Don Winner published a great article in the Panama Guide written by HUGH O’SHAUGHNESSY about the greatness that lies ahead for Panama.
Panama City – THE CENTRAL American republic of Panama will soon be unrecognizable, as many people have long forecast. But the changes in Panamanian life are coming about much more quickly than most expected.
The financial sector’s highly developed tax-dodging techniques will be subject to more government control, following pressure from Washington. The Panama Canal, started for France in 1881 by Ferdinand de Lesseps, builder of the Suez Canal, and completed by the US in 1914, is about to become the republic’s main breadwinner.
For most of the last century, the canal was run on a non-profit basis for the US state and US navy. President Jimmy Carter passed it on to the Panamanian government on the last day of 1999. It has since been widened to take supertankers, and improved by an enormous and costly transformation of its capacity.
In the last 12 years, the Panama Canal has been a major and swelling source of funds for the government, producing $6.6 billion in direct contributions over the period. In fiscal 2011 alone the contribution came to a little over a record $1 billion. This came about primarily because of a rise in toll revenues on the 14,700 transits, which were 17.6 per cent up on 2010.
Economic growth should rise further from the 8 per cent forecast for this year, with some optimists betting that Panama, with its tiny population of 3.4 million, will be the first Latin American state to become a fully developed “first world” country.
The signs today are unmistakeable. Washington is seeking progress on the implementation by the Panamanian authorities, and many others, of its “Fatca”, the Foreign Account Tax Compliance Act enacted in 2010 by Congress to increase the US government take on profit made by US citizens using foreign funds.
The Act requires foreign banks to report US account holders to the US tax authorities and impose a 30 per cent tax on payments or transfers to account holders who refuse to identify themselves.
In February this year, France, Germany, Italy, Spain and the UK announced they had agreed with the US to explore an inter-governmental approach to tax avoiders and the legal puzzles that the Act produces. They want an assurance that the transfer of data between the US and them is not in just one direction, towards Washington.
The US does not intend to allow Panama to evade the reach of the Act, and recently suggested two formulas under which the US could get what it wants.
The details still seem hazy, according Frank de Lima, the Panamanian minister of economy and finance.
He said he did not object to changes in the bilateral agreement of 2010, which had been supposed to already cover the Fatca demands.
Financial services, according to the Central Intelligence Agency, are responsible for about three-quarters of the gross national product. Panama’s president, Ricardo Martinelli, told me last year: “Don’t waste your time trying to open a bank account in Panama. You’d do better trying to get to Mars – it’s quicker.”
He was explaining how his centre-right government was working to clamp down on profiteering from dirty money.
Fatca may well mean a remodeling of the agreement on exchange of tax information between the two countries. Whatever the details eventually are, there can be little doubt that the freebooting activities of those who over the years have offered a refuge from taxes will be curbed.
While the financial services are unlikely to maintain their importance in Panama, plans for the canal are progressing mightily. The profits from tolls will increase hugely as larger ships become the norm after 2014.
The canal’s new capacity, the president says, would allow Panama to increase its share of seaborne world trade to 10 per cent from its current 6 per cent. The $13 billion project on new Dutch-designed lock gates – each weighing nearly 2,000 tonnes – will be complete by 2014.
The manufacturing is being done in several countries under the guidance of DHV, a Dutch consulting company.
Work to widen the waterway from 110ft to 180ft is going ahead fast on the installation of a third, wider set of locks parallel to the existing two. The government’s budget for the scheme is $5.25 billion.
A number of strikes were declared this year among the present workforce of 10,000 – soon to rise to 25,000 – employed by the Spanish-Italian-Belgian- Panamanian consortium Gupsa.
Yet work is continuing apace: 70,000 cubic metres of concrete are being laid down every month for the new locks and the first four of the 16 massive new lock gates are due here late this year or early in 2013.
Canal tolls will certainly rise, and Panama will return to the geographical prominence it had centuries ago.
Back then, pack mules brought silver and precious minerals from the Andes across the isthmus to the Caribbean and the galleons ready in their convoys to ship them to Spain for the greater glory of the Spanish crown.
This time the cash will be going to locals. (irishtimes.com)