(English) Panama, an example to the world

By Eduardo Morgan Jr.

August, 2010

In his presentation before the Banking Convention, Alberto Vallarino, Panama´s Minister of Economy and Finance, detailed the nation´s riches available to support our ambitious development plans for the coming years. He stressed the value of land in the Canal area and other regions, the expansion of public utilities and services, and several active and projected mining ventures.   With the recovery of sovereignty over its geographical position and the Canal, these national resources, if properly administered could eliminate poverty and make Panama the Singapore of the Americas within a few years. Today, Singapore’s per capita income is around $ 35,000 and Panama’s is $ 11,400.   In less than two decades, with the advantages presented by our geographical position, there is no doubt that we could equal and even surpass Singapore.

The purpose of this article is to point out that other revenue, of significant impact on the national budget, remains invisible for much of our population. This wealth is owed to great Panamanians who had to seek alternatives to avoid isolation fromo the rest of the world as they saw the cities of Panama and Colon turned into ghettos, its ports usurped, and the country blocked from both seas, because the Great Empire also monopolized the inter oceanic communications. Thanks to those visionary Panamanians, we were able to overcome circumstances that would have turned our country into the Haiti of Central America. 

The initiative of these great men led to the creation in 1917 of the first Open Registry of Ships, making our country a pioneer of globalization, creating an instrument which promoted the development of maritime trade and reduced the costs of shipping operations. Ten years later, those great men created Law 32 of 1927 on Corporations, and as an essential complement to both, also established a  territorial tax system.  Today, Panama has by far, the world’s principal merchant marine.

The benefits derived from these instruments have been critical to our economy, and are, perhaps, our most substantial foreign investment.  Year after year they provide recurrent income to the government  because of  new registrations of vessels and companies, as well as annual payments for rights and taxes from the existing portfolio already registered.  To give some idea of the magnitude of this resource, it is worthy of note that in 2010, the income from the merchant marine was budgeted at $93 million, and corporate annual tax, at $84 million. The corporate annual tax was established in 1977.  Since that time until 2009,  it has generated revenues of more than $800 million. There are also additional revenues such as those from the Public Registry (Notaries and transfer tax of goods and services, among others), estimated this year at $32 million, and we must  include the income to the private sector for services rendered to both the private and public sectors..   We estimate that our ships and corporations represent a total  annual income to our economy of approximately $300 million a year.  It is as if the country were the owner of a Trust Fund that at a rate of  3% interest, would represent assets of $10 billion. 

This source of enormous wealth is in the sight of the main partners of the OECD Cartel, with the intent of eliminating Panama´s  corporations against their corporations and LLC. (Limited Liability Companies from several States of U.S.A.). The Panamanian System with it´s public access to information in the Panamanian Public Registry, the requirement of a lawyer as Resident Agent and the obligation to know his client; guarantees that those who wrongfully use Panamanian societies to commit fiscal crimes are invariably identified. Thus, Panama is one of the few countries whose corporations comply with the rules of the IMF and the FATF on anti money laundering. This can be verified in the IMF 2006 financial evaluation of Panama.  The following is an extract from page 83 of the IMF report: “Given the specialization of the country as provider of services for the constitution of offshore corporations, it constitutes (bearer shares) a significant deficiency of its AML / CFT regime, unless there exist enough evidence that the investigative and judicial authorities have been successful in identifying the ultimate beneficiaries of the companies under investigation.”      In regard to this statement, the Panamanian Attorney General’s Office, at the request of the International Bar Association, certified in a note dated July 19,  the following:

“It is worth mentioning that the Panamanian system gives publicity to those who are the directors, officers and resident agents of any society, through public records,  allowing  the authorities avenues to investigate who is the ultimate beneficiary of a corporation in Panama,  event if  has issued bearer shares.  An example of this are the cases where, through the resident agent, we were able to locate the last beneficiary of these companies,  given the duty the resident agent  (lawyer) has to “know his customer”, according to the provisions of Executive Order N. 468 of September 8, 1994. “
       
In conclusion, Panama is an example to the world, not only for its Canal and its financial system but, also, for the serious manner in which it manages its merchant marine and corporate businesses; in notable contrast to the cartel countries of the OECD, like the United States, whose LLCs are invisible even to the FBI.