Panama ... Your Best Value for Offshore Living

Enjoy the best third of your life WITHOUT the normal cash flow worries and the constant penny pinching.

Check out living exotically in an offshore tropical paradise such as Panama and experience a lifestyle that will vastly exceed your present standard of living in North America or Europe at about 25% to 33% of the cost.

  New 2007 Edition "Offshore Living in Panama"   

Visit this spectacular, unspoiled, "first world", friendly Central American country. You will be very pleasantly surprised ....

The Government of Panama has put out a welcome mat for expats with the most generous and accommodating residency requirements available anywhere in the world.

My book compares and analyzes living in Panama with many other desirable offshore retirement locations including Mexico, France, Thailand among many others.     

With the expansion of the Panama "Third Canal" now in full swing, Panama is already experiencing an unprecedented construction boom which is expected to last at least 10 years.

With its strategic geographic trading location Panama will benefit from rapidly expanding world trade in spite of any temporary economic slowdowns creating a "first world country" in less 20 years. Many sectors of the economy are already close to this level. 

Panama Ranks High as a "Best Global Retirement" 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 destination but I would beg to differ with this choice unless high prices and crowded beaches are of little importance to you.  

Panama has consistently received high retirement recommendations  from many 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.

The Panama Tax Advantage

Panama does NOT tax your global income as in the USA or Canada. Income derived from sources outside of Panama is often "tax free" although it must be reported. There are circumstances where such income is taxed however and you must consult an accountant. 

As an American citizen living in Panama, your first $80,000 (approximately) 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 very simple ... particularly if the IRS determines that you are doing so for tax avoidance purposes and you have a net worth of about $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 is not true for active income earned offshore if you qualify as a "resident" for Panamanian income tax purposes. 

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

The Incredible Panama "Cost of Living"

The low cost of living in Panama applies to everyone irrespective of nationality. My wife and I have discovered that we can easily live on one-third or even one-quarter (if we wished) of what it cost us to live in New Jersey. These calculations are based on "after tax" dollars.

In effect, as of March 2008,  we can easily live on a budget of $18,000 to $20,000 per annum. We have no debts and carry all the normal insurance that one might have in the USA.

With $25,000 per year we could live like a "millionaire" in New Jersey.

Our Panamanian House

Our Coronado property has  almost 1800 square meters (20,000 square feet or about a half acre) and was purchased for $135,000 in the summer of 2005.

At that time the house (Coronado house) was 5 years old and contained roughly 2500 square feet in three detached buildings. This included a  300 square foot "casita" for a live-in maid or gardener ... now converted into a 600 SF, 2 bedroom guest house. An existing 500 SF studio was also expanded and converted into a one bedroom guest house with patio for friends. 

In 2008, we completed construction of another smaller house at the back of the property with a 1300 square foot "footprint" for friends and possible rental purposes.

Our property is across the street from an outstanding sandy beach called "Playa Serena" on the Pacific Ocean. The property backs onto an 18 hole PGA golf course designed by Tom Fazio who is 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 new "chip and put" from our backyard which is now fully lighted for night playing.  

This 4 star golf club contains two large swimming pools one being an infinity pool on the beach. The club contains four tennis courts for night playing, four great restaurants, a luxurious European style spa with saunas, an elaborate new equestrian stable and a very small (but very loud) disco called "Froggies".

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

Some Interesting Panamanian Facts 

The ANNUAL taxes on our house remain zero. They will be adjusted under the new Law #6 but will be exempt from all property taxes for a period of at least 10 years (until 2118) at which time we will probably have to pay about $2500 per month.  

New properties can still receive up to 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 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 things were taken. Since then we have put steel bars on all the windows with no further issues.

The guards primarily serve to minimize through traffic on the weekends. In the two years we have lived in Coronado I have heard of several laptop computers, some jewelry and a TV were stolen in separate instances .... wow!

Lately, however, there appear to be about 5-6 minor "theft incidents" reported per month all involving minor theft and none involving violence, weapons etc.

Our municipally supplied potable water costs about $100 per annum although with a swimming pool and a lot of plant watering this bill can be higher.

Three times per week there is a municipal garbage pickup which costs $60 per year ... and they pick up almost anything and everything.

Our electricity costs, prior to installing our swimming pool, averaged only $35 per month two years ago but they are now $75 to $100 monthly as we have added several new appliances etc.

There are of course no "heating days" and we have been able to live quite comfortably (for the last 16 months) without using air conditioning. We ripped out our central air con system.

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

At night, we can generally hear the ocean waves from our property. I am awakened, sometimes a bit 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 one quickly gets used to these new sounds ... the alternative was to return to New Jersey.

A reasonably similar property 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. The annual municipal tax bill on such a house would far 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 2004 and was often not in the best areas of town. 

A superb pizza for two with several toppings and two cokes costs less than $7.00 in many Panamanian restaurants .... up from about $5.50 two years ago.  In Paris this same "lunch" would cost about $25; in NJ or Boca Raton about $17-20. Figure that restaurants are 50=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. To be totally frank, 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 but after a short while I realized it is genuine.

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

English is spoken throughout Panama city but if you will have to learn  Spanish to get a full flavor of the country.

The Entrepreneurial Spirit

I like to compare the Panamanian economy to that of Singapore in terms of dynamism and entrepreneurialism. I lived in Singapore for about 4 months in late 1999.            

The Panamanian currency is pegged to the US dollar. In fact the "Balboa" 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.

Panamanian banks including more than 100 foreign banks (with more coming on a monthly basis) offer interest rates roughly equal to those in the USA on a long term loan basis.  Panama happens to be the second largest international banking center in the world after Switzerland.

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

Comparative House Purchase Costs

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

Mexican banks, in 2004 at least, would only lend money at rates in the 17-18% area ... there is a street word for such activity but it is not  called "lending". 

In Mexico, it cost us 9% of the condo value just to close on the deal including all legal expenses, bank trust fees and transfer fees.  The sales "process" took almost 6 months.

When we finally sold our Mexican property one year later it cost us 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 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 and 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 (at least for the "Scotia" bank where we enquired).

As a Panamanian "pensionado" you can receive a discount on the mortgage rate and often free legal costs.

Being a Canadian, I walked into an upscale, very modern Canadian "Scotia Bank" in Panama City (one of several branches) 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" 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.  

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 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 and methodical which is probably a good thing.

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

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

Crime in Panama

Overall levels of crime in Panama are generally similar to those in Florida however they are very concentrated in several "red zone" districts primarily in Panama City area and in Colon.  As a precaution, use a cab at night and avoid walking around alone in these areas until you feel at home and fully understand the dynamics. You would be advised to take the same precautions in any American or European urban area at night and certainly where I used to live in New Jersey.

Based on my own experience of walking around in hundreds of urban areas during my lifetime, Panama is very "safe" ... whether or not a Pinkerton Tourist Safety Report exists or does not.

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 there first offshore franchise. There are 3 or 4 very high quality hospitals in Panama City. A triple heart bypass that costs $14,000 in Panama City will cost about $125,000 in the USA with urban center hospitals charging much more.

In Coronado, the San Fernando Clinic is rising from the ground and should open its doors by about June 2008.

Panama City Skyline

The number of construction derricks in Panama City started at a high number in 2005 and has probably doubled to today (May 2007) A major building boom is in progress and it gives Dubai a run for the money. 

The Panama City skyline is starting to resemble that of the New York City "downtown" banking area. It is probably six times larger than either the skyline of Montreal or Miami.

The city skyline comprises at least 150 significant commercial or residential "skyscrapers" in a concentrated downtown area.

As of early 2007, at least 40-50 major projects were under way in downtown Panama City with another 50-60 in pre-selling or planning phases. 

Currently an estimated 100 significant projects are under construction or on the planning board somewhere in Panama.

Construction incidentally is the number one employment sector.

Panama Residency Conditions

Panama has, without doubt, the best residency conditions in the world for people wishing to retire or start a new business. If you can show a pension income of USD$500 per month after taxes plus an additional $100 for your spouse and any other independent you will meet the financial conditions. There still remain several medical and police record conditions.

If you purchase a house for $200,000 in your own name you can also 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 $500 per month. 

Our total cost to become "pensionados" was less than $1500 including $200 for two multiple entry visas ... which was probably a waste of money for us. This is a one time expense and endures forever with no restrictions on the amount of time you have to spend in Panama.

Our PanamaMundo Newsletter 

There is a lot to learn about Panama.  Many of the above topics, plus many others, are expanded and reviewed in my PanamaMundo Newsletter.   Be sure to sign up ... its free.  Unfortunately, the last 8 months have been extremely hectic and there are issues missing. I may simply try to move this info flow to a new blog.

Browse the photo galleries which I can now update more frequently now that I am permanently based in Panama.

A Short Note on Background

My wife and I are Canadian citizens. We have been permanently residing in Panama since November 2006. We traveled the world looking for the "perfect place" for a second home and an eventual "retirement" although that word is not frequently part of my vocabulary.

We love swimming in the ocean and swaying palm trees. We lived most of our lives in the cold north of Canada but have also been residents of Boca Raton Florida, Boston Mass, Long Island NY, Puerto Rico, Phuket Thailand, Puerto Vallarta, Mexico, Singapore, Windsor UK, and Paris France. So we have seen a bit of the world. 

Panama is by far the best country for us without any doubts.