Panama ... Your Best Value for Offshore Living even for the "Great Recession"

Even as the "Great Recession" takes its terrible toll (March 2009) the outstanding value and charms of Panama remain overwhelming for living, working and retiring. 

Why not enjoy your life WITHOUT the high costs and constant penny pinching.

Check out living or retiring in an exotic tropical paradise and experience a lifestyle that will easily exceed your present standard of living in North America or Europe at about 33% of the cost.

Read the facts and economic comparisons in my recent book.

  2007 Edition "Retirement Planning for Offshore Living"   

Explore Panama from one of our villas opposite the ocean in ritzy Coronado.

Click on "Villas for Rent" on the left hand index. Check our brochure "Las Bougainvilleas"  (English) or Las Bougainvilleas (French) for more details, room rates and lots of great photos.

Visit this spectacular, unspoiled, friendly Central American country and you will be extremely impressed ....

The Government of Panama welcomes expats with some of the most generous and accommodating residency requirements available anywhere in the world. Whether you are 25 or 75 years of age, Panama offers many advantages.

My book analyzes living in Panama as well as some alternative offshore living/retiring locations including Mexico, France and Thailand.     

With the construction of the "Third Canal" in full swing, Panama continues to experience a construction boom which should last for at least the next 10 years while the economies of most other countries are in rapid decline.

As of March 2009 and with the American recession more than one year old, the Panamanian economy is projected to grow at about 6% for 2009 (down from 11% in 2008.

With its strategic trading location Panama will continue to benefit from world trade in spite of any temporary economic slowdowns. The democratic traditions of this country plus use of the American dollar make this an attractive location for expats and the "offshore solution" whatever your age or asset level.   

Panama is "Best Offshore living/retiring Option"

As an offshore living destination, Panama was selected as the "best country in which to retire" by International Living for 6 years in a row. In 2007, IL chose Mexico as the "top retirement destination" but I would beg to differ with this choice unless North American style prices, crowded beaches and a high crime rate are of little importance to you. Today it is once again at the top of the list.  

Panama has consistently received high retirement recommendations  from major publications including USA Today, Fortune Magazine, Money Magazine the Wall Street Journal etc.

AARP's Modern Maturity magazine ... the largest due paying organization in the world with 35+ million members ... also picked Panama as a top retirement location.  While AARP ranked France and Italy ahead of Panama (for countries outside of the USA) they  strongly suggested consulting your tax accountant before taking that European plunge. As of 2009, both France and Italy are in poor economic shape and getting worse.

The Panama Tax Advantage

Panama, in many instances, does NOT tax your global income as would generally be the case in the USA or Canada. Income derived from sources outside of Panama may be "tax free" although it should be reported. There are circumstances where such income is taxed and you must consult an accountant. 

As an American citizen living in Panama, your first $80,000 (or $160,000 if you file jointly) of regular salary or business income is treated as tax free for IRS purposes but you must live outside of the USA for at least 330 days in a single calendar year.

All of your investment and "passive income" such as interest payments, however, is still subject to American taxes. Your global income must be reported to the IRS unless you decide to renounce your American citizenship which is not a simple matter ... particularly if the IRS determines that you are doing so for tax avoidance purposes and you have a net worth of over $600,000.  

As a Canadian citizen and for many Europeans, non-Panamanian income can become tax free without limit. As a Canadian, without any assets or interests in Canada, you can invest your money, for example, in a high quality Cayman Island mutual fund and earn tax free income while living in Panama with a permanent residency status. 

This may not be true for "active income" earned offshore if you qualify as a "resident" for Panamanian tax purposes. 

Bank interest earned in Panama may also be tax free for non-American expats when held in a Panamanian bank account. 

The Incredibly Low "Cost of Living"

The low cost of living in Panama applies to everyone irrespective of nationality. My wife and I can easily live on one-third of what it used to cost us in New Jersey or in Ontario Canada. All calculations are based on "after tax" dollars.

As of March 2009,  we can easily live on a budget of $20,000 per annum. We have no debts and carry all the normal insurances that one might have in the USA ... albeit my Nissan SUV is an older model.

With perhaps $25,000 per year we could easily live the life of a relative "millionaire" in New Jersey.

Our Panamanian House

Our Coronado property has  1750 square meters (about a half acre) and was purchased for $135,000 in the summer of 2005. Today it has a value of about 4-5 times this amount.

When purchased our house (Coronado house) was about 5-6 years old (with some parts much older) and contained roughly 2500 square feet in three detached buildings.  

As of March 2009 we have three small houses or casitas available for rent with a total of almost 5000 square feet.

Our property is located across the street from a sandy swimming/surfing beach called "Playa Serena" on the Pacific Ocean. Our property backs onto an 18 hole PGA golf course designed by Tom Fazio who happens to be a world famous golf architect engaged by Donald Trump for two of his premium golf courses in the USA.

We can watch people playing on the "chip and put" course from our back terrace. The 9 hole chip and put course is fully lighted for night playing.  

This 4 star golf club contains several large swimming pools plus an "infinity pool" on the beach. It contains four tennis courts with lights for night playing, four great restaurants, a luxurious European style spa with saunas, an elaborate new equestrian stable and a small but very loud disco (thankfully acoustically protected).

The cost to belong as a full member is a $10,000 initiation fee, plus a $5,000 administrative fee plus $180 per month maintenance.

Some Interesting Panamanian Facts 

The ANNUAL taxes on our house are zero. They may be adjusted under Law #6 but we will be exempt from all property taxes until 2118 at which time we will probably have to pay about $2500 per year.  

New properties can still receive a 20 year property tax exemption in Panama.  This rule was reinstated in late 2007. The higher priced the house the fewer years of tax exemption are provided. 

Coronado is a "gated community" ("double gated" in certain areas) with a 24x7 security guard. It is questionable whether this level of security is actually needed or not although our house was entered recently by several thieves and a few minor things were taken. Since then we have installed steel bars on all the windows and doors.

The security guards serve to minimize traffic on the weekends. There appear to be about 5-6 minor "incidents" reported per month all involving minor theft and never (to date) involving violence, weapons etc. 

Our municipal potable water costs about $20 per month including costs to keep the swimming pool full and a lot of water for the plants in the summer dry season.

2-3 times per week we have a municipal garbage pickup which costs us $60 per year.

Our electricity costs, prior to installing our swimming pool and the three rental casitas, averaged $35 per month. They are now $125 to $150 monthly (and sometimes more) as we have added several new appliances etc.

There are of course no Canadian style "heating days" here and we live very comfortably without ever using air conditioning. In fact we ripped out the existing central AC system in our house.

We prefer to turn on inexpensive ceiling fans for sleeping because of the wonderful ocean breezes on most evenings.

At night, we often hear the ocean waves from across the street. I am awakened, sometimes too early, by the neighboring roosters kept by resident gardeners ... including those who manage million dollar properties across the street. The parrots also tend to get quite active and chatty at dawn but only in season. One quickly gets used to these new sounds.

A property similar to ours on the Jersey Shores, in Boca Raton, or in Southern California would have cost in the $3 to $8 million dollar range ... before the meltdown. Today perhaps 30-40% less. Just the annual municipal tax bill for such a house up north would vastly exceed our annual cost of living.

Even in Puerto Vallarta, a better 2000 square foot house on a half acre of land opposite a good swimming beach was priced in the $1,000,000 to $2,000,000 range in 2003/2004 and was not in the best part of town. 

A superb pizza for two with several toppings and two cokes costs less than $10.00 in many Panamanian restaurants .... up from about $6.00 four years ago.  In Paris this same "lunch" would cost about $30+; in NJ or Boca Raton about $20. Figure that restaurants are generally 50% to 60% cheaper on average than the USA.

The cost to take a taxi almost anywhere in Panama City is still $1.50 to $2.50.

Friendly People?

For me, this is probably the most important single factor when I select a place to live. I have never met friendlier people in my entire life and I grew up in Saskatchewan where "friendly" is everyone's middle name. 

Everyone in Panama takes the time necessary to answer your questions. Initially, I was a bit suspicious because this is such a contrast to many cities in North America; after a short while I realized it was genuine.

Panamanians are exceptionally family oriented. While they may often be highly entrepreneurial and business-focused, personal friendships are valued most.

English is spoken throughout Panama City but less than you might wish. You will have to learn  Spanish to get the full flavor of the country and that will take some hard work. 

The Entrepreneurial Spirit

I like to compare the Panamanian economy to that of Singapore or Hong Kong in terms of dynamism and entrepreneurialism. I actually lived in Singapore for about 4 months in late 1999. There are so many opportunities here in Panama with minimal "red tape".            

The Panamanian currency is pegged 100% to the US dollar which has been a very good thing during the current economic meltdown. The "Balboa" (the name for the Panamanian currency) looks exactly like the American dollar. The Balboa suffers/enjoys the same ebbs and flows on a foreign exchange basis as does the US dollar.

Panama is a banking center second only to Switzerland with more than 100 foreign banks. They offer interest rates roughly equal to those in the USA on a long term loan basis.  

Colon is the second largest global "free port" after Hong Kong. Think about it. 

Comparative House Purchase Costs

Before discovering Panama, we purchased a small condo in Puerto Vallarta Mexico in early 2004. The only real option was a "cash deal" although some American banks advertised that they could provide 60-70% loans at rates about 2% higher than USA mortgages if secured by a property in the USA. In Panama, house generally provides the required security.  

Mexican banks, in 2004, were lending money at 17-18% for a home purchase. In Mexico, it cost us 9% of the total condo purchase price just to close on the deal including all legal expenses, bank trust fees and transfer fees.  The sales "process" took 6 months.

When we sold our Mexican property a year later it cost another 15% of the final selling price including a real estate commission of 8%, bank trust fees, legal fees and capital gains taxes.  Property flipping is a very bad idea in Mexico.

In contrast, the cost to close on our property in Coronado Panama was exactly ONE PERCENT of the purchase price. The entire process was exceptionally well handled and took about 6 weeks ... not 6 months. 

Our Panamanian house could have been bank financed at 70% for 25 years at mortgage rates equal to those in the USA at the time (about 5.25%). However, for any term that extends beyond your 70th birthday you need to have a Panamanian life insurance policy in an amount equal to the outstanding loan. That is why Panamanian banks are not in financial trouble today with "toxic assets" ... as in the USA and Europe.

As a Panamanian "pensionado" I could have received a discount on the mortgage rate and free legal costs.

Being Canadian, I walked into a very modern "Scotia Bank" in downtown Panama City and was quickly informed of the mortgage conditions in impeccable English and invited to apply. I distinctly recall that the loan officer mentioned that there were "unlimited" funds to lend.

To obtain a mortgage, you require two years of tax statements, a domestic bank account, and personal references (ideally including someone in Panama) and a satisfactory income. Turn around time is about two weeks.  Legal fees are normally about $1000.  The title is entirely in your name and not in a "bank trust" with an annual renewal fee as in Mexico.   

The Past and Future of the Panama Canal

Following a valiant but failed attempt by the French, the Americans completed the Panama Canal about one hundred years ago and remained in possession of a 10 mile strip of land containing the waterway, called the "canal zone", until the end of 1999. 

At that time, the "canal zone" territory with all of its buildings and infrastructure were "reverted" to Panamanian control.

The $5.25 billion, 7-8 year, "Third Lock" canal project was approved by an overwhelming referendum vote in October 2006. The Third Canal will be able to accommodate the largest cargo ships with 8,000 to 10,000 containers on board permitting an increasingly massive flow of finished goods from China and Asia to the rest of the world. The World Bank will underwrite a significant portion of the required funding. 

The decision to expand the canal touched off a dramatic rise in real estate values throughout Panama and remains the main force driving the real estate boom. Global trade prospects for the next decade and beyond look very optimistic even with the "Great Recession" upon us.  

Panama City Communications and the Web

The Panama City communications system is based entirely on fiber optics. Four of the five major global underwater fiber optic companies string their lines through the Panama Canal making Panama an excellent choice for a major ecommerce business.

Outsourcing businesses are discovering Panama. Dell (among many others) has a customer service facility in the Canal Zone with 2500 employees.

Banking in Panama

It is a relatively complicated and time consuming matter to open up a bank account in Panama. A legal firm will do all the work for you for about $500 to $700. The banks are very careful which is a good thing.

The Global Bank, with a branch office in Coronado, called up my bank manager in New Jersey to verify my statements. They also ran a credit check on me in the USA and in Canada.

All this to say, the Panamanian banking system is sophisticated and fully applies the "know your customer" international Basel guidelines.

The Johns' Hopkins Hospital

A brand new, state-of-the-art "Johns' Hopkins" Hospital opened in 2006 in the Punta Pacifica area in Panama City.

As you are may be aware, this hospital is typically ranked #1 in the USA and this was the first offshore franchise. There are 3-4 additional high quality hospitals in Panama City. A triple heart bypass that costs $18,000 in Panama City will cost about $150,000 in the USA with large city hospitals charging much more.

In Coronado, the San Fernando Clinic opened its doors in September 2008.

Panama City Skyline

A major building boom is in progress in Panama City which is giving Dubai a run for the money. Since the Great Recession Panama City construction projects have definitely slowed down ... but Dubai has crashed and people are fleeing. 

The Panama City skyline is starting to resemble New York City. It is already about six times the skyline of Montreal or Miami.

Today in March 2009, the city skyline comprises 150 significant commercial or residential "skyscrapers" in a concentrated downtown area.

Panama Residency Conditions

Panama has the best residency conditions in the world for people wishing to live/retire or start a new business. If you can show a pension income of USD$1000 per month after taxes per couple you will meet the basic "pensionado" income conditions. There remain several medical and police record conditions.

If you purchase a house for $200,000 in your own name you can gain permanent residency as a "financially solvent" person. 

There are many other residency options including setting up a tourist business, investing in a teak reforestation project, or investing sufficient money in a Panama bank to provide the required pension income of $1000 per month. 

Our total cost to become "pensionados" was less than $1500. This is a one time expense and endures forever with no restrictions on the amount of time you have to spend or not spend in Panama.

My Neglected Newsletter and Photo Gallery 

Some of the above topics are reviewed in my PanamaMundo Newsletter.   Unfortunately, the last 2 years have been extremely hectic and busy. There are many issues missing but I will try to add more in the near future.

Browse the photo galleries.

A Short Note on Background

My wife and I are Canadian citizens. We have permanently resided in Panama since November 2006. We traveled the world looking for the "perfect place" for a second home, fine living and eventually "retirement" although the "R" word is not frequently part of my vocabulary.

We love swimming in the ocean and watching swaying palm trees. We lived most of our lives in the frozen north of Canada which we still dearly love ... but have also resided in Boca Raton Florida, Boston Mass, Long Island NY, Puerto Rico, Phuket Thailand, Puerto Vallarta, Mexico, Singapore, Windsor UK, and Paris France. So we have managed to see a bit of the world. 

Panama is by far the best country for us without any doubts and even more so as I watch the "Great Recession" unfold throughout the world.