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Understanding the Panama Financial Overview

Jul 2, 2008
The Panama financial overview is a success story. During the 1980s Noriega dictatorship, Panama lost its status as a banking and sanctuary for free trade zone. After the successful restoration of democracy Panama recovered to regain its reputation as the Western Hemisphere's primary financial and trading tax haven. In fact, Panama financial overview would not be complete without citing that Panama is known in the international finance community as the "Switzerland of Latin America". This is definitely a well-deserved moniker.

The banking system is the largest part of the republic's financial sector that contributes a sizable 8 percent to Panama's GDP. Panama's banking industry is the most modern and most successful in Latin America, second only to Switzerland in the world. With the restructuring of the banking system in 1998, the Superintendent of Banks that supervise and the central banking functions of the country. Panama's banking system meets most international standards. They have one of the strictest banking and financial laws in the world, adopt internationally-accepted standards for accounting and auditing, adhere to the Basel Committee guidelines, and employ up-to-date, state-of-the art security systems. Panama is also a foreign exchange center partly because there are no valuation or conversion concerns. Its currency, the balboa, is equal in valuation to the U.S. dollar. Panama is the only independent country that has this exclusive right.

A Panama financial overview reveals that the equity market of the country is small and illiquid. While the banking industry is a favored offshore destination and serves as a significant foreign market, it is still the insurance industry of the country that serves its domestic market. The insurance, securities, and other non-banking sectors are smaller than the banking sector.

In Panama, there are no levies or restrictions on transfer of funds. In fact, funds may be freely transferred in and out of the country, regardless of the purpose. The Overseas Private Investment Corporation in the United States provides guarantees on nationalization or expropriation and against inconvertibility of currency. This is an incredible advantage over many other countries, which strictly control the international movement of funds.

A Panama financial overview centers on Panama's reputation as a tax haven. In fact, 35,000 foreign holding companies and tax sanctuary operations operate in Panama because of its relative tax freedom. Panama employs the territorial method of taxation whereby all income and sales proceeds gained outside of the country are tax-exempt, while all income and sales proceeds made within the country is subject to Panamanian tax. A Panama financial overview discloses that Panama is the second most popular jurisdiction to incorporate in the world, next to Hong Kong, with 400,000 corporations & foundations domiciled in the country. This is because Panama does not impose any reporting requirements or taxes (no income, capital gains, interest income, sales, capital, property, estate, and other taxes are imposed), there is no "piercing of the corporate veil," there is anonymous ownership and control, and there is no paid-in capital requirement, among other advantages. These factors make for an encouraging read on Panama financial overview.
About the Author
Laurie Cooper, of Cpanama Real Estate Corp., is an expert on Panama real estate. For more information, please visit www.cpanama.com.
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