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Why Panama? |
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To many people, Panama is just "the country where the great Panama Canal goes through". Although the canal certainly still has a huge impact on Panama's economy, it is no longer the main reason for the country to "earn a living" in the world. The main reason is its financial laws. | |
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Panama has done what the Swiss have done: created a country where law is the primary foundation for all activity. And where those laws are created in fundamental respect for privacy and free market interaction without excessive government interference. At the same token, Panama demonstrates a humbleness in regards to the fees that are required for using its legal structures and banking infrastructure, making it a serious competitor to Switzerland!
Panama is rules by the principles of Civic Law, which basically mean that judges in Court cannot rule in accordance with laws that are not written. This is in sharp contrast to the principle of Common Law, which controls all English-speaking countries, as it truly is the old British legal tradition of respecting as "law" also what people in general are accustomed to and actually perceive as "fair", whether explicitly written and confirmed as law or not. This means that law in Panama is no guesswork. It is very predictable and not at all flexible. This means that, when it is good, it calls for some serious stability. And Panama is indeed an excellent law-maker, who has adopted principles and solutions from many other countries, in order to "get the best of everything" put together. Panama law respects PRIVACY and people's rights to conduct their financial affairs without anyone snooping, including the government itself! There are financial laws and banking laws that are very much on line with the famous Swiss laws in this regard, and the similarities are not accidental. In Panama, as in Switzerland, disclosing confidential information you know of as a result of a client relationship is a serious crime - and jail terms start at 3 years! This means that you can generally rely your private information not being shared with anyone, if you trusted a Panama lawyer or entity officer with that information... This goes for banks, for Councilors of Foundations, for Directors of IBCs, for law firms, and for everyone in Panama who has access to confidential information about clients, whom they serve on a professional basis. These laws make it criminal for even the government to attempt to break this privacy protection! (One can't but wonder when comparing to the USA and the UK, whose governments are spying more on their own citizens than any nation in history ever has, Nazi-Germany and The Soviet Union included!) Why does Panama accept such financial freedom? The answer is simple: The country's leaders are smart enough to understand that they create more revenue for the country by attracting foreigners than by extorting their own citizens. The country is living proof of the fundamental law of economics: a free market will always create more wealth than a restricted, government regulated market. The result is amazing: Panama has become a powerful financial factor on the International market - primarily because of its reliable stability when it comes to financial laws! Financial decision-makers world-wide dare to trust that those fundamental law principles are not going to be revoked at the next election - they represent true win-win scenarios for Panama and the people using its laws for business. |
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Another thing that is important to know when you compare Panama to the USA, for instance, is that Panama law does not permit its banks to lend out more money than what they actually have in their accounts! Any US bank can lend out 10 times as much money as they have in their accounts, because the Federal Reserve backs them up, if they could crash. When a US citizen defaults on a bank loan, of any kind, the bank suffers zero loss - it just gets more money printed to cover this loss! In Panama, this is not so; a Panama bank cannot lend out more money than what it has. This is so because Panama does not want to undermine the economy with the surefire inflation that follows from letting banks just spend money they don't have. This healthy attitude to fiscal responsibility is probably one of the most important reasons for banking in Panama being far safer than in the USA! Almost all smaller offshore countries are following Panama's example and forcing their banks to apply honest accounting principles, simply to prevent the banks from crashing. They cannot afford the risk of a possible collapse, because the amount they administer for foreigners are many times the dollar value of their National Revenue. Also, they do not have the power to simply print more dollars when they run out of money... Combine this with the strict laws about client privacy protection - and no sane financial planner would never again want to do any banking in the USA... |
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Using Your Foundation |