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Panama continues as one of the world’s best tax and asset protection havens, and it also offers several options for tax-advantaged residency.  That’s a considered opinion The Sovereign Society has espoused for several years, based on hard facts about this strategically located central American isthmus, the so called “Land Between the Seas,” best known for its famous canal.  As a member of the U.S. Congress in the 1970s, I visited Panama several times. I did not return until 1999 and have been back many times since. The 30-year transition was truly amazing. From a sleepy American colonial town, Panama City has blossomed into a major urban center with a skyline dotted with huge hotels, international banks and countless condominiums. Urban, rural and ocean front real estate investment opportunities abound and retirement possibilities are everywhere. Panama enjoys an impressive financial infrastructure with over 80 banks, including many local branches of global banks such as HSBC, Barclays and Dresdener. It also has a stable, democratically elected government; established asset protection laws dating back almost a century; legal entities including trusts, international business corporations (IBCs) and family foundations; tax free investment for foreigners—all protected by statutory financial privacy and banking secrecy. And it also offers an attractive pensionado residency plan for foreigners seeking to retire in a tropical climate where living is easy and costs are low.  Most appealing, Panama stands up for its sovereignty. Notwithstanding the 1989 U.S. invasion to oust dictator Manuel Noriega, Panama does not accept dictates from the United States. Nor is it under colonial control from London, as are the British overseas territories, once known as reliable offshore havens.  In addition, the highly independent Panamanian government, regardless of the party in power, has consistently rebuffed the demands of the Organization for Economic and Community Development (OECD) and other global busybodies. From the outset of the OECD’s shameful “harmful tax competition” initiative, Panama has made it clear that it will not abolish bank secrecy and begin exchanging information about those who use its financial services with tax authorities in other nations until every other nation agrees to do the same. This “level playing field” scenario is highly unlikely to come to pass, particularly since the world’s largest tax haven, the United States, refuses to abide by it.

The Sovereign Society, headquartered in Waterford, Ireland, was founded in 1998 to provide proven legal strategies for individuals to protect their wealth and privacy, lower their taxes and to help improve their personal freedom and liberty. The Society's highly qualified contacts recommend only carefully chosen banks and investment advisors as well as financial and legal professionals located in select tax and asset haven jurisdictions around the world. The Society provides advice concerning the establishement and operation of offshore bank accounts, asset protection trusts, international business corporations (IBCs), private foundations, second citizenships and foreign residency, as well as practical safeguards for financial, Internet and personal privacy. The Sovereign Society stands alone in fulfilling this singular, international offshore service role for its members. To learn more about our organization and how you too can become a member, please click here.

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In early May, Panamanians went to the polls in the first national election since 1999. The clear victor was Martin Torrijos, the son of the late dictator, Omar Torrijos, who seized power in 1968 and ruled until his death in a mysterious plane crash in 1981. Although the younger Torrijos ran in the last presidential election, disenchantment with the president, Myra Moscoso, gave him fresh appeal this time and he won a three-way race with 50% of the votes.

Many Panamanians fondly remember the new president’s father, Omar, as a benign dictator who promoted land reform, opened up universities to blacks and defended the rights of the indigenous Indian and Creole populations against the white elite oligarchy. The elder Torrijos is also revered for standing up to the United States and, in 1979, securing control of the Panama Canal, the maintenance and operation of which remains central to the success of the nation’s economy.

The son admires the memory of his father, but has made clear he wants no return to dictatorship. His policy statements are pro-business and free market in specifics and tone. A Torrijos victory “should mean a considerable improvement in the outlook for policy in Panama, and a generally more pro business stance by the government,” Wall Street brokerage Morgan Stanley said before the election. Torrijos recognizes the highly important part offshore finance and banking plays in the national economy. 

No Tax Information Exchange Agreement 

One of the first orders of business for the new president is negotiating a free trade agreement with the United States. Talks with Washington are scheduled to conclude this month. No doubt, there will be more pressure from the United States to negotiate a tax information exchange agreement (TIEA), which might permit IRS fishing expeditions into Panamanian banks and trust companies. Although Panama has a mutual legal assistance treaty (MLAT) with the United States that provides for exchange of information in criminal matters, it has shown no interest in agreeing to a TIEA, even as many British “tax havens,” such as Bermuda, the Cayman Islands and the British Virgin Islands, have done so under orders from London. 

The incoming president must also decide whether to proceed with a multi-billion-dollar expansion of the Panama Canal, which Torrijos says will be Panama’s “most important decision of the century.” Constructed by the United States and opened in 1914, the canal is in grave need of widening to accommodate larger ships, including supertankers. Revenue from canal operations in 2003 was US$900 million, and the costs of renovation are estimated to be US$4-$6 billion. Financing this project will be a daunting challenge, but the expansion will also require the government to purchase vast tracts of land, much of it occupied by impoverished farmers. Before it can begin, Torrijos must obtain approval for the project in a national referendum. 

A Bright Future

After sluggish growth in recent years, Panama’s economy should grow at a brisk rate of about 6% in 2004, thanks to growing U.S. demand for its exports, plus a boom in construction fueled by real estate tax breaks that Torrijos plans to extend. 

I believe this growth will continue, aided in large part by Panama’s unique history and relationship with the United States. While the United States has for years tried to strong-arm Panama into repealing its attractive offshore laws, they are tolerated because they undeniably insure Panamanian stability. And Washington needs a stable and prosperous Panama to safeguard its strategic interest in the Panama Canal. 

For those who choose Panama as a retirement residence or their base for asset protection, estate planning and offshore business, these realities, as well as the recent election results, should provide continued confidence in the future. 

Contacts In Panama

Trust Services SA. Panama, Republic of Panama. Tel.: +(507) 269-2438 or +(507) 263-5252. Fax: +(507) 269-4922 or +(507) 269 9138. E-mail: fiduciary@trustserv.com. Link: http://www.trustserv.com or www.trustservices.net. Licensed in Panama since 1981, this firm specializes in offshore corporations and trust formation and administration. Derek R. Sambrook is the managing director. 

Rainelda Mata-Kelly, Panama, Republic of Panama. 
Tel.: +(507)263-4305. Fax: +(507)264-2868. E-mail: rmk@mata-kelly.com. Link: http://www.mata-kelly.com. Ms. Mata-Kelly specializes in Panamanian administrative, commercial and maritime law and assists clients with immigration, real estate, contracts, incorporation and other legal issues. 

Greg Geurin, Panama, Republic of Panama. Tel.: +(507)264-2204. E-mail: panama@internationalliving.com. Mr. Guerin directs the operations of International Living in Panama and has excellent contacts in the Panamanian legal and real estate communities. 

(Join Bob Bauman and more than 20 other distinguished speakers at The Sovereign Society’s Offshore Opportunities Seminar in Panama City, October 20-23, 2004. For more information, e-mail Grant Perry at gperry@agora-inc.com or call toll-free, 1 (866) 381-8446 or +1 (410) 783-8446.) 
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Robert Bauman is Legal Counsel for The Sovereign Society. He is a former member of the U.S. House of Representatives from Maryland. He is a graduate of the Georgetown University Law Center (1964) and the School of Foreign Service (1959). He is the editor of The Sovereign Society Offshore A-Letter, our free e-mail newsletter.

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