If you had read yesterday's editions of La Prensa, one of Panama's leading newspapers, you might have been shocked by this headline: "Panama yields to pressure concerning its lax banking laws."
The article stated: "Panama said it would make certain adjustments to its banking system recommended by the Organization for the Cooperation and the Economic Development (OECD) and the G-20 Summit leaders, which have often criticized the country for being a tax haven."
Who Is "We"?
As turns out, the "Panama" that was the source for this startling news was Vice Minister of Finance and the Economy, Frank DeLima (left).
He claimed that the new Martinelli administration intends to demonstrate that the country is not a tax haven. But he also was quoted as saying: "We are conscious that we must make changes in one way or another."
While admitting that there is no officially decided policy yet, DeLima, speaking as "we," suggested that "the path that we could take would be to follow the route Switzerland has taken through the negotiation of bi-lateral treaties providing for a more transparent exchange of tax information."
A Radical Change?
If indeed Panama's conservative new president was about to scrap the nation's established financial privacy laws and start signing tax information exchange agreements (TIEAs), that would be major news, distressing in the extreme to many in the offshore financial world. (Panama has no TIEAs with any country, although the U.S. has tried for years to get them even to talk about one).
Sr. DeLima contended that Panama can no longer risk being blacklisted or subjected to sanctions, as France and the United Kingdom have threatened. He also said that unnamed banks in Panama had consented to change their way of doing business.
Suspect Source
This is the same Frank DeLima who told Bloomberg News several weeks ago that then president-elect Ricardo Martinelli (left) "...will refuse to give in to pressure from the U.S. to change the country's banking secrecy laws because Panama's economy would be hurt by scrapping laws keeping bank account information secret from other governments."
Strong Reactions
I have in the past commented on Sr. DeLima's proclivity for making sweeping policy statements that seem to vary widely from expected Martinelli administration policies, based on the president's own pronounced free market conservatism.
The strong reactions to DeLima's statements came fast and furious.
One of Panama's senior attorneys, Edward Morgan, said that while he did not oppose international agreements to avoid double taxation, allowing exchange of tax information would be a mistake.
Emphasizing the importance of Panama's offshore financial sector he said: "It would be absurd and unworthy to sign a tax information exchange agreement that would have only one way benefit in which Panama gets nothing but loses a lot."
Chamber of Commerce President Aldolfo Linares, (left) said Panama should resist pressure to agree with the OECD to exchange tax information, that this would harm Panama's financial services industry.
Linares said that the government must send a "clear and convincing" message to the OECD that it will resist efforts to force it to comply with its demands and that Panama should also resist pressure from the United States which is seeking abolition of Panama's financial privacy laws as a condition to approving the pending U.S.-Panama free trade agreement.
The Minister Has Other Ideas
Our sources in Panama questioned seriously whether DeLima was speaking for anyone other then himself.
Within hours DeLima's boss, Alberto Vallarino Clement, (left) Minister for Finance and Economy, and a banker himself, was on national TV news denying that any "appease OECD policies" had been adopted by the new government.
Vallarino, one of the most conservative Martinelli cabinet members and a member of the rightist Panamanista Party, said creation of a commission to study the matter of changes in Panama's financial laws was likely, but that deliberation was needed before any changes would even be considered.
Currently Panama law makes it a crime to release any financial information unless under court order and action by a conservative dominated National Assembly would be necessary to change that law.
Both Vallarino and DeLima had been considered by President Martinelli to head this ministry and it appears DeLima has forgotten who is in charge.
Canal Billions Involved
Our Panama sources say that they don't expect any immediate changes in Panama's banking and financial secrecy laws, nor any TIEA signings. They point out that pressures from the OECD and its member countries may be tempered by a Panama law that bars countries that discriminates against Panama as a tax haven from participating in the lucrative contracts for expanding the Panama Canal.
A few days ago a consortium of companies, Grupo Unidos por el Canal, from Spain, Italy and the Netherlands won a $3.12 billion contract to build new locks for the Panama Canal. Another $2 billion more in contacts are pending bids.
Anti-Panama Attacks to Continue
There is no doubt that the tax hungry socialist governments including Mr. Obama's crowd, along with their puppets at the OECD, will continue to try to destroy Panama's financial privacy laws. If Switzerland can be made a major OECD target, no country can be considered safe.
These leftists are well aware of the historic reasons for Panama's enviable tax haven standing: 1) a territorial tax system that levies only on earnings within the country; 2) constantly modernized asset protection laws, dating from the 1920s; 3) an array of useful statutory legal entities (trusts, corporations, private foundations); 4) a host of qualified offshore professionals and bankers; and 5) some of the strongest financial privacy laws anywhere -- plus no tax information exchange treaties (TIEAs) with any other nation.
El Presidente Knows
These are the pillars of Panama's offshore establishment that are under attack.
President Ricardo Martinelli, president and founder of one of Panama's major banks, knows this better than most. It will be he, and not junior ministers, who make the decisions that will determine policies and Panama's future standing as one of the world leading tax havens.
I'll be in Panama next month and I'll be able to give you first hand reports on this leading tax haven and the new Martinelli government.
** To learn about the many offshore opportunities offered by the Republic of Panama, my book, Panama Money Secrets, is a helpful guide.
** The Sovereign Society is a recognized voice in the complex offshore world. Join the Sovereign Society and keep informed.
Comments