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Should old people move to Panama?
Panama has started a bidding war for retirees:
To attract more investment, the central American nation has eased immigration laws and set up a discount bonanza for expatriate pensioners that includes 20 percent off professional services such as those provided by lawyers, architects and physical therapists; no property tax for 20 years; no income tax on income earned outside Panama; and a 50 percent discount on real estate closing costs.
And that's only the beginning. The list of discounts goes on and on, including price breaks on telephone service, surgery and domestic airfares and a one-time waiver of duties on imported household goods up to $10,000.
All it takes to qualify is pension income of $500 or more per month -- at any age and from any source.
Here is the story.
I can think of four relevant models here. 1. The Panamanian government is simply stupid. 2. In Panama most prices are well above marginal cost, making this a good deal for the nation as a whole. 3. The Panamanian government has a preference for sources of wealth which will not get involved in politics. 4. The Panamanian government believes that the greater number of residents will result in a more efficient spreading of fixed costs. I put my money on #2 and #3, and do visit Panama if you have never been; it is far more interesting than the now overtouristed Costa Rica.
Posted by Tyler Cowen on November 26, 2006 at 05:42 AM in Travels | Permalink
Comments
I did a quick google for climate information--month by month temperatures and humidity. IMHO only certain varieties of amphibians and snakes (preferably from D.C.) should visit and/or retire in Panama. But then I've never understood the preference for Florida or Costa Rica either.
Posted by: Sarah at Nov 26, 2006 11:13:31 AM
They're copying Belize, which has been attempting to attract pensioners with a similar for several years. No discount on services, but you get permanent residency and no taxes on income from outside. I believe that the minimum income per month in Belize is somewhat higher than what Panama proposes.
Mind you, this is a step down from the wild and crazy 90s, when certain Carribean Commonwealth countries like Belize would actually sell you citizenship and a passport for an affordable price in the high five figures. The U.S. stepped on that one -- you can guess who many of the customers were -- though you can still buy citizenship and a passport from Dominica and I believe Trinidad and Tobago, but it's going to cost you.
Posted by: Jones at Nov 26, 2006 11:14:33 AM
They're copying Belize, which has been attempting to attract pensioners with a similar for several years. No discount on services, but you get permanent residency and no taxes on income from outside. I believe that the minimum income per month in Belize is somewhat higher than what Panama proposes.
Mind you, this is a step down from the wild and crazy 90s, when certain Carribean Commonwealth countries like Belize would actually sell you citizenship and a passport for an affordable price in the high five figures. The U.S. stepped on that one -- you can guess who many of the customers were -- though you can still buy citizenship and a passport from Dominica and I believe Trinidad and Tobago, but it's going to cost you.
Posted by: Jones at Nov 26, 2006 11:30:55 AM
I agree that Panama is definitely worth a visit; but go there soon, before the already-numerous American retirees buy all the land. I imagine that the incentives being put into place to encourage these retirees to come will pay for themselves in a short time thanks to the relative wealth, spending habits, and demand for goods and services they represent.
Posted by: anonymous at Nov 26, 2006 12:26:02 PM
Bill Bonner and the gold, guns, and economic armageddon crowd are already marketing beachfront property in Nicaragua as the coming place to live out your retirement tidily and ride out the coming-real-soon-now economic hoohah. Panama's for renters :-).
Posted by: Jones at Nov 26, 2006 2:00:53 PM
I can think of some other options:
5. The panamanian government believes that retirees will end up spending a lot more than they save: that the retirees will not take this into account when calculating the value of the discounts.
6. Having a bunch of 1st world voters in your country leads to all sorts of special consideration from the 1st world governments. After all, would the USA have abandoned South Vietnam if a bunch of congressmen relied on those votes?
Posted by: Patrick at Nov 26, 2006 6:33:37 PM
"3. The Panamanian government has a preference for sources of wealth which will not get involved in politics."
Retirees don't get involved in politics? Tyler, are you high? Even without the vote, one has to imagine that America's old people will be every as demanding and querulous in Panama as they are up here. In short order, AARP will own Panama.
In return, Panamanians will get lots of hugs, cookies, and stories about Aunt Gladys's recent operation.
Posted by: Tom T. at Nov 26, 2006 6:56:09 PM
Yeah, Costa Rica is way overpriced now. Panama is the new hotness, and Nicaragua will be the new hotness in a few years. But retirement to Central America in general will continue to be huge.
Business tip: Move to Granada, Nicaragua, and start an English language (or English/Spanish) bookstore. There are currently none despite more and more English tourists and retirees every year.
Posted by: Jacqueline at Nov 26, 2006 7:03:43 PM
What Panama may not have considered is that the "active retirees" who move there today may not be quite so active tomorrow. As time goes on, their health care needs will increase, as will the associated costs.
Posted by: Peter at Nov 26, 2006 8:32:41 PM
We have friends in their early 40s who just bot a condo in Panama.
The infrastructure was put in by US, and I read a year or so ago, the Panamanians spent money on lobbyists so we'd come back. Too many Chicoms because of the canal, they prefer us.
Posted by: Sandy P at Nov 26, 2006 10:46:22 PM
I write a lot about Panama from a libertarian stand point on my blog as I've lived there and still have very close connections to the country.
As the article also says Panama has had this law for ages. The only real benefits as far as I know that are directly related to the Pensionado law is the actual visa. The discounts are available to all retirees including my Panamanian mother in law. The tax rules are available to all residents, just remember that US citizens are still liable for US tax, even if they live abroad. There may be some special importing allowance specified in the law.
It is generally a good deal for the country as you get big spenders in. It does not cost the government anything as the foreigners are not covered by the Panamanian social security system.
Panama's economy is kept up by a combination of the building boom, the canal and the most globalized economy in Latin America. The foreigners buying properties are important and are generally looked well upon, although you are starting to see a bit of miscontempt in some of the hyper gringo areas such as Boquete and Bocas del Toro.
The building boom is a bit bubly at the moment and probably heavily influenced by some money laundering http://econotrix.com/archives/000524.html and it's probably a healthy thing if more of the apartments in Panama City were bought up by actual retirees rather than fictitious Colombian tourists.
Health care is excellent and relatively cheap in Panama as long as you have a health insurance or just self pay. Medical tourism is also seen as a growth industry by the government and is promoted heavily abroad.
Otherwise I would say that Panama despite heavy corruption is a great example of why globalisation works.
Posted by: Pelle at Nov 27, 2006 7:55:38 AM
Couldn't it also be because today's retirees are a bit more entrepreneurial than those in the past? Many of the retirees I know are now teaching at local high schools, opening shops, commercializing their hobbies, etc. - while they do consume a bit more leisure than those that are working, they do not seem to me to be whiling away the hours until their time has come. If people are the ultimate resource, then giving discounts like this seems to be a cheap way to attract them.
Posted by: Mike at Nov 27, 2006 9:00:13 AM
Having spent 10 days in Panama last summer on a business/pleasure trip, some comments:
Economy is growing rapidly due to their embrace of globalization, capitalism, and their legacy of U.S. institutions vis-a-vis courts, rule of law, and property rights.
Still big income disparities, but will be largely cured by growth and enlightened policies.
Vastly superior to Costa Rica, whose adoration of european model of social democracy will continue to mire them in stagnation.
The people are young, healthy and hip, and will embrace change and development. Panama will provide a wonderful example in the years ahead as what happens when a country embraces the market system. What a great contrast to some neighboring countries.
Posted by: Bob at Nov 27, 2006 10:13:37 AM
None of your four possibilities quite captures the most likely reason for Panama to try to attracct retirees, which is that retirees are perceived to generate positive externalities. For example:
1. Retirees could give locals the opportunity/incentive to learn English.
2. Retirees don't commit very many crimes, so they may help to reduce the crime rate.
3. Retirees may attract visiting relatives, which would:
(a) boost tourism revenues
(b) increase awareness of Panama in the US; potentially a businessman might go to Panama to visit his mom, then realize this is a good place to build a factory.
4. Retirees could generate local demand for telecommunications services and thus generate external economies.
Finally, retirees are surely an industry with a clustering affect: Retirees like to be near other retirees. So if you can attract a few with tax breaks, once you have a critical mass, you can remove the tax breaks and they'll keep coming.
Posted by: Nathan Smith at Nov 27, 2006 2:48:51 PM
I've always been amazed that more Americans don't retire to Latin America, where I've spent a couple of years in aggregate. I remember once overhearing a toast given by a late-50's apparent retiree in a beachfront restaurant, who said something to the effect of: "And here's to our friends who are still working hard, so that someday they can live like us." The SSI statistical snapshot for Oct. '06 gives a figure of $923 as the average monthly payment for all beneficiaries. Almost anywhere south of the Rio Grande that is enough for a maid, a charming house, and a decent standard of living. Another charming and apposite memory was paying the property taxes on a huge 4 bedroom in Mexico, which were about $60 a year.
Posted by: Timon Braun at Nov 28, 2006 12:23:26 AM
i would appreciate any leads to rent an apartment, since i am going to panama at the end of february 07...i am a person who likes views, nature and proximity...since i don't like to drive or long commutes...i would also appreciate any information about the nature of business in panama..thanks
Posted by: calvin at Jan 8, 2007 9:22:09 AM
I just returned from a 10 day visit in Panama. We stayed 3 days in Playa Blanca and then went up north to Boquete followed by 3 days in Panama City. I was with out a doubt pleased by the people, the service, the prices, the beauty of the country. This is a country of friendly people with smiling faces and I am not refering to the tourist areas. Some of the prices with the crafts vendor were so low I was ashamed. We made some real friends and have written and emailed with them since returning to Colorado. I have started the process to buy property at the DeCameron golf resort and expect to have a residence within a year. I have absoulutly fallen in love with Panama a stark contrast to my last visit to Orlando, Florida just 6 months ago.
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Regards,
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The only problem I find is the weather. We are very active people, and the heat and humidity outside is unbearable. Workouts are very, very early in the morning or night time. Still very humid.
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