Bob Bauman’s
The Republic of Panama
The Greatest Asset and
Money Protection You’ll Find
Anywhere in the World
Table of Contents
Foreward.......................................... 3
1. An End to Bank Secrecy......................... 6
2. Protection & Profits Offshore................... 9
3. Legal Entities, Retirement & Residence........ 12
4. Entry Requirements............................ 14
5. Buying Real Estate............................ 21
6. Professional Contacts & Information........... 23
7. Where to Stay................................. 26
8. Panama at a Glance............................ 27
9. A History of The Republic of Panama........... 30
Published by The Sovereign Society®
The Freedom Alliance
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The information and recommendations contained in this brochure have been compiled from sources considered reliable.
Employees, officers and directors of The Sovereign Society do not receive fees or commissions for any recommendations of
services or products in this brochure. Investment and other recommendations carry inherent risks. As no investment recommendation can be guaranteed, the Society takes no responsibility for any loss or inconvenience if one chooses to accept them.
The Sovereign Society advocates full compliance with applicable tax and financial reporting laws. U.S. law requires income
taxes to be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or have a residence.
Each U.S. person who has a financial interest in, or signature authority over bank, securities, or other financial accounts in a
foreign country that exceeds $10,000 in aggregate value, must report that fact on his or her federal income tax return. An additional report must be filed by June 30th of each year on an information return (Form TDF 90 22.1) with the U.S. Treasury.
Willful non compliance may result in criminal prosecution. You should consult a qualified attorney or accountant to insure
that you know, understand and comply with these and any other reporting requirements.
About the Author: Robert E. Bauman JD
Mr. Bauman, legal counsel to The Sovereign Society, served as a member of the U.S. House of Representatives from 1973
to 1981. He is an author and lecturer on many aspects of wealth protection. A member of the District of Columbia Bar, he
received his juris doctor degree from the Law Center of Georgetown University (1964) and a degree in international relations
from the Georgetown University School of Foreign Service (1959). He was honored with GU’s Distinguished Alumni Award
in 1975. He is the author of The Gentleman from Maryland (Hearst Book Publishing, 1985), and of the following publications
of The Sovereign Society: The Complete Guide to Offshore Residency, Dual Citizenship & Second Passports (7th ed. 2009),
Where to Stash Your Cash Legally: Offshore Financial Centers of the World (4th ed. 2009), Swiss Money Secrets (2008),
Panama Money Secrets (2005), Forbidden Knowledge (2010), and The Offshore Money Manual (2000). He also served for
nine years as founding editor of The Sovereign Society Offshore A-Letter, an Internet e-letter that more than 250,000 readers
worldwide receive daily. His writings have appeared in The Wall Street Journal, the New York Times, National Review and
many other publications.
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Foreward
The Republic of Panama is the latest tax haven to fall victim
to the international campaign for tax information sharing pushed
by the Organization for Economic and Community Development (OECD)
and the near bankrupt, high tax countries feverishly seeking more
revenue.
On November 30, 2010 in Washington, D.C. the government of Panama
signed a broad Tax Information Exchange Agreement (TIEA) with the
United States.
When I learned this disturbing news I was reminded of an e-mail
that the late Robert D. Kephart, a lifelong friend and founder of The
Sovereign Society, sent me in 1999. As a worldly traveler, Bob wasn’t
easily impressed by anyone, anything or any place. So his e-mail to me
from the Panama City airport came as a surprise…
He was on his way home after his first business trip there. While
waiting for his flight to board, he wrote:
“I’m sweating that the hurricane heading for Miami won’t
close the airport before I can get there. But, if it does, I
couldn’t have chosen a nicer place to be stranded…
“Panama City is VERY impressive. It’s a very cosmopolitan
city — full of the trappings of wealth, dozens of skyscrapers
and four-star hotels. I stayed on the 31st floor of a hotel as
good as any I’ve ever found in New York, Paris or Zurich.
“The place is clean. No goats or chickens roaming the
streets. Virtually no crime and no violent crime at all.
“And real estate is a screaming bargain. For $60k you can
find a three-bedroom luxury apartment downtown. You’ve got the
ocean view, a deck, private parking, a pool – the works. And
you can walk everywhere.
“Panama City has so much going for it that I can’t believe
these apartments won’t be worth 10 times that in a few years.
I’m thinking of coming back just to shop for such a place for
myself.”
Bob was right. About it all. Specifically about the property
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bargains. That $60k apartment in 1999 will now cost you $150k-plus.
That’s close to triple the original value.
Still, I only came to appreciate this a year after his e-mail.
I had visited Panama many times before. During the turbulent
1970s, I was the ranking Republican member of the Subcommittee on
the Panama Canal of the U.S. House of Representatives Committee on
Merchant Marine and Fisheries. Back then, the country was in the grip
of the late dictator, Omar Torrijos. Demonstrators had raged in the
streets against continued American control of the American-built and
-financed Panama Canal.
In September 2000, I returned to Panama for the first time in 20
years, this time as a private U.S. citizen on a business trip.
The sleepy, slightly seedy colonial city, dominated by the
American military… all gone.
In its place was a thriving, gleaming metropolis with scores of
modern skyscrapers, condos, first-class hotels, restaurants, shops,
malls, digital Internet and international communications, fast-paced
traffic, a brand-new airport, superhighways, and your pick of night
clubs… Latin music filling the warm, tropical night air until the wee
hours.
Modern Maturity magazine rates the mountain town of Boquete in the
Chiriqui province the fourth best retirement destination in the world.
National Geographic, Travel and Leisure, The New York Times, the
Los Angeles Times, The Wall Street Journal, the Telegraph (London)…
all write favorably about Panama.
Harpers Bazaar calls it, “the most beautiful retreat in the
world.”
The Boston Globe calls it “an undiscovered paradise.”
Sure, at first glance you might think the TIEA has sullied Panama’s
status as the world’s ultimate tax haven. But let me assure you: it
hasn’t. Panama is still the ideal location for retirement, a second
home, an offshore bank account or an asset protection trust.
This is why I’m giving you all the details you need to take
advantage of this best, all-round offshore haven in the world.
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In this report, I tell you what Panama is like today — and why you
should consider this fascinating country for:
• A base for your company, trust or foundation
• First class asset protection, banking and relative financial
privacy
• Your vacation home or retirement residence
• Profitable real estate investments of all kinds, from condos to
coffee farms to beach fronts
• A must-visit place for tourism, leisurely vacations or just
plain fun
From the Caribbean to the Pacific, Panamanians are some of the
friendliest people you’ll ever meet. And their country holds the
promise of real fulfillment in many aspects of your personal life —
business, financial security, investments, good living, retirement, and
adventure.
Panama is a proud nation that will welcome you… as it has me.
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Part I
An End to Bank Secrecy
The Republic of Panama is one of the world’s oldest tax and asset
protection havens. It has legislation establishing tax and other
advantages for corporations dating back to the 1920s.
In the past it guaranteed – by law – near absolute financial
privacy and confidentiality. And for four decades, it pointedly refused
to commit to exchanging any information with tax authorities in other
countries.
That all changed in 2009 when Panama President Ricardo
Martinelli’s government began signing a series of double taxation
agreements with several countries.
Before the global financial crisis struck in 2008 Panama faced
little pressure to reveal tax-related data. Other jurisdictions,
such as the Cayman Islands, were more popular targets of foreign tax
collectors.
Once the Organization for Economic and Community Development (OECD)
began its propaganda campaign against alleged offshore tax evasion,
many of the leading havens surrendered to the growing international
pressure. But Panama began to stand out for its intransigence.
Absolute Privacy No More
Until November 30, 2010, I was able to say that, of all the
offshore tax havens, Panama combined maximum financial privacy, a long
history of judicial enforcement of asset-protection-friendly laws, a
strong anti-money-laundering law, and tax exemptions for foreigners.
That changed with the signing of a tax information exchange
agreement (TIEA) with the United States. I’ve studied the terms of
the treaty. Those terms definitely stop Panama from offering “maximum
financial privacy”.
Since Panama only taxes economic activity within its territory,
meaning that no American assets are subject to its levies, the TIEA
represents a clear surrender to U.S. Internal Revenue Service (IRS)
demands.
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Indeed Panama now offers about the same financial privacy offered
by the many other tax havens that have surrendered to the demands of
the U.S. government, especially those of the IRS and the OECD.
Despite this, in my opinion, Panama remains the world’s best,
all-round offshore haven thanks to all the other investor friendly
policies and opportunities it offers: its asset protection friendly
laws, a strong anti-money laundering law, a territorial tax system
with tax exemptions for foreigners, an array of useful statutory legal
entities, and a host of qualified offshore professionals and bankers.
What a Candid Discussion with Panama’s Vice Minister
of Economy and Finance Revealed
I was in Panama when the TIEA treaty was signed and met with the
Hon. Frank DeLima, Panama’s Vice Minister of Economy and Finance.
In a candid discussion, DeLima told me that President Ricardo
Martinelli had decided to sign the agreement to advance Panama’s
economic world standing and to shed the stigma of arbitrary U.S. and
OECD blacklisting.
He admitted that Obama administration officials suggested that
signing the TIEA with Washington would go a long way towards achieving
U.S. Senate approval of 2007 U.S.-Panama Free Trade Agreement (FTA)… a
trade deal that Panama business interests strongly want.
But that’s not the full story…
I heard rumors about other less acceptable reasons for the treaty,
such as that Panama’s agreeing to the TIEA was holding hostage specific
lucrative business deals between U.S. companies and influential
Panamanians.
In effect, the government of the Republic of Panama abandoned
decades of bank secrecy because of the Obama administration’s economic
blackmail.
Luis Alberto Laguerre joined DeLima and me in our meeting. He’s
one of the official TIEA negotiators with Washington.
Both he and DeLima insisted that the TIEA, and the accompanying
declaration, gives Panama the upper hand in administering its terms.
However, a literal reading of both documents doesn’t support this
claim.
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I was told Panama rejected demands that IRS agents already present
in Panama be allowed to conduct investigations. Apparently only
Panamanian officials will conduct such tax probes.
DeLima also said that, independent of the TIEA, Panama has decided
to notify persons when the IRS asks for their tax information.
He also insisted: “I guarantee that no IRS ‘fishing expeditions’
with lists of names will be allowed.” When the IRS wants information,
it must make its requests for specific names, particular bank accounts
and bank identification.
Comply with U.S. Tax Laws & You’ll Have No Worries
Under Panama’s rules, you can’t appeal to its courts to prevent
the IRS getting its hands on your financial information.
As DeLima rightly says; “Anyone in Panama who must comply with
U.S. tax laws and who has done so has nothing to worry about with this
treaty and the way we’ll enforce it.”
Panama may have to change some of its laws to ensure that the U.S.
government has access to details of beneficial ownership of all legal
entities, including the owners of bearer shares.
That said, Panama is still a financial haven that offers far
greater financial privacy than the United States, and many other
countries. But Panama is no longer a place for Americans to evade
their domestic U.S taxes.
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Part II
Protection & Profits Offshore
When most people think of Panama, they think — canal!
But the country is less well-known for what it has become in the
last four decades: Latin America’s major international banking and
business center. It has strong ties to Asia and Europe — and a special
relationship with the United States and with Americans.
If you’re looking for a retirement or second residence, an asset
protection haven, or a base for your business, trust, private family
foundation or for private banking, this is the place to be.
Leading Asset Protection & Residential Haven
Notwithstanding recent changes in its financial privacy laws,
Panama remains one of the best asset protection and residential havens
in the world.
Only hours by air from the United States, Panama offers a variety
of lifestyles and geographic diversity with a century-long history of
working closely with Americans. Its real estate boom has cooled, but
the current multibillion-dollar expansion of the Panama Canal can only
increase economic growth.
In many ways, Panama has it all.
40 Laws Protect Your Financial and Investment Rights
Panama’s central geographic location makes it a natural base for
world business operations.
There are more than 80 banks in the country today. The major
players are the 56 multinational banks that represent 30 countries
primarily conducting offshore business.
In 2009, all Panamanian banks held an official US$75 billion in
total assets. Their liquidity was impressively high at an average of
30%. They had virtually no exposure to the kinds of investments that
undermined U.S., U.K. and other national banking systems in 2008.
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According to Canada’s Fraser Institute, Panama is near the top of
the list of the world’s freest economies. It ranks eighth – in good
company with Australia, Ireland, the Netherlands, and Luxembourg.
Panama has adopted more than 40 laws protecting your financial and
investment rights on its soil. These include the Investments Stability
Law (Law No. 54), which guarantees foreign investors the same equal
rights enjoyed by Panamanians.
Stable Banking System
The U.S. dollar has been Panama’s official paper currency since
1904.
Since the country has no central bank to print money, it has an
agreement with the Federal Reserve Bank of New York to supply its
paper U.S. dollar currency.
As Juan Luis Moreno-Villalaz, economic adviser to Panama’s
Ministry of Economy and Finance, noted:
“In Panama… there has never been a systemic banking
crisis; indeed, in several instances international banks have
acted as the system’s lender of last resort. The Panamanian
system provides relatively low interest rates on mortgages
and commercial loans. Credit is ample, with 30-year mortgages
readily available. These are unusual conditions for a
developing country and are largely achieved because there
is no exchange-rate risk, a low risk of financial crises and
ample flow of funds from abroad.”
If you’re concerned that Panama’s use of the declining U.S. dollar
will hurt its economy… don’t worry.
The health of Panama’s economy depends on the same internal
factors as any other nation: unique GDP growth, employment, and direct
local and foreign investment. Panama has demonstrated its separate
and distinct economic existence. It has enjoyed decades of very low
inflation while U.S. inflation has occasionally soared to double digit
levels.
Personal Introductions Necessary
In 1999, Panama enacted a comprehensive new banking law that
accelerated its growth as a leading world offshore finance center. That
law uses the guidelines of the Basle Committee on Banking Supervision,
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the international oversight group that sets banking standards. It
requires all banks with unrestricted domestic or international
commercial banking licenses to maintain capital equivalent to at least
8% of total assets. (In fact, Panama banks have far exceeded that
minimal percentage requirement.) This means that Panamanian banks are
far safer than those in the U.S.
The Superintendency of Banks governs Panama’s banking industry.
They administer broad investigative powers and controls, bringing
Panama in line with higher regulatory standards found in European and
North American banking centers.
Under the banking law, a prima facie case of illicit financial
conduct can launch an investigation of possible criminal conduct. The
law also allows foreign bank regulators to visit and inspect any of
their domestic banks with branches in Panama.
You should be aware that Panamanian banks are very reluctant to
open new accounts for Americans and other foreigners, unless the
applicant has a home or an active business in Panama. In almost all
cases, you need a personal introduction to a bank.
The Sovereign Society has arrangements for private investment
accounts with reputable banks in Panama for our members. We can
arrange an introduction by a local professional (attorney, trust
officer) who serves on our Council of Experts.
Panama’s financial sector also includes an active, but fairly
small, stock exchange, captive insurance and re-insurance companies,
and financial and leasing companies. But local investment possibilities
are comparatively limited.
Another major business and financial attraction at the Atlantic end
of the canal is the booming Colón Free Zone. This is a major tax-free
transshipment facility. It’s the second-largest free trade zone in
the world, after Hong Kong. This is ideal for tax free international
distribution of products.
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Part III
Legal Entities, Retirement & Residence
Panama has liberal laws favoring trusts, international business
companies and holding companies. Use this to your advantage.
In 1995, it enacted Law No. 25, a private interest foundation
statute modeled after the popular Stiftung family wealth protection
and estate planning vehicle long used in Liechtenstein. (Refer back
to your November 2010 Special Report on Liechtenstein for more
information.)
This law allows you to use the tax-free family foundation for
investment, tax sheltering, ownership of commercial business, and
private activity. The founder retains lifetime control. Foundation
assets are not counted as part of the founder’s estate for death tax
purposes. And Panama doesn’t recognize the restrictive inheritance
laws of other nations.
This could mean significant estate tax savings for you if, as a
U.S. citizen, you choose Panama’s family foundation as your estate
planning vehicle.
Leading Retirement Haven
Simply put: Panama is an affordable place to live.
A live-in maid earns about US$150 per month. First-run movies cost
US$2.50 in the theater.
Unlike much of Central America, Panama boasts a first-class
healthcare system with low costs compared to the United States — a
doctor’s office visit costs about US$45.
Because of Panama’s geographical diversity, there’s considerable
climatic variation. Panama City, the historical and financial center,
has a year-round tropical climate. Yet, only a few hundred miles away,
near the Costa Rican border, you’ll find sub-tropical forests with
cascading waterfalls, mountainsides covered with flowers and springlike weather nearly every day of the year.
Weather and cost of living aside, there are many comparatively
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low-priced buys on condominiums and other real estate, particularly in
Panama City and the surrounding areas.
Also, there are numerous programs in Panama for foreigners who wish to
make it their home. The best known of these is the pensionado program.
All you need is proof of a guaranteed pension income of at least
$1,000 a month. You must make your resident visa applications through
a Panamanian attorney (this is non-negotiable). There is no minimum or
maximum age requirement. Those younger than 18 years, the legal age of
emancipation in Panama, will qualify as dependents of their parents.
However, none of these visas automatically grant you the right to
work in Panama. If you want to work there, you must apply for work
permits separately.
Panama also offers a variety of visas for investors, persons of
high net worth, wealthy retirees, small business and agricultural
business investors and entrepreneurs… and those who simply want to
immigrate and become Panamanian citizens.
The government makes retirement in Panama relatively easy and laws
provide important tax advantages for foreigners who wish to become
residents. The only significant requirements are that you be in good
health and have that verifiable monthly income of at least US$1,000.
There are no local taxes on foreign income and you can import your
household goods tax-free.
International Business Corporations Available
Panama’s international business corporation (IBC) Law 32 of 1927
is modeled after the U.S. state of Delaware’s corporation-friendly
statutes. There are about 450,000 IBCs registered in Panama, second
only to Hong Kong’s 500,000.
A Panamanian IBC can maintain its own corporate bank account
and credit cards for global management of investments, mutual
funds, precious metals, real estate and trade. It can spend taxfree corporate income on worldwide business purposes. It also allows
you to avoid home country zoning, labor, manufacturing, warranty,
environmental and other restrictions.
As an American, consult a U.S. tax expert before forming a Panama
IBC. There are some severe and costly U.S. tax consequences for
Americans using offshore corporations.
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Part IV
Entry Requirements
U.S. citizens traveling by air to and from Panama must present a
valid passport when entering or re-entering the United States. Sea
travelers must have a valid U.S. passport or a certified U.S. birth
certificate with a government-issued photo ID.
By Panamanian law, you must present a passport that is valid for
at least three months. You’ll get a tourist card at the airport in
Panama before clearing customs. Alternatively, you can get a multiple
entry visa from a Panamanian embassy or consulate before you travel to
Panama.
The Embassy of Panama is located at 2862 McGill Terrace NW,
Washington, DC 20009. Its telephone number is (202) 483-1407.
Panamanian consulates are also located in Atlanta, Boston,
Chicago, Honolulu, Houston, Los Angeles, Miami, New Orleans, New York,
Philadelphia, San Diego, San Francisco, San Juan or Tampa.
As a U.S. tourist, you’re allowed to stay in Panama for 90 days,
without extension. If you want to stay longer, you must ask for a
“change of migratory status visa” before your 90 days in the country
are up. A Panamanian immigration lawyer can help you with this. You’ll
pay an extension fee of US$250.00. The Panamanian Immigration Office
can use its discretion when granting this change of migratory status
visa… but usually it grants it automatically.
Travel to Panama for an Appropriate Visa
In most cases you must travel to Panama to get any of the
available visas that I describe below. You must be present for the
application filing and again when your visa is issued to you.
You need 90 days to get your Pensioner Visa (pensionado). Other
visas take about five months on average. Once you get a visa to reside
in Panama, but wish to live overseas, make sure to visit Panama at
least once a year.
A multiple-entry permit will allow you to travel often. It’s valid
for up to two years and saves you the paperwork and bureaucratic
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hassles of applying for a permit to leave the country every time you
must. Don’t ever let your visa expire while you’re out of the country.
Is the Pensionado Program
(Turista Pensionado) for You?
Perhaps the best known of Panama’s resident visas is the
pensionado or pensioner visa.
Panama law stipulates that anyone entering the country as a
qualified pensionado is guaranteed to keep that legal status so long as
they choose to stay in the country.
This is a very important point.
Why? Because it is guaranteed in law that if the government
changes the requirements for this visa at a later date, the changes
won’t affect anyone who already has pensionado status. You only need
to maintain the required minimum level of income.
The visa application process for Panama’s basic pensionado program
is simple:
Step #1: Make a onetime application (no renewals or extra fees
necessary).
Step #2: Get your permit. This takes about 90 days. It’s fast,
affordable and easy.
And that’s it.
The pensionado costs no more than a few thousand dollars for legal
fees and processing.
Remember, The Sovereign Society stands ready to help you in
meeting these program requirements and we can recommend reliable
professionals in Panama who can assist you.
The 3 Things You Need For Your Pensionado Visa
Under the famous pensionado program, you must prove you’re entitled
to a monthly income from an official foreign program (Social Security,
disability, military retirement, government pension), or a private
corporate pension plan. You must get at least US$1,000 a month. You
need an extra US$250 each for a spouse and other dependents.
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You will need a letter from the appropriate authorities certifying
your retirement income and amounts. Also a bank statement showing past
retirement deposits.
Panama strictly enforces this requirement for an existing pension
or comparable guaranteed future income.
When the Panamanian attorney files your visa petition with the
Immigration and Naturalization Directorate, you’ll get a visa for
residence status for an indefinite period. This usually arrives within
a few weeks.
The Directorate can grant your pensionado status for life. This
entitles you to a one-time exemption of up to US$10,000 on duties on
imported household goods, plus a duties exemption every two years on
an imported car.
It also entitles you, as a matter of right, to the many discounted
prices for services and goods in Panama.
Be warned: Living as a resident of Panama with this visa doesn’t
count toward the five years of residency you need to qualify for full
Panamanian citizenship.
Requirements for a Private Income Retiree Visa
(Rentista Retirado)
This is a variation on the pensionado visa. Apply for this retiree
visa if you’re retired and don’t have a guaranteed monthly pension… or
if you’re no longer employed but get a retirement lump sum… or have
other wealth.
The law grants a special travel document (definitely not a
passport) and immediate residence (not immediate citizenship) to
you if you establish a five-year certificate of deposit (CD) at the
National Bank of Panama. This CD must produce a minimum of US$850
per month in interest. (At recent rates, your CD would need $280,000
or more.)
Your retiree visa (and the CD) is renewable every five years on the
same date. It includes a Panamanian travel document which is NOT an
official passport. It also doesn’t grant citizenship. Remember this.
Many Panama sources try to sell this particular visa. They charge high
fees and falsely represent it as an official passport. It is NOT an
official passport. It is only a travel document.
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This visa gives you a one-time exemption of up to US$10,000 on
duties on imported household goods, plus an exemption every two years
from duties on an imported or local car. You’ll still pay sales and
luxury taxes.
To open a time deposit account at the National Bank of Panama, you
must submit:
1.Three letters of commercial references. At least two of these
must be from banks;
2.Three letters of personal reference;
3.Two photocopies of your passport;
4.A “Form for Opening of Account” (any National Bank of Panama
branch can give you this form);
5.A “Form for Verification of References”. Get this form from the
Panamanian Association of Credit (APC); and
6.Your profile.
Complete the two forms (4 and 5) in the presence of a National
Bank official. Or you can confer a special power of attorney on a
personal representative to act on your behalf. Usually this will be
your Panama attorney.
Panama’s Immigration and Naturalization Directorate will
provisionally grant you a one year immigrant visa.
At the end of one year, you must petition for permanent residence.
Your Panama attorney must file this petition on your behalf.
Once the Directorate approves this, it’ll issue you a permanent
residence permit and a Panamanian identification card (cedula).
Five years after you get this visa you become eligible to apply
for and receive full Panamanian citizenship.
For Wealthy Folks Who Want to Live in Panama
The Person of Means Visa (Solvencia Económica Propia) is for the
wealthy folks who wish to live in Panama without working or starting a
business there. They have the financial means to do so.
If this is you, you must have a three-year fixed term deposit in
any bank located in Panama. The minimum balance is US$300,000. Or, you
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must invest in real estate worth US$300,000 in Panama. You must pay
this up fully and you must hold the title to the property.
If you’re a founder of a private interest foundation, register the
property title under that entity. You or your dependents must also be
the beneficiaries of this foundation.
There’s a third alternative. Create a combination of the above
with a minimum value of US$300,000.
You Need a Minimum $160,000 Investment
to Become a Inversionista
If you’re only interested in investing in Panama, apply for an
Investor Visa (Inversionista).
However, you can only invest in an “allowed business.” Certain
retail businesses and some professions are reserved as monopolies for
Panamanians only.
Your investment must be no less than US$160,000 and the business
you’re investing in must hire a minimum of five permanent Panamanian
employees.
The Directorate only grants this visa provisionally for one year.
When you renew it, you get an identification card (cedula). After five
years, you’re eligible to apply for citizenship.
A similar visa is available for those who intend to invest in
agricultural projects and farming.
For the Entrepreneur: Get a Small Business Investor
Visa (Inversionista de Pequeña Empresa)
If you want to establish a small business in Panama, you need the
Small Business Investor Visa. To get this, you must have a minimum
investment of US$40,000. You must also hire a minimum of three
permanent Panamanian employees. For each dependent under this visa,
you need an extra US$4,000 investment.
When you petition for this visa, show proof that you have enough
funds to invest in the business. You’ll need to establish a Panama
corporation with an associated bank account.
The Directorate grants this visa provisionally for one year. You
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must renew it three times before it becomes permanent with the right
to an ID card. Five years after you get the permanent visa, you’re
eligible to apply for Panamanian nationality.
Three Ways to Become a Panamanian Citizen
Should you wish to become a citizen of the Republic of Panama, you
may have to give up your U.S. or other national citizenship. So don’t
make this decision lightly.
If you’re ready to expatriate in favor of tax and other advantages
that come with being a Panamanian citizen, you can do so in three ways
(according to the Panamanian Constitution):
1.By birth. A child born within Panama’s territory is
automatically a citizen, regardless of the nationality of the
parents.
2.By descent from a person who’s already established legal
residency in Panama. If a Panamanian by birth or naturalization
has a child abroad, then that baby is a citizen of Panama.
However, the child must declare his or her intention to elect
Panamanian nationality no later than the 19th birthday.
3.By naturalization. If you’ve lived in Panama for at least five
years, have a command of the Spanish language, are knowledgeable
of Panamanian history, and have renounced your previous
citizenship, then you can become a citizen of Panama. A child
under age 7, born abroad and adopted by Panamanian nationals,
doesn’t need a naturalization certification. However, he must
declare his intention to elect Panamanian nationality no later
than his 19th birthday.
Dual Citizenship is Not Possible
Under Panamanian Law
The Panamanian constitution and laws don’t recognize a citizen’s
right to hold dual citizenship. If you want to become a Panamanian, in
theory you must renounce your American or other citizenship.
That said, according to Rainelda Mata-Kelley JD, a leading
citizenship attorney in Panama, the government only enforces this law
in rare cases when citizenship status becomes an extradition issue.
When a foreign citizen is naturalized as a Panamanian citizen,
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government officials don’t insist on any formal renunciation of foreign
citizenship. Nor do they ask that you surrender your non-Panama
passport.
Err on the side of caution. When you’re making the decision to
naturalize, be 100% certain that you are prepared to renounce your
current citizenship should the Panamanian government insist on it.
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Part V
Buying Real Estate in Panama
Panama can be an international real estate buyer’s dream.
Spanish is the native language, but English is widely spoken.
The U.S. dollar is the official currency for both domestic and
international deals. And thanks to the Canal and its massive
expansion, Panama will continue to attract an array of foreign
investments for the foreseeable future.
For many residential buyers, the most attractive element is the
package of deals and discounts for non-resident retirees that the
pensionado program provides.
Panama is also renowned for its low taxes. Depending on the
property, you may be exempt from property taxes for up to 20 years.
Be sure to check the tax exemption status since not all property is
included.
There are also special programs in designated tourism zones that
waive income taxes on rental income and encourage investment in and
construction of tourism facilities.
Six Practical Facts to Know When Dealing
in Panama Real Estate
Fact #1: Use a reputable, independent attorney to guide the
transaction. Have him investigate the title and register the final deal
with the Public Registry. I’ve included a list of attorneys you can
contact for this purpose at the end of the report.
Fact #2: When clear legal title isn’t available, you could buy
the property with “rights of possession”. This only gives you control
over the property. Avoid buying any property of this kind. Even
in legitimate deals, anyone can challenge these rights in complex
judicial proceedings.
Fact #3: Get things right the first time. The courts will NOT
help you later. In fact, the Panama judicial system is a notoriously
unwelcoming labyrinth for foreigners. It’s also often corrupt. Quick
and simple resolutions are rare unless well-connected Panamanian
21
lawyers represent you.
Fact #4: Agent commissions are typically 3% to 5% of the sales
price. The country’s agent group, ACOBIR, is moving to bring standards
in line with the rest of the world.
Fact #5: If you can, buy real estate in the name of a Panamanian
corporation you create and control. This offers legal tax avoidance,
inheritance and security benefits. If you buy the property in your
name, and then later sell it, you’re subject to a transfer tax. The
sale of shares in a corporation that owns real estate is tax-exempt.
Fact #6: Buy/Sell contracts are usually in Spanish. Insist on an
English translation. Due to the vagaries in translation the English
version may not always be interpreted the same as the version in
Spanish. Before signing have your Panamanian lawyer explain contract
terms in English and resolve any conflicts or ambiguities.
22
Part VI
Professional Contacts & Information
Embassy of the Republic of Panama
2862 McGill Terrace, N.W., Washington, D.C. 20009
Tel.: (202) 483-1407 Consulates are located in New York (212) 8402450 or Philadelphia (215) 574-2994, Atlanta, Chicago, Houston, Los
Angeles, Miami, New Orleans, or Tampa.
Website: www.embassyofpanama.org
Email: [email protected]
United States Embassy
Edificio 783, Avenida Demetrio Basilio Lakas, Clayton, Panama City
Tel.: + 507-207-7000
Send personal and official mail for the embassy and staff to: U.S.
Embassy Panama, Unit 9100, DPO AA 34002
Web: http://panama.usembassy.gov/
Email: [email protected]
Attorneys
Rainelda Mata-Kelly, Esq.
Suite 406-407, Tower B, Torres de las Americas, Punta Pacifica
Panama City, Republic of Panama Tel.: + (507) 380-0606 Fax: + (507)
380-0607
Website: http://www.mata-kelly.com
Email: [email protected]
Ms. Mata-Kelly specializes in Panamanian administrative, commercial
and maritime law. She can help you with immigration, real estate,
contracts, incorporation, and other legal issues. She is a member of
the Sovereign Society’s Council of Experts.
Ramses Owen, Esq.
Mossfon Group, Mossack & Fonseca Co., Arango-Orillac Building, 54th
Street
P.O. Box 0832-0886, World Trade Center, Panama, Republic of Panama
Tel.: + (507) 263-8899
Web: http://www.mossfon.com
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Email: [email protected]
This firm offers a wide array of legal services in Panama. It has
offices around the world.
U.S. Attorneys for Tax and U.S. Reporting
Requirements
Josh N. Bennett, JD
440 North Andrews Avenue, Fort Lauderdale, Florida 33301
Tel.: (954) 779-1661 Fax: (954) 767-9989 Cell: (786) 202-5674
Web: http://www.joshbennett.com
Email: [email protected]
Michael Chatzky, JD
Chatzky & Associates, 6540 Lusk Boulevard, Suite C121, San Diego, CA
92121 USA
Tel.: (858) 457-1000 Fax: (858) 457-1007
Email: [email protected]
Trust Officer
Trust Services SA, Edificio Balboa Plaza, Oficina 522, Avenida Balboa
Panama, Republic of Panama, Mailing address: P.O. Box 0832 1630 World
Trade Center
Panama, Republic of Panama Tel.: + (507) 269 2438 / 263 5252 Fax: +
(507) 269 4922
Website: http://www.trustserv.com
Email: [email protected]
Licensed in Panama since 1981, this respected firm specializes in
offshore corporations, trust and private foundation formation and
maintenance. Derek Sambrook, a member of The Sovereign Society Council
of Experts, is director of the firm.
Real Estate
Margaret Summerfield, Pathfinder Ltd. Panama City, Panama.
Email: [email protected]
Samuel Taliaferro, Boquete, Chiriquí Province.
Investor Blog: http://primapanama.blogs.com/
Resort: http://veresort.com/
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Community: http://valleescondido.biz/
Cell phone: 507-6612-1147
Gail Geerling, Punta Paitilla, Panama City, Panama.
Cell phone: +507 6780-3526
Web: http://www.gailgeerling.com/
Email: [email protected]
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Part VII
Where to Stay
Whether you’re just visiting, looking for a home to stay during
your trips to Panama, or finding your dream retirement location, here
are some places where our members have enjoyed staying in recent
years…
1) Hotel Bristol Panama Avenida Aguilino De La Guardia, P.O.
Box 835-542, Zona 10, Panamá Tel: +507 264 0000. This is a small,
traditional luxury hotel in the heart of Panama City, close to major
banks, offices and stores, two blocks from the Pacific Ocean front.
Rooms are limited so book ahead.
2) Le Meridien Panama Calle Uruguay & Balboa Avenue, Panama City
Tel: + 507 - 297 3200
Le Meridien Panama has ultra modern décor. It is a brand new “W”
style hotel. It offers great service and is situated on the waterfront
on Avenida Balboa.
3) Miramar Intercontinental, Balboa Ave., P.O. Box 7336 Panama
City 5, Panama
Tel: +507 206 8888 This hotel is on the waterfront and offers
excellent service to an international clientele.
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Part VIII:
The Republic of Panama at a Glance
Government: Constitutional democracy
Capital: Panama City
Population: 3,360,474 (July 2009 est.)
Total Area: 30,193 sq. miles / 78,200 sq. kilometers (about the size
of South Carolina)
Languages: Spanish (official), English 14%; many Panamanians are
bilingual
Ethnics: Mestizo 70%, Amerindian, mixed (West Indian) 14%, white 10%,
Amerindian 6%
Religion: Roman Catholic 85%, Protestant 15%
Life expectancy: 75.22 years
Currencies: U.S. dollar (USD); balboa (PAB)
GDP: $40.76 billion (2009 est.)
GDP per capita: $12,100 (2009 est.)
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Economy: Panama’s government debt in 2010 received a coveted
“investment grade” rating by Fitch and S&P, confirming that President
Martinelli’s conservative fiscal and tax policies are headed in the
right direction.
Add the US$5.25 billion expansion of the canal due for completion
in 2014, and planned government expenditures for another $13.6 billion
on infrastructure and social programs in the next four years, and
you’ve got a sound Panamanian economy.
For most of the past decade the economy grew at breakneck speeds
of 8% or more. Growth reached a high of 11.5% in 2007. Panama even
managed to dodge recession during the recent global downturn, even
though annual growth slowed considerably. The poverty rate dropped
from 36.8% to 32.7% between 2003 and 2008.
Since the 1990s, inflation has barely exceeded 1% per year. Annual
inflation has averaged 1.4% for the past 30 years, much lower than in
the United States for the same period.
Public Holidays:
January 1 – New Year’s Day
January 9 – Martyrs’ Day
February/March – Carnival
Good Friday
May 1 – Labor Day
November 1 – Kid’s Day
November 2 – Day of the Dead
November 3 – Separation from Colombia
November 4 – Flag day
November 10 – First cry of Independence from Villa de Los Santos
November 28 – Independence from Spain
December 8 – Mother’s Day
December 24 – Christmas Eve celebrated in afternoon only
December 25 – Christmas
December 31 - New Year’s Eve celebrated in afternoon only
If a holiday falls on Sunday, the Monday following becomes a
public holiday as well.
Carnaval (carnival) is one of the biggest celebrations over the
four days preceding Ash Wednesday, the beginning of Lent. Music and
dancing culminates in parades on Mardi Gras. Celebrations are biggest
in Panama City, Penonome and Las Tablas.
Panamanians celebrate Semana Santa (Easter week) throughout the
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country. Most communities hold religious processions on Good Friday
and Easter Sunday. Celebrations at the Villa de Los Santos, on the
Península de Azuero are famous.
The Festival of the Black Christ at Portobello on October 21
includes a parade of the famous life-size statue of the Black Christ,
and attracts pilgrims from all over the country.
Other interesting events:
The Flower and Coffee Fair in Boquete in January
The Trade & Agricultural Fair of David in March
The Orchid Fair in Boquete in April
The Fair of Azuero in May
The Festival of the Sea in Bocas del Toro in August.
29
History of the Republic of Panama
A unique geographic and strategic positions as the land
bridge linking North and South America and the pathway
between the Atlantic and Pacific Oceans has marked Panama’s
history. From the original Spanish explorers in the 1500s, to
Americans building the Canal 500 years later, the history of
the isthmus is that of a land where foreigners have invaded,
invested, settled, intermarried, and influenced the native
peoples, for both good and ill.
When I was a teenage pageboy in the U.S. House of Representatives,
a huge oil painting that hung in the U.S. Capitol enchanted me. The
great American scenic artist, Albert Bierstadt, painted it and called
it “Entrance into Monterrey.”
It shows white Spanish explorers worshiping at a Catholic
They’re under a large wooden cross near a huge tree. A small
American natives observe these strangers and their religious
The open, rolling hillside leads down to a glistening, azure
Mass.
group of
ceremony.
bay .
It depicts the discovery of the West Coast.
To this day, the massive canvas hangs at the west end of the
House Speaker’s lobby, over a staircase near the male House Members’
restroom. And it serves as a constant, vivid reminder of how ancient
explorers literally shaped the world we live in.
One explorer that stands out in Panama’s history is Vasco Nunez de
Balboa (1475–1519). It was he who put Panama on the map.
The first European sighting of Panama was by the Spaniard Rodrigo
de Bastidas in 1501. A year later, Christopher Columbus dropped anchor
in the Caribbean and may have gone ashore at the site of the present
day Portobello in Colon province.
But it was Balboa who gets the credit for getting there first.
In 1510 he became the first European to set foot on the neck of land
(isthmus) that is now called “Panama”. And modern Panama still
remembers him today. The coinage that passes for local currency
(although the U.S. dollar is the official currency), a major brand of
beer, and the 10-lane main boulevard along the Pacific in Panama City —
all bare his name.
Statues of him stand on that avenue, in a major city park in
San Diego, Calif., and in the impressive bronze Columbus Doors in
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Washington, D.C., that flank the main entrance to the U.S. Capitol’s
East Portico.
The First Eyes to See the Pacific Ocean
History records that Balboa was the first European to see
the eastern shores of what we now know as the Pacific Ocean. His
sighting took place in September 1513, from a mountaintop in the
Darien area of Panama. Even today, it’s still a place of dense,
wild jungles.
How did Balboa manage two monumental discoveries just three years
apart? He went gold hunting… that’s how.
History tells how natives told Balboa, in 1511, of a land called
“Tubanama”. According to legend, in the land located “across the
mountains near a great sea” there was gold beyond measure.
In September 1513, he led an expedition of 190 Spaniards and a
large number of natives from Darien across the isthmus. Three weeks
into the trip, Balboa’s native guides told him he could see the sea
they’d described from a nearby mountain.
With a prescient sense of history, the egotistical Balboa ordered
the men to stay where they were. Then he climbed the peak himself to
become the first European to gaze out upon the Pacific Ocean.
On September 29, 1513, Balboa waded into his new ocean and
claimed it, and all its shores, for the King of Spain. According to
his expedition’s official notary, Andres de Valderrabano, Balboa, in
complete armor, lifted his sword in one hand and raised a banner, with
the image of the Virgin Mary with the arms of Castile at her feet, in
the other. He marched into the midst of the ocean waves and said aloud
(in Spanish, of course):
“Long live the high and mighty sovereigns of Castile!
Thus in their names do I take possession of these seas
and regions; and if any other prince, whether Christian
or infidel, pretends any right to them, I am ready and
resolved to oppose him, and to assert the just claims of my
sovereigns.”
Because this was the feast day of Saint Michael, the anchorage was
named the Gulf of San Miguel. We still call it that to this very day.
Unwittingly, Balboa had discovered the water passage that lead
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through the land and onto India. The very passage Christopher Columbus
had been searching for since 1502.
It was exactly 400 years after Balboa’s discovery that the path
Columbus had sought between the seas would become a reality called the
Panama Canal.
In 1878, Ferdinand de Lesseps, the principal mover behind the
successful building of the Suez Canal in Egypt (which opened in 1869),
acquired a concession to construct a canal in Panama.
Trusting in his name and prior success, thousands invested funds
in a French company that began digging in Panama in 1881. But the
French project suffered from poor administration. And workers died
from the ravages of tropical diseases. Eventually insufficient funding
caused the company to declare bankruptcy in 1889, creating a major
international scandal. The French rights to the company were sold to
the United States in 1901.
The Discovery Fed Spanish Exploration and Conquest
Along the Western Coasts of the Americas
For a time, the Spaniards called the Pacific Ocean the “South Sea”
because it lay south of the strip of land that runs from west to east
linking North and South America. (That unusual geographic placement
explains why ships moving through the Panama Canal from the Atlantic
Ocean go from west to the east, before emerging in the Pacific Ocean.)
They established their first settlement at the town of Santa
Maria de la Antigua del Darien, and for a time Balboa became acting
governor. He led expeditions into Panama’s interior, conquering some
natives and making treaties with others.
Balboa also established the town of Acla on what is now Panama’s
Caribbean north coast. This has long since been lost to the jungle.
He also transported materials across the isthmus to build ships
for further conquest and exploration. Two ships were completed by 1518
and allowed Balboa to explore along the Gulf of Panama.
But politics in Panama has always been intriguing and remains so
today.
Before the news of Balboa’s successful expedition reached Spain,
King Ferdinand appointed Pedrarias Davila, an elderly nobleman, to be
Panama’s first royal governor. He arrived in Darien in 1514 and moved
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the capital from Acla on the Caribbean to the newly established Panama
City on the healthier, drier Pacific coast.
When the King finally learned of Balboa’s findings, he appointed him
to serve under Pedrarias as governor of an area on the Pacific coast of
Panama.
Insecurity Started a Curse of Bad Luck for
Panamanian Politicians
But an insecure Governor Pedrarias perceived a threat to his rule.
After all, Balboa had become a popular hero with many supporters back
in Spain. Suddenly in 1518, the governor falsely accused Balboa of
treason and had him arrested. Pedrarias arranged for a speedy trial,
and Balboa was sentenced to death. In January 1519, Balboa and four
friends were beheaded in the public square of Acla.
A few subsequent Panamanian politicians have met similar fates.
Locals still debate what caused the mysterious 1981 plane crash
that killed the late president/dictator General Omar Torrijos Herrera,
father of the later president (2004-2009), Martin Torrijos.
General Manuel Noriega, now sits in a French jail serving time
for money laundering in France. U.S. Army troops arrested him during
the U.S. invasion of Panama in 1989. Later courts convicted him of
drug smuggling and sentenced him to 15 years in a Miami prison before
handing him over to French authorities.
A Dash of Spanish Influence and
a Helping of Gran Colombia
Long after Balboa’s untimely death, the people who lived on this
unique isthmus remained loyal to the Spanish crown. It became the
route by which the treasures of the Inca Empire were transferred to
Spain, attracting the unwelcome attention of English buccaneers and
pirates like Sir Francis Drake, William Parker, Sir Henry Morgan, and
Edward Vernon.
With the decline of the Spanish Empire, Panama lost much of its
importance in the imperial trade.
In 1821, Panama declared its independence from Spain as part of a
loose confederation that Simon Bolivar – Latin America’s “Liberator”
– founded. He called it “Gran Colombia”. But Colombia’s constant
33
internal political strife and civil wars motivated the provinces on
the isthmus, far away from the capital in Bogotá, again to attempt a
separation as early as 1840.
Panama’s aspiration for independence wasn’t fulfilled until 1903,
and then only with U.S. political and military intervention.
The Historic Relationship With U.S. Began in 1846
The signing of the Mallarino/Bidlack Treaty in 1846 marked the
first phase of Panama’s direct relationship with the United States.
In that treaty, the U.S. agreed to protect Colombia from expanding
British colonial aspirations, in exchange for a guarantee of free
travel for U.S. citizens crossing the isthmus.
Then the California gold rush began in 1849. Thousands of east
coast Americans sailed to Panama, and made risky crossings on foot, by
horse and mule, to board San Francisco bound ships on the Pacific side.
The construction of a trans-isthmus railroad in 1855 and
establishment of large banana plantations in Bocas del Toro province
at the end of the 19th century further forged business and personal
ties between Panama and the United States.
And the U.S. didn’t hesitate to send in troops when they thought
Americans or their business interests were in jeopardy. U.S. troops
landed in the Colombian province of Panama seven times between 1856
and 1902 to protect U.S. interests.
At the beginning of the 20th century, several factors re-ignited a
new anti-Colombian separatist movement in Panama. It had enthusiastic
support in the United States. In 1902, the U.S. military took control
of the railway stations and deployed troops to prevent Colombian
forces from landing.
With expanding American ownership of banana and coffee plantations
and the U.S.-built transcontinental railway, American interest turned
to the failed French canal project.
It was left to the ebullient U.S. President Theodore Roosevelt to
make the dream come true.
Succeeding the assassinated President William McKinley in 1901,
Teddy Roosevelt made the building of America’s “Great White Fleet”, to
expand U.S. naval power, one of his first priorities.
34
A canal in Panama would greatly increase the U.S. Navy’s strategic
maneuverability. Historians generally concede that, had it not been
for Roosevelt’s stubborn insistence on the building of the canal,
Panama might never have achieved nationhood.
In August 1903, the Colombian government rejected a treaty with
the U.S. that would have authorized the building of the canal in the
province of Panama.
That was too much for Teddy. In November 1903, Roosevelt’s
diplomatic agents secretly and skillfully engineered a Panama “revolt”
against Colombia. It was led by wealthy provincial families. Within
hours of the “uprising” in Panama City, while a U.S. Navy gunboat
stood off Colon to block Colombian troops, Washington officially
recognized the new nation of Panama. The U.S. pledged $10 million in
cash to get the new government started.
Colombia only recognized Panama’s independence in 1921… and then
only in exchange for $21 million from the U.S. government.
Unequal Partnership… But Strong Attraction
For Panama, relations with the U.S. dominated the course of its
history during the 20th century. From the beginning, in spite of their
unequal partnership, there was a strong attraction between the two
countries.
The large and powerful North America saw this small country of
Panama as a powerful commercial and military asset in Latin America.
It was the perfect place to base Teddy Roosevelt’s growing “two ocean”
U.S. Navy.
The relationship not only flourished on a governmental level, but
between the two peoples as well. Americans who came to Panama were
fascinated by the tropical surroundings and the easy going people,
Spanish, mestizo. In turn, Panamanians began to look to America for
trade, education, jobs centered on the Canal, and foreign policy
guidance and defense.
The Treaty No Panamanians Ever Signed
Philippe Bunau-Varilla, whose hyphenated name is attached to the
treaty that allowed the U.S. to build the Panama Canal, was a French
civil engineer. He went to Panama, then a province of Colombia, at a
young age to work in the construction of a Panama Canal.
35
It was the 1880s and the first canal had begun as a private French
effort, headed by Ferdinand de Lesseps (the respected builder of the
Suez Canal). But the French Panama Canal company went bankrupt under
his management. Thousands of Frenchmen lost their investments and the
crash became a national scandal.
So Bunau-Varilla made it his self-appointed life’s work to rescue
French financial interests (including his own). Towards this end he
meddled in Panamanian politics for years. He had a hand in arranging
for the first U.S. military presence… the U.S. Navy battleships that
kept Colombian troops at bay on November 3, 1903 when Panamanians
declared their separation and independence from Colombia.
Within days, Bunau-Varilla was appointed plenipotentiary
ambassador by the new Republic of Panama. He was given power to
negotiate the terms of a Panama Canal treaty with the United States,
under the watchful eye of President Theodore Roosevelt.
The eager Bunau-Varilla went to Washington to negotiate the terms
with U.S. officials led by Secretary of State John Hay. But he received
a telegram from the Panamanian government instructing him to wait
until an official delegation arrived to review and sign the treaty.
Bunau-Varilla couldn’t wait. He decided to act on his own.
Desperately wanting to recoup the lost French investments, he gave
the U.S. even better terms than Washington requested. These included a
“perpetual” lease on what was to become the Canal Zone, plus the right
for the U.S. military to intervene at any time in Panama to protect
the waterway and “maintain order”.
The treaty stated the United States would “guarantee and maintain
Panama’s sovereignty” and for this, the U.S. paid $10 million, plus an
annual fee of $250,000.
Days later, when the Panama delegation arrived, Bunau-Varilla
presented the done deal to the surprised leaders, who had little
choice but to accept it. Still today, Panamanians call the Hay BunauVarilla Treaty the “treaty that no Panamanian ever signed.”
Inevitably, the treaty and U.S. control of the Canal became a
constant point of political and diplomatic contention between the two
nations for most of the 20th century.
It took ten years to achieve the treaty’s true objective. On March
4, 1904, U.S. construction of the Canal began. The mighty feat was
finally accomplished a decade later. In August 1914, a U.S. Navy ship
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made the first inter-oceanic transit from the Atlantic to the Pacific.
Hundreds of thousands have followed.
Panama Canal: The Greatest Engineering and
Technical Marvel of the World
Without a doubt, the design and execution of the Canal was one of
the greatest engineering and technical marvels of the world. It became
an important asset to the U.S. and the world, allowing trouble-free
commercial transit, reducing weeks of treacherous ocean travel around
South America’s Cape Horn, and saving millions of dollars in shipping
costs.
After 90 years of service, passengers traveling through the Canal
on more than 300 cruise ships per year continue to marvel at the lush
surrounding vegetation, a sharp contrast to the Canal’s nuts and bolts
and enormous structures now under major expansion.
Some 16% of commerce destined to or from U.S. ports continues to
use the waterway and 4% of total world commerce travels through this
“path between the seas”.
American historian, David McCullough, wrote the definitive book on
the building of the Panama Canal. It’s called The Path Between the
Seas, and it won the 1978 National Book Award. I heartily recommend it.
McCullough described the enormity of the Canal building, calling
it “the moon shot of its day”. He wrote:
“This was the greatest undertaking America had ever
attempted, and beyond its own borders. Everything was 2,000
miles from the base of supplies, including the personnel, the
workforce, all of whom were brought to the scene. Every steam
shovel, every paper clip, every nurse, engineer, secretary,
doctor, every stick of dynamite, every rail track needed —
all of that was brought from very distant points to one of
the most difficult and inhospitable climates on Earth. And the
size, the magnitude of the undertaking surpassed anything in
prior experience for any country in the world. And it ranks
to this day, without any question, as one of the greatest
achievements in American history.”
I share McCullough’s opinion, and I predict that once you see
the Canal first hand and witness its operation, you too will come to
appreciate the magnitude of what America did in Panama more than a
century ago.
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The Panama Canal crosses the Isthmus of Panama, connecting the
Atlantic Ocean and the Pacific Ocean. It runs south and southeast,
eastward from Limón Bay at Colón on the Atlantic, to the Bay of Panama
at Balboa on the Pacific.
The Canal is 40 miles (64 km) long from shore to shore and 51
miles (82 km) long between channel entrances.
The Pacific terminus of the Canal is 27 miles (43 km) east of the
Caribbean terminus. This geographic fact means that ships traversing
from the Atlantic to the Pacific actually move from west to east, a
surprise for those who, as I did, have a mental map in their head that
assumed ships headed for the Pacific naturally had to go west.
The minimum depth of the Canal is 41 feet (12.5 m).
From Limón Bay, a set of three Gatún Locks raise a ship to an
elevation of 85 feet (25.9 m) above sea level. It then traverses Gatún
Lake and crosses the Continental Divide through Gaillard Cut (formerly
Culebra). The Pedro Miguel Lock lowers the ship to Miraflores Lake and
then a set of two Miraflores Locks lower the ship again to sea level.
The average tidal range on the Atlantic side is less than one
foot. The tide on the Pacific side is a huge 12.6 feet (3.8 m).
A New Canal
At the time of the debates on the Carter-Torrijos treaties in the
1970s, many opponents charged that we couldn’t trust Panamanians to
manage and operate the Canal as well as Americans did.
Truth be told, from its very inception, the 15,000 people who ran
the Canal were mostly Panamanians. Only 1,500 Americans filled managerial
posts. The U.S. military stationed another 8,000 troops in the Zone.
Panamanians have established an excellent record since they took
over full control of the Panama Canal from the U.S. at the end of
1999. They have not only increased efficiency and the number of ships
using the waterway, but the Canal operated at an unusually high 95% of
its capacity. Even after required maintenance costs, it has produced a
net surplus.
Arnoldo Aleman Zubieta, the Canal’s administrator, notes that
the waterway lies at the intersection of no less than 144 global
shipping routes. “The strategy is to make Panama the most important
transshipment hub in Latin America and I think it will work,” he says.
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The move that could turn the flow into a flood is the widening of
the Canal and the building of bigger locks. This project is now under
way. Although 92% of the world’s ships can fit through the present
Canal locks, about 60% of the container ships now being built cannot.
The largest modern super tankers and U.S. aircraft carriers can’t pass
through the Canal. This expansion will solve this problem.
A Time for Change
The history of Panama is characterized by two elements — a fierce
nationalism and a century-long love-hate relationship with the United
States.
The 1977 treaties signed by U.S. President Jimmy Carter and the
late Panamanian dictator, General Omar Torrijos, did much to end this
contention and bring about a better equilibrium. (As an echo of past
history, in 2004, the general’s son, Martin Torrijos, was elected to a
five-year term as president of Panama.)
But the U.S. became a whipping boy for Panamanian politicians, and
the governing U.S. military resented attempted interference by the
locals.
In January 1964, nationalistic students tried to enter the Canal
Zone to raise a Panamanian flag at Stevens Circle, clashing with police
and U.S. troops. Nearly 20 Panamanians, some of them high school
students, died. Today, this act is commemorated by the Avenue of the
Martyrs that traverses the same ground where blood was spilt that day.
The signing of the 1977 Carter-Torrijos canal treaties initiated
an era of better relations between the two countries. But Torrijos’
mysterious death, the assassination of another president and the
ascendancy of the dictator Manuel Noriega, who headed the National
Police, caused growing concern in Washington.
On December 20, 1989, President George H.W. Bush sent 24,000
soldiers into Panama after a U.S. marine was killed. The U.S. ousted
Noriega, in what the U.S. called “Operation Just Cause”. Panama
officials publicly say only 500 people died during this unrest. Human
rights groups estimate the number to be much higher. Over 3,000 were
injured and parts of Panama City were laid waste.
Although the canal treaties and the handover of Canal control have
eased hard feelings, the past contentious relationship between Panama
and the United States still characterizes and shapes relations today.
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But don’t worry about this history because it is just that — it’s
in the past for most Panamanians. The Los Angeles Times observed early
in 2005:
“Although anti-Americanism is on the rise in much of
Latin America, Panamanians heartily embrace their onetime
occupiers’ values and symbols, from language to music and
fashion — and the almighty dollar.”
I can tell you from personal experience… when you’re in Panama,
you’re among friends.
Faithfully yours…
Bob Bauman
Chairman, Freedom Alliance
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