury today, Treasury Secretary Tim Geithner and Panamanian Vice President and Minister of Foreign Affairs Juan Carlos Varela signed a new tax information exchange agreement (TIEA) between the United States and Panama.

"Today, we are ushering in a new era of openness and transparency for tax information between the United States and Panama" Secretary Geithner said.  "This bilateral agreement to provide for the exchange of tax information between our two countries reflects the commitment of the United States and Panama to the importance of transparency of tax information."

Upon entry into force, the new TIEA 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 TIEA will permit the United States and Panama to seek information from each other on all types of national taxes in both civil and criminal matters for tax years beginning on or after November 30, 2007.  Information exchanged pursuant to the TIEA shall be used for tax purposes, although the information may also be used for other purposes as permitted under the the provisions of the Treaty on Mutual Legal Assistance in Criminal Matters between the United States and Panama as long as the tax authorities of the country providing the information consents to such use in writing.  

The full text of the TIEA and the TIEA Joint Declaration can be viewed at the links below.

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LINKS

• U.S., Panama Tax Information Exchange Agreement
• U.S., Panama TIEA Joint Declaration