Sunday, October 11, 2009
Banking and other service atrocities in Panama...
Last week I saw a very entertaining movie called "The Ugly Truth", an adult comedy on the differences between men and women and how it is oft times hard to be honest about the differences between the sexes. I feel it is now time, if only for my sanity sake and for the sake of full disclosure on "living in Panama" that I express the "ugly truth" about banking and general service culture in Panama.
There are many charms and advantages to living in Panama and Latin America in general from a cultural and surely financial standpoint. The cost and stress of living on a daily basis is significantly reduced from "first world" living and if you can adapt and understand the Latin way of living, your life can be overall changed and improved as far as quality is concerned...IF you are willing to back way from your first world service expectations.
The biggest reason over 70% of foreigners who try and move offshore to Latin America return to their homelands within 2 years is simply the disillusion with basic services in their new-found country of residence. Sure, there are other main reasons like the isolation from family and friends back home and the often difficult challenge of making new friends and establishing camaraderie with locals ...especially if you don't know the local language and customs. But 90% of the people I talk to who are "heading out" from these pristine shores, their decision is based on their disillusionment with basic services, dishonesty and downright being robbed blind for being a "handicapped foreigner". What I mean by "handicapped foreigner" is the lack of equal rights and even pricing when it comes to basic goods and services tied to the inability of many "expats" to communicate and reason in the local language. If you are not able to communicate clearly or have many layers of people "handling" your basic service needs in Panama and elsewhere...you are definitely a walking target for inequity and even abuse.
Let me start the "Ugly" list of stories and experiences to back my premise. If you move or even just try to set up business in these Latin countries, you need to understand that you are...and will always be...the outsider. Some of us are used to that within the makeup of our personalities, way of thinking and general individualism as we decipher our life experiences. But a majority of people I think go through life quite dependent on "others", whether it be government, family or work friends. You cannot depend on much or any of that in these emerging Latin markets. You have to be self-sufficient and made of "Teflon"...letting difference and contrariness roll off you without affecting your state of being either emotionally, physically or financially.
The first and biggest area of disappointment I have found in living and doing business in Panama and elsewhere in Latin America is the totally dysfunctional and bureaucratic banking institutions. While Panama boasts the purported second largest financial center in the WORLD, the accessibility and functionality within that sector of Panama's economy is alarming and appalling. I could write a mini-book here of personal and friend's stories related to dealing with banks in Panama and Costa Rica. To take up the challenge of an abridged version of the story, let me give a few brief descriptions of some of these experiences...and while it probably would not make much difference if a Panamanian banker, government official or bank regulator read this, it is at least self serving therapy to put this in writing...and wishing they WOULD read and be affected by these experiences.
Banking and establishing new accounts in Panama is all about WHO you know...not WHAT you know. You can know ALL the processes, and if you are lucky enough to find a bank that actually writes down all the qualifying measures of establishing a banking relationship with them...you can complete every item of the checklist and they will still come back to you with 5, 8 or a dozen additional items they "forgot" or need in order to establish you as a client. Now this reality is mostly just for us "little guys" or small business. If you are a large "money launderer" or multi-national company with millions to put in their bank...you can forget about any requirement list and basically get your account open on a handshake between "friends" in a few hours.
Obviously in the last few years there have been a mountain of new regulations and international pressure on banks everywhere including Panama to "know their customer" and gather more data on account holders. It has become quite evident that even Panama's purported "bank privacy laws" are meaningless within large international or USA based banks in Panama. The international banking laws and primarily the USA's anti-terrorism and money laundering regulations run rough shod over Panama's own bank sovereignty and regulations. Banks worldwide are now basically the first line of protection and information gathering/sharing...for governments...not for their clients. Banks in Panama that are international will share all info on foreign clients through data exchange with the domicile banking or government requests, no matter what the local regulations may say. So one must recognize right out of the gate that entering into a banking relationship with most international banks equals giving up your privacy and control on YOUR money and you are basically giving license to the banks and governments everywhere to share information on everything they can find out about you. They will know and will reveal to each other every transaction you make if requested: where you buy your groceries, what bar you drink at, who you do business with and even what sexual services or products you chose to purchase or participate in. Now many "moralists" would argue "what is wrong with that...you shouldn't be doing anything that would embarrass you in public or that you wouldn't want the government to know about". Unfortunately, that mentality feeds right into the global mentality that collective need and greed is more important than individual rights and sovereignty. I have enough blogs on those issues, so won't regurgitate that theme here...but that mentality does impact all the way to the relationship between you and your banker. Basically...outside of small private banks, YOU don't have a banker...the government does.
There are many stories both in Panama and internationally that prove in action that the money in most bank accounts can be frozen or absconded by a government or banking entity just based on an unproven accusation or "suspicion" of wrong doing. Due process and legal notification which used to be a staple of first world financial systems are out the window in recent years...and it seems the majority agree with this mentality...until they become victim to false charges or lawsuits that tie up THEIR bank accounts. So out of the gate I am saying here that banking anywhere including Panama starts with the premise that any assets you have in those institutions are "public" knowledge and the banks primary interest always seems to fall on the side of "reporting" your financial life to any institution that requests that knowledge.
If you cross swords or publicize your displeasure with your bank/banker, they often times can simply tie up or cancel your account without cause or notice. There was a high profile case here in Panama a couple years ago with Bank of America where a North American millionaire owned a Panama company and had those corporate funds lodged with Bank of America. When the client experienced bad service continually and had money even disappearing mysteriously from that corporate account, he filed a law suit and went public with his displeasure after getting no satisfaction for his grievances with the bank. The response of the bank was to freeze his company's millions on account and counter sue him for "defamation". This was done according to the press without notification to the client and within a 24 hour period with no due process. As far as I know that case is still pending a couple years later...because the other reality is that in Panama the due process of law is very slow and backlogged (I'll get to lawyers and the legal profession in a minute)...and in essence you are guilty until proven innocent...UNLESS you are a government official or part of the wealthy elite.
My final point for now in regards to banks is regarding the process for getting a mortgage, or what they call "hipoteca", down here. The banks advertise some very competitive rates compared to the international markets for mortgages and for interest on deposits in these banks, but the reality is for foreigners that only those who don't really need a mortgage can get one. If you're willing to lock up money in a savings account in Panama, then the banks will loan you up to 80% of the value of YOUR money. They won't even care that much about the value of the real estate that they ALSO have first position on if you default on payment. That's a pretty secure position for the bank and a main reason why the local banks in Panama are overall healthier than USA banks.
When people come here and ask me how long it will take to get a mortgage or bank account open, I have to honestly tell them "anywhere from one to six months". When I first moved to Panama, I was fortunate to have developed a relationship with a law firm who introduced me to one of the major Panamanian banks who helped me open an account in about 10 days. I am sorry to report that is VERY rare today. The Panama bank system has succumbed and surrendered to so much additional regulation and paperwork that even with an attorney representing you, it will usually take minimally 2-4 weeks to get an account opened. One law firm I used to recommend for this service are no longer offering the service of opening bank accounts, because they have lost many big customers through the client's reactions to not getting accounts qualified and opened within a reasonable time...and most times the attorney is not to blame...but is blamed anyways. These banks almost daily lose files, lose significant documents within a file, or just get so backlogged that they won't tell you a time-line for getting your account. And if you are doing all the footwork/paperwork yourself...it can become a full time job for a number of weeks to run through all the hoops or collect all the information they want on you or your company before they will take your money.
I just had a good friend go through the ringer with a major local bank in getting a mortgage on his condo. He wanted to do some improvements on his place, had paid cash for the condo which market value is currently around $160,000. He has excellent credit in the USA and no issues in Panama with an existing bank account at another local bank for the past 4 years. He only applied for a $10,000 mortgage...over 3 months ago. The bank has told him 3 different times in these 3 months that "everything is done". He was told 2 months ago that legal had approved his paperwork and the money would be in his account in 2 days...so he went back to the USA thinking everything was done. When the money never showed up in his account he had to call for over a week from the USA to find out the reason for no deposit having been made. He was told TWO MONTHS LATER that he had to have fire insurance on the condo...and a $40,000 life insurance policy with them as first insured...in order to grant the mortgage. He has now spent the last 10 days in Panama pursuing these insurance policies...had them delivered to the bank one week ago...and still no release of funds. He figures it has now cost him an additional $1500 in time and travel costs to secure this $10,000 loan on a $160,000 bay-front condo in Panama and of course repents ever starting this process. In fact, he is so annoyed with Panama's lack of service and basic ethics in business that I know where you can buy a nice furnished bay-front condo for $160,000.
Now a short word about the "Legal" profession in Panama. I have a list of 20+ lawyers and/or firms that I have had direct experience with in Panama...and there are only 2 that I would still speak to or recommend. Even then, my recommendation would be based on WHAT services one would need legally, because the best lawyers specialize in something, whether it be immigration, corporations, taxation, criminal law, etc. Any one that tells you they can handle ALL your legal needs is misrepresenting themselves and just out to fleece you for every dollar they can get. The other rule is "pay as you go". Do not pay retainers or more than a token deposit towards a legal pursuit...because in most cases they will take your money and go on vacation or put you at the bottom of some pile that a "clerk" is supposed to get to sometime this year. If you are lucky enough to find an attorney who executes quickly, pay them on time and keep them close by as your best friend...because that is the only way you will get legal recourse in a reasonable period of time. Oh...and the attorney needs to be well connected politically at all levels to adequately service you...at the executive, judicial and legislative government levels. Again I say, in Panama and throughout Latin America, it's not WHAT you know, but WHO you know that counts in getting things done in banking or "lawyering". I also have to add that the USA system really works on the same basis if you think about it for a minute. Connections or having money means everything for getting things done quickly and efficiently...
And finally, a summary on services in Panama. Both Panama and Costa Rica overstate their capabilities and cultures related to tourism and service. There are some beautiful places to go and amazing things to see and do in these countries, but don't assume just any agency or tour guide is going to assure you a good and safe time. Very low percentages of these populations speak anything but Spanish...and their desire or initiative to learn or expand their horizons are overall non existent. There are reasons why repeat tourism to these countries is very low. Most people here don't know how to say "please" or "thank-you" in the discourse of service. Many will tell you they are "trying" or "wanting" to learn English or learn a trade or skill to improve their life potential, but a very small percentage actually take ACTION on their dream or goal. This is primarily because a majority in this culture WORK to LIVE...not LIVE to WORK. I see very little pride taken in service or professions at least at the lower income levels in Panama and elsewhere in the region. Sure, you can find excellent and inexpensive health-care, first world shopping malls, and many fine bars and restaurants. But only a small percentage will have what I would term "world class service mentality". Its unfortunately just not part of their culture or educational systems...yet.
To end on a positive note, I would say that while being a bit backward and lazy, the general Panamanian culture is moving SLOWLY towards raising the standard of living and service mentality for all. There are many new real estate projects and homes for the middle and lower classes in addition to a myriad of high priced luxury homes for the global elite. There is movement by the new administration to level the playing field of opportunity to all classes of people and to get some checks and balances put on the ever present corruption and misappropriation of funds in government. But, I have to be honest and suggest not to expect change very quickly. It is going to take 2-3 more generations to majorly impact the service mentality in Panama...and they are going to have to focus on educating the very young...because in Panama you just can't "teach an old dog new tricks"...