(English) Why Here and Not There?

By Eduardo Morgan Jr.

In 2001, the U.S. decided to try to comply with the proposal of the Organization for Economic Cooperation and Development (OECD) to provide information to foreign countries on the deposits of its nationals. Below are, verbatim, some of objections raised:

1. Letter from Congressmen to the Treasury Secretary: “The proposal is in conflict with a longstanding objective of the Department and the Congress:  to encourage nonresident aliens to deposit their money in U.S. banks, so that those funds can in turn be used to foster growth and development in this country.  We are concerned that adoption of the proposal will place U.S. banks at a competitive disadvantage relative to the banks of our trading partners and will result in significant withdrawals of foreign deposits from U.S. banks, thereby reducing the amount of credit available to local communities and others who traditionally seek bank loans as their chief source of credit”.

We also understand that none of our trading partners has imposed these requirements on their own financial institutions. The adoption of these rules, therefore, would create a level of unfair competition that would lead to the transfer of said deposits”.

2. Letter from Jeb Bush, Governor of Florida, to the Treasury Secretary: “The new rules will place U.S. banks at a disadvantage relative to banks in the Caribbean and Europe … and will damage the ability of U.S. banks to continue to attract foreign deposits”.

3. Letter from the President of Eagle Bank in Miami to the Treasury Secretary: “The rule could prompt withdrawals of $15 billion to $20 billion by Latin American depositors in Miami alone”.

4. Letter from Congressman Crane to the Treasury Secretary: “I remind you that the U.S has close to 10 trillion dollars of foreign investment in the economy of the United States, which could very well be lost if the country if it became an informant for the tax authorities of other nations. Many States of the Union, have favorable laws on taxes and company incorporation, to attract clients from all over the world.  These laws often include strict protective measures to privacy that would not be allowed under the proposals of the OECD to the U.S.A.

Public opposition, led by bankers and Florida congressmen and its Governor, was such that the Treasury Secretary’s proposal was not even discussed by Congress.

There was fear of loosing the million-dollar deposits from Latin American clients. In order to soften the opposition and allay their fears, the Treasury amended its proposal, limiting it to 16 countries, none from Latin America. This was not well received and the U.S. went ahead and strengthened its tax haven status by providing total anonymity to foreign investors.

The following questions arise: why is our government committed to signing a tax information treaty with the U.S., which is precisely the country that has publicly refused to provide tax information? And, why do we not defend Panama’s financial center of with the same vigor with which the Americans defend Miami’s?

There are plenty of reasons for our government not to make the mistake of signing a tax information treaty with the U.S. Our financial center is mainly regional and our main market is Latin America. Total deposits are less than $70 billion, or more than a trillion below the Caymans and about $300 billion below the Bahamas. Yet, bank deposits are of fundamental importance to our economy, because we neither have a central bank nor can print money.

The money that drives our economy and development is in the banks. If the billions that our Latin American clients have in Panama are moved to Miami, where they pay no taxes and are guaranteed total anonymity, the economic damage to our country would be enormous, and would not be compensated with a TPA, much less with the supposed bonanza that U.S. firms would bring. As a sovereign State, we can negotiate with the U.S. a double taxation treaty that takes into account our interests as a territorial income country, the importance of the financial center to our security, and our responsibility to foreigners who have investments here.

It is not the first time that the U.S. has tried to impose on us this agreement. It tried in the 1980’s with Endara, after the invasion, and its last attempt was during the Mireya Moscoso Administration. They always failed, for there were intelligent and patriotic people who knew how to say no to the Americans. So what happened? We grew as never before, obtained investment grade status, the IMF recognized us as a model financial center, we began the expansion of the Canal, and this year we have the biggest budget in our history. And, besides all this, we upheld our national dignity.