Panama consolidates itself as a Financial Center in Latin America
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The Pan America HUb
Panama upholds itself as one of the most important financial centers in the region despite strong competition from other jurisdictions, like Miami and the Caribbean Islands that with the passing of time had been able to attract a large number of banks from throughout the world.
The Central American country, located at the waist of the American Continent, presently has more than 80 banks and the number continues to increase. After the terrorist attacks of September 11, 2001 in New York, Panama overcame Miami and secured itself as a financial center for the region with a sense of belonging.
After those attacks, the USA started its war against terrorism and the Patriot Act created many barriers against investors who conducted business in that country. As a consequence, many of the financial institutions that conducted business in Miami moved their operations to Panama.
The Caribbean Islands, meanwhile, have suffered the desertion of important banks due to the fact that the present regulations in force do not agree with the standards required by more developed countries like the USA, England, France or Japan. Lastly, the political uncertainties awaken by Hugo Chavez in Venezuela, and Evo Morales in Bolivia, forced – or is forcing – many South Americans to move abroad to Panama where they believe their assets will be more secure. Likewise, the Panamanian laws have endured the test of time, and reflect the last security requirements for the prevention of money laundering, and the adapting of capitals demanded the international agreements such as Basel II.
Presently, there are 33 banking entities operating in the country with international licenses, 9 with representation licenses, 40 with general licenses, and also 2 official banks.
This number reflects an important fact when compared to 2006 because the number has diminished due to mergers or sales. By July of last year, there were 34 banks with international licenses, 5 with representation licenses, 42 banks with general licenses, and two official banks.
A General Banking License allows banks to conduct local and foreign operations; an International License permits the bank to conduct foreign operations, but it cannot participate in local banking interchanges.
A license of representation is for offices of foreign banks from which they can promote their services and visit active and potential clients, not only in Panama but the region as well.
These 84 entities come from all corners of the world, although the majority of institutions are from Latin America. Nevertheless, several European banks such as the French Natixis, the Merrill Lynch Bank (Suisse), USB AG and the BSI (Formerly the Banque de la Svizzera Italiana) have recently established themselves or are close to joining the banking system.
According to Executive Vice-president for the Panamanian Banking Association, Mario de Diego, the Latin American banks have operations in Panamanian territory mainly to bring services from their countries to their citizens, facilitating their businesses off shore through their own banks. In fact, an important portion of foreign deposits in Panama come from Latin American countries.
According to de Diego, another explanation is that many Latin American banks had branches in the Caribbean, and in view of the application of the new Basel rules they opted to move their offices to Panama, a much more active and fulfilling location than their previous jurisdiction.
The Executive Vice-president for the Banking Association affirms that Panama retains all the attractive conditions that since 1970 has maintain it as an optimal international banking center: Its monetary and fiscal systems, the absence of a central bank and monetary authority, the open flow of funds, and other segments of important international services such as legal, anonymous stock societies, and more recently the establishment of private interest, and unparalleled proved stability throughout the financial crisis which has affected other financial centers and important Latin American countries.
Furthermore, it has other advantages such as excellent communications, and the ease of movement by air to other important cities in Latin American. These and other aspects have caused the Panamanian banking market to surge and not stop growing. Up to September of this year, the Panamanian Banking System could count with 406 bank branch offices, among them banks with general licenses and official banks, 754 ATMs, and 133 bank agencies. To them, it should be added 33 branches of banks with international licenses and 9 with banks representation, for a grand total of 448 branches throughout the country. In 2006 there were only 389 banking branch offices, among them banks with general licenses and official banks, 628 ATMs and 119 bank agencies. Then also, banks with international licenses and representation amounted to 39 branches.
Growth of assets
The growth of the Panamanian Banking System has not only been in terms of banks and branches. By July of this year, total consolidated assets reached US $49,627.36 million, which represents an increase of US $7,721.20 over July 2006 when it totaled US $ 41,906.16 million.
As far as deposits, they reached US $35,607.30 million, which shows an increase of US $6,338.64 from July of last year when they reached US $29,268.66. Likewise, the banks own assets have increased from US $ 5,269.22 million to US $6,766.25 million, from July 2006 to July 2007.
According to the Executive Report for the first semester of the year, published by the Superintendent’s Office for Panamanian Banks, the positive performance by the banking activity was driven by growth in internal credit to the private sector (14.8%), and an increase of external operations (18.4%).
In addition, the promising local economic situation and the favorable outlook for growth in volume and prices for the main exporting products in the emergent Latin American economies are a source of augmentation in the banking activity; although, the high liquidity in the system continues to be the main source of funds for the expansion of credit. The interest rate has been stable in response to this high liquidity and the competition within the system.
At the internal level, the banks have been favored by the movement of container cargo through the port system which increased 45.5% as it relates to 2006. In addition, tourism continues to show an unparallel dynamism, the expenditure by tourists could reach to more than US $1,000 million by the end of 2007, and the export of non traditional agricultural products continue to reflect an increase in income.
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