Panama, traffic jams, car, cars, transport, network, train, metro, bus, buses, quality, life, work, employment, jobs, commute, commuting, driving, riding, stuck

Traffic jams

It’s 4.44 a.m. and I am awake with my hot chocolate. This, for me, is quite a normal time to be awake and up.  But that’s just my body clock – that loves getting up hours before dawn to welcome the day!  I love the quiet morning – no interruptions – just to sit and write.

Most Panamanians, however, have a waking time similar to this – with alarm clocks and a commute that I do not envy!  One friend tells me she leaves home before 5.50 a.m., otherwise she will be stuck in traffic for 2 hours.  If she leaves before then, it only takes 30 minutes.  So, she gets to work at 6.30 a.m. every morning!  But it’s better to be at work than stuck in traffic for hours!

Another lady in my office leaves home (Chorrera) every day before 5.20, so that she has a “hope” of getting on the unlicensed buses (known here as bus pirata), because at least then she can come with air-conditioning and sitting down.   All in order to get to the office before 8.00 a.m.  Most people that live in Chorrera are awake at 4.00 a.m. to get to work by 8.00 – to me that is simply unimaginable!

It’s quite normal for a Panamanian to spend 4 to 5 hours a day stuck in traffic on their way to and from work!  Imagine the quality of life they could have if they could recover 3-4 hours a day!

While it’s true that the Metro train runs from Los Andes to Albrook Mall in 20 minutes, that’s only a partial solution to Panama’s commuting problem!  Panama has built suburbs in three directions:

  1. Los Andes / Milla 8 / San Miguelito
  2. Tocumen / Pacora / 24 de diciembre
  3. Arraijan (pop. 300,000)  / Chorrera (pop 200,00)

Of these three areas, the current metro line only services the first of these.  The second metro line – under construction but “almost finished” will cover Tocumen, 24 de diciembre & Pacora – but will not actually go to the airport!  So, for now, we can forget about the option of coming into the airport and just catching the metro home!  Once again, I see no plans for any parking at the final station.

And the third line of the metro – that will take care of commuters from Chorrera & Arraijan, is still in planning phases – with the largest part of the plan being the bridge across the Canal for the train & more traffic.  Chorrera and Arraijan used to be in the same Province as Panama City – until the populations grew so much, that the west side of the bridge was divided off into a new province: Panamá Oeste.  Chorrera is now the capital of that province!  But it doesn’t “act” like a provincial capital in many ways.  It continues in its role of sleeping & housing satellite for Panama City.

As Ursula Kiener stated earlier this year in a tweet – building 20 bridges across the Canal isn’t going to solve the problem – the issue lies with having Chorrera & Arraijan simply as dormitory cities.  We need to start developing the rest of the country and creating jobs there.

But even if I look at New Zealand – and their commuting problem for Auckland’s central business district – is it really all that different? Twelve KM from New Lynn to CBD in about an hour – which is half the distance that commutes have from Tocumen or a third from Chorrera (34km) into Panama City’s CBD.

Panama attempts to solve the commuting issue by having all of the lanes of the Interamerican highway coming INTO town from 4.00 to 8.00 a.m. – meaning that if you want to go out of Panama City, you take the Puente Centenario!

Basic culture – driving:

And that’s without even talking about the traffic in downtown Panama City!  Unfortunately, Panamanians do not appear to have learned the basics of how to handle intersections – exacerbating the traffic jams and frustration for other drivers.

What’s worse — you watch the traffic cops telling drivers to pull up over the intersection while they wait in line… doing nothing to help in the education of drivers who are respecting an intersection.

 

Pet peeve # 2 – Panamanians do not seem to have learnt the correct way to use a roundabout!  Panama would be a slice closer to Utopia, if every driver would just follow the simple etiquette and rules for using a roundabout.

Part of the solution lies in a complete education of Panamanians regarding regard to the driving rules – not driving on the shoulder and creating a third lane when there are only two, not driving down a one-way street the wrong way to avoid the queue in the other street, and respect for fellow drivers.  Everyone is heading the same direction – getting to work.

Transport solutions

Public transport

The options in Panama at the moment are limited:

  1. Buses, including metro buses & “piratas” – referring to the unlicensed buses that run daily (who when they are deemed illegal actually protest and block the roads)
  2. Metro system – line 1 – running North-South – only available at the moment from San Isidro to Albrook Mall
  3. Taxis – which used to be relatively safe and comfortable – are now often not air-conditioned and people are concerned about their safety
  4. Uber & other apps – a better option, as long as you have a credit card for payment, since they are phasing out cash payments (although in today’s headlines – this is being extended again)
  5. Walking
  6. Cycling

I don’t know anyone in Panama that would cycle to work – especially since upon arriving at work they would need somewhere to shower.  The heat & humidity of the tropics does not make this a cool morning ride to work – and the fumes from the traffic are asphyxiating!  Not to mention the complete lack of cycle-friendly cars that would push you off the road in their angst to get to work “on time”.

Uber & taxis are certainly not options for a long commute – such as from Chorrera or Pacora, because they would break a hole in your pocket if you did that daily!

And so commuters are left only with walking (fine for short distances as long as there isn’t a tropical downpour), buses or their private vehicles.

Car-pooling or ride sharing

Car-pooling would seem like one obvious solutions to Panama’s public transport crisis more than one person travels in a car, and prevents the need for others to have to drive  themselves. Ride-sharing reduces each person’s travel costs such as: fuel costs, tolls, and the stress of driving.

While to me it may seem crazy – Panama prohibits carpooling or ride-sharing to work – unless you’ve registered for it!  The taxis and public transport didn’t want people to be able to do this, because they said that the driver would charge others for the ride (i.e. gas money) and that was taking money out of the pocket of public transport.

Really?

Seriously?

Would you LOOK at the transport problem that Panama has?

And you want to legislate carpooling & ride-sharing so that it’s done properly???

While every other country simply has a rule that there are carpooling lanes (i.e. if there are two or more people in a car they get a special fast lane) – Panama is sitting here complaining about the traffic problem without really solving it!

Rant over.

Parking for at Metro Stations

One of my pet peeves is the LACK of parking at the final metro stations – I’m talking Pacora (when they finish line 2), San Isidro (out past Los Andes) and whatever the plans are for the last station in Chorrera.  I understand that there is no parking at the station on Vía España or even San Miguelito’s “La Gran Estación”.

But I don’t understand the lack of planning of not ending the final station with a car park, so people can drive to the station, leave their car and hop on the train! So you don’t want to have security looking after the cars? Put a sign up – “leave cars at your own risk”.

But the reality of Panama’s situation – especially in a country where it rains 8-10 months of the year – people need a way to get from their home to the train station.  How do we expect commuters to get from their homes (often in suburbs and gated communities) to the train station to start the commute? They are not going to pay a taxi and most likely not going to walk 3 km to the train station!

Implementing solutions

While I agree that it would be fabulous if some of the companies and jobs were available in Chorrera, rather than everyone commuting into Panama City – I don’t realistically see that happening within the short term.

Headquarters for multinationals are already “out of town” – in the sense that they are not central business district – either in Panama Pacifico, ciudad del Saber or Costa del Este. Processing zones are constantly being developed in Don Bosco, Tocumen and Transistmica – areas which are highly industrial and strategically located for logistics between Colon and the airport.

But Panama needs to find that perfect mix between investing more heavily in public transport (buses, not just the metro) and offering commuters options of how to get from their homes onto the public transport network.  They need to make sure that walking to a bus stop is actually an option, not an obstacle course.  I am constantly amazed at how sidewalks simply “end”, leaving you in the middle of an overgrown or muddy patch of mire.

There has been a lot of criticism these last two years about how the walking infrastructure (foot paths & walkways) has taken away what little parking there was in the central business district.  Not to mention the horrendous flooding that badly planned and executed works have caused!  The current river flowing down Vía Argentina each time it rains has become a sad parody of  wake-boarding!

That aside – if we really want to improve the quality of life for Panamanians – we need to accept that public transport is what will provide that.  This means more trains & a metro system that allows people to get home within 30-40 minutes, rather than 2 hours, more buses (especially shorter routes that go through neighbourhoods) and taxis or Uber.

If we are going to go with more public transport – Panama needs bus stops that actually keep the water out when it’s raining – not tiny little roofs for a spring shower!  And the public foot paths need to be walkable – rather than dangerous obstacle courses!

Building more roads (corredores or bridges across the Canal) will not solve the problem – this requires a change of culture & expectations.  And this means – the solution will take a generation to re-educate!

So – when do we start?

 

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self-employed, unemployed, entrepreneur, shadow economy, labour, labor, unemployment,contracts,business, enterprise

Self-employed or Unemployed?

For the 5th consecutive year, Panama’s unemployment numbers are increasing – up to 7% – even in an economy which is touted as the highest growing in Latin America & the Caribbean.  Almost 50% of the unemployed are under 24 years of age, with more women unemployed than men.  School leavers typically only have a 50% employment rate.

However, these figures cited seem to hide a situation within Panama’s economy – the “self-employed” or casual labour that are not even counted in this 7%.  40% of Panama’s labour force – some 606,000 workers, are not counted as “unemployed” because they have casual labour or are “self-employed”.

So, for example, if someone loses their job and then goes back to subsistence farming – they are no longer counted among the “unemployed” – because “look – they have a job“.   If they are lucky enough to have a family with a little plot of land still in the interior of the country where they can live off the land – at least to somewhat make ends meet. Their alternatives are finding another job – perhaps with a lower salary or becoming “self-employed” or simply taking odd jobs as they arise.

Self-employed versus entrepreneurs

Don’t make the mistake of thinking that the self-employed in Panama are all entrepreneurs, either.  Only about 1% of the self-employed move from being self-employed to entrepreneurs – the rest are simply making the best of a bad situation. This is created by necessity, not by design.

For some, they actually manage to create a business and an income that was better than their employment.  But this is not the case for all of the self-employed.  For others, this means going back to work for the company where they were employed part time, as a contractor rather than an employee, and then taking whatever odd jobs they can get in their field to make ends meet the rest of the time.  And for many, this is simply a temporary solution until they are able to get a job again.

In total, only 4% of the self-employed in Panama consider themselves to be entrepreneurs.  Few of the self-employed are hiring others to work for them and creating and innovating.  Panama’s culture is typically risk-adverse – taught to seek job security.  Only 3% of the entrepreneurs make it past 3 years, with little support offered for entrepreneurship and small business.

Typically, AMPYME is supporting small businesses, such as hair-dressers, IT support companies, printers, etc.  These are backbone small businesses, but not entrepreneurs.

Economic Growth

According to published figures, Panama is still seeing economic growth.  The challenge is that this growth is in the ports, Panama Canal, public infrastructure projects (such as the building of the Metro 2 line),, & government spending.  None of these areas are high-employment.  Agriculture, industry, commerce, tourism, real estate, banking & casinos – all of these are showing “modest figures” – i.e. they are not in the red (yet).  Fishing & local services, however, are in the red.  This means that the industries which typically provide the most areas of employment in Panama are actually just getting by – and they are getting  by through “restructuring” – cutting labour costs.

This year, Panama has seen El Rey supermarkets cut back on their 24-hour service – closing at night and getting rid of an entire shift of workers.  The overnight sales represented only 2% of their gross income, and so in restructuring their hours, eliminating the shift, they are able to increase their returns substantially.

Add to this the increases in salaries that have been implemented over the past 8 years – which automatic increases happening every 2-3 years.  With these wage increases, Panamanian firms have restructured their labour forces, down-sizing and reorganising.  So, it’s no wonder that 40% of the work force is now “casual labour” or “self-employed” rather than employed with all the rights and regulations that this entails.

However, it also means that 40% of the workforce + 7% that is unemployed (47%) – are outside of the social security system – minimum health care and no pension plan!

This 47% has no coverage in the case of accidents on the job, no health care plan, no pension plan, and no holiday pay.

This 47% includes the accountant that is selling hotdogs on the street at midday, the lady that is baking empanadas daily to sell to her neighbours and goes out daily at 5am to sell at breakfast time, and the young banking employee that is now driving a taxi.  It’s the hairdresser that comes to your home to do your hair, because she doesn’t actually have a salon that she works in. It’s the lady that comes to your house once a week to clean & iron, because that’s what she does to make ends meet.

But, luckily for Panama – we only have 7% unemployment!

A global issue

Of course, the numbers are just representative of Panama. Colombia has 50% casual labour as do many countries in Central America.  Even in Argentina, the figures are higher than expected.  Within the US, some 25% of those who lose their jobs consider starting their own business, rather than continuing to look for a job. In the 35-44 year range, there is the highest number of start up businesses.  26 million people in the US are unemployed and these levels are expected to stay up at least another 5 years.

Solutions

Unfortunately, solutions need to be considered long-term!  1 in 3 companies in Panama has problems getting skilled labour for well-paying positions.  There is a disconnect between the current needs of companies – especially in technology & customer service – and the education and preparation that school leavers are given.

The typical skills that employers are looking for at any time are:

  • Communication.
  • Teamwork.
  • Problem solving.
  • Initiative and enterprise.
  • Planning and organising.
  • Self-management.
  • Learning.
  • Technology.

This, unfortunately, is not what is taught in Panamanian schools. While they do ask for “group work”, there is no actual teaching done of what team-work is and why doing the homework or assignment as a group will actually enable you to learn essential life skills.  Similarly, while baseball and football are very popular in Panama, there does not seem to be a lot of attention placed on how these sports can improve life-skills and ensuring that students understand the importance of working together.

Communication is not a skill that is taught in school – especially nothing like crucial conversations or difficult conversation, empathy or social skills that will allow a school-leaver to adapt to a work environment.

Self-management, planning and organising, initiative & enterprise are also not taught in schools – leaving school-leavers ill-prepared for joining teams where they are not constantly supervised and having to be self-starters!  Homework is still micro-managed in schools and students are simply expected to “do as I say”, rather than to think outside the box and come up with their own ideas.  Critical thinking and challenging the system is certainly not welcomed.

Panama needs, however, over 150,000 technically qualified staff for commerce, construction, logistics, tourism, industry & agriculture.  It needs a further 25,000 professionals in these areas!  Some of these are as basic a plumbers, electricians, carpenters, metal workers, and painters. But even these skilled labourers are not available.

Immigration

Like it or not – Panama needs more foreign immigrants.  But not just any immigrants!  If we look internationally – 14% of the US population is foreign-born, but 30% of US entrepreneurs are foreigners. For example, Elon Musk. In fact – Silicon Valley would not exist if the US only depended on locally-born talent! In New Zealand or Australia, 25% of the population is actually foreign-born.

For innovation & entrepreneurship to grow – Panama needs immigrants.  People that are willing to come & invest in the country – entrepreneurs with business ideas.  But in order to attract that kind of investment – Panama needs an education system that will provide the thought processes & creativity that are required for entrepreneurs to succeed.  Not employees that need to be micro-managed – but ones that will think independently and creatively -that know how to work in teams and brainstorm new ideas.

There’s still a long road ahead for Panama in moving from unemployment to entrepreneurship!

 

Panama, economic growth, Panama Canal, economy, industries, public debt, private investment, employment, laid off, lay offs, agriculture, infrastructure

Where did the economic growth go?

A few days ago Standard & Poor’s improved Panama’s risk rating to BBB – indicating that Panama has shown consistent economic growth and a stable fiscal policy.  This is in line with the rating which Panama has by Fitch. Nevertheless, this rating comes on the heels of news that Panama’s foreign investment dropped by 17% in the first quarter of 2018, compared to the same period in 2017.

A lot of people in Panama are asking themselves – where did the economic growth go?

Shops are closing.
People are getting laid off.
And what about the 30 days of strike by the construction workers and the millions that were lost by construction companies during those days that turned into weeks?

But the cost of living in Panama City is the highest in Latin America.

How do they measure risk?

What many fail to understand regarding this risk rating is that it takes into account global factors such as:  international debt management (with the World Bank), GDP, government fiscal policies, banking and financial transparency, and even private investment in infrastructure projects.

Panama, shipping, transportation, logisticsMany of these aspects are out of the reach of the average consumer on the streets in Panama.  They are not seeing in their pockets (no trickle down here), the efforts from the expansion of the Panama Canal and the ports. No one is talking about all the development that is happening on the Caribbean Coast since opening up the third bridge across the Canal in Colon.  And no one believes that corruption is truly being addressed, as mentioned in the S&P report.

But, the S&P takes into account international aspects, such as exchange of information policies, which have changed substantially over the past 5 years.  They also take into account the new regulations for stopping money laundering and the supervision of previously unregulated business areas (real estate, casinos, and even accountants and lawyers).

All these things that the little man on the street has no real interest in.

Addressing poverty:

In formal circles, there is talk about how this government has addressed poverty, and especially criticism of the report that “150,000 have now moved above the poverty line.” But, as many point out, this is simply because of an increase in welfare subsidies – it is not actually because of increased employment!   The poverty line in Panama is a mere $60.00 a month, and so with the subsidies introduced by this government, they have “effectively” moved people out from below this poverty line.

Panama, poverty, economy, economic growth, trickle downUnfortunately, however, they haven’t actually solved the problem.  They simply moved it to a different place!  While these families are now receiving the welfare subsidy, no new policies, training, education or other measures are being introduced to break the poverty cycle in these communities.  They are simply depending on welfare!

The perception (i.e. the reality of the common man on the street) is that unemployment has increased.

There are more people “camaroneando” – which is basically picking up odd jobs wherever they can!  The Panamanian word “camarón” apparently has it’s origins in “come around” – like “why don’t you come around on Saturday and mow the lawn for me?”

So, while on the one hand you have official government figures saying that they are making headway in addressing poverty, the average worker on the street would disagree.  If unemployment has increased and relying on odd-jobs has become a way of life for many more people, then “how is it that we are better off now than before?”

A more real criticism that I see is that most countries don’t establish an arbitrary figure to calculate their poverty line.  They use their GDP as a measure – anyone that is getting LESS than half of the GDP would be considered to be under the poverty line.  Assuming that Panama’s GDP is still somewhere around $14,000 a year, that means that anyone earning less than $600/month is under the poverty line.  How many people does THIS leave in “poverty”?  In other countries, they will call these the “working poor”.  How are Panama’s “working poor” doing?

And let’s be real: one of the World Bank’s criticisms of Panama in its recent visit was that Government (i.e. size) was growing faster than the economy and the taxable income.  In other words, our government is getting too big for the country – it’s costing more than it receives in taxes!

A $300M injection into the economy

One solution for this situation is a $300 million injection that the Government has requested (taking from Peter to pay Paul), by authorising an increase in the budget deficit.  This is apparently to assist businesses that were hardest hit by the construction strike earlier this year.

The sole purpose of this cash injection (they haven’t actually said what they will spend the money on other than “investment projects”) is to help the struggling economy.  Unfortunately, however, what is true is that the strike did affect two major infrastructure projects – the finishing of the expansion of the Tocumen International Airport and the Metro Line #2.

The government needs to have both of these megaprojects finished by January 2019, because of the World Youth Day celebrations that will take place in Panama!

Looking back over recent years

But, even if we look back at 2015, where Panama was still doing quite well in terms of growth (at least, it hadn’t slowed down as much as we are now seeing in 2018), we are still left with questions.  Where has this economic growth gone? Who is receiving all the money? Where is it going?

If the man on the street is saying we’re in recession – why are official figures still showing national growth?  Car sales have dropped by 9%. Foreign investment drops 17% in the first quarter.  But we’re still fine.  Panama is still growing.

Where?

If we look at 2015, foreign investment was about $5 billion.  For Panama, that means we’re flying! And yet, in 2015 unemployment was already starting to increase and we were already starting to see some shops closing or reducing their sizes.

dollar-1319600_640One reason for this change is the change in ownership of local businesses – Panamanians that owned Café Duran, Cervecería Nacional, the mills, the sugar mills, the milk companies, etc., all sold out for a profit.  They then took those profits and moved to Florida (or wherever).  That’s to say – they cashed out.  Now foreign companies own the production.   Add to that, foreign companies own all the major infrastructure (telephone, electricity, etc.), at least in partnership with the National Government (state owned enterprises).

So, if you took a look at the daily life of Panama – about 95% of the profits of any company in Panama are now headed overseas.  Twenty years ago, although we had none of the infrastructure that we have today (because of all the foreign investment that made this possible), all the profits remained in Panama.

All major infrastructure projects undertaken now in Panama are all foreign investors.  In fact, 45% of all foreign investment into Central America actually comes to Panama – not to the rest of the Central American countries!  But as soon as the project is finished, the company and all its capital leave Panama.  Panama gets the debt and the infrastructure it had built, but all the profits head back overseas.

Let’s blame the Venezuelan crisis

It’s really easy in Panama to fall into the game of just blaming all these woes on those foreigners that come to steal our jobs!  And yes, Panama has received thousands upon thousands of displaced Venezuelans over the past 10 years, and in recent years it has gotten considerably worse.  Yes, there are Venezuelans sending money home every week to their families in Venezuela, trying to keep them alive.  They are working in bars and beauty salons, they are picking up odd jobs anywhere that they can get them. And yes, it is true that violence has increased in Panama, as it has throughout all of Central America!

But really? We’re going to blame it on them?
For me, that fails to address deeper issues!

Panama has so much to offer but at the same time seems to be damned to be just another Latin American country.

So… where is the economic growth in Panama going?  I see it being sent back overseas… the money comes in as foreign investment, bribes are paid, an infrastructure project is built… and the money flows right back out again!

Hopefully I’m wrong!

What now?

I’m no economist and no expert in any of these matters.  I can only speak from where I am seated and what I see.

But I do notice some things that have solution:

  • addressing corruption – let’s stop the bleeding! You can’t save the patient on the operating table if you don’t stop the bleeding. It doesn’t matter how much money you pour into Panama, if we don’t stop the bleeding we have going on, the patient will die on the table!  Is this the biggest problem? Yes, probably!  The corrupt politicians.  The corrupt companies that participate with the bribes and kick backs.
  • addressing the lack of preparation for the new economy.  Panamanians are not ready for the new economy that is taking over world-wide.  Our education system is not up to date. The very mentality in the schools & universities is out-dated.  They are preparing everyone for an economy that existed 30 years ago, and in my personal opinion, not doing a very good job at that, either.
  • agriculture & production – Panama needs a local production and a pride in its own produce. Yes, we want variety & options – but so many countries have established home country brands that its nationals are proud to purchase “made in …”.  That doesn’t seem to exist here in Panama. And we are seeing less and less produced in Panama, and even tradesmen and artisans are shutting down as they cannot compete with the prices of imported goods.
  • science and innovation – related to the last two points – one of the things that I worry about the most in Panama is the lack of innovation and entrepreneurship in Panama.  I don’t see any biotech, a whole lot of clean energy, technology based companies – and especially not owned, operated and run by Panamanians.
  • Why is everyone so scared of entrepreneurship and dependent on someone else being the employer?  Where are all the entrepreneurs?
  • banking and finance – hand in hand with my last question – Panamanians will not change jobs and certainly will not go independent if they haven’t already purchased a home and car, because if they do, they will not qualify for financing from any financial institutions.  The banks will only lend you money if you have a check stub that you can show you receive your fortnightly check from a company and are on payroll.  You are considered “high risk” if you are independent, even if you have your tax returns to show.

 

 

Panama, business, money, entrepreneur, business index, economy, doing business, starting a business, economic indicators, ideal business environment, import, export, fintech, incubators, assistance

Panama’s money stories – the way forward

Ranking and Index: doing business in Panama

One of the difficulties that I see on the way forward, is that Panama is not the easiest country in which to set up a business (locally) and run it.

Panama scores a low #54 in “economic freedom” according to the Heritage.org, having a score of 67.0 – because of drops in property rights and government integrity (corruption).  On the other hand, the Fraser Institute and the Economic Freedom Network place Panama for 2017 at #30 in Economic Freedom.  Forbes lists Panama as #64 in “Best Countries for Business“.  Unfortunately, economic growth has depended on debt-financed infrastructure projects, while the economy has depended heavily on transportation and logistics services.

One of the biggest problems with all the infrastructure development and spending is the burden this creates on tax payers.  General government gross debt accounted for 39% of GDP in 2017, with a fiscal deficit of 3.1% (up substantially from 2% in 2016). That said, amazingly enough the IMF estimates Panama will have the highest per capita GDP in Latin America – USD 25.712 – in 2018.

That said, Panama continues to have the fastest growing economy in the region: our well-developed services sector accounts for over 75% of GDP.   Before the crash of 2008, Panama has the highest growth rate in Latin America (close to 11%) – with real estate prices and speculation leading the rush.  Since 2013, the GDP has slowed from previous levels of 6-8%, and following on from the #PanamaPapers scandal the banking and corporate services sectors have diminished considerably.  The services which continue to contribute to GDP include logistics, banking, the Colon Free Zone, insurance, container ports, tourism and offshore services to a lesser extent.

Unfortunately, Panama dropped (2016-2017) on the global entrepreneurship index from 32.2 to 26.1, and in the innovation index ranks also #63.  In human development, Panama also ranks similarly at #61.  Likewise, in the knowledge economy index, we come in at #64.

Having looked at these indexes, it is interesting to see how well Panama is moving with respect to FinTech, blockchain and the implementation of these technologies. As Panama seeks to leave behind the shroud of “shady deals” and “Panama Papers”, the Ministry of Economy & Finance has announced an initiative to regulate FinTech, blockchain, sandboxes, crypto-currencies, and crowd-funding enterprises.

Development of the Fintech industry in Panama

Bitcoin, blockchain, fintech, crypto, currency, FinTech, disruption, innovationUnbeknownst to most people, Panama is on the list of countries that are friendliest to Bitcoin and crypto worldwide!

Panafintech is the Panamanian Association of Fintech, who so far have organised five blockchain and fintech events.  Back in 2017 they organised an event for 300 people from banking and finance, to discuss blockchain – its scope and application.  It was at this event back in 2017 that Cryptobuyer announced that it was moving to the City of Knowledge and that it would be developing Blockchain Academy Latam.

Blockchain Academy offers training not only to developers and entrepreneurs, but also for financial institutions (such as banks), organizations, schools and the government.  It also offers a bootcamp in which it is possible to learn about cryptocurrencies, industry, mining, Blockchain, opening a digital wallet and other applications of the technology.

blockchain-3212312_1280Cryptobuyer is unique in Panama, offering the “Blockchain Academy Panama“, in which it offers training and certification in programming with blockchain, and has its offices in Ciudad del Saber.  Additionally, it has installed Bitcoin ATMS in parts of Panama, such as in Banistmo (since June 2017) and has installed Cryptobuyer Pay in various local businesses (so that they can accept payments in Bitcoin and other currencies).

Cryptobuyer also set up Blockchain Embassy Panama, which opened in 2017.  In addition to offering crypto clothing and merchandise, craft beers, hardware wallets and working space, the embassy also gives cryptocurrency workshops and presentations.

The first large-scale conference on fintech & blockchain was held May 5 & 6th, at Ciudad del Saber, and called “PanamChain“, with Andreas Antonopoulos  as the Keynote Speaker (author – Mastering Bitcoin (O’Reilly Media), speaker, educator) .  This event was organised by Cryptobuyer and Panafintech.

Coming up on May 24th, Panama will host its secondDigital Business Day“, offered by CAPAtec – the Panamanian Chamber of IT, Innovation & Telecommunications.  This is a “Microsoft Experience Day” – about AI, transforming customer experiences, using ChatBots, and “intelligent billing”.

Disruption & change of the market

Fintech additionally has a role to play in Panama’s “offshore industry”. At its simplest, financial technology – or fintech – applies technological innovations to financial processes, products and services. It could easily play a large role in the lucrative business of identity verification, eKYC and fraud detection. This could also directly impact in the banking industry, if Panamanian banks could work out how to incorporate this into their account opening process.

blockchain-3019120_1280Experts in blockchain have shown that banks could easily change their account opening process to a simple 5-step process relying on this system.  Some go so far as to claim blockchain technology could transform international financial transactions in much the way the Internet transformed communications. Of course, on some levels fintech competes with the traditional financial methods of delivering financial services.

Blockchain = distributed ledger technology  – provides decentralized networks that simply record transactions.  So, for example, IBM provides “Blockchain-as-a-service” for banks.  It is interesting to see how the blockchain industry could have helped Panama avoid the #PanamaPapers, as expressed by Otonomos BCC:

Our hope is that a decentralised database, which by its very nature is secure, tamperproof by third-parties and immutable even by its very authors, can be looked at by enlightened regulators around the world. This technological architecture could ultimately become a global, cross-jurisdictional database.
At Otonomos, which represents private company shares on blockchain and makes them programmable, we have engineered a decentralised solution that performs Know-Your-Customer checks at every stage of the ownership chain of company shares, and watermarks the shares with the UBO’s identity.
In addition, Otonomos has architectured our solution with the privacy of end-users in mind. We make public only such information regulators in a specific jurisdiction require to be publicly accessible, whilst masking non-publicly disclosed information.
Finally, we future-proofed our solution by letting third-party verification agents — typically organisations such as banks who by legal mandate from their Government can perform KYC checks -“stamp” people’s KYC at the blockchain level, resulting in a layered verification process in which every check fortifies a user’s KYC.

Nonetheless, it seems that tech giants are much further ahead in disrupting banks, as these lag behind in cloud computing, AI and big data.  Fintechs define the direction of innovation in financial services, but they face a challenge in their ability to scale (something that companies like Amazon or Facebook have already dealt with).  So, for example, Amazon Web Services provides cloud computing for Capital One and Nasdaq.  That’s because of the scope of the transactions that occur on a single day, which small start up fintech companies are not ready to handle.

If what we see internationally occurs in Panama, this means that large banks are acquiring fintech companies and digital banks, as strategic acquisitions – they are simply leveraging the competition to re-establish their leadership in the market.  So, for example, in Panama we have a small crypto-currency that was recently established:  Natan Edu – created by a group of young entrepreneurs, as a payment system in education, to allow payments of online courses.  This was created by Osmar Major and Marcos Pineda (22 and 24 years old respectively).  Will this be swallowed up by bigger players in the market?  Additionally, just this week, DigitalX (the first crypto-currency fund established in Australia) indicated that it is looking at Panama to establish the Latin American financial hub.

Response from the banking sector

Panama’s banking sector, however, has been very cautious in response to fintech, indicating that until it is fully regulated, they simply see the possibilities of further scandals for money laundering.  On this note, Panama’s banking Superintendence issued a notice to banks that the activity of exchange, investment, purchasing, and commercialization of “Bitcoin” or any other crypto-currency is unregulated in Panama.

As a result, some traders were threatened with having their bank accounts closed at local banks for receiving funds from their international crypto accounts!  This seems to be completely contrary to the way it is being dealt with, for example, in the US where Goldman Sachs and Morgan Stanley both announced that they were going to get involved in crypto-currencies.

Nonetheless, we find that Australia (leading with DigitalX), the UK and other jurisdictions have all introduced regulations in order to create the market conditions for development of fintech, blockchain and financial services.  For example, back in 2015-2016 the UK introduced their regulatory framework, working closely with the operators, so that fintech firms could set up.  This involved the Innovation hub (similar to what Panama wishes to do in the City of Knowledge), in which the businesses can understand the financial regulations and how these might apply to their business model.

As with the Innovation Hub in the UK, the City of Knowledge will simply provide guidelines, from which the startup would need to apply for the regulatory approval from the respective agency (possibly the Banking Superintendence or the Securities Commission).  Also copied from the UK is the idea of the “sand box” – where fintech startups can test their financial products and their business model in the market, and then work out the details of regulation as the market develops.

So, as Panama looks to regulate “Specialized Financial Entities”, as it is calling fintech companies, setting up crowd-funding enterprises, incubators and sand boxes, I hope that it doesn’t simply protect the interests of the existing players (like banks), but rather innovates to draw into the country investors, know-how, and entrepreneurs that are looking to build something special from Panama.

 

 

 

Panama, business, money, entrepreneur, business index, economy, doing business, starting a business, economic indicators, ideal business environment, import, export, fintech, incubators, assistance

Panama’s money stories, part 2

In Part 1 of Panama’s money stories, I highlighted some of the sordid details that Panama has been known for and the ways that Panama has been presented and vilified in the press internationally.  In this Part 2, I want to have a good look at what Panama has to offer, the strengths and weaknesses of Panama’s location, workforce, and infrastructure.  In Part 3, I am simply going to dream of “what could be” – well, because this is PanUtopia.

Location, location, location

Like any good real estate investment, Panama has a great location.

It is the Bridge of the Americas and the Crossroads of the World: with the InterAmerican (or Pan-American) highway travelling East-West along the entire length of the Isthmus (well, except for the Darien Gap which Panama refuses to open – but that’s fodder for another post). Running North-South through the Istmus is the Panama Canal, recently expanded to allow post-Panamax ships to pass through.

The Pan-American highway has many stories to tell, haivng 14,000 miles of road (or roads) that traverse from Tierra del Fuego all the way to the Arctic Ocean. I remember at 8 years old a French couple that had started riding their motorbikes in Argentina and were heading up through Mexico, intending to get all the way to Alaska! pedal moped, riding bikes, interamerican highway, argentina, alaska, mexico, colombia, Panama, Bridge of the Americas

They were something like this – but much more worn and dirty! And fitted out to carry their bags on the back, and side-bags.  At 8 years old, I could only imagine the adventures they were having!  Roll forward to 2018 and we still get those bikers through Panama – perhaps riding better bikes, but with the same adventuresome spirits!

As the land bridge between the two continents, Panama boasts an incredible variety of species, both plant and animal life.  From North America, it has jaguars, tapirs and deer, from South America sloths, anteathers and armadillos, and from the oceans the giant sea turtles which lay their eggs in Bocas del Toro and even on the Casco Viejo beach in Panama City!

Panama, Isthmus, land bridge, Bridge of the Americas, Crossroads of the WorldPanama is blessed in its location: we are protected from the hurricane belt, getting pelted only by tropical storms and heavy rain.  While Panama rests on the Pedro Miguel fault line, it does not have a history of seismic activity.  You might read about the 1621 earthquake, or the 1991 Bocas del Toro earthquake (which actually happened in Costa Rica, but caused considerable damage in the neighbouring Bocas area).  This is one the strongest recorded earthquakes in Costa Rican history, registered at 7.7! But, as noted, it was actually in Costa Rica…

Since the 1500s (you might remember the pirate stories) Panama has played an important role in international trade routes: from Peru through to Spain, with the French and the United States heavily interested in participation in the possibilities of this location.  Even today, Taiwan and China dispute investment and participation in the Panamanian economy (the ports), and a US presence is continually felt under the terms of the 1979 treaty in spite of the removal of a military presence.

Hub of the Americas

Panama Canal, Miraflores, locks, logisticsFrom this location, Panama has become known as “the hub of the Americas” – one of the most significant transportation and logistics countries in the world.

As a travel hub, Panama has developed Tocumen International Airport to attract flights from Europe (KLM, Lufthansa, AirFrance, Iberia, Turkish Airlines, & Condor), China, and North, Central and South America.  The recent investment in the expansion of Tocumen is about 84% completed, with an expected completion in the third quarter of 2018.  This investment project was above US$900M, taking it up to 54 gates and extending the runway for larger aircraft. By 2025, the two terminals are expected to handle some 25 million passengers per year.

Panama has also become an important hub for telecommunications, with the Submarine Cables passing through Fort Amador and Colon (such as the Arcos Cable that connects Central America, Florida and the Caribbean and the South American Crossing cable).  In 2010, Panama became one of the first countries in the world to offer free wireless broadband access nationwide through the National Internet Network project, which provides free wifi at libraries, some busstops and other government sites.  In Panama City, connectivity is pretty easy to get, but there are generally fluctuations in the areas where there are not fibre-optic connections.  For businesses that rely on fibre-optic level connectivity, there are a limited number of neighbourhoods that can guarantee this service.

Panama, shipping, transportation, logisticsAs a logistics hub, Panama intends to make the most of its geographical location, creating the largest logistics conglomerate in Latin America. Shipping, logistics and trade contribute close to 35% to the national economy, making the concept of “hub” vital to Panama’s growth.  It uses the Canal, the ports on the Caribbean and Pacific Oceans (MIT, CCT, Cristobal, Balboa & PSA), the train line between the ports, and Tocumen International Airport (Copa, DHL, FEDEX & UPS), to provide multi-modal solutions.  This is all interconnected with the Colon Free zone and Panama Pacific zone.  The logistics industry is expected to create 10,000 or more jobs per year for the next 10 years or so – over 100,000 jobs in a growing industry!

Obviously, in order to fully develop this hub, Panama needs to continue investing in additional infrastructure for distribution and storage essential to the international business community.  Georgia Tech maintains a Logistics Innovation and Research Center in Panama, aimed at aiding the country to become the trade hub of the Americas.

Open for Business

Panamanians are complaining that the economy has really slowed, and yet it continues to be the 2nd fastest growing economy in Latin America. While the growth rate dropped from 11% in 2013 and 5.3% in 2016, it is still over 4.6% in the first quarter of 2018!  Infrastructure investments are underway in a number of areas, including the building of the second metro line in Panama City and the studies underway for another bridge across the Canal, which will include a metro rail bridge for the third line.

Depending on who you believe, and how the scoring is done, Panama ranks #3 in being “open for business”.  The World Bank rates Panama as 79th, taking into account a number of factors, and 39th for the ease of starting a new business.  Apparently registering for and paying taxes in Panama is one of the most difficult aspects of doing business in Panama!  But, hopefully that ranking will change, with the adoption of the online tax payment system implemented recently.  Panama is also ranked 54th in Economic Freedoms, which looks at rule of law, government size, regulatory efficiency and open market criteria.

That said, Panama continues to consolidate its position as a business hub, as the headquarters for more than 130 multinational companies!  The principal business and investment attractions for Panama are:

  • corporate headquarters & regional services
  • multimodal logistics
  • infrastructure development
  • maritime services
  • light manufacturing (free zones)
  • renewable energy investments
  • tourism

This translates into the following prime locations/special laws and incentives:

  1. Panama Pacific 
  2. Ciudad del Saber
  3. Colon Free Zone
  4. Special Free Trade Zones (dotted around the country)
  5. Multinational Headquarters

In terms of quality of life, Panama is ranked #1 in Central America and #4 in Latin America (UNDP).

Workforce & other challenges

workforce, employees, professional, training, educationAs I pointed out in my previous blog post about Panama’s money stories, corruption is probably the biggest obstacle that Panama faces – and it certainly is as far as perception goes. While Panama’s economy is stable and Panama has a well-developed services sector (most employment in the areas of banking, commerce, tourism and logistics), Panama continues to under-prepare its workforce for modern challenges. The poorly educated workforce ranks as the third obstacle in business for firms!

Education standards are considered to be poor by the World Economic Forum. The quality of public school education in Panama is still under fire, with a World Bank study indicating that upon completion of secondary school, the quality of the education is equivalent to 8 years of education, rather than 12.   Panama has taken important steps in improving the level of English in the public school education system, but still needs to modify the focus at Univeristy level.  Nonetheless, tertiary education is not in line with the needs of the marketplace – as social sciences, administration and law continue to be the predominant choices for students, rather than technology and sciences!

Back in 2016, news sources were reporting the problems employers faced at job fairs: while 72,000 jobs were on offer, only 25,000 people joined the labour market through these fairs, because they were under-qualified or lacked experience.  Call-centers in Panama provide about 14,000 jobs to the Panamanian workforce – the principal ones in Panama are Dell and HP.  But there continues to be a need for better qualified English-speakers for Call-Centers.  Even in 2018, Panama faces these same challenges in logistics, tourism and even the construction industry.  Among the listed skills required are “soft skills”, such as discipline, punctuality and others.

At the same time, it appears that Panamanian firms do not do well in offering formal training to their employees, which does not assist employees in getting the industry specific training that they need.  Training for tourism or customer services is virtually non-existent and foreigners are constantly complaining of the bad service in restaurants.

Retraining, especially in technical schools, is very low.  There is a “stigma” attached to working in “manual labour”, and yet a dearth of properly qualified electricians, plumbers and specialist construction workers. Improvement is especially necessary in the vocational and technical areas. Everyone is a “handyman” and “knows how to do it”, but the reality is that you wouldn’t be able to pass inspections!  And as Panamanians have sought to move out of “menial labour”, Nicaraguan, Colombian & other immigrants have taken the posts of maids and housekeepers.

There are laws protecting many professions, such as law, medicine, dentistry and engineering. This means that foreigners cannot practice in these professions in Panama.  Yet, one of the fallacies is that chemical engineering is reserved solely for Panamanians – but Chemical Engineering isn’t actually taught in Panamanian Universities! Guess how many chemical engineers we have…

Inflexible labour laws are another cause for complaint among prospective investors into Panama: firing is heaving regulated, labour mobility is limited and labor typically costs 41% more than the paid salary (including social security, holiday pay, liquidation costs, etc.).  Panama’s minimum wage is the highest in Central America, and it is often difficult to find fluent English speaking employees.  Panamanians typically have an intermediate to advanced level of English, but are seldom proficient in business writing and customer service level English.

 

All of that said, Panama continues to be one of the most attractive places in Latin America for investment.  And yet, with respect to innovation, Panama still has so much to learn.

Panama, business, money, entrepreneur, business index, economy, doing business, starting a business, economic indicators, ideal business environment, import, export, fintech, incubators, assistance

Panama’s money stories

Last month I saw this tweet regarding Panama’s money story:

In Panama, there are three types of money: old (from the grandparents), corrupt (from politicians and friends) and dirty (drugs, weapons, laundering, etc.)

Panama’s reputation as a country of carpetbaggers, “cocaine towers” (from the Tailor of Panama), the “home” of #PanamaPapers (even if most of the guilty parties were spread across the four corners of the globe), the country where Odebrecht continues to receive government and municipal contracts in spite of the scandals and admissions of guilt, and the general “juega vivo” precedes it.

But how true is this really? Is the only money in Panama really old money, corrupt money or dirty money?

In this post, I want to have a look at how Panama suffers from both a reality issue and a perception problem.  In my next post, I want to look at the opportunities that Panama offers, the free market, the incubators and technological advantages, as well as looking realistically at challenges (labour force, incentives for small & medium businesses) and close with a third post offering some suggestions for those living or moving to Panama that can make this country the land of opportunity that it really is: the “bridge of the Americas”, the “crossroads of the world”.

The strikes against Panama:

A history of #Pirates and #Carpetbaggers

Anyone in Panama can tell you the history of “Captain” Henry Morgan, the “privateer” who invaded Panama in 1671!  It is an extraordinary story in military history – the capture, sacking and burning of Panama City – especially when you consider that it wasn’t a military campaign. It was just plain piracy by an intrepid Welshman and his “men at arms”!  With 37 ships and possibly 2000 men, Henry Morgan set out for Portobelo, Panama, to pick up the gold that passed through from Peru on its way to Spain.

A few years earlier, he had asserted himself in Portobelo.  Instead of hitting the two fortresses that guarded Portobelo from the sea, where they would have been seen and expect, Morgan landed elsewhere and then marched his men through the jungle and attacked one of the forts from the landward side, in a surprise assault. They took the fortress over quickly, massacred the defenders and blew up the armaments!  The attack on the 2nd fort had many casualties, but was still effective.  Holding these two strategic points, Morgan sent a ransom demand to the Spanish governor of Panama: 100,000 pieces of eight – possibly some $12 million today.  At that time, he took his money and left.

Portobelo, Panama, ruins, pirates, Henry Morgan
Portobelo ruins

But now, set with some 48 cannons and more than 30,000 pounds of gunpowder, Morgan set out to attack Panama City itself (on the Pacific side, not the Caribbean Sea).  To do this, he had to take his men by boat up the Chagres river, so they first hit the Chagres fort. By luck, a shot from one of the pirates set fire to the Spanish magazine, with the resulting explosion devastating the fort and allowing the pirates to storm its walls.  Leaving a small garrison of men behind to guard the fort, Morgan lead some 1,200 men into the jungle to cross the isthmus on foot.

They almost starved to death, crossing the Isthmus, as the Spanish burned and stripped everything in their path, knowing they were coming. They were anticipated when they arrived finally in Panama City with a contingent of 3,600 Spanish troops, some of which were cavalry.  To Morgan’s advantage, the ground was boggy and the horses were unable to maneuver. They cut down most of the cavalry with accurate fire, and when the Spanish tried to stampede a herd of cows, they gratefully slaughtered and barbecued the beasts!  Seeing their cavalry cut down and their stampeded herd slaughtered, the Spanish infantry fled, clearing the way for Morgan’s assault on Panama City itself.  Morgan eventually returned to Portobelo with 175 pack animals laden with treasures. As history books go, the “pirate” Henry Morgan died as “Lieutenant Governor Sir Henry Morgan”, rich and respectable.

Panama City, ruins, pirates, attack, Henry Morgan
ruins of Panama Viejo

As history and geography would have it, the Camino de Cruces of Panama – the legendary trail across the Isthmus – lies between two rich colonial ports, with a history rich in gold and gold that was plundered by pirates!

Most people don’t know that the treaty “The Hay–BunauVarilla Treaty (Spanish: Tratado Hay-Bunau Varilla)”, signed on November 18, 1903, by the United States and Panama, was signed by a French-man with the United States.  This treaty established the Panama Canal Zone and the subsequent construction of the Panama Canal. History kindly refers to Philippe-Jean Bunau-Varilla as “the French diplomatic representative of Panama”, many Panamanian historians describe this treaty signing process a little differently (like how the Panamanian representatives were told to “shut up”).

Panama deals, Panama, carpetbaggers, taking advantage, pillage, raping the natural resources, scoundrels

It is said that Bunau-Varilla was an important shareholder in  Compagnie Nouvelle du Canal de Panama, which still had the concession, as well as certain valuable assets, for the building of a canal in Panama. He had not been in Panama for seventeen years at the time of representing Panama before the United States and never returned to Panama after the negotiations. For some reason, as part of the treaty negotiations, the US bought all the shares and assets of Compagnie Nouvelle du Canal de Panama for US$40 million (yeah, $40 million in 1903).  I’m not saying he was a carpetbagger: you can draw your own conclusions.

The “carpetbaggers” come down from “the north” seeking private gain in the underdeveloped “south”.  According to the Merriam-Webster Online Dictionary, a carpetbagger was an

“Epithet used during the Reconstruction period (1865-1877) to describe a Northerner in the South seeking private gain. The word referred to an unwelcome outsider arriving with nothing more than his belongings packed in a satchel or carpetbag. Many carpetbaggers were involved in corrupt financial schemes.”

Unfortunately, I have seen my fair share of foreigners coming into Panama with an idea to “get rich quick” and then making off with “the spoils”, leaving their investors (often other foreigners) high and dry.  There’s also some stories about Panamanians having done the same, such as the title dispute in Bocas over Hospital Point:

“Stephens, 75, an entomologist, came to the isthmus in 1959 to work for the fruit company. In 1970 he bought Hospital Point, two acres in area, with title dating from 1899. Later on, he bought possession rights to several acres south of the point. His neighbors are a Gnöbe Indian village and another American, Jon Nilsson, who bought possession rights to twelve acres south of Stephens and build a vacation home.”

But a guy showed up with a hand-drawn map, claiming his grandfather had left him that land. When his map was found to be faulty, “no problem”,  “My surveyors will fix that”.  The claim is going through the court-system.  For more on this story: http://laestrella.com.pa/panama/nacional/carpetbagger-hospital-point/23749723 

But most of the cases are like those of “Too Good To Be True” – foreigner on foreigner. Developments and investments where the developer has “gone bankrupt” or left the country with the purchasers money before finishing the project and delivering.  The best advice I read in that article was:

If it seems too good to be true, it most likely is. Panama has many flaws that will not be seen on a two week visit.

Due diligence is required for Panama to be right for you.

Even the late Lee Zeltzer warned in 2011 of a guy “doing the rounds” in Boquete, trying to get people to invest money in a marina project that he wasn’t the owner of!

#Corruption

Since 2016, Panama has been immersed in the “Lava Jato” scandal of Odebrecht.  So far, 43 people have been charged with corruption and related crimes and have been identified as having received money from the Brazilian giant.  News outlets world-wide have outed many politicians, and locally we read news articles that express the following:

  • “In Panama there is a feeling that many people of the current Government are involved in the Odebrecht scandal.”  “Despite of rumors and accusations against government officials involved in the Odebrecht case, no clear evidence has been laid on the matter.”  “Fernando Migliaccio da Silva, executive of the Brazilian construction company, responsible for paying the bribes of the company and close friend of Marcelo Odebrecht, said that two people associated with the company, Luiz Eduardo Soares and Rodrigo Tacla Durán, repeatedly traveled to Panama to avoid the government’s cooperation with the investigation.”   http://www.panamatoday.com/special-report/odebrecht-corruption-scandal-has-left-traces-panama-4624
  • “Odebrecht has become the largest government contractor in Panama in the past decade, with contracts totaling upwards of US$500 million, including one for the construction of a subway line in Panama City.” In these cases, there is $59 Million identified as having been paid out/received by the 43 implicated and charged.  “Although a number of defendants in the case have remained anonymous in order to preserve “the principle of presumption of innocence”, according to a statement from the Roland Rodriquez, spokesperson for the Prosecutor’s Office, some of the high profiles charged with bribery are ex-president of Panama Ricardo Martinelli and his children, among other well known officials.”  https://www.telesurtv.net/english/news/Suspects-in-Panama-Odebrecht-Corruption-Probe-Rise-to-43-20170727-0010.html
  • “Third witness says Varela {current President of Panama} took money from Odebrecht”  “Now the specific allegation is that his party’s 2009 campaign — which was dropped after an alliance with Ricardo Martinelli was formed at a meeting at the US ambassador’s residence — got $700,000 from Odebrecht via a US foundation.” “In the October 30 online edition of La Prensa, it was reported that former Panamanian ambassador to South Korea and Panameñista Party activist Jaime Lasso told anti-corruption prosecutors that the Brazilian construction conglomerate Odebrecht gave $700,000 to President Varela’s 2009 presidential campaign.”  http://www.thepanamanews.com/2017/10/third-witness-says-varela-took-money-from-odebrecht/

Lava Jato, Odebrecht, corruption, stadiums, World Cup, scandal, investigations, politicians, corrupt businessmen, kickbacks, kick back, bribes

On the other hand, almost 1/3 of Brazil’s current ministers of government are under investigation.  In Colombia a former senator and the former vice-minister for transport have already been charged.  In Venezuela a number of people were implicated, all the way up to the President Nicolás Maduro. Peru has two ex-presidents under investigation, and even the opposition leader Keiko Fujimori has come under investigation.  (more at http://www.bbc.com/news/world-latin-america-41109132) This is considered to be one of the biggest corruption cases in history!

#Dirty Money

After all that history of Panama’s money stories, how much more can I say about the dirty money in Panama? Almost thirty years ago when you mentioned “Panama”, everyone responded with “Noriega”. If you were lucky, someone had heard about the Panama Canal and that would be the topic of conversation, rather than Noriega and the 1989 invasion!  Twenty years ago you mention “Panama” and everyone is talking about John le Carré’s book “The Tailor of Panama”, the cocaine towers, and his own description of how he”was drawn by the obvious corruption of Panama and the wonderful collection of characters you meet there”. Ten years ago, you mention “Panama” and every one says “oh, the canoe lady“, referring to the Anne Darwin case of the missing canoeist who showed up alive and well in Panama, alleging “amnesia”.  Role on 2016, twenty years after Le Carré’s publishing of The Tailor of Panama and you get the #PanamaPapers!

Panama, Darwin, canoeist, missing, scandal

A 2003 examination of tax havens by Jeffrey Robinson quotes a US Customs official as saying:

[Panama] is filled with dishonest lawyers, dishonest bankers, dishonest company formation agents and dishonest companies registered there by those dishonest lawyers so that they can deposit dirty money into their dishonest banks. The Free Trade Zone is the black hole through which Panama has become one of the filthiest money laundering sinks in the world.

Of course, Robinson’s book then goes on to say:

It is a path that leads ultimately to the dealing rooms of New York, the vaults of Zurich and the plushest boardrooms of the City of London.

But most people get stuck on the first quote.  And this perception of Panama is shared by all the publicity on #PanamaPapers, which focused on “The Secrets of Dirty Money“. Of course, the name itself fails to remind readers that most of those secrets were because Mossack Fonseca had “offices in more than 35 locations around the globe” and that most of the referrals of clients were from “first world” countries – bankers, lawyers and other professionals.

PanamaPapers, Panama, money, dirty money, scandal, challenges

On the other hand, there are issues that Panama is tackling in the non-financial institution sectors.  As highlighted in Open Democracy:

the task force identified nearly 730.000 Panamanian businesses considered to be at “high risk” of participating in money laundering. The group found that supervision of these entities is low, and that most of them are still active.

Nevertheless, in 2016 and 2017, Panama took some significant steps in legislating and implementation to clear up those areas of business which were previously unregulated or unsupervised:

The final challenges – perception & development

I can remember speaking with a client on the phone in 1996, who would be visiting Panama for the first time, and he asked me what kind of clothes he should bring and how far out of town the airport was.  I don’t know what got into me that day, but I told him to wear his khakis, and that we would have a white land-rover at the airport to pick him up, and that he shouldn’t worry too much about the accommodation, because we had managed to put air-conditioning in our “huts” in “town” with generator electricity. When he arrived in our office a few days later, he was livid at me! He’d only brought khakis and taken everything I had said seriously!

Image result for caesar park  hotel panama cityHe really did think that he would “walk down the steps” off an airplane at a “jungle airport” where a driver would pick him up in a white land-rover and drive him into “town” which was basically huts. When he got through the airport and the driver ushered him into a sedan and took him to the Caesar Park hotel, he realised that I had been pulling his leg!

In my defense, I was young, with a sense of humour! But those are the images that he had in his head of what he was coming to in Panama!

Some rustic huts, sitting on the beach, perhaps?

Panama, development, challenges, infrastructure, perceptions

It really is all about the perception!

And Panama continues to battle with the perception of how life is in Panama – “Banana Republic”.

 

But, I disagree with Ursula Keiner – I think there is a lot of room for money to be made in Panama by honest, entrepreneurial investors.