Panama Perspective
Now that you’re here, how to you get around Panama.
It was once observed in Britain that a week is a long time in politics.
In Latin America a day can be just as long in the political scheme of
things. A good example of such shifting and sudden mood swings is Venezuela.
The country’s politics, in particular, have upset the president
of one of its large oil customers, the United States of America, in another
example of that continuing political play, George and the Dragon. On a
visit to Beijing last December, Hugo Chávez signed an accord with
China to sell 120,000 barrels of fuel oil a month and to also allow Chinese
companies to help pump oil from 15 Venezuelan oil fields. It’s reckoned
that at the moment there is one car for every 70 Chinese vs. one car for
every two Americans. If car ownership eventually rises to American levels
it would equate to 650 million cars, a figure that exceeds the number
of cars in the world today.
Venezuela and Panama have discussed using an existing Panamanian pipeline
in conjunction with Panama’s canal to enable oil to be shipped faster
and more economically to Asia. The canal, which already carries 4 per
cent of world trade, may be widened (apparently, over 100 consultants’
reports have been commissioned). Alberto Alemán Zubieta, administrator
of the Panama Canal Authority, is emphatic that if the project goes ahead,
the costs (around $8 billion) can be covered by canal tolls, adding that
the canal “by the constitution is an inalienable property of the
Panamanian people, so there’s no equity participation from anyone
else”.
If widening the canal is on the cards, narrowing the country’s budget
deficit is taking precedence. The new fiscal reform package, promised
by president Martín Torrijos, has been presented. Torrijos has
said that the reforms are central to his economic plans and he acknowledges
that they represent “drastic austerity measures”. The expectation
is to cut the government’s budget deficit (about $700 million) almost
in half by 2006 through tax increases and spending cuts. The government
wants to cut its payroll by 30% in 2005 alone and economic growth, together
with the reforms, could bring the deficit down to about 1 per cent of
GDP in 2007 (it was 5 per cent in 2004). The international market has
welcomed the initiative and one Credit Suisse First Boston emerging market
analyst shares the view of many in saying that it’s “very,
very good news”. The new tax regulations have yet to be published,
but those with offshore Panamanian companies should not be concerned.
Even although the annual company franchise tax is set to increase from
$250 to $300 next year, it still makes Panamanian company costs competitive.
Offshore financial services are not a target and alarmism is unwarranted.
Many years ago it was said that the Eiffel Tower is the Empire State Building
after taxes. I can’t see a parallel and the only tall skeletal structures
you will see in Panama are destined to become either new office or apartment
buildings. And there’s lots of them.
Panama Perspective is provided by Trust Services, S. A. which is
a British- managed trust company licensed under the fiduciary laws of
Panama. It is written by Derek Sambrook, our Managing Director, who is
a former member of the Latin America and Caribbean Banking Commission
as well as a former offshore banking, trust company and insurance regulator.
He has over 35 years private and public sector experience in the financial
services industry. A broad range of related essays can be found at www.trustservices.net.
| Back |
|
