OK...this blog has been 7 years in the making. Having devoted this much time primarily living in Panama, I think I now have a few qualified views to contribute to those wondering about living, working or retiring to Panama.
I see a lot of hype everyday in my mailbox or in the "news" about what its like to live in Panama. Of course, at the beginning of the conversation we must admit that it depends on "which side of the tracks" you are living on. Panama is a small country of less than 4 Million residents...yet its wealth reaches a very small proportion of that population. If you understand that basic fact, you begin to understand the framework around which I will paint this picture and tell my observations.
Trying to be as positive as possible this year, let me start with the "pros" of Panama living...
Panama is small and manageable. Even though it is very bureaucratic for its size, one can know and understand Panama more quickly than most other LatAm countries.
The "pensionado" (retirement) program for foreigners relocating to Panama is still the most aggressive and cost effective of any other Latin country. "Pensionado" is any foreigner who can afford to "retire" to Panama, regardless of their age, and they qualify for 25-35% discounts on most everything...from food to airline tickets. For this you need a VALIDATED income stream of $1000 per month, or $1500 per married couple.
Health-care is very inexpensive in Panama. An office visit for a dentist, with a cleaning and exam is anywhere from $25 to $45.
Panama City is more modern than most other cities in Central America. It has upscale malls, and great movie theaters.
Panamanians are overall peaceful and laid back. They are not as aggressive or in your face "patriotic" as many other Latin countries. Their 100+ year history of having Americans in their country building and running their canal (until that changed in 1999) helps them understand and at least accept some of the idiosyncrasies of "Americans" in their midst.
The dollar is tied to the local currency called the "Balboa". That, at least for the time being, creates more stability of currency for this region. Of course, that could all change in the future if the dollar takes an expected devaluation.
There is no Central Bank to manipulate or control the money supply in Panama. That means the banks are run more conservatively and maintain values better than much of the rest of the world. Panama is the largest international financial center after New York in the hemisphere.
Based on the huge money reserves in Panama, the past 8 years have seen a building boom unheard of in Latin America for such a small country. There are plenty of new skycrapers for condos and offices available. Of course, some of this topic will fall under "cons" as well.
Lots of late model cars and trucks on the road, and prices are about the same or even less in some cases for a new vehicle than in the USA.
If you know the right people, you can get most anything done here if you have enough money and patience to endure the process. It is easier to be a "big fish in a small pond" than vice versa.
If you like warm, the climate year around is tropical at sealevel...and there are enough higher elevation mountains such as near the northern border with Costa Rica that feature a more "springlike" climate year around.
Panama features more species of flora and fauna than most any other country...and because of its relatively small size, it is easier to find or observe those wonders of nature.
Islands, islands and more islands. If you like islands, Panama has the most of any country its size. The best beaches in Panama are at the islands...the two largest groups being "Las Perlas" islands on the Pacific side, and "San Blas Islands" on the Caribbean side.
Food and drink are much cheaper overall than the USA and elsewhere...unless you get into specialty imported items which will offset the potential savings in this department.
Cons...unfortunately I differ from many people and publications on many issues. Some of the pros I see heralded are either not true, used to be true, or just mis understood.
Doing business in Panama is not for the "amateur" or faint of heart. While there are many opportunities of small and medium scale in Panama, the bureaucracy and cultural barriers end up costing time and money that even some of the bigger international companies have turned away from and gone a different direction recently. The biggest problem in this department are the protectionist labor laws and constantly changing regulations that make any long term business planning a misnomer in Panama.
Immigration bureaucracy...and constantly changing regulations...make Panama a mess to try and reside officially and legally. There are also many contradictions between their promotion of inexpensive housing projects for foreigners...but then having immigration regulations where many of the potential buyers would not qualify for residency. If you do not have an OFFICIAL pension to qualify for "pensionado" status, then you need to invest over $300,000 in a house or in a bank account in Panama to have "investor" residency. So, theoretically you can own a nice place here for under $100,000, but if you don`t have an extra $200,000 to put on reserve IN Panama, you will not qualify for residency here or be able to live in your house year around.
Changing tax scenario...the current government has significantly increased taxes on almost all fronts. A pretty good summary of Panama taxes for 2012 has been published by Deloitte, but I find the increased sales taxes and income taxes have caused a significant increase in Cost of Living in Panama as businesses have typically passed on their increased taxes to the general public. While it is understandable that for the government to take on so many projects they have to increase revenues...unfortunately many of these increases come off the backs of those least able to afford it, and many foreigners are taking this into account when deciding where to retire. The annual corporate tax of $300 per year PLUS required registered agent fees make owning a corporation in Panama a much more expensive proposition than it used to be. They also have just increased the "minimum wage" which makes locating business in Panama a bit more expensive than it was.
I also must point out a fallacy purported by many Panama promos. Some "professionals" still tout 20 year "tax free" incentives on Panama real estate. The fact is this is only on "improvements" on a piece of land...such as a house or condo. The land tax is still there...and is one of the highest in Latin America. That law was also changed so that the tax moratorium on a typical structure over $200,000 is now only 5 years. As I have said, these laws get changed almost yearly, and sometimes quarterly. Most lawyers and professionals don't or cant keep up. In addition, the advertised prices for real estate are not the real price. They expect significantly low counter offers on properties here. I also would never buy property "pre-construction" in Panama. I have never known a happy customer nor a project delivered "on time" in Panama. Typically the contracts are heavy on the side of the developer or builder, and you have little legal recourse of significance to fall back on in Panama.
Justice overall is based on what you can afford. The court system are almost all political appointments...and your level of justice will depend on what party or connections you have. While this is true throughout most of the world, it is much more obvious in Panama. Don`t bring your American approach of being "sue-happy" to get your way in Panama. There is no quicker way to losing money on a losing cause...even if you are in the right.
The roads and traffic systems are not designed for the volume of traffic Panama is now experiencing. In addition, there is total disregard for laws and regulations for parking or driving in Panama City. It is "dog eat dog" when it comes to getting around the city, and those who come from organized, highly regulated countries like the USA, Canada or European Union will not be comfortable driving in this craziness. Red does not always mean stop to everyone here...and a stop sign is more a "suggestion" than a rule.
Service...is practically a foreign word in Panama. As in most Caribbean destinations, it seems locals in tropical climates have a hard time getting motivated to go out of their way to provide service or show ambition in this regard. Timeliness and professionalism are an exception versus the rule in Panama...and no one seems to expect improvements in that accept the foreigners here. So, if first world service and excellence is important to you where you live, Panama will consistently disappoint you.
Infrastructure problems are plaguing the development story of Panama. While Panama has historically had more clean, fresh water than most any LatAm destination for drinking and other uses...water is becoming a problem in this country. There is not enough to run their reliance on Hydroelectric dams for electricity...and electricity rates are higher than many neighboring countries per KW. The past two years have seen significant problems with IDAAN, the government bureaucracy that oversees the water supply system, and there have been long service disruptions and a decrease of quality in the drinking water. Not only that, but many of the new high-rise projects do not have adequate drainage and sewage treatment systems in the most expensive of areas. There have been many documented payoffs in engineering and construction contracts that have decreased the costs by cheapening the infrastructure around some of these projects. "Buyer beware".
Cultural barriers...while it is reported that Panama is an "English friendly" place to live or do business, I find that most people who do not speak Spanish are at a tremendous disadvantage in Panama when it comes to business or social concerns. Most taxi drivers and service people do NOT speak or understand English. They also will not respond to criticism or nagging foreigners about their not understanding you or not responding to your demands. In fact, if you get aggressive, it will slow even further your desired results. These people do not respond to "foreign" pressures, and “mañana” does not necessarily mean “tomorrow.”.
The most fundamental problem I see in Panama is the lack of effective education. The public education system is terribly underfunded, and this shows up when looking for qualified, trained workers. While there are some tremendous private (and expensive) schools in Panama City, 98% of the children cannot afford to go there. For Panama`s long term planning, they need more quality schools and teachers than more buildings or office complexes.
As you notice, I have probably gone into more detail about the cons. The reason for that is trying to counterbalance all the "superlatives" you can read at other sources about the joys and benefits of living in Panama. I think peaceful, easy going foreigners with low expectations of their host country will get along fine in Panama. If you have a "live and let live" attitude in life, you will have to adjust, but you will get on fine in Panama. But, if you are out to change or revolutionize this country...well, lets just say you could choose a more reasonable goal.
There is no "Utopia" anywhere in the world. Each person, or company, needs to carefully determine its requirements against its "wish list", and then determine if Panama meets your needs for peaceful and/or profitable living.
I have a Stategic Consulting business in Panama designed to help with these decisions. Let me know if I can be of service. www.latamsynergies.com