The international press keeps reporting that the global banking crisis is global. That seems like truth, but they are giving you incorrect information. Although the crisis that began in the American banking sector has spread across the globe, and has hit most major banking center it has not hit the banks in Mongolia. Nor has it hit the banks in the Republic of Panama. In the case of Mongolia, there are no close ties to the global economy. This means there is no exposure to the toxic assets that flood the global system. In the case of Panama, with its close ties to the global economy, it must be “luck.”

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.

Panama has international credibility. It’s easy to make a statement like that and then talk about all the qualities of a place in glowing terms and not really make any specific quantitative claims that can be pinned down. But the proof is on the pudding, or rather in the evidence. In the case of the Republic of Panama, it is easy to make the claim and easy to back it up.

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.

When someone thinks of Panama, the first two things that come to mind are the Canal and ‘tax haven’ – usually in that order.  Yes, there is a huge canal here.  Yes, the Republic of Panama is a ‘privacy haven.’  But, that’s NOT all there is to Panama.

There are many other advantages to doing business here.  Panama’s location made it a strategic transportation link in the Spanish Empire’s effort to ship gold and resources to Madrid.  Panama, and Panama City, were established from the very beginning for the purpose of doing business on a global scale.  That heritage remains.  And despite being a modern city, Panama City has managed to retain its charm and ease of living.

A building boom over the past few years has kept prices down.  Panama City is inexpensive when compared to other cities of the same caliber.  Don’t be fooled – inexpensive doesn’t mean that you sacrifice your quality of life.  Panama does business on an international scale and accommodates the wants and needs of international businessmen, who tend to be fast-paced.  At the same, Panama offers beautiful beaches, a temperate climate, great restaurants.  High quality downtime; a little bit of ‘la dolce vita.’  What good is working hard, and what good are wealth protection strategies, if you don’t take the time to savor the fruits of your wealth?  You have an amazing range of choices here and the freedom of choice.

The government is stable and has a new President, Ricardo Martinelli, elected on an anti-corruption platform.  Martinelli, who will be in office until 2014, is a businessman, so the pro-business attitudes will remain.  Even in the worst of times, Panama has never suppressed its citizens or instituted currency controls.  There were periods of corruption, but there has never been oppression.  Panama has its own currency, but the U.S. dollar is the business currency.

Panama has well developed international trade and banking systems.  These two sectors depend on technology.  Panama has one of the finest telecom systems outside of the U.S. or Europe.  Five major global fiber optic networks cross Panama and provide international access.  Panama City, which is overlaid with several fiber optic networks, is a world-class mission-critical data and hosting center. This business segment continues to grow as foreign companies take advantage of this infrastructure.  Panama is a gateway to Central and South American markets.

Panamanian leaders recognized that the same strategic location that made it an important water transport link also gave it a competitive advantage in air transportation and logistics.  One of the best things about doing business here is the ease and comfort of travel.  Panama City is a great place to live and I enjoy living here, but sometimes travel is necessary.

The national air carrier, Copa Airlines, flies Boeing 737’s to 40 major cities daily and was named Best Airline in Central America in 4 of the last 5 years.  Copa has an outstanding order to purchase 21 new jets over the coming years.  Over the last decade, Tocumen International Airport has been transformed through the ‘Hub of the Americas’ project.  Copa’s partner KLM-Air France flies direct from Amsterdam, complementing Iberian Airway’s daily flights from Madrid.  Tocumen Airport is a great airport if you are coming here to do business, or if you are just looking for convenient connecting flights within the region.
Undoubtedly, Panama is a great base for business and banking, and for gracious expatriate living.  And with a little planning, that gracious living, la dolce vita, can be tax free.

Corporations are always searching for great opportunities. Panama has been a great opportunity for decades; global Fortune 500 companies – Coca Cola, Sony, HSBC, Nestlé, Roche – all know this.  Where they go, others follow.  Foreign investment capital inflow continues as potential becomes reality, and reality becomes profit.

The Republic of Panama stands apart from other Latin American countries.  The Economic Liberty Index for 2007 ranks Panama 47th of 157 countries.  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.

Some of the key attributes of Panama are: a stable government; a dollar-based economy, without currency exchange restrictions; the Canal and the Colon Free Trade Zone; an international financial center with a well-developed infrastructure including a top notch telecommunications system; an excellent legal framework that allows 100% foreign owned investments; a strategic location with access to the entire western hemisphere.

The U.S. – Panama Free Trade Agreement (2007) passed the Panamanian legislature and is awaiting U.S. approval.  Its purpose is to provide legal security for business, trade and investments between both countries, and increase opportunities available to investors from the United States.  Law 41 (2007), based on successful models in Switzerland and Singapore, was passed with the intent to ensure that Panama becomes an attractive center for multinational firms.  Benefits given to multinational companies establishing their headquarters in Panama include tax exemptions, and special labor and migration status, with simplified and streamlined visa, residence and work permit requirements.  There are already special considerations for industrial parks, call centers, and ecommerce to facilitate trade and investment.

Income tax laws permit taxation only on income generated from trade entirely within Panama.  Foreign source income, generated outside Panama, is 100% exempted. Income from the following activities is not considered domestic activity within the territory of the Republic of Panama, and is specifically exempted from taxation:

-Invoicing, from an office established in Panama.

-The resale of merchandise or products for an amount greater than had previously been invoiced against the office in Panama, provided the goods transit solely outside Panama.

-Directing transactions that are executed, completed, or effected outside Panama.

-Distributing dividends or participations from the tax exempt activities.

A corporate regional headquarters with offices and employees based in Panama does not pay any income tax, if the office merely directs operations from Panama; that is, it performs only international operations from Panamanian territory.

For manufacturing or assembly operations, the existing law for Export Processing Zones designates them as 100% tax-free areas. Both the developer and the export item will be 100% exempted from national direct and indirect taxes, duties, levies, right and charges.

It is plain to see that there are tremendous benefits to doing business in Panama.

The international press keeps reporting that the global banking crisis is global. That seems like truth, but they are giving you incorrect information. Although the crisis that began in the American banking sector has spread across the globe, and has hit most major banking centers it has not hit the banks in Mongolia. Nor has it hit the banks in the Republic of Panama. In the case of Mongolia, there are no close ties to the global economy. This means there is no exposure to the toxic assets that flood the global system. In the case of Panama, with its close ties to the global economy, it must be “luck.”

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.