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PANAMA : THE “IT” PLACE FOR RELOCATION!
by Susan Banks

It seems that year in and year out, for the past decade, Panama has ranked in the Top Three destinations to retire to, relocate to or just escape to! Whether as a retirement haven or a second home base or relocating a business, just to escape the red tape of North America’s business climate, Panama has many attractions making it the IT place to relocate.  

And even for those of us who will soon retire from the business world there is still the worry about living in the real world and as such, we have concerns about the tax structure, currency restrictions, privacy laws, banking, infrastructure, language, education level of any new country we’d consider moving to. 

For the past five years my husband and I plotted out our ‘perfect’ spot for semi-retirement by embarking on three month journey’s to a variety of selected countries– Panama, Honduras, Argentina, and Mexico – in search of the right place for us. Aside from the low cost of living we require - because we are retiring very early - we need to be assured about a few other factors that we could only learn about through the experience of living in a place – and so living in each country we did.  By year five, we have finally settled on Panama as our spot for semi-retirement. We plan to move there sometime in 2010.
 
PEOPLE BECOME ENTHRALLED BY A COUNTRY’S BEAUTY.. AND THE DIFFERENCE OF BEING ANYWHERE BUT HOME…

Lots of people go to a country and become enthralled by its physical beauty, peace and just the general difference of being anywhere but home, but we looked at each country from a personal and business bottom-line perspective. The business perspective came in to play because we felt if we became bored, or started running low on funds, we’d want to work or open a business. 

Some important factors to know about Panama include:

•    It is known as The Republic of Panama,

•    It is located at the narrowest point of the Central American Isthmus, which connects the continents of North and South America,

•    It is just 2.5 hours by air from Miami, FL, USA and located in the same time zone as the U.S. East Coast (five hours behind Greenwich Mean Time),

•    Panama is located between Costa Rica and Colombia,

•    Panama is known as the ideal jurisdiction for international investors and businessmen to operate their offshore corporations, banking, investing, finances, and all other areas of international trade,

•    Panama City is a capital that is a first world city of skyscrapers to rival those of Manhattan,

•    Duty free shopping with high end goods, US style malls and US mega-stores as well

•    The friendliest people in Latin America,

•    Beaches to die for and spectacular mountain backdrops,

•    A country with a low cost of living with virtually non-existent inflation that offers a generous list of incentives to attract foreigners,

•    Panama has less bureaucracy and red tape to deal with than other retirement destinations,

•    Inexpensive real estate as compared to North America,

•    Safety – Low crime rates and good policing differentiate Panama from typical snowbird and retiree destinations like Florida and Mexico,

•    Stability – A stable economy based on the US $, virtually zero inflation and a stable democratic government combine to make Panama an ideal country in which to live,

•    Infrastructure – Panama offers a First World infrastructure with many US companies and brands to be seen on its streets,

•    US$ economy, makes it nice and easy for expatriates to settle and handle the transition of moving to a new country,

•    Great amenities – Panama City especially is a major modern metropolis offering all the amenities you would expect in a First World capital,

•    US standard health care – Enjoy the same types of facilities as you would in the States or Europe. Many English speaking doctors in Panama are US trained,

•    A Booming Economy – the Canal expansion brings more cruise ships, bringing tourists and money. The more money coming into Panama, the better the economy. The canal expansion is due to be completed by 2014.

•    The Free Trade Zone – Panama's Colón Free Trade Zone is the second largest in the world and receives over a quarter of a million visitors a year. This zone, offering exemption from tax on importation and re-exporting, is a vital part of the Panamanian economy.

•    Tax breaks and incentives for retirees – The Pensionado Program offers retirees the best incentives in the world. For example, people retiring to Panama can enjoy perks like 50% off entertainment, 25% off airline tickets, 15% off hospital bills and much more... Plus, you don't have to be a certain age to be classed as a “pensionado” - anyone over 18, who has an income of $1000 or more from a pension, can take advantage of these benefits.

•    Tax breaks for foreign residents – No tax to pay on income earned abroad and your financial privacy is guaranteed.

What we learned on our journey in selecting Panama may be helpful to others …we rated 15 category areas under each country on a rating scale of 1 to 10 - with 10 being perfect, 5 average and below 3, forget about it. Here are our 15 categories and some information on each, showing why we put Panama at the top of the IT list:

LANGUAGE

My husband and two teenagers’ insist on living in a country where most people understand at least some English. Panama's official language is Spanish; however, English is the second most widely spoken language. 8 out of 10 Panamanians business people are bi-lingual in English and Spanish. And this is growing in to other industries as well – such as tourism. 

LITERACY AND EDUCATION

This is important to both my husband and me, as we are teachers.  We want to live in a country with a high literacy rate. It makes life easier in dealing day to day with anyone from the gardener you are trying to pay wages to or in dealing with utility companies when we are trying to negotiate services. I want to deal with a literate workforce. As it turns out Panama has a very high literacy rate in comparison with other Central and South American countries. And, as a mom I don’t my two teenagers’s “hanging out” with other teenagers who are not literate.

The educational system provides for the free schooling of all children. An excellent parallel private school system exists primarily in Panama City. The main universities are the University of Panama, a state institution, with six campuses, and the University of Santa Maria La Antigua, a Catholic institution. There are more than five other private universities, plus the recently created City of Knowledge.

Panama City boasts an excellent private school system. Education is offered in English, French, Italian, Mandarin and there are several bilingual schools (Spanish/English).

LOCATION 

Panama is extremely easy to access from almost anywhere, due to its central location in the middle of the Americas. Its proximity to large cities in the US and Europe makes it relatively cost effective to bring in specialist know-how for installation and maintenance.  Direct flights are available to Panama from most major cities around the globe. We had a nagging worry about the need for emergency travel to the USA and Guyana, as we have relatives and work in each country.

So one of our criteria to consider was a close location for emergency travel.  Panama is about two and one-half to four hours from any place we would need to travel for emergency reasons.  Additionally, it has an excellent airport and to obtain a flight on any number of airlines would never be a problem. 

Miami is only a two and a half hour flight away from Panama City and Copa Airlines, Panama's main airline, is opening up more direct routes to many US cities. It's easy to visit family and friends. Panama is also sandwiched between the Pacific Ocean and Caribbean Sea making it a veritable Paradise which is unspoiled by mass tourism and overbuilding.

Another of the criteria under location to consider was if we out of the Hurricane Zone as we wanted to live someplace that is  free of environmental  and natural disasters such as hurricanes, tornadoes, earthquakes, tidal waves, etc.. Panama is out of the ‘zone.’

CLIMATE

Not only is Panama a tropical haven without the hurricanes that other countries, like Belize, suffers but it has great weather. It has hot temperatures all year round and a rainy season from May to November which keeps its scenery lush and green. Sea breezes and the advent of air con in many properties and public buildings make any humidity easy to bear. Mountain living, in places like Boquete, offers eternal springtime with warm temperatures all year round.

STANDARD/COST OF LIVING

In Latin America, Panama ranks as one of the best places to live, according to a business survey of 192 cities worldwide by the Corporate Resources Group. Panama ranked among the top three cities in which to live in Latin America next to Buenos Aires and Montevideo.

The survey takes into account transportation, crime rate, arts and entertainment. In executive living expenses, recreation and entertainment costs and prices of basic goods, Panama ranks well below Buenos Aries, Sao Paulo, Santiago and Caracas (EIU, Worldwide Cost of Living Survey).

MEDICAL SERVICES

Health care is both excellent and reasonably priced in Panama. Many of the country's physicians earn their degrees in the U.S. and other industrialized countries, and the state university offers a top quality medical program. Bilingual doctors are common in all Panama City hospitals. Water supply is safe to drink with few exceptions throughout the country.

ENVIRONMENT

Panama is the only city in the world in which a protected, tropical rainforest can be found within city limits. The country has many and varied outdoor attractions from the mountain region of Chiriquí to the beaches on the Caribbean coast.

IMMIGRATION STATUS

Panama is still looking to welcome foreigners, such as retirees and investors. Changes to the law include the following:

1. Elimination of the Small Investor's Visa – The only investor visa now available is the Large Investor's Visa which is issued to those investing sums of $200,000 or more.

2. Pensionado Program – To benefit through this program, you will need to have a pension of $1000 per month for the main applicant, instead of $500, and $100 for each dependent ($1100 for a couple). See below for more details.

3. Person of Means Visa – The amount has been raised from $200,000 to $350,000 and the CD must be in a local bank, in your own name for a minimum of 4 years. Real estate must be residential, be in your own name and free of liens.

4.Employment Visas – The minimum salary is now $1000 – watch out, the visa is not permanent.

PENSIONADO PROGRAM

The majority of people relocating to Panama from North America are eligible for the Pensionado Visa. Obtaining the visa is not difficult – no insurmountable pile of red tape to fight your way through. Simply prove to the Panamanian authorities that you have a pension income from a private pension or government agency.

No minimum age is required, just a pension amount of $1000 or over, or $1100 for a couple. To prove your pension, you will need to show the authorities your pension statements and possibly bank statements.

The Pensionado Visa does not have an expiry, but you will need to prove your income on an annual basis. The benefits of the Pensionado Program are what draw many people to Panama:

1. A one-off exemption from tax and duties on the importation of household goods, such as furniture, up to a value of $10,000.

2. An exemption from tax on importing a new car every two years.

3. 50% discount on hotels Monday to Thursday and 30% at weekends.

4. 50% discount on entertainment such as entry to movies, theaters, cultural events and sporting events.

5. 25% discount on utility bills.

6. 25% discount on restaurant bills.

7. 30% discount on public transport and 25% on airline tickets.

8. 20% discount on doctor's bills.

9. 15% discount on hospital bills.

10. 15% discount on loans.

11. 15% discount on eye examinations and dentist's bills.

12. 10% discount on prescriptions.

PANAMA’S COMMUNICATIONS SYSTEMS AND INFRASTRUCTURE ARE THE EQUIVALENT OF ANY FIRST WORLD COUNTRY

COMMUNICATIONS

I can do without a lot of things, as can my husband and children, but what we can’t do without is a top quality communications and internet service. Panama is a technically advanced country with excellent communications services, highly comparable to all first world countries.  This assessment applies to both cell and land line service, as well. In addition to this fact – the overall costs for communications is relatively low.

Panama's communications systems and infrastructure are the equivalent of any first world country such as the USA, Canada, or the United Kingdom. Telephone, fax, internet, and cellular communications are all offered in Panama by the world’s largest communications companies.

Panama has the highest level of communications infrastructure for telephone, fax, internet, and cellular communications in all of Central & South America, including the Caribbean. Panama has the best access to multiple high-bandwidth continental fiber optic networks in telecommunications infrastructure. The extremely low risk of natural disasters (hurricanes etc.), gives the Panama telecom sector security and reliability of service as well as a competitive advantage over other offshore jurisdictions.

TAXES

Panama is a 100% Tax Haven:

Non-resident Panamanian International Business Corporations (IBC's) and Private Interest Foundations do not pay tax on any of their income (as indicated below), nor do they have any reporting requirements to the Panamanian government. So there are no capital gains tax on your offshore investments, no interest income tax on your offshore bank account interest, no inheritance tax, etc. and:

•    No income tax.
•    No capital gains tax.
•    No interest income tax.
•    No sales tax.
•    No tax on issuance of corporate shares.
•    No tax to shareholders.
•    No stock sale or transfer tax.
•    No capital stock tax.
•    No property tax.
•    No estate tax.
•    No gift tax.
•    No stamp tax.
•    No succession tax.
•    No inventory tax.

STABLE CURRENCY

Panama's circulating currency is the US Dollar, and Panama has no currency exchange controls or currency restrictions so funds can flow in and out of the country freely.

Panama uses the U.S. dollar as its legal tender (currency), instilling tremendous fiscal and monetary discipline while keeping inflation very low - under two percent for the last 40 years.

A dollar economy insulates Panama from global economic shocks. During the Asian monetary crisis of 1998, Panama became one of the healthiest economies in Latin America.

There are no currency exchange controls. Panama has no restrictions on monetary remittances abroad, including dividends, interests, branch profits and royalties. There are no restrictions on funds flowing in or out of the country in any currency.

STABLE GOVERNMENT

Panama has what is considered by government analysts to be the most stable government in all of Central or South America. It has had a democratic government since 1990. It is one of the safest countries in the world to visit. The government of Panama is headed by the executive branch, which is composed of a president and two vice presidents, democratically elected for a five-year term by direct vote. It has a civil law system.

The Panamanian military was abolished by constitutional amendment in 1994, and the government still has a unique security arrangement with the U.S. due to the Neutrality Treaty of the Panama Canal. As a result, the risks of going back to the earlier military regime are virtually non-existent.

STABLE ECONOMY

Panama's economy is one of the most stable, prosperous, and most advanced in all of Central and South America. Panama is home to the second largest international distribution and trade center (free trade zone) in the world next to Hong Kong. Panama's Colon Free Zone has over 1500 international import/export businesses operating within it, receives more than 250,000 visitors yearly, and generates exports and re-exports valued at more than US$11 billion annually.

Panama's inflation rate has been less than 2% for the last 40 years, although it has been slightly higher on 2008. Panama's GDP (2007) was over US$19 Billion. In recent years, the service sector has accounted for over 80% of the country's GNP. The Panama Canal is also a large contributor to Panama's overall economic success. Panama is at the top of the list of the world's freest economies, according to Canada's Fraser Institute (Economic Freedom of the World: 1998/9 Interim Report, Nov. 1998). Ranked eighth with Australia, Ireland, the Netherlands and Luxembourg, Panama represents an environment conducive for the creation of companies, jobs and prosperity.

Panama has been ranked first in Central/South America for low cost of living, operational cost and index of labor by the Tripartite Committee, which consists of the Economic Commission for Latin America and the Caribbean (ECLAC), the Organization of American States (OAS) and the Inter-American Development Bank (IDB).

Major companies in Panama include Federal Express, DHL, UPS, Price-Mart, Movistar, Kansas City Southern Railways, Continental Airlines, Copa Airlines, American Airlines, ICA (construction), Cable & Wireless, Evergreen and Hutchinson Whampoa, and many others.

EXCELLENT BANKING SYSTEM

Panama City is home to the second largest international banking center in the world next to Switzerland. Panama has the most modern and successful international banking center in Latin America, with more than 150 banks from 35 different countries. Panama offers a modern and technologically advanced banking system. Total assets in Panamanian banks are over US$100 billion.

Some of the banks present in Panama's banking center are: Citibank, HSBC, Dresdner Bank, Bank of Tokyo, Bank of Boston, Banco Nacional de Paris, International Commercial Bank of China, Banco du Brasil, Societe Generale, Banque Sudameris, BBVA, Stanford Bank, Metrobank, Banco General, Banistmo, Global Bank, Multi Bank, ABN Amro, Banco Aliado, BancoLat, BIPAN, Bank of Nova Scotia, and much more.

Are you sold on Panama as yet?  I invite you to check it out on your next vacation as a retirement retreat or maybe to buy that second home you are longing for. You won’t be disappointed.

Author : Susan Banks is married to Noah Banks and has two teenagers. The family divides it time between the States, where Susan is a graduate student in education at a University in California, and Guyana, her husband’s birth place. After an exhaustive search for the ‘it’ place to relocate, the family selected Panama and plans to move there Panama in 2010 after Susan’s graduation.

Email : Susan Banks