The FAT CAt is killing your business opportunities – but there is a solution

Even if the headline looks funny, it is not. For decades now, entrepreneurs from all over have gone West, to build their business in the Silicon Valley, in NYC, Boston, Austin or elsewhere. Many still do so.

However, the way how the United States is nowadays treating their citizens or people with a greencard or other form of visa is very disturbing.

All over the world, these persons, once welcomed and respected, are now knocking on closed doors of banks and employers. What a change.

It’s all about FATCA, the Foreign Account Tax Compliance Act – Uncle Sam’s way to make every bank employee in the world an unpaid IRS agent.

When I opened a bank account days ago, here in Panama, there is a mandatory questionnaire to fill out, assuring your bank that you are not a trouble maker with a blue U.S. passport, a green card, a U.S. visa or even having spent more than 182 days in god’s own country. A formula is applied to the number of days spent during the last 3 years, in order to figure out if you are a risk, they may reject or charge more fees.

I am quite sure, right now, there are entrepreneurs out there, thinking about their plans to move business to the U.S., but do not want to end up under such a rigid regime for decades to come.

Here’s my recommendation: Come to Panama.

This blog has some posts describing the business environment and how life is here. Save your business a lot of money and enjoy a tropical lifestyle instead. Settle in a special economic zone and earn foreign income tax-free. Good for your business, right?

An increasing number of global leaders are establishing their regional or global HQ in Panama. What’s good for them is most likely good for your business too.

Try something new. Come to Panama.

Real estate prices SFO vs. PTY

Read a story these days where a couple bought a small house of 70 m² in San Francisco for $1.2 mio. Shocking. And what did Mark Twain say about the summers there?

Even for well-paid IT people, this is a lot of money for not a lot of living space.

How about this one instead? Just one example. 

Light-flooded 240 m² living area in one of the best and most expensive locations in Panama’s capital, for $995,000. One can get it for half of this along the coast, out of the city.

A penthouse with 3 bed/3bath at the entrance of the Panama Canal, 15 minutes from downtown and with stunning views of the skyline and historic quarter of Panama City, Panama.  

 

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Warm weather all year long. Numerous restaurants, yacht club in walking distance.

Nearby ferries going to the islands

Jogging and biking tracks along the Pacific entrance of the Panama Canal.  

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Do the math yourself. And it’s much more about quality of life then about money.  

TexMex and CalPan

TechCrunch yesterday had an interesting article about how “Mexico’s Ressources Fuel The Texas Startup Economy”. Quite impressive.

There is a solid trend to consider Texas’ (and others’) neighbour country before China or India. Mexico appears to become the better place for manufacturing jobs. Labour may still be higher but transport costs and flexibility are superior, compared with Asia. Mexico and Central America will most likely become the new workbench for U.S. companies.

How does Panama fit into the picture?

 

PTY Downtown

 

Well, Panama has no surplus in workforce, nor does it have any track record in manufacturing. Panama is much more of a service than a manufacturing economy. Think of the vessel registrations, the solid financial sector, the offshore business industry. And how multinationals are moving their global or LatAm headquarters and callcenters to this country.

What Mexico is and will become for outsourced manufacturing, this should Panama be for California’s IT and VC firms. Fueling growth and profitability.

Preferrable business, tax and immigration rules, constantly growing economy, US currency, first world infrastructure, very affordable living costs, excellent investment opportunities,  and a tropical lifestyle.

 

Island

 

Think about it.

Coincidence

Funny. Few days after starting this blog I ran into an article today in AllThingsDigital.

Judson Moore writes about “How to Achieve Silicon Valley Anywhere”. Here’s the link.

It describes their view of what it takes to begin building something similar. Their example is the Brazos Tech District, downtown Austin, Texas. Good job.

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However, the Panama approach is different. Come back soon to learn how.

And if you like the topic, share it. A blog has to be read, you know, or as we Germans are saying: A beer that is not drunk has missed its determination.

 

 

Panama – Building a global workforce

Panama has a population of 3.6 mio and 44.7% of them are age of 24 and younger. (USA 33.1)

 

PM_popgraph 2014

This makes for a perfect population pyramid, as shown. Life expectancy is 78 years. (USA 79.5)

Despite the USA’s unemployment rate of 7.3%, Panama has 4.6% what in reality means a lack of qualified workforce. Therefore the immigration rules have become much easier through the last years and is now kind of inviting for 44 so-called friendly connected nations. (Source)

Bringing these relaxed immigration rules into a mix with Panama’s tropical lifestyle, excellent business environment and investment opportunities,  it is easy to attract talent from everywhere to staff hightech businesses with global reach. And this way to offer many opportunities for young Panamanians too.

 

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canal_entrance_bridge

 

This picture shows the Pacific entrance of the Panama Canal with the Bridge of the Americas, kind of connecting North and South America, crossing the Panama Canal, which connects Atlantic and Pacific.

There is a marina on the left, where ferries and yachts are leaving to and arriving from the numerous islands in the Gulf of Panama, a general aviation airport is 10 minutes away by car. Along the coast there are many surf spots and year-round, nobody wears a neopren suit. Here’s why not:

 

Playa-Venao

 

Conclusion: There’s no better place to attract, motivate and keep talent.

 

 

Panama – The business environment

Before even thinking about extending the Valley to Panama, there have to be criteria defined and considered. Panama today is already a first class logistics and financial hub:

The famous Panama Canal, extended by another set of locks, doubling capacity in early 2016. (www.pancanal.com)

The Port of Balboa on the Pacific entrance of the canal and Port of Colon on the Atlantic side, and the Pacific Canal Railway, connecting both.

The Colon Free Zone, second largest in the world. (www.colonfreeezone.com)

City of Knowledge, Special Economic Zone, a technology hub, connected to four major communication cables. (www.ciudaddelsaber.org)

Panama Pacifico, Special Economic Zone and quarters for up to population of 60,000. Center of manufacturing and logistics. (www.panamapacifico.com) All these zones offer favourable tax rules for their companies.

Tocumen International Airport, a hub connecting the Americas and the Caribbean, and direct flights to Amsterdam, Frankfurt, Madrid and Paris.

Panama has more than 50 airports and airstrips, a paradise for private pilots.

Financial industry: Panama’s currency is named Balboa, but there are no Balboa bills, only coins. Balboa means US Dollar. The country has more than 50 banks and none of them crashed during the US financial crisies. Panama is a safe heaven for many foreigners when their countries and currencies go South. Venezuela is a recent example.

Investment opportunities. Taking a look at the capitol, the beaches and islands, there is no question about investment opportunities. Real estate prices are still a bargain compared with the U.S. or Europe. How about oceanfront appartments at $2,000 per m²?

Establishing a corporation. Panama is famous for having the majority of vessels under their flag. And there are numerous foundations and holding companies. Easy to set up and maintain. Same for operational businesses.

Taxes. Foreign income is generally excempted from tax. So imagine the average Google employee, not a U.S. citizen, living in Panama, paid by the mother company – legally no income tax. And VAT is 7% only.

Conclusion: Panama has an outstanding and inviting business environment.

 

The famous Silicon Valley

Being an IT person for ever, I know and admire this place, the people, the business, the spirit. This has brought so much progress into our lifes, and is still going on and on.

Have been in Austin for some time when the VC scene was going crazy there as well, around 2000, and know that NYC is doing a lot to catch up, but nobody so far has beaten the original. Congratulations, guys. I am really impressed.

However, nothing lasts for ever and sometimes you have to destroy your business yourself before somebody else does it, right? Creative destruction or so.

The success of the valley comes with some side effects that haven’t been so visible for long but are popping up now and won’t just go away:

(1) There is heavy competition between companies for talents. And it’s hurting as past silent agreements between the big guns have shown.

(2) Some talented people from all over the world may not want to end up under the IRS regime for the rest of their life.

(3) And, as the Valley is a wealth-creating beast, the number of millionaires, of rich and well-paid employees is going up steadily. Which is good. But this means, of course, that demand goes up and prices go up. And after some time this makes many people outside the industry unhappy, even creates social unrest, unfortunately. It already does.

I think it is the time to let the Valley grow another leg, in a place where overall conditions are even better.

Guess where?

When the U.S. had given the Panama Canal into the hands of Panama, this has been a jumpstart for this country. And now imagine what will happen when part of the spirit of the Valley is being transferred to Panama too.

In my next posts I will describe in detail, why this makes a lot of sense, will be a win for everybody involved.

Thanks for visiting my blog. Feel free to share it.

A surprising opener

In Houston you’ll find 14 buildings higher than 200m.  Los Angeles has 11, Seattle and Miami have 4 each, San Francisco only 3 and Boston 2.

Panama City, Panama, has 19.  (Source: emporis.com)

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It can’t compete with New York City and with some others when speaking about the number of highrises generally, but in the 200m category you have most likely not expected a “third-world country” to compete with US cities.

And with the Trump Ocean Club Tower it’s home of the highest building in Latin America too.

Can’t impress you with highrise buildings? Well, how about Panama City having a tropical rainforest natural park within city limits?  Here you can have it all.

The explosive growth of Panama’s economy and the capitol has been initiated by the Torrijos-Carter Treaties which gave the Republic of Panama the Panama Canal and Canal Zone with all its facilities back for free, by end of 1999.

Between then and now, Panama has become the second-richest country in Latin America with an impressive average annual growth rate of 8.4% since 2004.

But, you may say now, what has all this to do with the Silicon Valley? Come back to see …