PMC Group Belize

Recently I had the pleasure of attending a wonderful event in Belize for the Caye Bank International new building grand opening and Asset Protection conference.  I was representing my company PMC Group International and speaking to a group of foriegners eager to learn more about how to protect the monetary and tangible assets they posses. It was an exciting event and an educational one at that.

Here is the expert below from the event.

November 30, 2009

October 1st, 2009 marks the Sixth Anniversary of Caye International Bank and its transformation from a successful mortgage company into a “Class A” International Bank. Over these six years, the bank has grown aggressively becoming one of the leading mortgage lenders for properties in Belize as well as wider Central American Regions.

The bank has expanded its operations and product offering year over year averaging 50% growth to its deposit and customer base. As world financial markets teetered on the brink of collapse, Caye International Bank had its best quarter ever. Belize’s 24 percent (24%) liquidity requirements (the highest in the world) was a beacon of safety during what was a very turbulent time for global financial markets.

As other institutions were closing theirs doors, Caye Bank International made its largest plans for expansion in its history, including the opening of a new state of the art Bank headquarters and financial center. To celebrate the opening of the new facility, Caye International Bank held a ribbon cutting ceremony together with a financial services and investment conference entitled: The “Cayes” to Wealth Preservation and Financial Security.

Special companies were invited to attend including PMC Group International along with Ernesto Chong Coronado asked to speak at the event providing invaluable information about Panama corporations, foundations, and asset protection. Caye Bank is one of PMC Internationals partnered offshore banks that PMC offers its client as an offshore solution.

To learn more about what Caye Bank and PMC Group can offer you, please contact chad@pmcinternational.com for more information.

Panama Corporations

Investors and Entrepreneurs can be quite skeptical about investing in foreign markets for establishing a corporation in another country can be a daunting and complex process. Complicated legal regulations and unknown market situations always restrict offshore investment. However, Panama historically has always attracted business people and investors from all over the globe due to its incredible banking infrastructure and corporate shield protection laws.

Panama offers great opportunities for entrepreneurs to start a full-time or part-time business. Although it is comparatively easier to start a business in Panama, there are some basic rules that you should understand to avoid legal or financial disagreement.

In Panama, sole proprietorship, partnership and corporation are the three major business structures.

1. Sole Proprietor – Sole Proprietorship is owned by the person, spouse and family as a sole proprietor.
2. Partnership – In partnership, business is owned by two or more partners.
3. Corporation – There are two types of corporation in Panama: a) resident and b) non-resident.

To start a corporation, you are required to register with the government, have a Board of Directors and corporate offices. Following are some key points that you should always consider:

• To find a trustworthy law firm is very critical for the success of your business in Panama. Any error in your legal documents can make the documents legally null and void for the members of the corporation.
• Corporations in Panama are formed under the Law No. 32 of 1927 and the Commercial Code (Decree-Law No. 5 of 1997, Article 5).
  • Two or more individuals (nominees or subscribers) can start a corporation by executing legal documents called the Articles of Incorporation. However, once the corporation is formed, only one shareholder will be required.
  • The legal documents need to be filed with the Panama Public Registry office.
  • The corporation must have a resident registered agent or a registered Panamanian lawyer.
  • Corporate shares can be of various classes. They may be officially registered, or can be discreet bearer shares.
  • There should be at least three directors to start a corporation in Panama.
  • Directors’ names should be in the articles of incorporation.
  • If there is any change of directors then it should be filed with the Public Registry.
  • You are not required to file any change unless it involves change in the articles or merger or dissolution of the corporation.

The entire process to start a corporation in Panama can take 5 to 7 working days. You need to comply with many legal documents, government applications, contracts and laws to create a corporation in Panama. It is advisable to consult a Panamanian lawyer who is knowledgeable and well informed about the laws in Panama for a successful incorporation.

Asset Protection Panama

Capital safety and inventory security is of utmost importance for individual as well as corporate investors. Offshore investment increases the capital and investment risks because it involves more than one economy. Capital loss prevention strategies and underlying laws of offshore jurisdiction are the key factors that ensure assets protection.

Even if you have a comprehensive loss prevention strategy, it is critical to understand offshore jurisdictions before investing in any offshore trust. The security of your capital and assets completely depends on the offshore jurisdictions of the country where your organization or financial account is established.

Some countries have strict corporate laws restricting the movement of funds in or out of the country. At some places you cannot even incorporate your private interest foundations. The Republic of Panama is a democratic country with a strong and stable jurisdiction. It has one of the most secure tax and assets protection jurisdictions in the world. Several reports have revealed that Panama has the best qualification among offshore jurisdictions for assets protection and real estate planning around the world.

The economy of the Republic of Panama is highly developed. Its stable financial infrastructure and favorable tax schemes always attract foreign investors. Panama has stringent law and order system. It helps in providing superior protection to offshore trusts and assets. More than 400,000 international business corporations, trusts and private foundations are registered in Panama. Most of these companies are controlled by foreigners and are protected by 100% financial and banking privacy.

You can create and diversify your assets such as a trust, corporation, real estate investment or a bank account with absolute security. Legal entities in the country enjoy complete legislative privacy and banking secrecy. Taxes like capital gains tax, interest income tax and inheritance tax are not effective in the country. Foreign investors and native companies are exempted from tax on offshore derived income.

Privacy in Panama is protected by constitutional laws. Banking secrecy laws in Panama are very comprehensive and strict. It has no mutual legal assistance treaties and therefore foreign courts can never get banking information unless the account holder is involved in any criminal activity. You can conduct financial transactions with complete anonymity. Online transactions as well as transactions by credit or debit cards are secure and confidential.

Panama offshore jurisdiction has extremely good reputation among the international business community. It is evident that Panama is fast becoming the jurisdiction of choice for offshore assets protection and attractive destination for offshore investment.

Here is my top-1o list of why Panama is one of the most desired destinations to retire, work, or start a business.  My company PMC GROUP has assisted many clients in starting their new lives in Panama or new business ventures. Its just as exciting for us as it is for our new clients in this new exploration of life and happiness!

1. Panama Is Tourist Friendly! “Welcome!”

Since prehistoric times Panama has been a country of transit. Panamanians have been working close to foreigners for centuries. There is a long tradition of service to foreigners as an international crossroads and many people speak English as a second language. Panamanian people are amongst the friendliest in the world. They are known for their peaceful, get-along and fun loving nature.

2. Panama is inexpensive: do more with less

Because tourism is just beginning, prices are still modest and your money will go a long way. Panama was the first Latin American dollarized economy making currency matters easily handled. You will get superior and personalized service at a lower cost. Panama’s inflation has historically been very low and the cost of living is definitely inferior to the U.S.A., Canada and any country in Western Europe but the quality of life is absolutely superior. After visiting Panama you might even want to stay living here!

3. Panama is close: easily accessible through direct flights

As most countries in Central America, Panama is just a short plane ride away. Eight major US cities offer direct daily flights to Panama City: Los Angeles, New York, Newark, Miami, Houston, Dallas, Atlanta and Orlando. Try Continental, Copa Airlines, Delta or American Airlines. Taca and AirPanama have direct flights from San José, Costa Rica to David (30 minutes from Boquete) in case you want to skip flying to Panama City or if there is not any airline offering direct flights from your city to Panama. You can also fly directly from Madrid with Iberia and from Amsterdam with KLM and rumors are that direct non stop flights will be also offered from Frankfurt and London in the near future. Kayak is a good tool to find the cheapest flights to Panama from anywhere in the world. For more info about international and domestic flights in Panama go to our useful info section about Airlines in Panama.

4. Panama has 1st world infrastructure: just like home…

Panama has a sophisticated service-based economy, the second largest Free Trade Zone in the world, a banking sector with over 100 banks and many international corporations have their Latin American headquarters in Panama. The Panama Canal’s expansion is one of the regions most ambitious projects and real estate and the tourism industry are booming. The highway and road infrastructure, hospitals and medical care, telecommunications and business services are excellent-comparable to the USA as noted in the ARRP’s Modern Maturity magazine.

In Panama you can drink water from the tap and have a high speed internet almost anywhere in the country. Panama has one of Latin America’s most exemplary and stable democracies. First rate hotels, restaurants and shopping on par with the United States but conveniently priced with Panamanian values.

5. Panama is safe: forget about crime and natural disasters

Panama is one of the safest countries in Latin American for tourists and for residence. In fact, it is one of the safest tourist destinations anywhere. For this reason, dozens of multinational companies are changing their Latin American headquarters to Panama. More than 100 multinational companies have offices in Panama, including: Dell, Hewlett Packard, Proctor & Gamble, Coca Cola, FedEx, Continental Airlines, PriceSmart, Citibank, ExxonMobil, ChevronTexaco, Radisson, 3M, AES, Avaya, Caterpillar, Homewatch CareGivers, Johns Hopkins International Medicine, Telefonica, Sumitomo, Itochu, Mitsui, Sony, Matsushita, HSBC, Cable & Wireless, Harcrow, Samsung, LG, Hyundai, Nestlé, Roche, Peugeot, Western Union and Thunderbird. Ask any foreign resident and they will tell you how safe they feel living in Panama compared to any other country in Central America.

Unlike other countries, taxi drivers are honest and purse-snatching and pick pocketing are rare. No express kidnappings or mafia/drug related crimes. But this does not mean that you can be foolish: take care of your personal belongings and do not be careless with your safety. In Panama we say, “la ocasión hace al ladrón”; something similar to temptation makes the thieve.

In Panama you are also safe from natural disasters. Panama is the only hurricane-free zone in Central America and the only country with none destructive earthquakes that unfortunately hit our neighbors.

6. Panama’s history is alive: the country’s history is all around you

In Panama, history is not restricted to museums. It is all around you. In a stroll down the cobblestone streets of Casco Antiguo, past ornate seventeenth-century cathedrals. In the majestic ruins of old Spanish forts laid siege to by English pirates. In the proud, vibrant cultures and independent comarcas of our seven indigenous Amerindian tribes. In the thriving and lush tropical rainforests, virtually unchanged since the dawn of time. In the engineering marvel that is the Panama Canal. And in the cultural and culinary legacy left by those who came to build it.

7. Experience wildlife upclose: uncrowded nature observation

Come nose to nose with a red-naped tamarin monkey or a trio of colorful toucans. In Panama, you will experience nature up close. Panama’s expansive, tropical rainforests are among the richest and most complex ecosystems on the planet. Not surprisingly, Panama is home to the greatest number of animal species in the world. That includes 954 unique bird species and over 1,500 kinds of butterflies. Plus an astonishing number of mammals and reptiles. All of which makes Panama an eco-paradise for you. Spend the night in a treetop lodge in the heart of the rainforest. Discover a Resplendent Quetzal in Chiriqui’s highlands. Explore the rugged wilderness of Parque Nacional Darién with a guide, and perhaps catch a glimpse of a jaguar. Or search for exciting finds along a coastal preserve.

8. Paradise between seas: wide selection of islands & beaches

Panama offers a sea of enticing choices: two beautiful oceans to explore. Will you swim in the blue waters of the Pacific? Or in the clear turquoise of the Caribbean? Wherever you go in Panama, you are never far from the water. Or a new adventure. Explore our tropical coastlines, with their gentle breezes and endless stretches of beautiful white or volcanic sandy beaches, perfect for sunbathing. Seclude yourself in a coral cay. Or discover the lovely, unhurried world of our three archipelagos: Las Perlas, Bocas del Toro or Kuna Yala. Head outdoors for snorkeling, scuba diving, surfing, deep-sea fishing, rafting, kayaking and more. And when the sun goes down, relax over a delicious Panamanian dinner. Or sample our impressive array of international cuisines.

9. Ecotourism & Adventure: exciting and unique active pursuits

Panama is the natural bridge that unites the Americas and because of its unique geographical position it has the greatest diversity of wildlife in Central America. Flora and fauna historically endemic to South and North America have mixed and evolved over time in Panama (which literally meaning abundance of), resulting in tremendous bio-diversity.

Almost 1/3 of this natural link is covered by National Parks. There are said to be over 10,000 varieties of plants and 1500 species of trees, and more then 1,000 species of birds. This is more than can be found in North America and Europe combined, and it includes some of the rarest on Earth. There are also 220 mammals and 354 reptiles and amphibians.

There is a saying that in Costa Rica, there are 20 tourists to look at one bird, while in Panama there are 20 birds for one tourist to look at. There is much truth to this.

In Panama you can hike eco-trails, zip line in the rain and cloud forest, relax in hot springs, raft in class IV-V rivers, do rock climbing on natural walls, go on coffee tours, visit indigenous communities, do canyoning and rappelling, go scuba diving or snorkeling, do incredible surfing and much more.

Panama has not one, but 7 Indigenous groups. Each of them has preserved its own fascinating lifestyle. Many live in accessible locations and are happy to share their life and culture with visitors.

10. Panama is a happy country: come and be happy!

The Central American country of Panama makes the top five, according to a study published measuring people’s happiness and their impact on the environment. Vanuatu, Colombia, Costa Rica, Dominica and Panama complete the top five in the Happy Planet Index, compiled by the British think-tank New Economics Foundation (NEF). For comparison, the U.S. came in at #150, and the U.K. at #108!

The Happy Planet Index combines life satisfaction, life expectancy and environmental footprint. It measures the amount of land required to sustain the population and absorb its energy consumption or in other words it represents the efficiency with which countries convert the earth’s finite resources into well-being experienced by their citizens

Life In Panama

More than 15,000 Americans currently live in Panama. This figure is not surprising since the Panama Canal Zone was under U.S. control until the year 2000. During this time the country had strong American presence and became very Americanized.

Another reason for living in Panama is country’s warm climate. If you’re tired of cold weather you’ll be happy to know Panama is hot and sometimes humid in the lowlands with cooler year-round spring-like temperatures may be found in mountain areas like Boquete. In 2001 and 2007 Modern Maturity Magazine considered Boquete the fourth most desirable place in the world for retirement living partially because of its great climate.

Panama City is one of the world’s least expensive first-world cities. It is also among the most modern and prosperous cities in Latin America with over one million people. The city’s array of tall sky scrapers is reminiscent of Miami. It boasts incredible shopping where almost any product from the U.S. may be easily found.

The country fits the bill for anyone sick of the hustle and bustle, seeking a more laid-back way of life. It will also appeal to people of all ages seeking to move to a new and exotic land, the energetic entrepreneur, the burned-out baby boomer, those sick of long rush-hour commutes and anyone seeking an alternative way of life.

But Isn’t It Expensive?

Panama is a place where you can maintain your current lifestyle for less money.  Resident retirees benefit the most with attractive retirement program available in Latin America today. Residents pay NO local taxes on their foreign earned income.

Retirees can bring in a new car and furniture every couple of years. On top of that they received substantial discounts ranging from 10% to 50% on a wide variety of local products and services.

What you really spend depends on your lifestyle. If you must have a luxurious home, drive a late model car and buy imported goods, you could spend as much or more than you would in the States.  But if you live more like the locals, take advantage of all of the perks and watch your money, you will spend considerably less.

Many Americans living below the poverty line in the United States can live in moderate luxury on a modest retirement or investment income in Panama.

You won’t have to worry about an unfavorable exchange rate since the U.S. dollar is the official currency.  The cost of food, utilities and entertainment are all substantially lower than in the United States.

Panama’s affordable medical care is among the best anywhere.  The quality of health care is comparable to North America but the prices are one half or less! A local Panamanian Insurance Company can provide full medical insurance for under $50 per month per person. Even if you have to pay out of your own pocket, medical costs are still affordable.

Panama has an over all life-expectancy rate of 75.68 which is almost as high as —72.94 for men and 78.53 for women)—the United States (76 for men, 79.8 for women).

In Panama hired help is a bargain when compared to prices up north. A full-time maid can be hired for under $200 per month.

In Panama any legal resident may buy and own property. Retirees don’t have to pay property taxes until they sell their homes.  On new homes there is a 20-year exoneration from taxes. Property prices are very reasonable when compared to what you’ll pay in the U.S., Canada or Europe. A decent apartment can be rented for as little as $200 per month.  A luxury apartment in the best area of Panama City can range from $500 to $800 monthly.  A new home may be purchased for under $50,000. Actually, an investment in Panama today is much better than an investment in California real estate was 30 years ago.

What gets people excited about Panama, however, is that it offers some of the best real estate on the planet at affordable prices. The price will eventually go up as the rest of the world catches on.  There’s only so much beautiful beachfront and prime real estate left in the world. When you think that almost every bit of the coastline in the U.S. is becoming overcrowded and overpriced, Panama seems like a bargain.

An excellent transportation and communication networks, every imaginable activity to stay busy and happy, a government which goes to great lengths to make retirement and living as easy as possible, contribute to Panama’s appeal and make it one of the world’s top retirement and Expat havens.

A Place to Invest

Panama’s currency is the U.S. dollar which makes investing in the country easy. The country offers some of the very best banking and communication services in Latin America.

Panama has a wealth of business opportunities awaiting creative hard-working entrepreneurs. You can run a global business by using Internet access, fax machines and cell phones.

A business may be started for far less than in the United States. Wages are very low when compared to U.S. standards. Furthermore, tax incentives and a government which encourages investment contribute to a propitious business climate. As more and more foreigners move to Panama and tourism grows there will be an increasing need for travel related business and American products.

With the new millennium upon us, a shrinking world due to better communication, a burgeoning global economy—possibilities are unlimited for doing business in Central and South America.  Trade pacts between Central America, U.S., Mexico and South America will be a reality by 2005. They promise to link all of the nations in the hemisphere in to one trading block.  Panama is sure to be an excellent base of operations.

Most of Panama’s 130 banks offer a high degree of secrecy. Panama is a time-proven business and tax haven. Passive investors will find CD’s in Panamanian banks.  There is NO tax on interest earned from bank accounts for locals or foreigners.  Furthermore, there are NO corporate of personal taxes on offshore activity.

Word is getting out about Panama as an investment and banking haven. And that’s why now such a good time to invest is.  The Adventure of Starting Over

Some move to Panama to start over and seek adventure in an exotic land. They are tired of dead-end jobs or the rat race and want new challenges, a chance to pursue their dreams and achieve greater personal growth.  As an Expat, you have the challenge of immersing yourself in a new culture and, if you choose, the rewards of learning a foreign language.

Newcomers will make friends easily because foreigners gravitate towards one another.  One Florida transplant told us he had lived in Florida for 20 years and hardly ever had contact with his neighbors.  He claims not to be the most sociable person in the world, nevertheless he has made over a hundred friends while residing in Central America. He proudly says, “Everywhere I go I bump into people I know.”  Adjusting and Keeping Busy

Adjustment to a new way of life can take many months. However, an open mind, a positive attitude and a willingness to seek out new experiences can make the transition relatively painless.

Central America, especially Panama and Costa Rica, has come a long way in the last decade.  Satellite and Direct TV, private mail service and the Internet make it easier to stay in touch with family and friends in the United States and keep up with what is going on all over the world. If you don’t own a computer, you can go to an Internet café.

Panama’s modern technology has made life easy for foreign residents.  In most areas of the country you can get cash at a local ATM, manage your investments online and read almost any major newspaper in the world the day it comes out.

You will never be bored here unless you choose to be. Panama has something for everyone. This little known country offers a real paradise for the nature lover with its uncrowned beaches and mountains, the fishing enthusiast and water sports fanatic as well as the retiree. You can find hundreds of interesting activities: movies in English, support groups, computer and bridge clubs. You name it, and Panama has it.

For: America Exonomia

Amercia Economia

The world is currently going through an intense economic recession which has been underway now for just under a year.  The question is, will it be long before we escape from the crisis?  While it may sound negative, I don’t think it’s going to happen.  Since the beginning of the crisis, the governments of the wealthiest countries in the world, both from the OECD and the G-20, have organized meetings with the Heads of State and Economic Ministers, with the idea of joining forces to fight the global recession.  These meetings were held because, regardless of where the crisis started, everyone understands that it has reached global proportions.  Invariably in these summits, representatives from the various countries talk firmly about the need to take action together and to cooperate with each other.  Nevertheless, as soon as the conference is over, each country’s government resumes making their own decisions and creating their own policies, completely disregarding the concept of international cooperation.

Countries are applying protective measurements that, instead of helping, can and do aggravate the situation of the average person.  One example can be seen in the policies of the current U.S government, that since taking power, has been determined to implement protective policies that are supposedly intended to favour domestic businesses instead of companies from other countries, which has led to the motto “Buy American”.  These protective measures are very popular on the political playing field and they have always been one of the preferred tools of populist governments, but on the economic playing field, they cause only problems, beginning with the fact that these kind of policies breed inefficiency.

Thanks to the law of comparative advantages, free international trade favours all participants.  Consequently, everyone involved aims to produce the most efficient and competent product.  The result is more high quality goods at lower prices.  This way, everyone gets wealthier, both producers and consumers – the latter because of an increased range of options at better prices.

But, the law of comparative advantages only works in an environment of free trade.  At the moment each government begins to block the comparative advantage, free trade is inhibited and stops working at its maximum potential.   And, this is exactly what is happening with each government now making policies that restrict the importation of certain goods.

Another way in which economic protectionism is being displayed is in the pursuit of fiscal competition between countries.  It seems that the world’s richer countries (OECD and G-20) are plotting against the countries with better tax systems that do not belong to these elitist groups.  The renewed war against countries with low taxation, derogatively referred to as tax havens, is a result of the sheer desperation of richer countries in light of the sudden drop in tax collections in their countries.  And, instead of adapting, reducing their excessive government spending, what they are doing is shooting the messenger.

The real solution for government finances in the time of crisis is for the government to tighten their belt (reduce their public spending) and reduce taxes.  While it seems ironic, reducing taxes achieves two very positive objectives:  Firstly, it lets businesses and consumers breathe – they are also having a bad experience during the crisis.  Secondly, it helps to stimulate the supply side of the economy, since high taxes are a barrier to business and reducing them will lead to an easier business climate.

Unfortunately, the world’s businesses seem to be suffering from severe short-sightedness which is leading them to implement policies that despite being popular in their countries, they are endangering not only their own people, but also people all around the world, by further inhibiting world trade which is already suffering because of the crisis.  If we continue along these lines, as much as it pains to me say this, I believe the crisis will only get worse and last longer than necessary.

Why Invest In Panama

Panama, a small country with beautiful landscapes and friendliest people, is emerging as a new destination for developing businesses. You can buy a beautiful island, beach, property residential or commercial to either run your business or to settle down after your retirement. The sky is the limit for investment in Panama.

Panama offers you a variety of investment opportunities. With its awesome geopolitical and socioeconomic conditions, Panama is becoming first choice among retirees and entrepreneurs for investment. Some of the contributing factors are:

• A full fledged tax heaven – Panama is like a heaven for taxpayers. It has neither capital gains tax on offshore investments, interest income tax on offshore bank account nor inheritance tax.
• Panama allows for anonymity – There are strict privacy laws that protect your banking information and corporate book information. Bearer share corporations omit your name from official registration documents while retaining your total control at the same time.
• Stable currency with no currency restriction regulations – The currency of Panama is stable and the movement of funds in or out of the city is totally unrestricted. Panama has the US dollar as its currency, which of course is extremely convenient for international business. This makes daily life hassle free for visitors and foreign residents. The dollar as currency is a major contributing factor to the fact that Panama has the lowest inflation rate and the most stable economy in Latin America.
• Excellent banking system – Panama is the second largest international banking center with over 40-million in assets and can offer up to a 7% return. With strict lending regulations Panama has been protected from the current Economic conditions such as the United States. With complete banking secrecy, Panama remains the top choice for most private investors or companies alike.
• Excellent communication system- The communication system in Panama is technologically very advanced that helps to stay connected with other parts of the world seamlessly.
• Time zone compatibility & close location – The time zone of Panama is compatible with US time zones, thus allowing you to contact your offshore provider or financial institution during normal domestic business hours.
• International trade - Panama is the second largest international distribution center in the world next to Hong Kong. Some of the world’s largest organizations have their distribution centers in Panama’s tax free zones.

A sophisticated dollar-based service economy, an advanced financial sector, the second largest free trade zone and incomparable geographical location makes Panama a leading Latin American business centers. With all these advantages living and investing in Panama is certainly a smart decision in my opinion!

Written by: Ernesto Chong Coronado

For:  Economica Magazine

America Economia

In these times of crisis, how do companies manage to obtain new financing?  How do they get credit when all the banks are in a process of restricting credit?  The current global economic crisis, which has mainly affected the financial sector, has resulted in a financial deleveraging.  In other words, credit is contracting rather than expanding.  What does all of this mean?

Credit Contraction

We see that Central Banks around the world are implementing aggressive policies to revive credit in the banking systems and capital markets in general.  But, until now, the expected results are not being seen.  There is no doubt that the situation has improved since September 2009, when banks were not lending to each other regardless of the rates.  At that time, the situation was very uncertain and in that kind of instance, nobody in their right mind lends money, since the risk cannot be measured.  At that time, with the fall of Lehman Brothers and the AIG fiasco, with Goldman Sachs and other financial entities in desperate need of a bail out last year, no banker could possible understand the extent of the insolvency that was been seen throughout the markets.  Nobody could know if their neighbour was also on the brink of insolvency or bankruptcy.  The result was a near shutdown of credit lines for several weeks across all markets.

Since then, with the bail outs and the aggressive policies of central banks around the world, banks have begun to loosen their grip on credit lines, but what they haven’t done is renew the credit lines that they offered prior to the crisis.  And that makes sense.

Stimulus Plans: Do They Work?

That’s the million-dollar question.  At the end of the day, financial and monetary policies around the world are worth nothing if they have no effect of people’s willingness to assume risk.  After all, central banks cannot hold a gun to a private banker’s head and force him to resume lending.  This is when we begin to see a process of deleveraging.  This is normal in a depression.  Economic depressions are characterized by a sharp reduction in the levels of borrowing, both on the part of consumers and businesses.  As painful as it may seem, deleveraging is required as it is the only way to begin healing the effects of the excesses of the previous economic “boomtime”, which both investors and bankers generally believed to be a time of permanent economic growth.

These are the reasons why the stimulus plans do not have the desired effects.  They may prolong the onset of deleveraging, but in the end it is unavoidable.

What can be done?

All this does not mean that there will be no more credit in the next few years.  At the end of the day, the essence of banking lies in lending money and if that were to ever stop, the banks would have to close.  What we will see, however, and what we are already starting to see, is that bankers will have to become far more conservative when it comes to lending money, both to consumers and businesses.  This means that among other things, banks will no longer base their lending only on the credit history of a person or company, but they will rather take a very close look at the financial strength of the applicant.

Apart from this the winning strategy for banks and investors will now be to opt for safer industries like health, agriculture, food and basic services, to name a few.  Company objectives will now be focused on reducing credit granted to the industries most affected by the economic crisis.  Sectors such as entertainment and discretionary consumption are among those which will have their credit lines notably reduced.  This in turn will allow companies and the private sector in general to reassign productive resources to the sectors and activities that are truly required at these times.

Thin cows continue to outlive the fat cows.  It’s time to tighten our belts.

For: Economica Magazine

The Organisation for Economic Cooperation and Development (OECD), together with the G-20, have recently increased efforts to attack the countries that they derogatively describe as “Tax Havens”.  “Tax Haven” has been an ambiguous term for many years, since neither the OECD or the countries who pay the most tax who have discriminated against these “Havens” have wanted to specifically define the term.

If the term “Tax Haven” conjures up images of small islands in the South Pacific or the Caribbean, allow me to inform you that the most important tax have in the whole world is, in fact, a very small island.  But this island is not located in the Caribeean, nor in the South Pacific.  It is located in the Atlantic Ocean at the mouth of the Hudson River, and it’s called Manhattan.

Why do I say this?  Well, if you choose to invest in the New York Stock Exchange and you are not an American investor, nor a resident of the United States of America, you will receive preferential treatment with regards to taxation.  The Internal Revenue Service (IRS) offers foreign investors preferential taxation in order to attract investment to the country.  More specifically, while a North American investor will pay 15% income tax on any profits from his stock portfolio, a foreign investor will pay 0% on their profits.

It is exactly this kind of preferential treatment that the OECD adopted many years ago as one of the criteria that defines a jurisdiction as a tax haven.  However, the United States of America has never been classified as a tax haven.  Would this have anything to do with the fact that the United States is one of the member countries of the OECD?

And the United States is no exception.  Similar examples of preferential tax rulings towards foreign investors are offered by many of the OECD’s member countries and yet, for some reason they choose not to classify themselves as tax havens.

Meanwhile, the OECD pursues countries like Panama, dubbing them tax havens, despite the fact that Panama does not offer preferential tax regulations to foreigners.  Panama’s tax system is strictly territorial, meaning that taxes are only levied on income generated within the Republic of Panama, and everyone is responsible for paying these taxes, regardless of their country of origin.  So, according to the law, if income is generated within Panamanian territory, the person or company that generated this income is required by law to pay the respective tax, regardless of their nationality.  Therefore, Panama is not a tax haven, but rather a jurisdiction that, because of an internationally-focused service industry, has no interest in taxing activities that take place beyond its borders.

As a sovereign nation, Panama realized a long time ago that a territorial tax system would be the most appropriate system for the country’s economic development and to attract investors.  What right does the OECD have to dictate the type of tax system that this sovereign nation should use?

Pressure from the OECD toward countries like Panama has gained force since the beginning of the global which we are currently facing.  Because of reduced economic activities, high-taxation nations are seeing substantial reductions in the funds they are collecting.  What they should do is adjust their belts and reduce their excessive public spending; this is what years of “thin cow” logic would dictate.  However, bureaucracies never volunteer to adjust their belt and limit their public spending in accordance with their income.  By nature, a bureaucracy tries constantly to expand their comfortable reserves.  And when less taxes are collected, the invariable reaction of the bureaucrats is to reach into the pockets of those who truly generate wealth; the private sector.  This is the reasoning behind the persecution of the so-called “Tax Havens”, a crude and simple attempt from the rich countries to force small nations to collect taxes on their behalf.  Imperialism is not dead; it has simply changed its appearance.

For: Economica Magazine

Investment benefits available to foreigners in Panama are diverse.  Panama offers a favorable framework for developing a business in the long-term in several economic sectors, all within a legal framework coherent with today’s global economic contexts.

Permanently developing and demonstrating international characteristics, Panama is a transport hub for both people and freight, pioneered by internationally-acclaimed companies, a fact backed up by the current Panama Canal expansion project.

Add to this the Colon Free Zone, a leading international logistics port, thanks to its strategic location and ability to receive and distribute merchandise to and from every corner of the world.

Moreover, Panama is home to a telecommunications system that supports a variety of technological platforms, a secure business environment, the US Dollar as legal currency, and a certain quality of life, all of which help to make Panama an ideal place not only for foreigners to invest, but also to live.

All of the above advantages would not be possible without a legal framework established with the investors’ needs in mind, who are coming to Panama, an international business center and a country with business opportunities in a variety of sectors accompanied by fiscal regulations that offer advantages to the businesses established here.

These are the reasons for which the Panamanian economy has steadily grown over the last few years, aided in part by the increase in investments in residential and commercial real estate, infrastructure and residential and resort tourism.  Given Panama’s mid- and long-term prospects, this growth is set to continue, thanks to the megaprojects and infrastructure developments that are being carried out over the next few years.

The Colon Free Zone, which continues to be a pivotal force in the country, is in a similar stage of growth, complemented by a constant increase in passenger and cargo movements across the country.

There is one situation in Panama which requires extreme patience and tolerance, the Panamanian financial center.  The financial system has its good and bad points; the good points are that it is a very healthy and solid system, but on the bad side, the system has become stagnated and is not aggressive enough in managing the innovative financial products that are available nowadays.  This has led to a lack of understanding of the financial needs required by international markets and means that now, opening a simple personal or corporate bank account can take months.

This is the situation, therefore, in which many nationals and foreigners, particularly foreigners, find themselves after having made a study into which country in the region offers the best investment conditions, and find Panama welcoming them with arms wide open.