Looking Panamanian saves money while ensuring equal treatment from the bureaucracy and judiciary, but it makes doing business complicated.
Anyone who has traveled much in developing countries has come across a situation where tourists get charged more than locals.
The tourist price, or the gringo price as it is known in Panama, can be genuinely noble, like paying extra to visit a national monument and subsidizing access for locals while helping to fund necessary upkeep. Or it can be downright thievery, like paying several times the usual price for carpets and cab rides.Businesses, unlike tourists, are in competition and can’t pay several times the price their competitors pay and be competitive.
Benefits of Looking Panamanian
There are more benefits to looking Panamanian than just avoiding the gringo price, but paying a fraction of what you might otherwise pay is a pretty big benefit. Getting permits is easier. Hiring is easier. Buying is easier. And resolving legal disputes is easier.
Getting permits is a headache for everyone, but it can be worse if you don’t look Panamanian. Most ex-pats in Panama have stories of frustrating little bureaucratic double-standards like applications taking longer than they do for Panamanians.
Looking Panamanian will help reduce this sort of problem.
Buying and Hiring
Prices and wages get inflated for international companies compared to local ones. Locals tend to think every gringo is wealthy and demand more as a result. Expect to pay significantly more for a whole host of goods and services:
- job applicants expect better pay
- contractors charge more for their services
- suppliers inflate their prices
Looking Panamanian will save you from having to pay the gringo price.
The common perception amongst some Panamanian demographics that all gringos are wealthy also makes gringos more likely targets of lawsuits.
It’s not that Panamanians target foreigners, but rather the wealthy are worth targeting and many Panamanians think all foreigners are wealthy. Therefore foreigners are more likely to be the targets of lawsuit.
Then, when going before a judge, which story resonates more? Rich foreigner victimizes poor local? Or shifty dealer victimizes small company? If you don’t look Panamanian, you start a lot closer to the former rather than the latter.
Foreigners still aren’t likely to have legal problems, but looking Panamanian further reduces the odds.
How to look Panamanian
In Panama, it’s possible to do business in complete anonymity by using bearer shares.
A bearer share grants ownership to whoever is physically in possession of the share. Typically shares are registered and investors almost never see the physical shares that they own. Bearer shares are not registered in any way. The owners of bearer shares are not recorded, so ownership can change hands privately.
Bearer shares have fallen into disuse in most parts of the world because they were commonly used to avoid taxes. Most countries have strict rules governing bearer shares and other bearer instruments with severe penalties.
Anyone purchasing Panamanian bearer shares should look into the laws governing taxes and ownership in their home country before purchasing or issuing bearer shares because the consequences for not being in compliance with home-country laws are often severe.
Running Business Through a Law Firm
The in-Panama costs to run a company this way are $1000 per year or more (compliance with your home-country laws will likely add to the costs). You need to hire an attorney who, along with the attorney’s staff, fill the director and officers roles.
You also need to carefully consider which law firm to hire. The firm will be signing all of the documents on behalf of the corporation, so there needs to be a strong degree of trust.
The firm also needs to have adequate staffing levels. Anything that has to go through the firm will move more slowly than in a regular business. Adequate staffing will make the difference between this being just a nuisance and a complete disaster.
Finally, no matter how good the law firm, you need to be able to pull the plug on the directors and officers overnight. You need solid documentation, verified by a different law firm, confirming your ability to dismiss the directors and officers.
Business Dealings With a Panamanian Face
The final requirement is to conduct day-to-day business through Panamanian proxies.
Very simple businesses, like a land-holding company, only need the occasional proxy, but more complicated businesses need to hire Panamanians to conduct all public-facing business.
Hiring more Panamanians introduces all sorts of cross-cultural problems that complicate business.
Look Panamanian and Reap the Benefits
Using bearer shares to conceal ownership of a company is an important first step toward looking Panamanian. By looking Panamanian you stand to save money and reduce legal and bureaucratic headaches by more than enough to justify the costs.