October 30, 2009

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Panama’s New Property Laws

By Matt Atlee

Tensions were high this past week at the National Assembly as the Assembly members debated and passed a first version of Law 71. Even the U.S. Embassy sent out an email notifying the expatriate U.S. community that the Embassy would be monitoring developments at the National Assembly.

So what is Law 71? Law 71 is a proposed law that would force owners of coastal lands and islands, who bought their land as a right of possession rather than legally titled, to title their land.

The difference between rights of possession and legal title is that with the former you do not own the land, but lease it from the government. The government would like  property owners to have have legal title so they can tax the property.

The law would also weed out property owners who grabbed land, said it was rights of possession and who now want legal title to land they never purchased. The feverish “land grab” that took place a few years ago in Panama has made it very hard to figure out who owns what. When the “land grab” occurred the government was not institutionally set up to process all the land claims.

The big fear among property owners with rights of possession is that the government will pass a law which will allow the government to eliminate rights of possession and then seize land that was sold as rights of possession.

Of course, there is always a danger when buying rights of possession: you don’t really own the land; the government is leasing the land to you. So what if they want to unilaterally end the lease – you would lose your money.

I don’t think the Panamanian government wants to expropriate land – though there will be a few cases where they will – rather they want to collect taxes. The government wants to increase tax revenue – they’ve been strengthening tax collection since they came to power in July.

People are tense about the proposed law, but they’ll have to wait and see what the law looks like in its final form. There’s no doubt a law is going to be passed and people owning land along the coast and on the islands will be affected.

Another controversial act of the Panamanian government  was the enacting of resolution number 52. Resolution number 52 would make it illegal for people to rent their homes, apartments, or condos on a short-term basis – for less than 90 days.

A huge battle has been raging in Panama between hotel owners and owners of property who want to rent their properties on a short-term basis. Some members of the government want to shutdown what they term “illegal” hotels (private homes, apartments and condos for rent) because the owners don’t have to pay the 10% tax that “legitimate” hotel owners have to pay to the government.

This resolution has since been suspended and replaced with a new Resolution, however we have not yet been able to obtain information about what exactly the new Resolution contains.  We’ll keep our readers updated on this topic.  If anyone has accurate information about the current state of this law, please email us at info@panamaatyourservice.com

It was announced this week that the U.S. would not import from Panama any fruits or vegetables sprayed with the pesticide Carbofuran. The chemical is considered a serious health danger in the U.S.

Many years ago when I first came to Panama, I worked in rural development and I quickly realized that Panamanian farmers were using pesticides that were outlawed in just about every other country. Panama’s richest agriculture land is located in the highlands of Chiriqui and this is where farmers use the most pesticides. Make sure you wash your fruits and vegetables very well in Panama.

After only 100 days in office, Panamanian President, Ricardo Martinelli, enjoys an 85.9% approval rating, this is better than his three predecessors: Ernesto Pérez-Balladares, Mireya Moscoso and Martin Torrijos. Martinelli is getting tough on crime and he’s extended social welfare benefits to the lower classes; both policies have made him a popular figure in Panama.

The IRS is scouring the globe trying to find out how many U.S. citizens have been able to hide their money in offshore accounts. So far 7,500 Americans have come forward to declare that they have offshore accounts where their money cannot be taxed by the U.S. government. The IRS plans to open offices in Beijing, Sydney and Panama City in order to combat tax evasion.

I have no doubt that in the future there will be a branch of the IRS in every U.S. embassy around the world just like the DEA. Because of money laundering and the integration of the Panamanian economy with the U.S. economy, there is little doubt that the IRS will want to have access to American bank accounts in Panama – and the Panamanian government will probably have to oblige them; Switzerland is already working with the U.S. to identify tax evaders.

The U.S.-Panamanian trade negotiations are stalled. It looks as if the Obama administration and the U.S. Congress have their hands filled with health care reform and Afghanistan. Obama ran against the trade deal last year during the campaign season; the trade deal was originally negotiated by the Bush administration. Obama is trying to strengthen his support with middle America and any trade deal might mean sending more American jobs overseas.

Consumer prices fell by 0.6% in Panama in the month of September, this is a sign that the economy is beginning to slow down. Last year inflation was running at 8.7%. The fall in inflation should mean a drop in electricity, gasoline, and food prices. The price of gas and electricity has already dropped by 10.7% since last year.

Written By Matt Atlee

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