OnTheBall Travels
A great hub for Finance; Banking, Companies, Funds, Tax planning–But simply not stable enough for living year-round
I headed to Panama to see the place as many expats have commented on it being a great place to hideout or to remain free in this captive world. I also had some business meetings. It was a quite a packed trip and although we never got to see Boquette (next time) I wanted to share our travels & thoughts to an audience considering visiting Panama or relocating there for various reasons.
UPDATE! Our Assessment has been correct. Panama is in A LOT of trouble amid protestors effectively shutting down the country. See more below!
Itinerary
Panama is a major international airport connecting the Americas to each other and to Europe. It’s a huge advantage having this as your hub as a businessman who needs to be places, often. Just an FYI, if you fly in with an international layover there won’t be a layer of security in the airport–this makes travel a lot more comfortable (For example, USA to Argentina by way of Panama).
On the flight we were handed a form to fill out if we were staying in Panama (most of our flight was simply doing a layover). The form asked where we were staying, for how long, if we had anything to declare, etc. (they have a 10,000USD cut off before you need to declare). Interestingly, this form had numerous misspellings on it. The form did state that the value that one was bringing in included cameras, clothing, laptops, jewelry, etc. (in case you’re bringing 9000 dollars in cash). However, realistically, this is not an issue (but I did take note that they ‘could’ zing you). I’ve heard from others that coming into Panama is simple, they don’t care– as long as you’re legal.
We heard of two flights being overbooked and some people looked upset–it sort of seemed chaotic but we were itching to catch our Uber so we went through to baggage claim and lined up accordingly for immigration. We had a drug dog sniff ourselves and our bag before moving further in the line. When we got to immigration there was a younger guy working who was pretty relaxed to chat. They take your fingerprints if its your first time arriving. As he was teasing me that my Spanish wasn’t good, he signalled to someone to ‘watch out! watch out’! It turns out… there were three Cubans sneaking through immigration into the country after their plane ride!
When I moved on, I was waiting for my travel partner who found more out: The agent said that there are lots and lots of Cubans, Haitians and Dominicans always trying to sneak in.. not just at the airport but through various ports in their country. The country is hyperaware of the folks who require a visa.
We found our drivers to be of no help with tips, always wearing no seatbelt themselves or listened to uncomfortably loud music. Traffic was not always smooth, and outside from close to downtown, the roads were in rough shape in areas.
Details noticed/Experience
Panama is clearly a 3rd world country. Whoever tells you otherwise is in denial or wants an ego-boost. There are elements that are certainly modern, but it takes a 6 minute drive from downtown to find some very ugly levels of poverty. This poverty is especially bad in and around Colon. We stayed at a 4 star hotel that was great service, but the power cut out at least 3 times when we were there–I can’t imagine households. There were also delayed services to a tour bus as well–which felt like the norm.
Some influence from China was apparent. There were Chinese news stations on TV, Chinese tourists & they Chinese/Singaporean companies own a container port close to the canal. We were told Chinese real estate investment had increased as well.
Of the buildings that exist in Panama City, apartment buildings account for 70%, whereas the remaining are dedicated to businesses, corporations & bancos (I would have thought it was more in favour of banks–there’s many). There’s many nice areas with an obvious wealth split. Nice apartments range from 500K-1M USD in price. Many of these are unoccupied and are second home investments by Americans, latino businessmen or Chinese investors.
We noticed a cautionary drill simulation (for a bomb attack?) in Old Panama by the government. It involved a couple of hundred of political heads and many police. They slowly and lazily walked to the main meeting point in the city as a “get out of work” moment. It was funny to see how unconcerned they were about the “drill” and how happy they were that they were getting paid to do nothing. It was a great thing to witness.
Ethnically
Panama feels different compared to other areas of Latin America. The ethnic breakdowns are approximately as follows:
40% black
42% mestizo (Spanish & indigenous likely)
11% white
6% indigenous
1% asian (East asian)
As you can see, Panama is a melting pot of activity rather than a more homogenous country like their neighbour in Costa Rica. However, I can say that the food is far more tasty given it’s blending of cuisines available.
The education situation in the country isn’t the best either. The average citizen is not educated to a level that they could be unfortunately.
One aspect of Panama that I cannot deny is they do hold a level of professionalism that is not found in other LATAM countries [in the private sector]. We found professional hotel service, professional banking, professional lawyers–business wise they are tuned in unlike other Caribbean facing countries (HERE & HERE)
Culture wise:
Panama felt more-so like a Caribbean country rather than a Hispanic one–and felt (for me) far different than Mexico. Interestingly, after some inquiries we noticed that how the wealthy lived back in the early 20th century was about 50 to 100 years behind western standard. In other words, the peak wealthy there would have lived similar to a reasonably successful farmer in Canada or United States in the 1910s.
It’s immediately clear that Mexico (where I flew from) is superior on preserving culture, buildings, food, music. Panama culture is a blend of a few cultures and the motivation to be unique is absent. Outside of the financial district, the canal and being the connector of the Americas, it has no face.
Part of this is the fact that the USA (& to a much lesser degree France) are pretty much responsible for formation of Panama. In fact, after learning about the history of the canal, I joked that the locals took credit for the work done by the Americans. Some evidence of this? There are cops everywhere, everybody uses USD dollars in their transactions and it’s a pretty gun friendly country! Pretty ‘merican!
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City
We noticed that the place looked abandoned in many areas; both areas that were built nice and places that were literally falling apart were quiet. The streets, even though they had little trash, smelled like urine and feces in many areas throughout. Generally you could find places that aren’t bad–but nothing particularly was impressive that screamed “first world”.
Another last detail was the humidity in the city–I received a sinus infection from going between the high humidity into the cold air conditioned buildings. I’m sure one would get used to it, but for me, it was absolutely draining.
Whats Going on with the Protests?
A few people have been shot in killed over the anger of the blockades & protests!
This is due to a copper mine contract (an already well-known, producing and a major deposit) which enraged local indigenous commuters and thousands of others. The mine itself is nothing new for Panamanians–theres 2-3 decades of mining history with a staggering 1.5% of the worlds copper supply coming from these mines.
With this size of the deposit, worth hundreds of billions of dollars, the locals hadn’t like that so much of those dollars were leaving Panama as opposed to being extorted through taxation at home. So, a new contract was developed & signed by the president where they owe 375 million dollars in royalties to the government, plus a lot of environmental measures–in total the new contract was believed to cost $1B USD
Despite the government overwhelmingly agreeing to the new contract, the people on the ground fully chimp’d out. Panicked, the government flipped their approach by banning all mining which later became limited to mine renewals, mine start-ups and prospecting licenses for newcomers.
Turmoil has gotten so bad there was a credit-rating downgrading for the whole country
Suntracs, the largest union in Panama with 40,000 supported the outcry.
Loud speakers, pounding in streets, street blockades, lasted for miles. The airport had been blocked off for local flights & COPA airlines flight crew couldn’t get for the international airports. Road crossings to North/South America were few and blocked causing produce to rot for 2 weeks. No fuel or medicine has been transferred either causing gasoline prices to jump 13 dollars a gallon imported illegally from Costa Rica. People also took to social media and stormed the Presidents’ house crying for an end to the contract.
The indigenous population is only about 450,000 in Panama–I am skeptical that the outrage was purely from domestic sources. There’s a major benefit disturbing the Canal, Pan-American highway & copper prices–not to mention distractions from migrant caravans. Stay tuned for more on this…
This mine is second in line in importance for the economy after the canal due to the number of jobs, economic contributions, tax revenue, foreign investment, etc. It accounts for approximately 10% of the year budget. Panama’s debt sits at 47.4 Billion Dollars with its GDP just under 70 Billion Dollars. A major blow to their economy if the mine closes in the future.
Three reasons why it’s not a place to hang your hat (from what I’ve seen)
- Numero uno. Multiculturalism. I felt like a stranger & the folks there acted like it. There weren’t too many smiles on the street. People are not that unfriendly, but they obviously ‘stick to their own’. Life isn’t like a Hollywood movie where every race is equally present in the scary movie–many readers will not want to read that but it’s the reality. It’s diverse and people have many differing origins.
As I said, it felt more Caribbean than “Latin” which is fine, but it was clearly a melting pot (ask Croatians and Bosniaks how that goes). It didn’t feel like there was a collective identity whether that be religious, national, ethnic, etc. There was certainly no “proud to be Panamanian” vibe, yes they have the Panama Canal, biodiversity and the hats but there’s only so much independence you can feel from straw hats and Toucans. It’s unclear how the country unites in times of trouble.
- 2) Numero dos. They destroyed their economy with the strict lockdowns. This was a factor that made my trip hesitant in the first place. In fact, I remember you had to fill out a form before traveling (last year) where you had to agree to the terms and conditions set by the public health officials. So, like a nerd, I read those terms--and in so many words you were agreeing for them to arbitrarily choose you and complete all medical procedures they deem necessary, undergo an indefinite quarantine period and full compliance to social measures. Legal penalties ensued if not abided by (such as 6 feet distance, sanitizing hands, taking temperature). Again, similar to the customs forms, they ‘could’ zing you.
Furthermore, this was just not a bluff on their end–their lockdowns were incredibly strict in all aspects of life, even extending to food limitations. Residents were only permitted to leave their homes alphabetically & based on members of their house. Mask-wearing (outside) was strictly enforced with fines being commonplace. Many businesses had vaccine mandates and the PCR testing/quarantine procedure lasted much longer than other countries. It was not uncommon for dissenters to be taken away in police cars or intimidated. News was heavily monitored and businesses were strained from opportunities to turn a profit. They, a long with Mauritius and of course China were known to have the most tyrannical, strict and serious covid procedures in the world.
I am grateful that all of this had passed, but we were able to witness the after effects. The malls are closed up. We had gone to three malls (one being the largest in Latin America) and it was very quiet. One mall in the heart of the city had about 30 people on the entire floor with many shops closed permanently.
Citizens are simply not spending money; people are only outside to come home from work to get transit and return home. There isn’t a feel that there’s anything “happening” or any velocity of money is turning over. The restaurants, retail stores, even the airport was a zombie town. The airport was so bad that while we were the 5th flight of the day, we were one of the only walking through the halls and within 42 minutes we saw 9 people (who weren’t staff). In the gate area we were on only people for about 300 yards. We joked we were in the wrong airport!
More visible evidence that they damaged their economy was seen in July 2022 when they had some very serious protests too. These were due high costs of living and unaffordable fuel costs leading to widespread diesel shortages.
None of this situation is helped by them being dollarized either. Sure they have the canal & a great geo-positioning–but they’re not writing their own story with the balboa fixed to the USD.
3) Numero tres. Inherit instability. Stanley Motta, the top criminal runs everything & the slow bureaucratic government obey. If he & his cronies want something done, it’ll go his way as he has removed competition (especially during the lockdowns). He kills competitors and installs his version of the sector. Just because it’s not on Netflix doesn’t mean there aren’t cartels elsewhere.
Panama are reliant on the canal for huge sums of income but much is stolen from there too (not to the benefit of the Panamanians). To a lesser extent, they also get a large chunk of revenue and activity from the major copper mine that is now at a stand still. Without the mine, this means is more and more people go without social benefits, employment, social security, disability programs–and do you think they will be happy? Not to mention the dairy farmers, the agricultural farmers unable to export product. Everyone part of the supply chain is without income over the mine closure. As I write this, the canal is only operating at 50% capacity.
In preparation for something like the above happening, cops litter the streets & as said before, they DO have the capacity to enforce measures. As far as I could tell, if you shut off foreign investment & tourism (which is becoming more likely given their bureaucracy), the dollarized economy is not going to hold up.
Once you leave the lavish high rises (which are incredibly overpriced– I spoke to someone who is looking to get out of one they bought for >1.2M) the country is very poor and on the verge of desperation. We briefly passed one of the colonias or districts and it felt dodgy ‘in the morning’ where we were yelled at & someone tried to stop us on the sidewalk.
OH yea, and hardly any food is produced in Panama… Add any flavour of high diesel prices, difficulty with imports or more stupid measures, reduced social security & this all leads to instability. I see the advantage for banking, precious metals storage, foreign companies or foundations but calling that home? No way.
These reasons all point to inherent volatility in the short-term, however this is complicated further given three more factors that aren’t changing any time soon.
- Food–Reliant on Imports; Panama imports 2/3rd of all food from United States
- Energy–Reliant on Imports; No energy resources
- Geography: Geography is a double-edge sword. Given it’s location it’s rarely hit by bad weather events and it’s not vulnerable to earthquakes at all–which explains the whole pack of skyscrapers in Panama City. In this sense, it’s a safe haven from real estate disasters (Caribbean isn’t so lucky).
Having said this, it’s positioning is a little too good. It is a bridge between South and North America and its canal is very strategic for large superpowers. I spoke to some highly intelligent folks who described how an explosion could be utilized to wipe out locals/defences but keep the canal infrastructure intact in order to resume control. Shipping in some sense is the global economy party and Panama is one of few bouncers who can dictate a lot. A dictators’ wet dream that Panama offers.
Since completing this, I have returned to Panama (just passing through) and I realized that all the planes at the gates were all Copa Airlines. After checking the board of flights I noticed pretty much the same–there are A LOT less foreign airlines flying into Panama then there used to be.
Closing Thoughts
Panama remains an excellent option for banking, precious metals storage, free zone companies, tax friendly (& affordable) corporation formation or private funds–I believe it’s smart for everyone to have some exposure to Panama. It’s laws, while not upheld to the degree of a Liechtenstein or Singapore are still very much designed to be a financial centre for the Americas and many of the jobs in the city correspond to this. Residency is also very attractive from a tax perspective, however if sending money back to Europe is common, the EU will cause you trouble. Overall it felt like this place existed to appease offshore activities of foreigners. Again, no complaints about the service–they dominate the region in the “offshore” space. Please reach out to learn more if you have questions.
The main disadvantages with Panama are lifestyle, instability and poor economic outlooks. As previously mentioned, it is quite poor in many areas–I believe someone has an agenda if they try to tell you otherwise. Some say the freedom of buying a firearm or remaining in the rainforest without an address compensates for this–to each their own. The day-to-day life leaves a lot to the imagination with limited local production & dependency on an interconnected global economy. We found Costa Rica to be a lot more friendly from a lifestyle perspective (see this article here) and Mexico doubly friendly relative to Costa Rica.
The last few months has proved that my points have all rung true–the country is a place where tensions can run high and it can be volatile very quickly. In 2022 there were major protests over fuel and cost of living and these mining protests will have a more damaging long-term impact on the country. Even if they resolve all conflicts tomorrow, their Covid hysteria measures have been a deal breaker for many.
I believe the ideal aspect is to have an exposure to Panama via banking, corporations, or back-up residency, but there are far superior countries when it comes to setting this location as your ‘plan A’ place to live. Lucky for you, you don’t need to live there to get the benefits.
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