Wow, what a way to start the New Year. Here I was watching the movie Atlas Shrugged when I get the proverbial “bing” on my iPad announcing news on Panama. Of course, I always click through to see what’s up and Oh My God here is some stupid law passed by the government of Panama on New Years Eve declaring that any resident or corporation in Panama will pay tax on it’s world wide income! Talk about irony. Here we all are in Panama or Galt’s Gulch where we believe we are somewhat insulated from the world and governments that pass laws “just to see what’s in them” (see Obamacare) and then this happens. Luckily, we have now seen a retraction of the law as it has been repealed. Unfortunately, the damage is done and Panama is now being compared to one of the Black Swan Events like the bail in of the banks in Cyprus as governments around the world seek out means to pay off their huge debt loads. Well, our Government has quickly learned from this unfortunate mistake and the good news is that it will likely not happen again.
OK, so on to business as usual as I prepare the next newsletter when bam, I get another “bing” on my iPad and Panama has seemed to stepped back into the news just as news comes out that the tax law was repealed. Here we are building one of the new wonders of the world that will not only propel Panama into becoming a first world country with the Panama Canal Expansion, but it will be the building block for increasing world trade badly needed to bring the world out of a recessionary funk. Transiting through the Panama Canal is more than 5% of world trade and up to 30% of the cargo moving to and from the ports of the region. With the expansion this amount is expected to double. The capacity of the sea route will increase from 300 million tonnes to 600 million with the new locks.
And what happens, the builders threaten to halt the job unless Panama pays a slight surcharge of $1.6 Billion. No Panama Canal Expansion, that would be disaster for all. The finger pointing began immediately with each side blaming the other. The builder claims it was not aware of the geological problems and the delays that it caused when Panama rejected materials that were inferior. Panama claims that the builder must own up to the contract or it will proceed without the group and complete it themselves! We may see settlement but we may not so on to the next round.
Like the Panama Canal is the only project in the world to have cost over runs and delays, come on, I can name a dozen or so around the world in recent years. When I came here in 2006, I saw the vote coming up to approve the canal expansion and in 2007, I met with some powerful business leaders all of whom were extremely proud of the project as I was being Panamanian myself. However, I suggested that they stay sensitized to the fact that it will probably take a little longer and cost more than budgeted. “No way” was the proclamation and I remained quite as I was the new kid on the block.
So here we are now, waiting for the next shoe to drop and so far we are in the second week and there is calm, for now at least. I am glad about that as I just turned 60 and I was hoping to slide into this new decade of my life, not slam into walls.
Your senior reporter from Panama wishing you the best in happiness, prosperity and health this year.
Tom Brymer
The current government is generally in favour of economic development and prosperity for all. So they probably won’t make the same stupid tax law mistake again.
But what scares me is a future left of centre government will remember this stupid tax law and think it’s a great idea, and make it even more destructive.