Demystifying Panama – Part 2

Last week, we met Bob Adams, a world traveler and businessman now calling Panama home. Today we discover common misconceptions about the country, the drug trade, real estate market, as well as Bob's advice for would-be retirees or visitors to the county...

(In case you missed Part 1, click here.)

Demystifying Panama - Part 2

International Man: Bob, how do you persuade people that government sponsored social programs will not be a reliable source of post-retirement income?

Bob Adams: If they can't figure that out for themselves from the events of the last couple decades in the Old World of the North Atlantic, especially since the onset of the global financial crisis, I just give them a big smile, a pat on the shoulder, and wish them the best. I leave the tedious job of convincing the unconvinced to others.

IM: What methods do you recommend people take to overcome post-retirement income fears?

BA: Basically, use your retirement to learn, to grow, and to seek new means of income doing something you love, even if it doesn't pay a lot. That was the topic of one of my Barron's articles, "Next, the Retirement Bubble." You can find it at another free site I have up at Don't expect to live the retirement of past generations without modifying your expectations. But instead of just doing what you have always done, get out there and grow. It's worth it and in more ways than simply income generation, although income is included.

IM: Are there any common misconceptions that people have about Panama or any other non-Western retirement destinations?

BA: There are too many to even begin to list them all, even for one nation like Panama. Good grief, there are people who think Manuel Noriega is still an important person here, and not just an old man sitting in a jail cell with few "friends", outside of his immediate family and his lawyers! And that's only one tiny example. People who lived here for years, having left ten years ago, return and can hardly believe their eyes. If they come from an earlier period of Panama's history, they are stunned.

It's not just Panama. I worked in some nations for many years, over decades past, and I am still surprised to find how much they have changed since I last visited them. The Old World of the North Atlantic may be sliding, but the New World of the Rest is rising. Assumptions based on the past or simply on a few articles you have read recently cannot express the reality. Once you decide a nation might be good for you, get off your butt and visit! Leave the old assumptions and memories behind. Start from scratch with your eyes wide-open. Whether you like what you see or not, it is highly unlikely to be what you expected.

Every year that the US and Europe are stuck in their rut, the rest of us are growing. Don't blink. You'll miss something.

IM: How can people living in high cost Western countries enhance their retirement prospects in Panama?

BA: Pick up some income, even if it's small, and get involved. In Panama, like many nations, it is difficult to get a work visa, so finding employment is hard. But it's very easy to set up your own corporation and benefit from profits, not salary. You can even do that while you're still on a tourist visa. The logic is simple. If you take employment here at an established firm, you may be taking a job from a local person, but if you start your own business, no matter how tiny, you are potentially creating jobs, not taking them.

An entrepreneurial spirit can be a big plus. Just like home, wherever "home" is, it takes work and there are no guarantees, but there are very likely a lot of "niches" or "gaps" in a dynamic, growing economy that you might help fill, but were filled a long time ago in your home nation or may not be in demand in a declining economy.

You can easily buy bagels at a supermarket in Panama City, but it was an American expat who set up a real bagel shop here. He introduced Panama's first "bottomless cup of coffee" and offered free Wi-Fi. He has expanded his menu, expanded his floor space, and added a bakery, but it's still the New York Bagel Café and it is still the only one of its kind. It is a big hit with everyone and he's doing really well. If you visit Panama, stop by. Wonderful place.

IM: Panama is often compared to Switzerland - is this an appropriate comparison, and are there any notable differences between the two countries?

BA: Actually, we are more often compared to Singapore. In any case, there are huge differences to Switzerland and we like them. It's warmer, friendlier, growing faster, has more opportunities, and privacy still is an important value (although we, like everyone else, have to deal with people who fear privacy). Most people who compare us to Switzerland are still stuck in the 20th century with false images of both nations. At least when we're compared to Singapore, the speaker is from the 21st century, although we are still unique. Every nation is, but you will understand only by seeing it yourself and talking directly, face-to-face, with people who live here or in any Country X that catches your interest.

IM: What do you tell people who think that Panama is simply a haven for money launderers and drug traffickers?

BA: Simply a haven for money launderers and drug traffickers? Well, first of all, it is not true. Thinking that it is true marks someone as ignorant and they immediately lose all credibility, if they are silly enough to talk that way while they're here.

As for drug traffickers, like it or not, we have to accept that they must move their product from South American producers to their US consumers, meaning they have to get past us on the way north, along with other nations. We have no cocaine production here. It all comes from further south. We cooperate closely with the US and our neighbors to make life as miserable for traffickers as we can and we are having good signs of success. They are skipping us as much as they can and, if they don't, they face specially-trained, specially-armed police units along the border with Colombia who are treating them with the disrespect they richly deserve.

Also, if you keep up on this topic, you know that Colombia has made great strides in recent years to reduce their problem. This has pushed cocaine production not into Panama, but into Bolivia, Ecuador and Peru. The further away they are, the happier we are.

As for the Panamanian people, I have never lived in a nation whose people are more fervently anti-drug than Panama. Our neighbors in Colombia taught us the importance of that.

As for money laundering, its extent is a constant cause of argument and confusion, but it is not the major source of our income. The Canal, the free trade zone, our growing role as a regional hub for logistics, transportation, and communication, and the growing number of international businesses setting up regional offices here are all far more significant. In any case, I tell my Panamanian friends and associates that if the worst they have to deal with is the cartels investing their money, they are more fortunate than the US where drug consumption is the big problem. They grimace, the drug trade is hated here, but they get the point. In any case, the banking system fights this much harder than some critics give them credit for.

IM: Any advice for people considering the purchase of property in Panama?

BA: We have all kinds in all price ranges, but you have to look for the one you want, just like anywhere else. As in all nations, there is no "national real estate market," only a mass of local real estate markets. What is expensive in one part of the country may be much cheaper in another. That's the same as in the US, but Panama is a much smaller nation (half the size of Florida), so you don't have to drive very far to find a different market and if you drive 400 miles, you're either in another nation or under water.

However, keep one thing in mind. We're not crazy. While Americans were handing out zero-down payment mortgages, failing to check applicant's financials, offering super-low teaser rates and all that silliness, Panamanians continued to follow a much more traditional approach throughout the bubble up north. Expatriates have to put up 30% as a down payment, Panamanians 20% for homes 100K or more. Why the difference?

Expats have passports and can get on a plane and leave the country and their debts behind them. That increases the risk, so the down payment is higher. And, yes, they do check your financials carefully, including phoning your references.

In a nutshell, Panama adopted the mortgage system as found in the US when we were growing up, a system based on decades of lessons taught by experience and the Americans who lived here. The difference in recent years is that Panamanians did not forget those lessons and do not have to learn them again the hard way. We have had nothing to compare to the "real estate bubbles" of North American and European nations.

Americans in the past used to gripe about the strict mortgage requirements, but now they understand... again. Let's hope it sticks this time.

I discuss this topic in more detail at the Retirement Wave site's Members section.

IM: As a serial entrepreneur, how would you describe Panama as a place for foreigners to pursue business opportunities?

BA: Very good, even excellent for those who put in the time and effort. But don't come down with stars in your eyes or thinking that we poor Third Worlders are going to be blown away by your brilliance. Be prepared to work your butt off and accept the real possibility of failure. Entrepreneurism is the same here as in any nation, including the US, with the possible exception that consumer incomes are rising here, not falling. That's an exception that we are happy to maintain.

IM: Thank you for your time.

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