Panama vs. Panama

Governments and the public alike are all resenting tiny Panama because that is where Mossack Fonseca conducts its business of helping the rich and the powerful become even richer by hiding profits from their tax authorities. It is the word "Panama" in the so-called "Panama papers" that had the government react promptly. "Under scrutiny is a company," they said, "but that name is a blow to the nation".

Governments and the public alike are all resenting tiny Panama because that is where Mossack Fonseca conducts its business of helping the rich and the powerful become even richer by hiding profits from their tax authorities. It is the word “Panama” in the so-called “Panama papers” that had the government react promptly. “Under scrutiny is a company,” they said, “but that name is a blow to the nation”. Not later than February 2016, the Financial Action Group, which monitors tax havens and non-cooperative nations against money laundering and terrorist financing, cancelled Panama from its gray list, acknowledging the Central American country’s efforts to enhance its tax transparency.
Panama’s conservative and progressive media both called upon the public to close ranks and prevent Panama from becoming a “scapegoat of third parties”, i.e., countries that are not efficient in enforcing tax rules on their citizens. At stake is the economy, one of Latin America’s most stable ones.
It has been growing for more than twenty years now, with peaks of 10% per annum, but it depends by 75% on the financial services, tourism and logistics industries. Panama City is the second largest financial center of the Americas and the first in Latin America. It is also the region’s main exporter and importer, according to the World Bank and the IMF. Standard & Poor’s, Moody’s and Fitch rate it as “investment grade”.
This could partly fall apart now. Shell companies abound in Panama almost like bananas. Many law firms don’t perform their due diligence on their final beneficiaries before loosely wiring chunks of the almost $ 50 billion they keep at any given time in local bank accounts to other tax havens or banks worldwide.
Among those not working in the “City”, the OECD’s timely statement that Panama is not fulfilling its commitment to allow automatic exchanges of bank information, was met however with comments like “the OECD staff are experts, and that’s why they don’t believe in the fairy tale that Panama is not a tax haven.”
According to a survey by Feebbo for the newspaper La Estrella de Panama, the Panama Papers are a worry to 21% of Panamanians, while as much as 72% of the population does not see them as a threat. “The fact is that the bubble might now be about to burst,” commented Mrs. Susana Esquivel, “and the problem is the tax system and reforms.”
All Panamanian presidents since the 70s, including dictator Manuel Noriega, deposed in 1989 with a US intervention, contributed to build the current framework. And to support it with nepotism – read conflict of interest, which is in Panama is as dense as the cargo ship traffic between the Atlantic and the Pacific.
In September 2015, the conservative-nationalist President Juan Carlos Varela appointed 14 relatives and other 32 acquaintances – brothers, cousins, girlfriends and mothers in law – to executive positions in bodies, consulates, embassies and consultancies, wrote the news outlet PanamaAmerica.
Why did the President sent out four other members of the government to face the press after the leak? “Because he feared certain questions”, many believed maliciously, and rightly so, because Ramón Fonseca Mora, co-owner of Mossack Fonseca, is a senior official of the President’s Panameñista Party, and was until recently a member of the National Council on Foreign Relations.
“How is it possible,” asked Alicia, “that someone who would damage the country as much was acting a few steps afar from the President as his right hand?”.
Of the four members of the government who spoke publicly, the Vice Chancellor Luis Miguel Hincapié and the Minister of Economy Dulcídio De La Guardia both have relations to the powerful legal firm Morgan & Morgan; the Economic Councilor Gian Castillero has relations with Arias Fábrega & Fábrega, and the Minister of the Presidency, Alvaro Alemán is partner of Icaza, González-Ruiz & Alemán, which landed in turn consulting contracts with the Ministry of Economy and Finance.
Against the French decision to re-classify Panama as a tax haven protested the Panamanian Ambassador to France, who is… a sister in law of Minister Alemán.
Isn’t it peculiar, Panamanians reasoned, that authorities “resented the accusations against a few Panamanians, and not the fact that an entire segment of the economic elite was built upon “laundering” the fruits of some of the worst activities in the world?”
Ramón Fonseca himself, co-owner of “The Firm”, as many renamed Mossack Fonseca, admitted publicly that thousands of the shell companies he created fell into the “wrong hands.” Among the latter are those indicted in investigations closed, such as Venezuelan citizens accused of drug trafficking or mafia bosses like Giuseppe Nicosia. However, with Panama now in the spotlight, the Prosecutor General cannot allow this to happen again under his nose. On Tuesday the police and his prosecutors raided Massack Fonseca’s three office floors.
Panama boasts the highest per capita income in Central America, and the economy thrives around the newly-expanded Canal in its container ports, free tax zones and Latin America’s largest commercial air hub. Yet Panamanians who don’t belong to the elite or to the 25,000 employed by the financial sector do not fare by far as well in a country where tax avoidance is liable to a fine to the most. “Tax avoidance is bread-and-butter here,” said Esquivel, “and that is what creates the unjust inequality that we endure in this country.”
Panama’s choice to become an international financial center/tax haven also boosted vigorously the real estate market in Panama City, where nearly 1 million of the total nearly 4 million population live. Land prices skyrocketed. Those who do not live, like Jürgen Mossack, in the tycoons and diplomats neighborhood or in the Donald Trump tower, risk never being able to leave their shack neighborhoods spread not far from the financial district skyscrapers. According to CEPAL, Commission on Latin America, more than 400,000 people are unable to meet their basic needs, and this happens physically not far away from the Canal entrance, the new Maracana Stadium, the Biodiversity Museum designed by Frank Gehry and the giant shopping centers supplied by the free tax zone and crowded with tourists and rich Panamanians.
“This moment is providing an opportunity to reason on where we want to go as a country within the frame of a large national dialogue,” Mr. Luis Tapia believes. The problem is that in the so-called “Dubai of the Americas” the voice of the many Luis Tapias does not get to those in the skyscrapers.


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