Panama and Its Banks Weather the Global Storm
(baumanblog.sovereignsociety.com) Concerned about the gloomy economic situation and the leftist drift in U.S. politics, a good many Americans are considering seriously the possibility of moving themselves and their finances offshore -- while they still are able to do so.
The Sovereign Society (and yours truly) have long suggested that an ideal place for retirement, a second home, to locate your asset offshore protection trust or family foundation, is the Republic of Panama -- one country in this turbulent world that is proud to be known as a tax haven.
Safe Banking
Now Reuters reports (Oct. 13) that Panama's banks are flush with liquidity and well placed to weather the international credit crisis. The country's banking superintendent, Olegario Barrelier, says liquidity in Panama's banking sector stands at around 58% of deposits, with manageable exposure to international markets pummeled by the U.S. credit crisis.
"At the moment our banks are good, very good. They are healthy, they are liquid, capital is nearly double what is required. They are being financed by local deposits and are not dependent on external financial markets," he said.
Latin Banking Hub
Long a center for offshore banking where the U.S. dollar has been the official currency for nearly a century, Panama is home to 90 banks, nearly 40 of them international, making it Latin America's largest banking center south of Miami, (which it is rapidly overtaking in assets). Among the major banks are HSBC, Citigroup and BBVA.
With no central bank, no federal reserve and no government lender of last resort, Panama's banks have been encouraged to, and have stayed highly liquid. A 58% loan to holdings ratio puts the banks in a strong position, compared to major U.S. banks that have had to resort to billions in federal bail outs to stay afloat.
History of Low Inflation
Superintendent Barrelier said the global crisis would eventually hit Panama, but that the effect would likely be a slower national economy, rather than any major damage to the financial system. Since January banks in Panama have been encouraged to tighten credit to cool spiraling annual inflation, which is near 10%, a reflection of the declining U.S. dollar.
Between 1955 and 2000 inflation averaged 2.4% per year, during the 1990s barely exceeding 1% a year. Annual inflation has averaged 1.4% for the past 30 years, which is much lower than in the United States or most major nations.
Bad Timing in Washington
Panama's President Martin Torrijos, accompanied by Vice President and Minister of Foreign Affairs, Samuel Lewis Navarro, Panama’s Minister of Commerce and Industry and the Panama Canal Administrator met in Washington in late September with President George Bush and members of the U.S. Congress.
This was the fifth time that the two leaders had met since President Torrijos took office in September 2004, but his timing for this visit was less than auspicious.
One seasoned Panama observer commented: "President Torrijos must have thought he had the worst luck in the world. Here he was with three of his top guns in Washington, with hat in hand, hoping to get a trade deal, when the flood gates of an economic disaster unfolded around him. You can bet there was little time to talk about anything but the economy with the various congressmen and senators."
Good Growth Factors
Nevertheless, Torrijos still has plenty to brag about when it comes to Panama's economic status. Panama's strong economic performance of the last few years continues, despite the deteriorating global environment. Even the local real estate boom, while definitely cooling down, continues with skyscraper condos going up all over Panama City.
Panama was one of the fastest growing economies in the world in 2007 with real growth rising to 11.2%. The GDP is expected to post a growth of 9.5% during 2008. Buoyed by a strong, sophisticated services industry and a maritime and logistical transportation hub, Panama has taken advantage of global trade flows, recording an average annual GDP growth rate of 8.6% over the past four years.
It is now positioning itself as a "gateway to the Americas" and beyond.
Canal Expansion Underway
Then there is the wealth represented by the land, infrastructure and the tolls paid by ships and other income from the Panama Canal. Canal operations generated over $1 billion in total revenues during the 2006 fiscal year, much of that needed for the constant maintenance the Canal requires, but enough to generate a surplus. Tolls have declined this year as overall shipping has slipped worldwide.
The massive expansion of the Panama Canal now underway is on schedule to be completed by 2014 - exactly 100 years after the original canal built by the United States opened in 1914. The Inter American Development Bank is loaning Panama $400 million towards the estimated $6 billion canal expansion costs.
All things considered, Panama, with its special pensionado program aimed at attracting foreign residents, is worthy of your consideration too.
*** If you’re interested in Panama or other offshore places, you should join me at The Sovereign Society’s 3rd Annual Offshore Advantage Academy.
We’re bringing together some of the best and brightest from the world of offshore banking, asset protection and global investing to make setting up your own plan a breeze. We’ll be in Cancun, Mexico from November 4th through the 8th, and I look forward to seeing you there. Click here for more information.
