Procedure:
After notarizing your driver’s license, you must go to the “Ministerio de Relaciones Exteriores,” which is located on the bottom floor of Plaza Edison, on the corner of Via Brasil and Tumba Muerto.
• a.Get in line at the Ministerio de Relaciones Exteriores and tell them you need your notarized copy of your driver’s license to be authenticated by them.
• b. They will give you a slip to deposit $2.00 at the Banco Nacional de Panama. In addition to those $2.00, you must purchase from Banco Nacional 2 one dollar stamps (“estampillas,” they are pinkish). The stamps can be purchased from the same bank teller with whom you deposit the $2.00. The Banco Nacional is also located on the ground floor of Plaza Edison (Insider Tip: In order to avoid standing in line twice, go first to the Banco Nacional de Panama and fill out a deposit slip yourself in the name of “Ministerio de Relaciones Exteriores” and deposit the $2.00 and purchase the 2 one dollar stamps.)
• c. Bring the deposit slip and stamps back to the Ministerio de Relaciones Exteriores and hand them in to the desk. I was told to return in 3 hours to pick up the authenticated document.
• 5. Now you are ready to go to the Sertracen office in Albrook. Remember to bring all your documents! To get to their office, turn right before El Rey (after the turn to the Albrook Airport), and make your first left, where Union Fenosa is located. Follow that road for a minute or two and you will see the office on your right. There is a little map on their website: http://www.sertracen.com.pa/
• 6. Go into the office and tell the individual that you are there to get your Panamanian license and that you have a foreign one. They will go over your documentation, conduct a hearing and vision test, and voila, you can drive legally in Panama after staying for 90 days! The cost is $20 for the license and $20 for the hearing and vision tests, totaling $40.

-If you own your vehicle, basic liability insurance must be obtained.

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More than 100 American banks have been closed by regulators between 1 January and 15 October 2009; another 400 banks have bad assets in excess of net assets and are teetering. They have not been closed because the FDIC is woefully underfunded and can not ensure the deposits represented by these banks. Otherwise, they would be gone. Smart Americans are looking for a safe place to put their money, and quickly.

So it appears that the Mongolian banking system is going to see huge influx of American money seeking safe haven… But let’s take a look at Panamanian “luck” first. The banks in Panama have not suffered in this crisis for precisely the same reason that Mongolian Banks have not suffered, no exposure. No exposure to the greed that permeated the global banking system; no exposure to ridiculous Ponzi schemes; no exposure to borrowers who had absolutely no ability to make good; no exposure to borrowers who had no ‘skin’ in the game.

Understand that Panama has no central bank to act as a lender of last resort.  Since there is no one to “bail them out,” Panama banks are still conservative in their approach to business. They create only safe, well-collateralized, properly documented loans. The financially deadly concepts of subprime mortgages, 10% down, 5% down or even No Money down loans, and NINJA (No Income, No Job or Assets) loans are concepts that do not exist here. Panama banks still require a 25% down payment from Panamanian residents and 30% from non-residents. They simply have not created for themselves the same types of risks that are causing the global financial problems.

That’s not to say that these good outcomes were strictly the result of market action and corporate prudence. Panama’s National Banking Commission ensures depositor safety. Monthly audits detect problems before they get out of hand.  The NBC is empowered to deal with potential problems and to direct banks actions to remedy any situations. Banking superintendent, Olegario Barrelier, told Reuters “At the moment our banks are good, very good. They are healthy, they are liquid, capital is nearly double what is required. They are being financed by local deposits and are not dependent on external financial markets.” He said the global crisis would eventually slow Panama’s economy rather than create havoc in the financial system.

Panama uses the U.S. dollar; there are no exchange controls to prevent the ready flow of monies into or out of the country; there is a stable government; the Canal and the Colon Free Trade Zone encourage free trade. Panama has a top notch telecommunications system, an excellent legal framework that allows 100% foreign owned investments, and a strategic location with access to the entire western hemisphere.

Mongolia or Panama? Panama is obviously the correct choice.

And “luck” didn’t have a thing to do with it.

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This result should not surprise anyone. The Republic of Panama is a great place to do business, just as it has been for decades. I live here and I have the experience of doing business here every day. It’s a wonderful experience. This is a nation that does business on an international scale and accommodates the wants and needs of international businessmen. Panama has always respected the entrepreneur and the go-getter. Great places to do business attract investors who want to do business there. I know that sentence sounds like circular logic, but self-reinforcing phenomena often seem that way.

Panama has also been consistently ranked amongst the world’s freest economies with an open door policy for foreign investment that provides important incentives to business. In 2007, Panama attracted $6.2 billion in foreign direct investment… from the U.S. alone, says the Office of U.S. Trade Representative. Enactment of Law 41 in August of 2007 has made investment in Panama an even more attractive proposition. Through the first quarter of 2008, 15 companies had taken advantage of the benefits offered under Law 41. I see no reason why this trend would not continue.

The success of Panama as a place to do business is no accident. All the key elements are here – A stable constitutional government, an economy based on the U.S. dollar, low inflation, no foreign exchange restrictions, equal treatment of foreign and local citizens, and a favorable tax system. The workforce is literate (91.9% literacy) and largely bilingual / multilingual.

Panama has Free Trade Agreements with the United States, Europe, Asia and Latin America countries, and is a member of the World Trade Organization (WTO). Panama is active in the Caribbean Basin Initiative. The Economic Commission for Latin America and the Caribbean, the Organization of American States, and the Interamerican Development Bank have given Panama positive ratings. Panamanian government bonds are consistently graded B+ or higher by Standard & Poors ratings service.

The Republic of Panama does not simply rely on its strategic location, privacy haven reputation, and low cost of living to attract foreign investment. While the various political parties have their differences, they all recognize the goose that laid the golden egg is business. The Colon Free Zone and City of Knowledge initiatives, as well as Law 41, are major efforts to ensure that corporations of all sizes will find Panama an attractive place to do business for many more years into the future.

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One of the things that I think speaks volumes to this idea is the consistent inflow of foreign investment capital. In another of my articles, I discuss the details of how and why foreign capital flows into Panama. I think an investment of $6.2B (US) by U.S. companies alone in 2007 is strong proof of credibility.

Mercer Multinational Consultants reported on quality of life and personal safety in 215 cities worldwide. Panama City, the national capital, was ranked 96th, which places it above all other Central American cities. Mercer created these ranking by analyzing social, political and economic environment, health, education and transportation factors for each city.

A major consideration in making the choice to do business in Panama is quality of life. Panama City is cosmopolitan and offers excellent living conditions. Office, commercial, industrial and housing spaces are available, as are skilled, multilingual employees. Panama City is 5th in Latin America behind San Juan, Montevideo, Buenos Aires and Santiago de Chile. Panama City is first in Central America, 12 places above San Jose, Costa Rica.

With an index of 91.4, Panama City is the third safest city in Latin America, only behind San Juan, Puerto Rico and Santo Domingo, Dominican Republic according to a report by International Scope.

With an 8% increase in GDP, Panama was the leader in economic growth in Latin America during 2008. Much of this due to the fact that Panama has a US dollar-based economy, low inflation and little foreign exchange risk, an absence of exchange controls, favorable and equal tax treatment of foreign and local citizens.

Panama has a stable Constitutional government with a keen understanding of its reliance on international trade. The Economic Freedom Index for 2009, a joint publication of The Heritage Foundation and the Wall Street Journal, ranked Panama 55th of 157 countries. Citizens and expatriates alike have freedom to make their own decisions for their benefit and for the benefit of their families.

You may argue that some of these are not indications of ‘credibility’ per se, but they are certainly evidence that something special is going on here in Panama; something worthy of international attention. Something worthy of your attention.

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Yes, it does, and here’s what Panama offers.  Because of the Canal trade, Panama has well developed international trade and banking systems.  These two sectors depend on technology.  So, Panama has invested in creating what is likely the finest telecom and internet system outside of Europe and the U.S.  The “City of Knowledge” technology and business park is located at the site of the U.S. Air Force’s former Clayton air base just outside of the capital, Panama City.

Five major fiber optic networks cross Panama and provide access to international telecommunications networks.  Panama City, which is overlaid with several fiber optic metropolitan networks, has become a world class mission-critical data and hosting center. This business segment continues to grow as companies from other countries seek to take advantage of this infrastructure.  Panama is often used as a gateway to Central and South American markets.

The human and intellectual capital needed to succeed in an international e-commerce venture are available, and at half the cost of the United States or Europe.  Panama boasts a literacy rate of 91.9%, and has a large supply of bilingual professionals and certified engineers.  The official language is Spanish, but due to American influences, a large portion of the work force speaks English as well.

Panama is a leading edge thinker in developing new methods of e-commerce.  In August 2001, Panama’s government passed new legislation specific to electronic commerce and acceptance of digital filings and signatures.  Both public and private sector input were used in crafting the legislation, with the Panamanian government leading the way.

On their own, the infrastructure considerations should be enough to give anyone good reason to choose Panama as a centre for their e-commerce business.  Add in the benefits of a tax and business-friendly legal and fiscal regime, the use of the U.S. dollar as the de facto currency, no restriction on currency translations, the availability of on-line credit card acceptance and processing, and THAT is the recipe for e-commerce success!

In amongst this talk about infrastructure and technology, we have failed to discuss another huge advantage of Panama: livability. Panama City is a first world city.  Crime is very low, the climate is temperate, and you have a choice of beautiful beaches just a short drive away. The national air carrier Copa Airlines offers 144 daily departures direct to 40 major cities all over North and South America and the Caribbean.  If you need to travel, getting in and out of Panama through Tocumen International Airport is quick, cheap and convenient.

Panama is a highly attractive location for offshore business and e-commerce. If your wealth building strategy includes an e-commerce business, take a look at Panama!

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Many foreign investors starting a business in Panama or purchasing real estate decide to use a corporate entity as an ownership vehicle.  The specific corporate form is defined during the due diligence phase, and the corporation should be established in conjunction with the project and not as a separate consideration.  The corporate ownership vehicle offers privacy and allows flexibility in estate planning, tax management, asset protection, and representation.

Should an investor use (or form) a local Panama corporate entity, or use an existing foreign corporation? The answer is “it depends,” but in most cases, the use of a local entity creates more benefits.   If you use a foreign entity, make sure to register it in the Public Registery.  Although Law 41 has streamlined the procedures for registration of foreign entities, it could still take several weeks to complete the process.

Panamanian commercial law allows many corporate forms.  Two important forms that offer the investor structures similar to the familiar limited liability company are the “Sociedad de Responsabilidad Limitada” and the “Sociedad Anónima.”   Determining which of the many forms is the correct choice is part of your due diligence efforts, but these are the two most prevalent forms with the S.A. as the preferred vehicle.

The S.A. has many features which offer privacy.  Some of the more important features are: no requirements to disclose ownership; no restrictions on owning investments outside of Panama; no restrictions concerning ownership of shares; no residence requirements for Directors/Officers; no requirements to file annual Financial Statements; no requirement to hold annual General Meetings of Shareholders or Directors.  This feature is very important – the accounting books for the corporation can be kept in any part of the world and in any language.

Entities doing business within Panama must register with the Tax Authority.  Formal tax registration is not needed if the corporation simply holds real estate, or does not generate taxable income within the territory of Panama. “Within” means any transaction that is from a location in Panama to another location in Panama.  Anything that crosses a border is a non-taxable transaction.  Directing transactions in other countries from Panama is non-taxable.

Every corporation must reside in Panama or have a local registered agent.  There is an annual registration fee paid to maintain a valid registration at the Public Registry of Panama.  The fees and taxes are quite reasonable, but must be paid promptly. Late payment can produce penalties or cause the company to be stricken from the Register.

A corporation may adopt by-laws for the regulation of its internal affairs and procedures, but adoption is not mandatory. If by-laws are adopted, they can be registered at the discretion of the directors of the corporation.  Registration of by-laws is not mandatory, but if the directors decide to register the by-laws, any amendments to the by-laws must be registered as well. For privacy and convenience, we recommend against the registration option.

We can assist you in the formation of the correct entity, or with entity management as needs may arise.  We are based in Panama City, but it is not necessary that you come to our offices, ever, unless you want to stop in for coffee.  The usual procedure is that we act according to the information you furnish us.   You can send the information by fax, e-mail, or regular postal mail, whichever you prefer. We will organize the articles of incorporation using a standard format. Normally within 10-15 days, all the pertinent documents will be returned to you.  For immediate delivery, we also have Shelf or Ready Made Companies.

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Because the desire for privacy and the desire to keep what they have rightfully earned IS the major motivating factor, we should really begin calling them “Privacy havens.”  People have worked hard, and played by the rules, their entire lives only to see the fruit of their labor threatened.  The best alternative people can see is to move their assets offshore to countries that still respect privacy and private property rights.

The Republic of Panama has long stood out as an offshore privacy haven and financial center.  The ability of non-residents to own bank accounts, Panama Corporations (IBCs), Private Interest Foundations and to use other privacy methods creates a business-friendly and investor-friendly environment.  Panama has never taxed non-resident income and Panamanian courts have a solid record with regard to respecting private property rights.

Panama is currently seeking to strengthen trade relations with the U.S. and there is speculation that Panama will be asked to become more transparent in its banking practices.  Global initiatives in the enforcement of banking transparency will likely mean that Panamanian banks will begin to co-operate in tax evasion investigations. Tax evasion through the ownership of non-declared bank accounts is rapidly becoming a thing of the past; anyone who tries this is likely to be caught, fined, and perhaps jailed.  I recommend that persons with undeclared bank accounts take immediate action to legitimize their situation.

Even if Panama does yield to some of these pressures, the culture of privacy that still allows anonymous corporations, controlled only by bearer shares, is not likely to vanish; the culture that welcomes foreign capital will not disappear.  Panama will still have a lot of attractive qualities in international tax planning and asset protection strategies.  In 1995, the Panama Private Interest Foundation was created in law, based on the European asset protection tradition of the Liechtenstein ‘Anstalt’ or Family Foundation.

With a little planning, you can utilize one of the greatest privacy strategies in existence – ignorance!  What someone does not know, they can not reveal.  The privacy elements in the law allow a Foundation to be structured such that no record about the client or beneficiary is held in Panama.  Even in the unlikely event that legal force such as a court order is rendered, the nominee director has no information of value. Keeping the Foundation, the assets, and the records in several different jurisdictions adds layers of privacy.  The topics of layering and jurisdiction shopping are complete discussions in themselves.

In summary:  We feel that even though the banking climate is changing, our clients will still be able to use Panamanian offshore investing and banking services as a means of legally protecting what is rightfully theirs well into the future.

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