The Future Is Turning Green
Our budding future is evident in all stages of policy making, in the classroom, and in public opinion. Some of the top degree programs securing a rewarding future are for MBA students specializing in resource economics, sustainable agriculture, and environmentally compatible architectural design.
Public interests continue their shift toward renewable energy resources and organic foods. Developing countries are favoring infrastructure that uses natural resources wisely for sustained growth and healthy populations.
Panama is no exception. Its law-making body has crafted policies that allow for modest investments by international interests for the purposes of owning and developing real estate for private or business use. The opportunities for retirees and for entrepreneurs have been tempting. For half the capital needed, they can place their savings in an enterprise, take up residency in Panama, and become citizens within five years.
The Law 24 Reforestation Investment
The pensioner plan is advantageous primarily to retirees and business owners. An alternative course for international investors is participation in the teak reforestation program. Enacted as Law 24 of the year 1992, the design includes an incentive for foreign investors who would like to obtain a permanent visa residency in Panama.
The package deal comes with two options: A minimum small reforestation investment of $60,000 or a minimal large business reforestation investment of $80,000.
There are also legal fees delivered in three phases. These are the Provisional Residency fees and costs (US $2,000), the second renewal (US $1,000) and the Permanent Visa (US $2,000).
The reforestation of teak is critical for Panama’s environmental plan and sustained resource use. Soil erosion from large-scale farming, clear cutting, and ranching projects resulted in a nearly 70% loss of its forests. Because teak grows quickly and easily in tropical areas, and can be harvested through rotation, this seed producing tree provides a sound environmental background for the restoration of renewable resources.
Documentation Requirements
You must pass a police clearance report before you can apply for immigrant status into Panama. All necessary documents are to be issued no more than four months before submitting the visa application.
You must have at least three months remaining on your passport before its expiration date. You must appear in person to the Department of Immigration for the initial visit and all renewals.
All legal requisites are to be handled by a Panamanian lawyer. Your investment must be through a certified teak reforestation program.
Teak Reforestation Is a Long-Term Investment
Teak is one of the most commodious of the hardwood trees. Favored not only for its constructive qualities, its handsome texture and grain make it desirable for cabinetry, framing, and furnishing. Teak resin is typically water-resistant, which contributes to the beauty of the wood and helps protect it from decay, bacteria, fungus, and insects.
Be cautious of companies that offer quick and easy returns. Quality teak requires 20 to 25 years for maturity. Profit margins can be low, particularly in the beginning years of your investment.
However, as one of the world’s leading hardwoods, the demand for teak is high. An investment of $80,000 into five hectares of land will yield approximately $125,000 per hectare by its 25th year.
Tax Benefits
Some of the benefits are immediate.
- Teak reforestation is a tax-deductible investment.
- The equipment needed for the development of a teak reforestation project can be imported free of tax.
- Exports to the U.S. are tax-exempt within the United States.
- Investments in reforestation projects provide tax exempt interest payments, exemption on dividend payments, and on capital gains.
Investment Alerts
There are many companies that offer investment into the teak reforestation program. Most of them study all the requirements and obtain the certification necessary for visa applicants to fulfill their residency credentials.
You will find that the average Panamanian company invested in teak demonstrates responsible management and yield roughly the same amount of teak per hectare. The differences are in the packages offered.
Management charges can vary greatly. Commonly, land is measured in hectare in Panama. A hectare consists of 2.5 acres. Without knowing the difference in measurement, you could buy into a package that requires more in management fees per acre than you would be charged per hectare.
Read the fine print. Some companies will sell you the trees but not the land. Your ownership ends with the completion of the final harvest. Make sure you know exactly what you’re buying. Figure the cost of your investment over time, and how much land you’ll be receiving.
Sustainable Teak Production
The key word to modern investment is sustainability. Teak production originated in Asia, primarily in Indonesia, Burma, India, and Thailand. About 28 million hectare of this area is covered by natural teak. Additionally, about 90% of teak plantations worldwide are in Asia.
However, all production of natural teak, except in Burma, has been restrained. Illegal timber poaching is high and there is a constant battle between teak production and land for cattle grazing. In its native soil, teak is plagued by pests that inhibit both growth and quality. Throughout Asia, teak forests are shrinking, with no solid reforestation plans in effect for nurturing renewed growth.
Panama’s Future in Teak
Although teak is able to grow under a variety of soil conditions, its habitat is limited to tropical regions. Typically, it prefers areas with a heavy rain season and accompanying 3-5 month dry season.
Panama’s climate is favorable to teak, and is relatively free from insects that harm teak production. As teak production in Asia wanes, the attention of investors shifts to Central America and its own teak-producing countries.
The uses for teak are numerous. Its natural oils help to keep it from warping, and eliminates the need for protective coating. This unique trait also gives it a great deal of desirability for boat decks and for outdoor furniture.
The demand for the strong, durable wood is expected to reach 135 million cubic meters by 2050. Without vigorous teak cultivation, there will be a deficit.
Responsible Harvesting
Teak plantations are the responsible use of renewable resource management. Teak is one of the only plantation species that is resistant to termites and fungi. Trees are grown and harvested according to rotation. In this manner, they are allowed to reach full maturity, delivering a quality product while maintaining a healthy environment.
Invested Residency
Law 24 was designed to allow a smooth transition into Panama citizenship while partaking in a program with positive future impact. The world cannot afford the continued dwindling away of forests that provide us with an oxygen rich atmosphere, shelters wildlife, prevents erosion, and generously gives us the products we use in our daily lives.
By investing in teak, you are investing in a quality wood with uses ranging from decorative to practical purposes, such as ship decks, door frames, and furniture. You are investing in a product that analysts predict will not be able to meet the demands of supply by 2050 if Asian production continues its downward trend. You are investing in the greatest favor you can do for your community; you are contributing to the greening of Earth.
A tourist friendly country with pristine beaches, majestic mountain views, and an affordable cost of living, Panama has so much to offer expats, including the mountain towns of Volcan, Cerro Punto, Boquete, El Valle, and Santa Fe.
While each of these towns has spectacular views, year round spring-like weather, and expat friendly communities, they each have something special that makes them unique.
First Stop, Volcan
Rich Young
Famous for its “eternal spring” climate, Volcan sits atop a plateau at 4,200 feet. And it’s not surprising that Volcan means volcano, since the large green mountain that provides the amazing backdrop for Volcan is in fact the dormant peak of Volcan Baru (the highest peak in Panama).
This quaint mountain village was first settled by indigenous people thousands of years ago and artifacts are still found in farmer’s fields to this day. While some Ngobe Bugle people still reside in Volcan, expats can mainly expect to find the same relaxed and laid-back way of life that you can find across the country.
There is an established expat community in Volcan and over the years many have opened hotels and restaurants, further expanding Volcan as a prime retirement spot.
Only twenty minutes from David, the third largest city in Panama, Volcan is perfect for those who are seeking the quiet, mountain town way of life, with urban amenities close by.
On to Cerro Punta
Celen Aper
Located in the highlands above Volcan, 2000 meters above sea level, Cerro Punta is the agricultural center of Panama. The hypothetical bread basket of Panama, Cerro Punta produces nearly 80% of the fresh produce for the entire country, and due to the high altitude, Cerro Punta has a slightly cooler, some might even say cold, temperature.
The friendly people and the relaxed farming atmosphere provide Cerro Punta with that small village feel that is sought after by many expats and as you stroll through Cerro Punta you will see many local farms, gorgeous mountain ranges and Ngobe families dressed in colorful traditional garb.
Next, Boquete
Boquete- roaming the planet – doors
Arguably the most popular expat spot in the province of Chiriquí, Boquete was rated by the AARP as one of the world’s top retirement spots. This popularity began in 2001 and as a result, you will find a well-developed expat community in Boquete today.
Only a 45 minute drive from David, Boquete is known for its misty rain (bajareque), coffee, and flowers, especially orchids.
Boquete is actually considered the flower capital of Panama and upon entry, you will be greeted by buildings simply covered with magenta and coral bougainvillea.
With fresh produce and seafood in abundance, Boquete promotes a healthy lifestyle for all who live there, and because of the low cost of living, a delicious dinner for four can be purchased for around $10.
Boquete also has a strong arts community with a yearly jazz festival and even an English language theater group.
Consider El Valle
Orban Lopez Cruz
The world’s only inhabited volcano, this mountain village remains close to the urban metropolis of Panama City while keeping its coveted small town atmosphere.
Known for its wind, water, rich volcanic soil, and perfect spring climate, El Valle attracts many people interested in eco-tourism and wellness vacations.
And even though the volcano has been dormant for 5 million years, many volcanic hot springs have surfaced, providing proof that there is definite volcanic activity happening underground.
Relaxed during the week, El Valle is alive with activity on the weekends as people come out of the woodwork to visit El Valle’s famous arts and crafts market. There is much to be seen at this massive market as the locals and the Kuna Yala Indians come out to sell their colorful wares.
Last Stop Santa Fe
Jerry W. Lewis
Expats come to Santa Fe to experience a truly authentic taste of Panamanian living.
Because Santa Fe is smaller and not as developed, you can really experience the serenity of Panama mountain life. Sitting at an altitude of 1350 feet, you will find the same year round spring weather and sweeping mountain views in Santa Fe, but with fewer expat additions.
The expats here don’t tend to participate in as many group activities as they do in the other mountain towns, and while there are still many outdoor activities to experience, there are not as many tour groups.
In addition, housing in Santa Fe tends to cost less, and although it will be equipped with cable and internet, the facilities will definitely feel more traditional.
Which Panama Mountain Town is right for you?
Rich with all the wonders that drew you to Panama in the first place, but with little differences that make each town a unique experience, any of these five towns could be the perfect place to set up shop.
A land covered in volcanoes, rivers, and lush forests, with a laid-back way of life and a low cost of living, Panama and its mountain towns are definitely an expat friendly treasure to behold.
So plan a trip and hop around to each town as you search for that ideal place to call home.
Martha de Jong
If you’ve done much reading about the state of the Panama economy, you probably already know that it’s “stable” and “growing” and “pro-business” and maybe even “foreigner-friendly.”
But what’s the basis for these types of claims? What is it that really drives Panama’s economy, and how is it performing during some globally tough economic times?
Panama Economy Overview
Panama has a dollar-based economy that is heavily dependent on the services sector. Namely logistics, banking, tourism, and of course the Panama Canal. In fact, services account for over ¾ of the nation’s Gross Domestic Product (GDP).
With an estimated GDP of $30.68 Billion as of the end of 2012, Panama’s economy is the third largest in Central America and the fastest growing, racking up a whopping 10.7% increase last year (its second consecutive double-digit growth rate). GDP per capita is around $9,444 and has more than doubled over the past decade.
The general composition of Panama’s GDP is 79.1% services, 16.6% industry, and 4.3% agriculture. Transport and communications make up the biggest chunk of the service arena, followed by property and services, commerce, and financial services. Here’s a breakdown of all areas and the percentage of GDP they represent:
Private Education .7%
Social Services/Private Healthcare .8%
Fishing 1.1%
Mining/Quarrying 1.4%
Utilities 2.8%
Farming, cattle ranching, hunting, and forestry 3.2%
Real estate, corporate, and rental activities 5.2%
Manufacturing 5.6%
Construction 5.8%
Financial intermediation 8.2%
Banking 8.6%
Wholesale and retail 14.6%
Transport, storing, and telecommunications 26.4%
The Panama Canal
It’s interesting to note that the Panama Canal itself accounts for only 4% of the nation’s GDP. However, due to the multiplier effect, its impact is much farther-reaching. Take into consideration, for example, expenditures by canal employees. Their income in turn fuels businesses such as grocery stores, restaurants, schools, and other businesses. As a result it’s estimated that the existence of the canal generates approximately 30% of the country’s GDP.
The Canal is currently undergoing a $5.5 billion expansion that will more than double its capacity. Begun in 2009, this expansion has already contributed greatly to the nation’s economic growth. Transport, storage, and communications increased by 15.3% in 2010. Port operations during that same time frame also rose by 25.2% due to the increased movement of 20-foot containers.
With the completion of the expansion scheduled for 2014, additional growth is anticipated. Some estimate that 40% of the $5.5 investment will be recouped in the next 5 years.
Tom Geibel
Imports/Exports
Approximately 65.2% of Panama’s GDP is exported, in the form of both goods and services. The $12.52 billion that is exported annually is made up of bananas, shrimp, sugar, coffee, and clothing which ship mainly to the U.S. (13.1%). Other recipients of these goods include South Korea (12.5%), Honduras (10.2%), Japan (9.3%), India (7%), Canada (4.4%), and Mexico (4.2%).
Panama imports roughly $15.18 billion each year, which includes fuel products, medicines, vehicles, iron and steel rods, and cellular phones. These come from Japan (23.5%), China (23%), Singapore (18.1%), the U.S. (13%), and South Korea (6%). Because it imports more than it exports, Panama has a negative trade balance, or trade deficit, of -12.7%.
Debt
Panama’s ratio of public debt as a percentage of GDP is a relatively low 39.2%. This number is down drastically from 66.2% in 2005, due to fiscal consolidations by the current administration. Panama’s Standard & Poor’s bond rating is BBB. It also received a Moody’s credit rating of Baa2 with an outlook of Stable. This positions Panama among the highest ranking emerging markets, alongside Mexico, Brazil, and Peru.
Inflation
Panama’s inflation rate, which has been as high as 6.82% several months ago, was down to 4.1% as of March 2013. This rate fluctuates greatly in Panama’s dollarized economy, since the country lacks the ability to implement policy or adjust exchange rates to counteract rising consumer prices. Panama’s inflation rate has generally averaged around 5.24% for the past 5 years.
Unemployment
Panama’s unemployment situation is a unique one. Although generally low (it’s hovered around 4.2% for the past 3 years), it’s also unbalanced. While Panama experiences a surplus of unskilled labor, it also has a shortage of skilled labor.
Efforts are currently underway to address this problem. Millions are being invested into education to build a strong, skilled labor pool. In the interim, the country is welcoming business professionals from other “friendly” countries to come to work or start a business in Panama. This is quite a shift, since Panama has historically taken great care to prevent foreigners from taking jobs away from Panamanians.
Business Climate
Panama continues to rank higher and higher on surveys citing the best places to do business. It recently appeared at #57 on Forbes’ list of Best Countries for Business. Panama also ranked 40th (out of 144 countries) for Global Competitiveness per the World Economic Forum.
World Bank and the International Finance Corporation ranked it #72 (out of 183 countries) on a list of Best Countries for Doing Business. The same survey scored it as #11 for Trading across the Border, #23 for Starting a Business, and #32 for Getting Credit. However, it fell to #113 in the same survey for Registering Property and #119 for Enforcing Contracts.
Panama was also given a rank of #71 by the Wall Street Journal and the Heritage Foundation on its Index of Economic Freedom. It scored a 62.5 on the index, where 100 = totally free and 0 = totally repressed. This survey measured freedom in a variety of areas. Panama’s lowest scores were the result of governmental corruption and political interference in the judicial system.
Economic Challenges
Like any developing nation, Panama has and will continue to face a myriad of economic challenges. Many are merely the flip side of the same coin that has led to its economic growth. For instance, Panama’s economy is extremely open. As a result, it is highly susceptible to external factors. Fluctuations such as a decreased demand for exports to the U.S. or a smaller flow of capital into Panamanian banks could have huge implications for the nation’s economy.
Panama is also plagued by high poverty and inequality of income distribution (the second worst in Central America), so it has a tremendous need for sustained growth that is socially inclusive. As previously mentioned, the country has begun to address the issue and is currently investing heavily in its educational and vocational programs.
This brings us to the issue of government spending. As it grows, Panama will continue to struggle with the need to strike a balance between investing in more and better improvements while also maintaining good fiscal management and eliminating corruption from the projects it undertakes. While these enhancements are warranted if Panama expects to keep up with other major players in the areas of tourism and banking, the nation will have to be prepared to take measures to sustain its economy, such as raising taxes.
Outlook
In terms of its economic outlook, Panama has a lot of good things going. Its recent $15 billion investment into infrastructure has and will continue to fuel many investment opportunities. Airport expansions will bring more visitors to the country. Better roads and methods of transportation will ease companies’ ability to do business within the country. Additional utilities, such as water, power, and phone service, will add value to real estate.
Panama recently signed Free Trade Agreements with the U.S., Canada, and the European Union. Proposed mining projects will also give the economy a boost. Not to mention the Canal, which will more than double its capacity with the current improvements.
If Panama continues to post 10%+ growth, it could soon be poised to earn its slot as the largest economy in Central America. If you’re considering investing or starting a business in Central America, find out more about Panama and the options it offers.
More Numbers
Just in case there’s some other piece of information you’d like to know, that we haven’t already covered, here are a few more statistics on Panama’s economic profile (as of 2012):
Gross Domestic Product (Purchasing Power Parity) $55.8 billion
GDP per capita (PPP) $15,300
Population 3,571,185
Population below poverty line 29%
Investment 30.1% of GDP
Taxes and other revenues 26.5% of GDP
Budget Deficit or Surplus -2.9% of GDP
Commercial bank prime lending rate 6.6%
Market value of publicly traded shares $10.68 billion
Industrial production growth rate 10.9%
Current account balance -$4.191 billion
Reserves of foreign exchange and gold $3.314 billion
External debt $13.13 billion
If you thought Captain Morgan was just the name for a bottle of popular rum, you were wrong. Morgan was not a legend, but a Welsh admiral named Sir Henry Morgan. What was believed to be his ship was recently found off the coast of Panama.
From 1663-1671 Captain Henry Morgan pillaged the sea ports of Latin America and sacked Panama City, one of the wealthiest in the area. He lost many vessels during his years as a privateer, one of which was his flagship ‘Satisfaction’ during the raid on Panama City.
340 years later, archaeologists from Texas State University have discovered a large section of the hull from what they believe is Morgan’s flagship, The Satisfaction and are beginning to retrieve artifacts from the vessel and surrounding sea floor.
Panama City, Panama
At the heart of Central America, which ties together North and South America and the Pacific and Atlantic Oceans is a small, quirky country being hailed as the next “Singapore of Central America” – Panama.
Panama is the fastest growing economy in 2013 for Latin America
This that has many experts comparing it to Singapore, another rag-to-riches success story.
But Panama isn’t booming just because of lucky geography, it’s booming because of smart free-market, investment-friendly policies which have sharpened its advantages:
- Panama’s currency is the U.S. dollar. This makes investing in the country easy.
- Banking and communication services are world class.
- Panama launched a five-year, $13.6 billion investment plan, focusing on schools, hospitals, sewerage, roads, and metro transit system.
- Panama’s import tariffs are among the lowest in Latin America. Also, the country has received foreign direct investment worth nearly 9% of GDP.
- Panama is a well-regarded tax haven and its banks offer a high degree of privacy.
- There is no tax on interest earned from bank accounts for locals or foreigners. There are no corporate or personal taxes on offshore activity. Residents pay no local taxes on their foreign-earned income.
- The result: an economy that’s grown at an 8% or more clip over the past five years.
Bocas del Toro, Panama
Booming Expat Paradise
Panama earned the number 2 spot on Forbes’ The 10 Best Countries to Retire to in 2013 who say:
“Panama is just plain easy, Panama City is a vibrant, cosmopolitan city with great restaurants, and excellent hospitals. It’s a banking and commercial hub so you find a real international community there. Panama is committed to attracting foreign retirees and offers the world’s best incentive program to do so, making it convenient and easy to get residence there.”
Things will cost you significantly less in Panama than what you’d expect back home. “A budget of $1,700 to $2,500 a month, housing included, would see you eating out, perhaps with a housekeeper a couple days a week, movies a few times a month, and so on.”
Panama Canal and Ports
A construction boom is also changing the landscape of Panama City. Office towers go up as fast as men can build them, including the Trump Ocean Club and Latin America’s first Waldorf Astoria hotel. But let’s not forget the work being done to double the capacity of the Panama Canal.
The Canal’s annual revenues have grown to over $2 billion (7.5% of GDP). Traffic and revenue were up about 25% in 2011. This produced a ripple of growth in many related businesses, such as insurance, ship maintenance and repair, trade finance, and banking. The canal and Panama’s business-friendly regulations have expanded big insurance, finance, and legal offshore industries.
Last year, the free-trade zone in Colón – on the Atlantic end of the canal – and Balboa, Panama’s Pacific-side trade gateway, became Latin America’s two busiest ports. These two ports are set to explode soon after the canal’s $5.25 billion expansion project is completed in 2014. This is one reason Colón’s become the regional base of firms like Procter & Gamble (NYSE: PG)… Two-thirds of the traffic through the canal is coming from or going to America.
Get ready for more growth. Panama is booming.
Healthcare is just one of the many aspects that a would-be expat might, and should, take into account when researching the retirement destinations they’re considering. Those hoping to relocate to Panama can go ahead and breathe a cautious sigh of relief.
While the country’s healthcare system is certainly not without its flaws, many expats have actually cited it as one of the best things about living in Panama. However, like almost anything else in Central America, it can vary greatly depending on where you go.
As a general rule, the best facilities and physicians are located in Panama City. However, some other areas are starting to catch up. For instance, Hospital Chiriqui, which treats many expats from the mountain haven of Boquete, provides an even better level of service than many in the city.
It is a smaller facility and may not be equipped to treat certain specialized cases, but is quite capable for most procedures.
Private Hospitals’ Healthcare
Panama boasts several state-of-the art private hospitals, many of which are associated with renowned facilities in the U.S. Punta Pacifica, located in Panama City, is considered the most technologically-advanced hospital in Latin America and is affiliated with the Johns Hopkins Hospital in Baltimore, Maryland.
The hospital is equipped with features such as videoconferencing capabilities to allow for information sharing and education.
Punta Pacifica Panama – photo by Maleg
Panama City is home to three other major hospitals, and there are two modern facilities in David as well. Still others are scattered throughout the country. Because the nation is small, it’s difficult to find yourself more than one to two hours from a modern hospital. The more heavily populated areas are also home to other health care providers such as dentists and eye doctors.
Public Hospitals’ Healthcare
Panama also has a number of public hospitals, which are funded by the Ministry of Health and the Social Security System. (Read: They’re nearly free.) However, those who can afford private health care often choose to go that route for various reasons.
The reason many expats do not opt to obtain services from public hospitals is because they can be a bit of a toss up. At best you may have to wait a few extra weeks for an appointment and may not get the same specialized attention you receive at a private facility. At worst you may wait hours to be admitted to an ER, only to deal with staff members who are tired, overworked, or rude.
But don’t let the few negatives turn you away from this viable option. For every understaffed facility with outdated equipment, there is another public hospital with modern technology and physicians who will take as much time with you as you need. Our recommendation is that, if you plan to take advantage of Panama’s public hospitals, check them out in advance. Make sure you understand what you’re getting into before you find yourself in a situation where you need urgent care.
Medical Professionals
One of the highlights of the Panamanian healthcare system is the quality of its medical professionals. The doctors are well trained, often in the U.S., and most are bilingual. The quality of medical care you’ll receive rivals that of many hospitals in the U.S., Canada, and Europe. This isn’t due to any regulatory standards being imposed by the government. But it doesn’t seem to matter.
While nurses do not receive the same level of training as those in the U.S., expats describe both them and the physicians as having an attitude of compassion that is not often seen in their first-world counterparts. In fact, the personal attention they receive from their doctors often comes as a shock to those unaccustomed to such dedicated care.
As opposed to U.S. physician visits where you’re usually worked over by a nurse and then visited briefly by a doctor who whisks in for two minutes before rushing off to see another patient, it’s not uncommon for a Panamanian doctor to spend 30 minutes to an hour with you in his office.
In addition to this one-on-one attention, you may be given your doctor’s home or even cellular phone number, as well as his or her home email address. While this easy access shouldn’t be abused, it’s not at all uncommon for a physician to allow patients to contact him or her after hours for pressing issues.
photo by Panama Health
Availability of Treatment
Something that’s important for expats to understand about Panama’s healthcare system is the disparity between the well-trained, well-meaning physicians and their ability to meet wide-ranging needs with the limited resources available to them.
Collectively, Panama’s hospitals have all the know-how and equipment they need. Individually, they may be unable to treat some of the more unique situations that might arise.
So the good news is that, whatever your condition, there’s probably a hospital that specializes in it. The bad news is that you will need to be more proactive in choosing your physician than you may be used to.
Inconsistencies in Care
Another common frustration among expats is the inconsistency among Panama’s healthcare providers. We’ve mentioned the differences between public and private health care, but even among privately-owned facilities the care can often vary greatly.
A good recommendation is to consider this fact when planning your move to Panama. If you need a good pediatrician, make sure you like the ones located near the area where you plan to relocate. If you have a heart condition, you may want to consider meeting with the nearest cardiologist before you sign on the dotted line of a bill of sale on a remote property.
A good idea is to ask around for recommendations on physicians. Again, because Panamanian doctors aren’t subject to a lot of the same scrutiny as those in the U.S., it can’t hurt to do your research. Don’t take for granted that they can be trusted simply because they’re physicians.
In addition, while many physicians may spend the better part of an hour with you alone in their office discussing your health concerns, there are also a few (especially those in public hospitals) that seem to hardly slow down to give you the time of day. If you’re concerned with being left in the dark regarding your health conditions, it’s best to consider your options ahead of time.
The language barrier is often another area of concern for many expats. While many doctors speak English, not all do. A visit to the hospital administrator’s office can quickly answer the question of whether the hospital offers a translator and whether those services are included in the hospital fees.
Health Insurance
Although many would-be expats are probably beyond tired of hearing health insurance debated in their home country, it’s nevertheless something they’ll need to consider when shopping for their Central American retirement home.
The good news is that there are many affordable options available. Even some U.S. health insurance plans are accepted in Panama.
Locally, there are HMO plans, which offer total reimbursement of services from in-network providers, as well as international plans, which allow patients to obtain treatment anywhere including places outside of Panama.
Many private hospitals also offer membership plans, which give participants hefty discounts on procedures performed at that facility only.
Cost of Healthcare
When comparing the different aspects of health care in Panama, low costs are another big plus for the “Pro” column.
Prices are drastically less than those of first-world countries, with procedures costing as little as one half to one fourth of the cost of what they would run in the U.S. While this may seem absurdly low, the ratio of health care costs to wages is quite proportionate, since many Panamanians earn around $400 per month.
One major reason for the low cost is that the overall health care system is far less litigious than in many other countries. With fewer frivolous lawsuits to threaten their livelihood, doctors pay less for malpractice insurance. The savings are passed on to the patient.
For instance, a visit to a specialist costs about $50. A trip to the ER runs around $100, which is less than a U.S. co-payment for the same visit. Procedures such as MRI’s are a mere $500, and a facelift can be performed for only about $1,700. Prescription drugs also cost less, and many medications that must be dispensed by a pharmacist in the U.S. are available over-the-counter in Panama.
photo by Panama Health
As a result of the low costs, insurance is also much cheaper for a good amount of coverage. As previously mentioned, public hospitals offer free routine care, but those who can afford private facilities will likely choose to pay the minimal cost instead.
Medical Tourism
Because of the low costs of treatment and the many attractions the area has to offer, Panama is becoming a hotspot for medical tourism. Many foreigners travel to the country to undergo expensive or even elective procedures, since they can be obtained at such a great value. Additional benefits are its proximity to and ease of access from the U.S., as well as its use of the U.S. dollar as its currency.
In addition to the low cost and high quality of Panama’s health care, foreigners are also clueing in to the fact that it’s just not a bad place to recuperate. Its many spas and resorts are quite conducive to the recovery process, making it awfully easy to turn your medical procedure into a much-needed vacation.
Medical tourism companies make the process a simple one by arranging for practically every aspect of the trip. They can book everything from air travel to hotel accommodations to the procedure itself. As this segment of the tourism industry continues to grow, it’s sure to have only positive effects on the quality of the health care system as a whole.
Why Invest Offshore
U.S. citizens have always been a little shy about offshore banking, unless they’re in that upper income bracket, moving millions and even billions of dollars around, tucking them away in stable banks and tax shelter havens. Middle class America, with modest portfolios, are more hesitant, and prefer to keep their assets with a local bank, close to home, where they can keep an eye on things.
While the caution is understood, in recent years, many frustrated middle class investors and homeowners have noticed their carefully cultivated portfolios aren’t growing; or worse, are even shrinking.
Traditional Offshore Banking
The first offshore jurisdiction to come to the average person’s mind, is Switzerland. The Union Bank of Switzerland (UBS), located in Basel and Zurich, Switzerland, however, was among the European banks to suffer some of the largest losses during the subprime mortgage crisis, necessitating the general stable banking institution to generate large amounts of capital from outside sources.
Criticizing the enormous world bank’s policy of privacy to its investors, the U.S. government has pressured Switzerland into more information sharing among U.S. account holders, for the purposes of detecting tax evasion. The complaint, which was joined by several countries in the European Union, resulted in more stringent laws concerning U.S. and European deposits. Although Switzerland has agreed to more effective tax cooperation, opening an account in Switzerland can be difficult and expensive.
The power of the Euro faces as much uncertainty as the American dollar, with as many weaknesses in the banking structure. Investment in cargo ships has sent many of the banks reeling. A cargo ship valued at $150 million in 2009, will not fetch more than $40 million now. With the shipping industry going for bust, European banks are facing a potential loss of $350 billion dollars in loans.
Canadian banks are not much different than American banks. While somewhat more stable, growth rate for your investment is slow, interest rates on loans are high, stocks even higher, and the labor market has stalled.
The Japanese yen has crawled back into recession.
The Significance of the Emerging Nations
The BRIC nations; Russia, India, China, and Brazil, have been under the watchful eye of financial advisors and investors for several years. Leading investment banking institutions, such as Goldman Sachs, estimate that the economies of these four nations will be wealthier than most Western countries within fifty years.
Investing in an overseas bank, however, is a major step. It’s always best to visit the country you wish to invest in, and China, India or Russia seem a little extreme to most modest investors. However, Latin America is right next door.
Many of the Latin American countries have changed their policies to a more open and friendly relationship with U.S. citizens wishing to visit or invest in a little south of the border real estate. These once war-conflicted countries have enjoyed increased stability under democratic governments and responsible fiscal policies stimulating a burst in retail growth.
Although Brazil has dominated the economic market, the united efforts of the Central American countries to maintain favorable investment options, has created a surge in real estate options. High end investors led the charge, with interests in a second or third home on a tropical beach, but Central American investment can be started with as little as $1,000.
Panama and The Highlight of Central America
With so many beautiful countries to choose from, it can be difficult to decide which one you want to dedicate to for your offshore investment. They all offer spectacular views, good banking policies and a rich and varied culture. A Panama bank account, however, is one of the most desirable in the world today.
With over 80 international banks, it has been placed among the world’s largest banking sectors. Three of Panama’s banks were featured in the top 1000 world banks for 2012. The leading banks in Panama and their positions are:
- No. 524 Banco General
- No. 663 Banco Latinoamericano de Exportaciones
- No. 789 Banco Nacional de Panama
Living It Up in Panama
Besides an expanded canal that has brought millions of dollars in revenue to the Panama economy and a sophisticated modern city, there are several reasons for its increased popularity. There are no corporate or personal taxes on offshore activity in Panama. You will not be double-taxed on your assets. All income earned outside Panama will not be taxed.
There is no conversion rate to foreign currency, or foreign currency controls. Panama uses the dollar. While Spanish is the primary language, most bank tellers and managers speak English. It offers online banking service, international wire transfer, and check service.
Panama is the top banking center in Central America. Its free market and investment-friendly policies have attracted a wide clientele, from retirees to entrepreneurs, to expats and adventurers.
Panama gives immediate residency to foreigners from 22 countries that maintain friendly, professional, economic and investment relationships with Panama. The United States is listed among these countries. Immediate foreign residents have the right to work in Panama, establish a business and engage in professional and economic activities. After five years of living in Panama, they may apply for full citizenship.
Perhaps one of its greatest advantages is its close proximity to the United States. You do not have to wonder how your offshore assets are doing. You do not have to travel halfway across the world.
If you move to Panama, you do not have to abandon the loved ones you left behind. A short plane trip, a hop on the bus or a drive in the car, and you can visit them, or more likely, they’ll wish to come and visit you!
Panama continues to be the best place to invest in if you’re thinking of an offshore bank. With a stable economy, easy access to your account, as well as a close circumference to the U.S., there simply is no greater advantage than investing in Panama.
Lee Zelter knows Boquete, Panama. It’s almost as if it’s in his blood. His blog Boquete Guide is a must read for those who are considering the move to Boquete or for those who have already made the jump.
Viva Tropical took a moment with Lee to dig a bit deeper into his reasons for calling Panama home for the past 7 years. His answers might just surprise you.
Photo Credit: Sky and Zak
Why did you choose to move to Panama and specifically Boquete?
We researched for several years while waiting for our youngest to finish high school. We visited Europe, Mexico, Costa Rica and last Panama. We decided on Panama for several reasons.
Cost of living was lower than Europe and the U.S. Mexico was getting too violent. Costa Rica was a boat we missed and crime was heading up as an anti-gringo attitude was developing.
The pluses of Panama were that in a time when the dollar was falling against other currencies, Panama used dollars so we would not be hurt by varying exchange rates. Panama has a hundred years of U.S. involvement and to Panamanians Americans are nothing new.
Gringo is a description not a swear word here. We loved the temperate climate and relative isolation of Boquete. It was time to leave city life and try something new.
There was a significant English-speaking international community in Boquete which made for an easy integration. My wife lasted 18 months, it was too much of a change for her. I stayed and love it here.
How long have you lived there?
Seven years in August 2013
Where where you living previously?
Tucson, AZ, U.S.
What do you do with your time?
I work online, write online and play online. I also travel extensively in South and Central America.
What surprised you when you first came to Boquete/Panama?
How many shades of green exist!
What advice can you give someone who is thinking about moving to Boquete/Panama?
Learn Spanish first, leave your preconceived attitudes at home and do not check your brains at the airport. This is a different world.
Anything else you’d like to say?
I have much more about the entire experience at this link. The entire Panamania series reflects the move, transition and experience.
Photo: Viva Team
Buying property in Panama can be a cumbersome task. The good news is that, when dealing with experienced professionals you can trust, it doesn’t have to be.
While some investors and expats choose to learn all the ins and outs of the process, many see no need to reinvent the wheel when there are others who do this kind of thing every day and are much better equipped to navigate the system.
As that latter group has learned, buying property in Panama isn’t about what you know. It’s who you know. And it is absolutely essential to work with a team you can trust.
Step 1: Narrow Down Your Search.
Start looking for properties. Take into consideration the type of climate, community, and culture that you’re looking for. Whatever you’re into, Panama has an area that can accommodate your interests.
Once you’ve chosen your area, find a few listings that appeal to you and contact the seller, developer, or listing agent. You can start by emailing them to see if you get a response. If it’s a company who’s selling, research them online. Try to verify whether they’re legit.
Once you’ve weeded out any bogus or unreliable sources, contact the sellers of your top candidates by phone to feel them out a little more. Treat this more like an interview than just a cursory fact-finding mission. You want to make sure that everything they’re telling you about the property and the process corresponds with what you know to be true.
If there are any red flags that pop up in your dealings with the seller, walk away. Don’t waste your time and effort trying to work with someone who isn’t cooperative or trustworthy.
Step 2: Build Your Team.
Working with a team of reputable professionals is the key that can make or break your property-buying experience. However you’ll be relieved to know that, having successfully weeded out any questionable sellers, you’re well on your way to building a team you can trust to work in your best interests and get the job done.
Like-minded folks often tend to run in the same circles. So if your real estate agent is trustworthy, then you can usually trust others in his network. (Note that the opposite is also true. If a seller gives you reason to doubt him, run–don’t walk–away from the rest of his cronies as well.)
While you should certainly do your part to double check their reputation, it’s a good idea to ask the real estate agent or property developer for recommendations on attorneys, escrow companies, surveyors, or other professionals you’ll need. This can save you a wealth of time and energy when trying to select these professionals from thousands of miles away.
So it’s important in this stage to evaluate whoever you’re going to be working with. This means real estate agents, attorneys, sellers, etc.
Step 3: Come See for Yourself.
The final step before pulling the trigger is to take a trip to see the property (or properties, if you’re considering more than one) for yourself. Make arrangements to meet with the seller (or sellers), and see if you can go ahead and plan a meeting with the attorney you’ve selected to get the ball rolling.
Keep in mind that, depending on the seller or company you’re dealing with, you may be responsible for arranging for all your own travel, especially once you’re on the ground in Panama. And we all know nothing ever goes wrong when traveling internationally, right? Wrong.
Things happen. Flights get delayed. Cell phone service is spotty. Make sure those you’ll be meeting know how to reach you and that you know where to find them as well. Get their office number, cell phone number, home phone number, physical address, email address, and every other form of contact you can think of. And always have a back-up plan.
Once you’ve connected with everyone, sit back and relax and enjoy the beautiful scenery. Make sure to allow plenty of time to do everything you need to do. Depending on the remoteness of the properties you’re considering, you may be traveling by boat, or horseback, or even on foot. Don’t expect to be hopping in a car with a realtor and seeing eight or nine properties in an afternoon.
Step 4: Let Your Team Get to Work.
Once you’ve selected your property, this is where the right team will really start firing on all cylinders. Your attorney will start by drafting up a contract to buy and issuing a deposit to the seller. The contract will spell out all the contingencies that must be met.
The attorney will then research the title or rights, liens, and any other legal issues with the property. Hopefully you’ll find everything in order once your team has done their homework on the property.
If everything’s in the clear, your attorney will obtain a bill of sale and have the title transfer completed. After that it’s time to disburse the funds, which you’ll need to have wired to a Panamanian bank.
That’s it. It’s that simple. At least, it can be. By delegating responsibility to a few trusted individuals, the process of buying property in Panama can be virtually hassle-free on your part. In fact, if you’ve arranged everything properly with your attorney, you might not even have to show up for the closing.
Imagine that. You take a trip to Panama to look at a property you’re considering, and the next time you return…it’s yours.
Photo: EcoCircucitos
If you’re looking to make Panama your home, whether for a few years or a lifetime, there are a variety of visa options available to you. Panama is very friendly to foreigners and is continually opening its doors even wider to those who want to move there for practically any reason. We’ve compiled some more information about the various visa options, their requirements, and the process of obtaining them. However, because the country is making such large strides to become even more open to immigrants, the laws are frequently changing.
The good news is that the process is only getting easier. The bad news is that it can take some serious digging to find information that is current. If you’re serious about starting the process now, a reputable Panamanian lawyer with immigration experience can drastically cut down on the time and headaches associated with the process. In the meantime, check back often for updates on recent decrees and resolutions.
The Application Process
The requirements, timelines, and procedures vary greatly from one visa program to the next (yet another good reason to work with someone who’s familiar with them all). However, a few key points are central to the process as a whole. Documentation will be required to show proof of all requirements set forth by the specific visas. For instance, a letter from a bank will be required to verify solvency where needed, and a promise of work contract will be needed to show proof of employment.
These documents should all be clean and current and bear the proper authentication by an attorney or Apostille, which is similar to a notary public. All passports should be current with at least a year (or more) remaining before their expiration date.
For dependents, you will need to obtain current copies of marriage and birth certificates. A current police record from your country of residence is generally required. You will also need to be examined by a Panamanian doctor to receive a certificate stating that you are free of disease and in good mental and physical health.
While some steps in the process require you to be physically present, an attorney can handle many of the tasks with a signed Power of Attorney.
The Visa and Residency Options and Requirements
Tourist Pensioner Visa
One of the most popular and beneficial visas offered by the Panamanian government is the Tourist Pensioner Visa. Available to those who can show a minimum monthly income of $1,000 from a verifiable source, such as a pension, this visa has no expiration date. It is also exempt to any future changes in the law, so current holders are grandfathered in under the program.
Proof of income is required and has to be provided on a yearly basis to show that you are still receiving a pension. While this visa does not offer a path to citizenship, it does provide a number of benefits that are unmatched by any of Panama’s other visas, or those of any other country.
However, don’t worry about missing out if you enter the country by some other means. While these benefits are provided automatically to anyone on the Tourist Pensioner Visa, they are also available to anyone over the age of 60 (55 for women) and to others on a case-by-case basis. Here are some of the highlights:
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50% off entertainment (e.g. movies, theaters, sporting events, etc.)
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30-50% off hotels
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30% off public transportation (e.g. boats, buses, and trains)
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25% off airline tickets
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25% off utilities
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15-25% off restaurants
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15% off medical services (exclusive of procedures covered by insurance)
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Tax-free importation of household goods (up to $10,000)
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Tax-free importation or purchase of a new car every two years
Private Income Retiree Visa
For those who might have received a pension as a lump sum, the Private Income Retiree Visa is an excellent option. To qualify for this visa you’ll need to invest enough money in a 5-year certificate of deposit (CD) in the National Bank of Panama to generate $2,000 per month.
The visa is renewable every five years, provided that the CD is also renewed. Holders of this visa are granted a Panamanian passport, but no direct path to citizenship. Private income retirees can also import their household goods and a vehicle every two years with no taxes, just like tourist pensioners.
Photo: Rita Willart
Person of Means Visa
The Person of Means Visa requires a 3-year fixed-term deposit of at least $300,000 in a Panamanian bank. A mortgage-free real estate investment of the same amount (or a combination of the two) will also qualify you for this visa. Unlike the previous visas, this option can lead to permanent citizenship after one initial renewal, so long as your financial situation remains secure. It also offers the ability to become a Panamanian citizen if you choose.
Investor Visa
Panama is also friendly to those who wish to do business or invest in the country. With a $160,000 initial investment and the hiring of five full-time Panamanian employees, you can qualify for an Investor Visa. This visa is good for a period of two years.
While it can lead to permanent residency, it must first be renewed three times. Once they become permanent residents, holders of the Investor Visa can also apply for Panamanian nationality.
This is an older visa and for most people there are better options.
Permanent Residency for Nationals of Countries Friendly to Panama
One of the most recent additions to Panama’s residency options, and the one with the longest name, is the Permanent Residency for Nationals of Countries Friendly to Panama option.
With requirements that are much more attainable than many of the other visa options, this program offers immediate residency.
In addition to skipping all the steps of obtaining (and renewing) a visa, it offers another benefit that many of the others lack: It gives you the option to work. Born out of an acute need for skilled labor, due to the country’s huge economic boom, this program requires a mere $5,000 deposit in a Panamanian bank (plus $2,000 for each dependent). In addition applicants must show proof of one of the following:
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Investment in Panamanian real estate
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Ownership in a Panamanian corporation
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Employment by a Panamanian business
This program, introduced in the form of Decree 343, is offered to residents of 47 countries that have been identified as being “friendly” to Panama and is available to you, your spouse, children under 18 (or between the ages of 18 and 25 if they’re students), and children of any age with disabilities.
No renewals are needed since this program grants immediate residency, and those who take advantage of this option are also able to apply for citizenship.
Given the simplicity of opening a Panama Corporation or investment in Panama real estate, this visa has become one of the most popular.
Accelerated Permanent Residency for Professionals
Another piece of legislation that’s hot off the presses is Decree 229, which changes the amount of time a person must work in Panama before becoming a permanent resident. Historically, those in Panama on a work permit could apply for permanent residency after a period of seven years.
The recent bill, which applies to those working in a professional capacity, reduces it to two. The decree applies not only to those who will seek employment in Panama in the future, but to those already working there as well.
Forestry Investor Visa
Designed to promote the production and preservation of teak, the Forestry Investor Visa offers both a small and large option. Small forestry investors will need a $60,000 minimum investment.
This visa is only temporary and must be renewed every year for six years. On the seventh renewal, you can apply for permanent residency.
The Large Forestry Investor Visa, which requires an $80,000 investment, is good for two years initially. After that period of time, you can apply for permanent residency. Five years after obtaining residency, you can also apply for citizenship.
Other Visas
Keep in mind that, while these visa and residency options are the most common, this list isn’t exhaustive. There are other solutions available for individuals such as agriculture investors, those doing business in tax-free zones, temporary workers, and more. If you want to call this Central American destination your home, there is almost certainly a way to make that happen.
If you’re hoping to retire to a beach haven overseas, may we suggest Panama? The Latin American country has a great deal of culture to offer, as well as beautiful scenery and fabulous weather. And the Panama beaches are an important part of the package.
Panama has many draws as an overseas retirement location, including vibrant communities, great quality inexpensive housing, and the beaches are some of the best. In fact, one of the best things about the country is that it has beaches leading onto two oceans: the Pacific and the Caribbean. In fact, Panama has over 1,500 miles of coastline!
Panama Beaches
In the past, Panama’s beaches have often been overlooked. Many of them are very rural and remote, and they haven’t typically been popular tourist destinations. However, there are some absolutely gorgeous areas of coastline in the country, and we don’t think that you should overlook them.
If you’re thinking about visiting or retiring to Panama, take a look at these top five beach areas in the country.
Coronado
Coronado Panama
Set only an hour away from Panama City, Coronado is a beach town that is well-loved by expats and Panamanians alike. The beaches themselves are an impressive site to behold. The beaches in this area have fantastic black and white sand, and are great fun to visit.
Away from the beach, the town of Coronado also has a range of leisure facilities including bars, restaurants, shops and a plaza area. This is a very popular area, and has a great expat community. This area is very different from the rest of the beach areas on the list: purely because of how developed it is. Coronado is the destination for you if you want to be able to shop in an American-style grocery store and meet up with friends for a nearby round of golf.
Boca Chica
Photo by Boca Chica Island
The Boca Chica area is wonderful if you’re looking for a rural, romantic spot to spend time with a loved one. The landscape here is made up of hills, valleys, and banana plantations. It also has a perfectly tropical climate. In the past, this was a very remote area, but it is fast becoming the next up and coming spot. The new airport in nearby David will soon be accommodating direct flights to the United States and Canada, which will make traveling here very easy.
The beaches in Boca Chica benefit from fine sand, dark beautiful water, and a quiet, peaceful atmosphere. Factor in the Chiriqui Marine Park, and the coast at Boca Chica is very attractive.
Bocas Del Toro
Bocas Del Toro is an area that’s made up of six islands, along with a number of uninhabited islets. It’s a beautiful part of the country, and is described by Conde Nast as “the Caribbean that time forgot.”
This area is popular with tourists and expats for many reasons. It has a great community, and is also home to some of the most typically beautiful beaches in the whole of Panama.
Here, you can expect to see flawless white sandy beaches and clear, turquoise water. Because of this, the beaches in this area are particularly popular snorkelling destinations.
Santa Catalina
The Lonely Planet has reported that Santa Catalina has the potential to be the next great Central American beach destination.
This laid-back town is mainly populated by laid-back Panamanian fishermen, but it does have a huge draw for tourists and expats alike: great surf! The beaches of Santa Catalina offer incredible surfing opportunities. Because of this, the town is growing, and is developing more and more facilities for expats.
Because of the relaxed atmosphere of the town, it also has a growing reputation for having a healthy attitude. There’s a real focus in the town on healthy food, as well as yoga. Santa Catalina is one of the few places in Panama with this sort of vibe.
Pedasi
Pedasi is a small town set in the outback of Panama. It’s a relaxed, low-key place with a rich history of folklore. If you visit the town, you can expect to be greeted by friendly residents, great food, and maybe even a beach party or two. There’s also something a little out of the ordinary waiting for you at Pedasi. In this area, some of the beaches feature beautiful lava covered sand.
But it’s not all quiet here. There are also a great deal of sports opportunities to choose from. Whether you’re into surfing, scuba diving, sports fishing, or horseback riding, you’ll find something to enjoy in the area.
The one downside of Pedasi is that property prices are quite high here compared to other rural areas with limited services.
Is One of these Panama Beach Areas Right for You?
Panama is a beautiful country that offers a lot more value for money than other more typical holiday or retirement destinations. It’s an inexpensive place to live, and this is true even in some of the more popular coastal areas.
If you’re looking for the ideal beach destination, to visit or even to retire to, one of these five areas might be the one for you.
The process of buying property in Panama isn’t always a straightforward one, but–with the right help–it may be a lot easier than you think. We’ve outlined the process from start to finish and defined some of the key terms, to help make relocating to your dream destination a little bit easier.
Photo: Chuck Holton
Before You Start Shopping for Panama Property
- Take your time. Panama is a buyer’s market. There are plenty of properties available, ranging from planned communities in quaint villages to undeveloped land in remote locations. Don’t feel pressured to make a hasty decision.
- Do your homework. Get to know the country. Start virtually, and then come explore the surroundings for yourself. Narrow down exactly which part of this Central American paradise you’d like to call home. Panama offers mountains, beaches, and city living. And depending on where you go, you might even find several of those in close proximity to one another. Also consider how close you’d like to be to major cities, airports, and the best healthcare. Make sure you spend plenty of time in the area to which you plan to relocate. See what it’s like in the different seasons. Picture yourself living there. Get to know some natives and local expats. Find the places you’ll eat and shop. Figure out how you’re going to spend your time in your new environment and what activities the area has to offer.
- Understand the different types of property. Panama has both titled and untitled property that can be yours to inhabit. However, they’re treated quite differently.
- Titled property works just as you’d think. It belongs to you. The title gets transferred to your name and recorded in the Registro Publico, or public registry.
- Rights of Possession (ROP) property is different. The Panamanian government owns title to the land, but you have the right to use the property any way you’d like…just as if it were your own. That is, all except for one important factor: You don’t have to pay property taxes. A full understanding of ROP property requires a little background knowledge of how the concept came to be. It is essentially the original model of real estate, where land rights were granted by the king in exchange for a fealty, or tax. The king protected your rights to the land as long as you remained in good standing. (Think U.S. property taxes.) Some estimates indicate that as much as 90% of land outside of Panama City is untitled, so it isn’t nearly as uncommon as you might think. So don’t let ROP property scare you. ROP land definitely has its risks, but the key is to resolve any issues on the front end by doing your due diligence before you buy. The right team of real estate and legal experts can do all the necessary homework on a property you’re considering, or in some cases they may already have. Let me reiterate that part about choosing the right team. Make sure you go with someone who has experience evaluating Rights of Possession properties in Panama and has a proven track record of success in this area. When done correctly, ROP property can be an excellent investment.
- A Note about Squatters: Both ROP and titled land that is unoccupied can sometimes be inhabited by squatters. After a certain number of years, squatters can actually be granted rights to the property. As a precaution when buying either type of land, it’s important to first check it carefully for signs that someone might be squatting on the property. Go spend some time there. And once you own the land or the rights, the laws are very clear on what measures you can take to prevent squatters from setting up on it.
- Learn the implications of the different types of property for visa requirements, tax exemption, and loan qualification. Because the two types differ it’s important to make sure you’re shopping for the right one. For instance, tax exemption is an excellent perk of buying ROP land. However, because you don’t hold the title, you can’t use it for collateral or a qualifying investment for a residency visa. While property taxes often do apply for titled property, there are some tourist areas where tax exemption applies, even for income earned on rental property. Buying property in the name of a corporation created and controlled by you is another good option to provide strong asset protection and better control over taxes. Setting up a corporation in Panama is a fairly simple and inexpensive process. An attorney can help you with the paperwork and requirements.
- A Note about Financing: While financing can be difficult to obtain in Panama, it is possible. Panamanian banks will offer mortgages to foreigners. However, it is necessary to first build credit in Panama. Seller financing is often a good option, but it’s important to buy only from a credible seller and have all contracts carefully reviewed by an attorney.
Building Your Team
- Find a real estate professional you can trust. The real estate climate in Panama is very different than in countries like the U.S. There are few regulations governing real estate practices. Many agents are unlicensed. There’s no multiple listing service (MLS) and little cooperation between agents. Even commissions vary greatly, ranging from 3 to 10%. Overall, there’s simply no fiduciary duty imposed on Panamanian realtors to protect your interests. So keep in mind that they only make money if they sell you a property, take everything they say with a grain of salt. The best advice we can give is to do your due diligence and make sure you choose a real estate professional who is reputable, someone who understands your goals and will work with your best interest in mind. Run a search on them to see if their name turns up any negative information. Feel free to contact us if you need a recommendation.
- Decide if you need to hire an attorney. Given the intricacies and potential complications of a Panamian real estate transaction (as well as the fact that all the paperwork is in Spanish), it’s probably a good idea to have an attorney to assist you along the way. Just like with any other professional, spend the time to research and find someone reputable. Make sure to spell out what you’d like for them to do. They can assist with the title search, researching rights on ROP properties, registering the title once the property is yours, obtaining English translations of all documents, and interpreting both translations for accuracy. It’s always a good idea to get a quote up front for their services, and it can never hurt to get multiple opinions.
- If needed, find a bank or private escrow company to handle the actual monetary transaction. Due to the potential for corruption and the difficulty of defending yourself in the legal system if a situation were to arise, you should generally avoid giving money directly to the seller or real estate agent. Like many aspects of real estate transactions in Panama, it all ultimately depends on the reputation of the entities with which you’re conducting business. If there is a need for concern, your attorney should be able to handle the disbursement of funds. However, some aren’t willing to do so. In such cases, a bank or private escrow company, can take care of it for you. The wire transfer from a U.S. bank is simple, since there’s no currency exchange, and generally takes around three days to be credited on the Panama side. You can then authorize them to issue the funds, in the form of a certified check, once all obligations have been met.
The Buying Process
- Step 1: Deposit and Contract. Congratulations! You’ve found your tropical paradise to call home. The first step is to sign a contract for purchase, often called a promise contract, and pay a deposit. The contract spells out all the terms and contingencies, the agreed upon purchase price, the deposit amount paid, and the time frame for closing. The deposit is non-refundable, except in a case where certain contingencies aren’t met. The contract itself is binding and enforceable in court.
- Step 2: Title Research. This step will likely be the longest and most complicated in the buying process. Request the title (or government issued Verification Certificate for ROP land) from the seller. It should include the name of the owner and a description of the property. The seller should also provide a map of the property. Consider having a survey completed, particularly if one hasn’t been done before. A survey would verify the exact boundaries of the property, which even the seller himself might not be completely sure of. While Rights of Possession properties obviously require a lot more research to verify that the seller does indeed possess the rights to the land, it’s important to note that research on a titled property is every bit as important. Make sure there’s a clear title, with no liens or other legal issues, before you buy.
- Step 3: Bill of Sale. Obtain the proper form and complete a bill of sale, which shows the name of the buyer, the seller, and the price paid for the property. This document is given to the Notary Public who finalizes the sale and is also used for determining the value of the property for income tax purposes.
- Step 4: Title Transfer. This portion of the transaction is handled by a Notary Public, who holds much greater power than those in the U.S. In Panama, a Notary Public is a high-ranking official who handles all legal aspects of a transfer of land or land rights, among other responsibilities. They will create create a new title, or certificate, which is then approved by the Chief Notary.
- Step 5: Transfer of Funds. Once all of the previous steps have been completed (and not before!), the final step to property ownership in Panama is the actual handing over of the money. The bank or escrow company you’ve chosen will issue a certified check to the seller, as well as separate checks for commissions or other service charges.
- Step 6: National Registry. Once the purchase of titled property has been completed, the title can then be recorded in the public registry. This final step makes it official! You now own your very own piece of paradise with nothing left to do but enjoy the fruits of your labor.
- A Note on the Buying Process: When working with many firms, the steps above may be transparent to you. A company skilled in real estate transactions will often handle many of the above aspects and include the fees in your closing costs, saving you a lot of time and energy.
Tips for Buyers
- Stay out of court. Panamanian courts can be very unfriendly to foreigners and often even corrupt. This is the main reason it’s so important to do your due diligence on the front end.
- Understand the special nature of beachfront property. All Panama beaches are public access. This means the public owns the first 20 meters from the high tide mark.If you buy beachfront property and plan to build a structure that extends into the water (e.g. a pier or even an entire home on stilts above the water), you’ll need to obtain a concession to do so. This process can take years, and no building permits can be obtained until this step is completed. When buying property that already has such structures, make sure that the seller can prove that the proper concessions were granted. (Note that this limitation only applies to the area in and immediately adjacent to the water. The rest of the land is yours to do as you see fit.)
- Avoid gimmicks. Steer clear of anything that sounds fishy or too good to be true. Remember what we said about realtors and the things they tell you. Investigate any and all unusual-sounding deals carefully.
- Use caution when buying in a planned community. Carefully review the development’s CCR’s, or covenants, conditions, and restrictions. Walk away if a builder says they haven’t been written yet. Believe only what’s spelled out in the document, not verbal promises made by the developer.
- A project is only as good as its developer. Because Panama is a thriving retirement hotspot, it is unfortunately riddled with amateur developers trying to make a buck by selling you grandiose dreams of the future. They may try to convince you to get in now in the early stages, with assurances that they’ll later build roads, shopping centers, and restaurants. Make sure they have a proven track record, as there’s always a chance these structures may not get built. If a grocery store right around the corner is a must-have for you, go with a property that already has one.
What other strategies do you use for buying property in Panama?