A decade ago, Panama City was simply a stopover for retirees looking for an easy retirement on nearby beaches, but today it’s the Panamanian capital’s rapidly expanding tax-friendly business environment that’s drawing expat executives to expand their firm’s Latin American presence.
Expats are lured by the warm climate, slower pace and the country’s connection with both North and South America. Fast growth has brought a slew of hotels, modern condos and office space, but many companies still lack the human capital necessary for expansion, said Remy Swaab, executive director of Panama’s World Trade Center, where companies including freight forwarder Henco, search firm MRINetwork and law firm Guerra, Sierra & Atie have offices. “There are both opportunities and voids in the market,” he said.
Its dollar-pegged economy has encouraged significant foreign investment from companies too nervous to invest in countries with fluctuating currencies. A favourable tax structure and supply of luxury housing are also a big draw for expats keen to live abroad without giving up the comforts of home.
Landing the job
Positions in freight, logistics, hospitality, real estate and executive roles at regional headquarters of large companies are in high demand. For example, computer giant Dell needs financial advisors at its regional headquarters, which opened last year. While consumer goods giant Proctor & Gamble recently expanded its offices to nearby Costa del Este and wants marketing executives. Shipping giants COSCO Container Lines and Hanjin have expanded their presence in the country and sending more ships through the Canal.
Average salaries for most Panamanians are just $400 to $600 per month, while expats can earn six-figure salaries annually comparable to their counterparts at home. Foreign companies based in the country are able to hire expats to comprise as much as 12% of their workforce.
“Companies that are setting up offices are looking for a certain degree of professional [experience] that the local human resources is not able to satisfy,” Swaab said.
Panama City offers an attractive environment for multinationals, including manufacturing conglomerate 3M and chemicals giant BASF, who are based in the Panama-Pacifico Zone. Location in this 1,400-hectare business park, 10km from downtown means significant tax breaks. For example, PPZ workers can get three-to-five-year work visas, instead of visas that expire annually, which is the norm. The country has also developed free trade zones designed to attract firms focusing on manufacturing, healthcare and even higher education. Larger companies can easily facilitate work visas for employees within weeks. Expats who have lived in Panama for more than three years can apply for permanent residency.
When it comes to getting hired, competition is on the rise. There are more expats looking to fill the skilled labour gap in the city than ever before, which means cushy relocation packages are fast disappearing, said Peter LeSar, chief financial officer, Thunderbird Resorts, which operates themed resorts in neighbouring countries. To fill roles at the company, LeSar, who relocated from the US 22 years ago, uses both local headhunters and LinkedIn.
It can take months for jobseekers to find roles because the quality of candidates has improved, he said. “There’s a lot of demand from expats to come and work in Panama.”
Getting settled
Both rents and food prices can rival Miami or Hong Kong, said Panama City boutique hotel owner Matt Landau, 32, who rents a one-bedroom in Casco Viejo for $1,500 per month. “People pitch Panama as this cheap yet cosmopolitan place,” he said. “That’s a little bit of a disservice.”
Relocation firms including Latin American Relocation Management group are often hired by corporate firms to help executives move and deal with everything from housing to visas.
For expats planning to stay, Kent Davis, director of Panama Equity Real Estate, recommends buying rather than renting property. A two-bedroom apartment near the sea can cost $2,000 to rent or $280,000 to buy, said Davis who relocated from the US eight years ago. Foreigners have the same easy access to financing as Panamanians and new builds can be a bargain, he said. Expats favour historic Casca Viejo along with more modern neighbourhoods such as El Congrejo, San Francisco and along Avenida Balboa. Families who relocate typically hire live-in domestic help for less than $500 per month.
Under the country’s corporate tax incentives, foreign companies that show they make profits outside of Panama and provide services to non-resident entitites pay 0% in income taxes. These savings can then be passed on to expat employees in the form of larger salaries. Additionally, individuals earning income from foreign companies aren’t subject to income tax in Panama.
Things to consider
The majority of expats in the country are still retirees. “The prerequisite to live here was having white hair,” Skyler Ralston, a marketer for local businesses said, adding that Panama City’s image is slowly changing. For younger professionals, this means there are limited options to build a professional network, according to Ralston, who started the Young Expats in Panama group after relocating from Miami six years ago.
While many expats speak mostly English and don’t need Spanish for their jobs, many feel isolated by not using the local language in day-to-day interactions. Despite widespread use of English, newbie expats can find the relocation daunting. “We have this amazing culture but it can be very difficult to navigate,” Landau warned.
In terms of security, Panama is relatively safe versus neighbouring Colombia and even Costa Rica, according to the US State Department travel warnings, but petty theft, credit card fraud and even muggings are common. The country isn’t without its problems and many Panama City residents still live in poverty and gang violence occurs, Landau said.
And expats, including Landau, may need to pay taxes to both their home country and Panama. Americans, for instance, are subject to worldwide taxation.
On a positive note, most expats say it’s straightforward to set up a business as a foreigner and many have started businesses after leaving a corporate role. After two decades in Panama, LeSar, who often hires expats, said the most successful employees go out of their comfort zone to understand Panamanian society both at work and at home. “You’ve got to really embed yourself in the community here,” he said.
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