April was a tough month for those of us living in Panama, both Panamanians and expatriate residents like me. The so-called “Panama Papers” became an international sensation. Despite the fact that the “guilty parties” were foreigners, despite the fact that the bulk of their money was placed in various Caribbean nations and not Panama, despite the fact that the Panamanian people did not see a penny of that money (other than the law firm involved), and despite the fact that the law firm had offices in 34 nations, there was also one other fact. The law firm was headquartered in Panama. Thus, the Panama Papers.
As of yesterday, May 5th, we have another “crisis”. I don’t know what foreigners will call it, perhaps the “Waked Affair” after the family accused of the crimes, but here we go again. The story is that a very wealthy investor in Panama has been identified by the US Treasury Department as a money launderer for drug money, probably from our neighbors in Colombia where he is also well-known.. We are talking about a really big investor. One of his projects, an indoor mall in Panama City, was a $400M project all by itself. And there is plenty more. Yesterday, we heard that the US Treasury Department has been investigating him and brought charges against him leading to his arrest and others, as well as jeopardizing his projects, including the mall which was also to house the new Ritz Carlton hotel. It came as quite a bombshell. A link to the Treasury Department’s press release will be included at the end of this post.
I want to say first that I see no reason to think there is any connection between the two. This latest scandal results from what I feel confident in saying was a very long and difficult investigation that began when no one was even thinking of any “Panama Papers”. But I have to agree, the timing was terrible! However, such it is. All of us in Panama will have to live with it. Putting emotion aside, let’s take a look at Panama’s growth.
The Growth Story
As the graph below shows clearly, Panama has experienced exceptional economic growth in recent years, expressed here as per-capita GDP. Note how it was “bunched” with other small Latin American nations in 1990, substantially behind the two big “emerging markets” in Latin America – Mexico and Brazil.
In 2006, we separated from our Costa Rican neighbors and headed up. By 2007, we passed Brazil. By 2009, we passed Mexico. Since then, we have left the rest behind and the gap continues to grow. Despite signing tax information sharing agreements with the US in 2011 and other nations on a bilateral basis, thus making Panama less attractive to tax evaders, the growth not only continued, it accelerated. It was during this period that the now-famous Panamanian law firm, Mossack Fonseca, saw its business begin to sharply decline as the Panama Papers attest. In short, Panama’s economic growth was not based on offshore banking. Sorry for the faint image, but the nations on the right from top to bottom are Panama, Mexico, Brazil, Costa Rica, Colombia, Peru, and Ecuador
The impetus for the growth shown above has been the purposeful decisions of various Panamanian administrations since shortly after the turn of the century.
A law passed in 2007, as just one example, made it attractive to large multi-nationals to move their regional offices from elsewhere in Latin America to Panama. So far, 124 firms from Caterpillar to 3M and beyond have done just that, bringing their money and thousands of jobs for Panamanians. Most of them set up operations at Panama Pacifico, a $700M project overseen by Britain’s London & Regional Properties Panama subsidiary with its own airport, free trade zone, and a government office designed to help them set up and operate easily. It has been a great success and continues to grow. In addition, the government is considering expansion of the law to encourage manufacturing operations to relocate here as well.
Beyond efforts like that one, there is the Panama Canal expansion, the creation of a transport, communications, and logistic platform in support of regional and global trade, and a massive increase in greatly improved infrastructure of all kinds that sets it apart from other Latin American nations. Although half or more of Panama’s GDP was derived from agriculture in most of the 20th century, agriculture, livestock, and fishing combined represented only 2.8% of the GDP in 2015. In addition, tourism has exploded in the last decade and its contribution has grown exponentially.
And there is more to come. It is not just the Canal expansion, but other projects of note. One obvious example is a copper mine which will be one of the world’s largest when it is completed in the next couple years. It provides very little to the GDP today while under construction (which is proceeding well), but its contribution will arrive soon enough and it will be significant. The investment being made in this project is even greater than the cost of the Canal expansion.
Enough. If anyone needs more statistics, there are plenty of them. One good site to visit is the National Institute of Statistics and the Census (INEC is the Spanish acronym) at its website where you can find the monthly, quarterly, and annual stats, plus the results of the Population and Housing Census of 2010, the Agricultural Census of 2011, and the National Economic Census of 2012. The real data is available for anyone willing to actually research it, not just guess or emote.
Simply put, Panama passed through the global financial crisis of 2009 without damage. Not only did the nation keep right on growing, but not a single penny of Panamanian taxpayer money had to bail anybody out. Additionally, the recent collapse in commodity prices that has trashed so many other Latin American economies, among others, has benefited us since these commodities are not sold by Panama, they are bought by Panama, and we are all thankful for the low prices. When the copper mine is functioning that may change a bit, but cheap commodities are a big net positive for us now.
The Current Crisis
Okay, let’s get back to the current Waked Affair or whatever it ends up being called. This is more painful as thousands of innocent people here who had absolutely no idea that anything illegal was going on now fear the loss of their jobs. It is not just lawyers at a law firm. That hurts, but we will deal with it and are dealing with it. One thing I appreciate is that yesterday’s surprise also demonstrated that the US government, the Panamanian government, and the Colombian government all cooperated to do what needed to be done. As the news broke, Panama’s Superintendent of Banks moved into the Panamanian bank involved and took control while Colombian authorities arrested one of the primary people charged with these crimes at the airport in Bogota.
As for drugs, Panama doesn’t even grow the coca plant, much less produce and export cocaine or any other illegal drug. We just happen to be stuck between the South American producers and the US consumers.
But let me sum things up by speaking to three groups of people – my neighbors here in Panama, the foreigners who are watching this unfold with us, and specifically those foreigners who choose to be our critics.
Friends and Neighbors
To my friends, business associates, and all the people of Panama, let me sincerely thank you for providing me with a “permanent residency” visa to live and work with you in Panama. You may be surprised to know that I take the word “permanent” seriously. This is my home and I am proud of it, as much today as any day before.
As a permanent resident, I have a responsibility to stand with you at times like this. As a US citizen, I never have hesitated to criticize US policy when I felt it necessary and continue to do so when appropriate. I would do the same here now, or at the very least be silent, if I felt it was necessary, but I do not.
I know many of you feel like Panama is a tennis ball being slapped back and forth by outsiders who do not have a clue about you and your nation. I know that you have long believed that foreigners evading taxation and drug traffickers from outside have used Panama for their own purposes. But you did not and do not have the resources to uncover something as complex as the current money laundering scandal.
Just like the law firm that had offices in 34 nations, Grupo Wisa, the prime target in this case, had operations in Colombia, Guatemala, Belize, Costa Rica, El Salvador, Mexico, Bolivia, Honduras, Nicaragua, and Uruguay. We can only imagine how difficult it was to unravel their operations and find the facts. I encourage you to see this revelation not as an insult, but as a gift. You can use that gift to help drive this money laundering business out of Panama, once and for all.
Above all, do not be ashamed. You have done more than 95+% of nations on this planet in the 21st century to build a dynamic economy based on solid achievement. What has happened in recent weeks is the shedding of the past century’s remaining ties to Panama. Good riddance. You will get through this and I and other expat residents like me from all over the world will have your back.
To Those Outside
As for those from other nations who are hearing about this and wondering if Panama is a dangerous place, full of criminals, nonsense! If you are interested in relocating here, investing here, or both, there is no reason not to follow up on that. A visit here and the opportunity to meet and talk with Panamanians and other expats will demonstrate that this is exactly what it is – a rapidly growing economy based on real effort, not the financial shenanigans of foreigners and a tiny crowd of Panamanians.
To those, especially in the US and Europe, who see this as an opportunity to pretend to be morally and intellectually superior and trash talk Panama, grow up! Look at the mess you’re in.
Europe is just amazing. You are not a mess, you’re a disaster. It is beyond words. You have our sympathies, but there is nothing we can do about it. Good luck to you.
As for those from the Right who think all of us are lazy, shiftless, ignorant people scratching out a living with a hoe and those from the Left who despise the success of our free enterprise economy while socialist economies all over Latin America are in various states of distress or even collapse, give it up. You are wrong.
Honestly, it is pathetic. It was the “advanced economies” of the North Atlantic, both sides, which brought us the great Stock Market Bubble in the early years of this century that lost trillions of dollars for tens of millions of households in their nations and “collateral damage” to many others.
It was the same nations who no sooner burst that bubble than began blowing a second Real Estate Bubble that burst and not only lost trillions of dollars, but left behind other trillions of unpayable debt and the ruined dreams of so many innocent people.
Now we hear those same nations talk about a growing “Debt Bubble” as they face the consequences of failing to meet their problems by trying to buy their way out of them.
The Panamanian people may have been poorly treated by foreigners who used them for their own purposes and by some of their own people as well, but I am watching as they struggle to deal with the fallout as constructively as they can without blaming anyone else. You should try that too.
Your bubble problems were not caused by Panamanians, Mexicans, Muslims, the Freemasons, the Illuminati, Scientology, FEMA, the New World Order, the Federal Reserve, Citibank, Halliburton, Google, the Vatican, Bilderburg, Walmart, the Rothschilds, the Knights Templar, the UN, Skull & Bones, the Bohemian Grove, the Koch Brothers, George Soros, the Trilateral Commission, the Knights of Malta, the Committee on Foreign Relations, Exxon Mobil, the Zionists, the Vril Society, or the Lizard People. You did it to yourselves. Suck it up, get to work, and fast. And for everyone’s sake, don’t let your Debt Bubble blow us all up!
Summing It Up
Next year, I will celebrate my 50th year since I first got on a plane as a new Peace Corps Volunteer off to the Philippines, never dreaming that it would change my life and introduce me to so many wonderful people in so many nations as it has. I have worked as an employee, a manager, or a consultant in various sectors of economic development to public and private agencies, to for-profits and non-profits, in some 45 nations or so, but I stopped counting a long time ago. I am no stranger to the global scene.
Rest assured, there are bad Panamanians, immoral Panamanians, corrupt Panamanians, and others like them; exactly the same as I have seen in every human society in which I have lived and worked. As I say to people coming to Panama to find their “little piece of Paradise”, Paradise is for dead people. For the living, Panama is a great place to live and work. And those bad Panamanians I mention above are vastly outnumbered by really good people with their eyes set on the future and determined to build, not tear down, their society. I wouldn’t trade places with anyone else.
Panama is a genuine democracy and the votes are counted honestly. The press is fee and has been full of political debate and controversy every day since I arrived here in February of 2004. No President can serve two consecutive terms, but since the bad old days of the 1980s and Manuel Noriega, no political party has been returned to power for two consecutive terms. Our current President’s political party is only the third-largest party in the National Assembly where the hooting and hollering goes on constantly. But when the day comes that decisions have to be made, they sit down and work something out. People of the US and Europe, please take note.
One of my greatest joys is to be with an expat who lived in Panama during the 80s or 90s, or earlier and has come back to visit. Their eyes pop out when they see everything that has changed. Even since five years ago, the changes are impossible to miss.
So bring on the scandals or whatever you want to call them! They do not kill us, but they do make all of us, citizens and permanent residents alike, stronger and better.
So come on down, then come back in five years.
To read the US Dept of the Treasury’s press release on this matter, click here.
To read a list of people and entities charged by the Treasury, click here.
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