Finances, Savings, and Other Perils

Is Your Money Safe in Panama?

Eye-opener advise for both locals and wannabe immigrants/nomads

Didimo Grimaldo

Published in

ILLUMINATION

10 min readDec 13, 2021

Wherever you move in the world, whether it is for temporary/permanent immigration, or retiring in Panama, you will almost certainly need a Savings bank account. The same applies if you are a digital nomad, a local or foreign freelancer, etc. If that destination in the world you are thinking about is Panama, you are reading the right article!

If you are investing in Panama, this article is not for you. But if the instruments you consider moving to Panama are savings accounts, certificates of deposits, or the like, then read on.

I lived and worked in several countries, including Panama. At first, I was amazed that a large percentage of the general population was unaware of the problem; therefore, I am writing this article. Many don’t even understand it because that is the only reality they have known. But, if you lived abroad, you know better. Feel free to skip sections of this structured article if it does not apply to you.

About Panama

For those that don’t know it yet, Panama is a small country in Central America with a little over 4 million inhabitants (a doubtful census in 2020) with 57 inhabitants per square kilometer. Of these, 4.39% are immigrants that come mainly from Colombia (24%), China (10%), and the USA (8%) ¹.

Pexels.com Panama city “Lighted city buildings during nighttime” by Yender Fonseca

This small country rose from the seas around 3 million ago and became that isthmus that joined North America & South America. Since then, it has become the Bridge of the World as its national coat of arms states.

In 1519 Panama City became the first European settlement founded on the Pacific coast. Then during the Spanish conquest, the voracity of the Spanish empire seeped all the riches (gold, silver, gems) of the American continent through Portobelo on Panama’s Atlantic coast.

Nowadays, many people want to emigrate to Panama because it is the banking capital of the Americas. Or because it is easy to immigrate, it is easy to do whatever you want if you know the right people in the right places. Other times because the economy is stable and your money is safe. Eh, safe? that is not entirely true. While it is not an imminent danger, you should be aware of an important fact.

Is the Information Colored?

Always consider who presents you with the information you read. On the Internet, there are many articles about banking and Panama. But most — if not all — are written by people who have something to gain one way or another (not necessarily monetary gain, nudge from employer, etc.). If you are clear on this, then move on to the next section; otherwise, read the rest of this subsection.

I came up with my view of society (or the world) which I gave a couple of names. Additionally, I explained it in terms of medieval society, modern society, and surprisingly, my model still holds. I published it a few weeks ago here at Illumination. If you haven’t, reading it would clarify the next part. I leave the link here so that you can follow it later. Now let’s get back to the topic.

Of Castles, Peasants, and Wanderers

A theory of progress, and how users get locked into privacy-invading platforms

medium.com

The people that present information that is too good to be true; typically belong to The Marketer category (modern) or Noble in the Castle (medieval terms). In Panama, like many other countries, but especially Developing Countries, the bulk of the population hovers in The Villager group (modern model). The Marketers are the group who divulge all these great virtues of the system. They usually omit those fine details of great importance. The 2nd (Villager) won’t tell you, either because they haven’t explored the world enough or because they don’t know better.

If you are considering emigrating to Panama. Or “secure” your money in Panama, then there are important items you should know. And guess what? neither the Villager nor the Marketer will present them to you. On the other hand, I will present you the information as an Explorer (or the Wanderer in the medieval analogy).

How do I know? You may ask yourself. I lived and worked in three different countries on two continents. I experienced banking as a user, and as an implementer (online payments) in those three countries. Therefore, I will present it to you from a unique perspective. But It’s your money, so you make your own judgment.

Banking in Panama

Panama does not have a Central Bank, and there is an excellent article by M. Vlieg explaining that in much detail ². There is a Superintendency of Banks which oversees the regulations of banks. There are two well-established and reputable state banks: Banco Nacional de Panama and Caja de Ahorros ³. There are 57 other reputable banking institutions. When disputes arise, we are yet to see any instance protecting customers’ interests. As an example, here is the horror story an expatriate experienced with an ATM. Many years ago, I also had the terrible experience of a Panamanian ATM swallowing my foreign card.

Customers are the pillars of all commercial banking operations. Even though it is a symbiotic relationship, none of the commercial banks would survive if it wasn’t for the capital (or debts) of their clients.

The article mentioned above is great but is never mentions the lack of deposit guarantee. We all know the purpose of marketing, so now let us get into the small letters.

Panama: The Financial Capital of the Americas?

For decades, Panama features as the banking capital of the Americas. While not entirely false, it resonates with the tons of articles claiming that X or Y countries have the highest level of happiness in the world. A few years ago, a click-bait article claimed that Panama had the happiest people in the world. But the moment you drive or observe how people behave in Panama, you will think otherwise.

It is true, In 2021, 57 banks were operating in Panama ⁴ from 19 different countries. In 2019, Panama registered the highest per capita bank deposits in Latin America ⁵.

All these references look very good, so you may be asking yourself what’s the point of this article. In Latin America, we have something that holds more like a law than an exceptional circumstance: Nothing is what it seems.

Global Payments

If you are a Digital Nomad or a Freelancer, you probably end up trying to collect payment from foreign customers. That would be a problem in Panama unless you are lucky enough to have a foreign bank account, as well as a physical address abroad that you can prove through documents.

Panama is sort of disconnected from the World

We are, in a way, disconnected from the world. We are in the XXI century, and we all know globalization, global payments, money transfers, digital nomads, etc. But, what is the reality for those that live or work in Panama? The short answer is: they learned to live an alternate global reality.

When I lived in Europe, it was easy to transfer money to any account in Europe. It didn’t cost a single cent in fees. But, it was a nightmare to attempt to transfer money to Panama for any purpose. Why? Panamanian banks need a correspondent bank in the USA. Money transfers must first go through those banks. So you needed a couple of SWIFT codes, one for the correspondent and one for the destination in Panama, but all online banking platforms did not allow for a correspondent bank.

Cannot sell an app in Google Play

Tough luck there! The Google Wallet did not work with Panama. In other words, you could distribute your app on the Google Play Store, but as a FREE application, you couldn’t charge for it because of Google Wallet. However, you still had to pay Google the $15 application fee. That is a disadvantage to freelancers living in Panama.

Goodbye PayPal, Stripe, etc.

Everybody knows PayPal, the easiest way to accept money from online transactions and send funds to other users. The users could then transfer their money to their local bank accounts. Well, that is not possible in Panama! You can open a PayPal account using a Panamanian address, but there is no way to link your Panamanian bank account to PayPal. You can have funds in your PayPal account, but you can never withdraw them unless you use a 3rd party with extra fees. Furthermore, you can only spend it online if you live in Panama. A local intermediary service can work around it, but that is not the idea because you don’t want to pay double fees.

As a PayPal user you want to operate like normal people do around the world, not settle for a Third World workaround.

Like many others with different names (N26, Revolut), Stripe is a well-known payment provider. If you are a writer at some platforms for writers, you will need to set up a Stripe account. But if you live in Panama, you are out of luck and unable to fully profit from your talents in a global market (again!). Nowadays, Payoneer is the only service that offers direct (no double fees) withdrawal to a Panama bank.

So, if Panama is the banking capital in Latin America and almost leading in using technology, why you can’t accomplish any of those things? Whatever you endeavor to do as a digital freelancer, you get shot in the foot with a shotgun!

Your money MAY be at risk!

That’s right! Panama has survived financial depressions that have put other countries to their knees. But in Panama, your money may not be completely safe. What? It is not that the institutions are unsafe. It is simply the attached risk (as any financial transaction) due to the local banking system resisting to insure customer’s deposits. So, let’s talk about that.

The institutions are safe and reputable. However, the system does not guarantee your deposits⁸.

In countries with a central bank, like in European countries and the USA ⁶, your bank deposits are guaranteed up to a certain limit. This limit is about $100,000 per account holder per bank or per account, it depends on local regulations. If you are a millionaire, then it would seem low, but millionaires have their way to put their money to work rather than save it. For the majority of the population, the guaranteed (insured) limit is more than enough. As an example, in Europe, someone I knew had €10K of life savings in a Turkish bank. The bank closed down suddenly. In three months the person in question recovered the money thanks to the guaranteed deposit. That bank was under the supervision of the Dutch central bank.

Panama has no central bank. Banks in Panama do not guarantee your deposits ⁷. Not a single cent! If a bank in Panama goes bust, you lose your money. And a bank, no matter how established it is, can go bust for many reasons. In this article’s resources⁸ you can find a worldwide list of deposit insurances per country.

I am pretty sure that despite the lack of a central bank, there should probably be a way to ensure the customer’s money is protected, some insurance. As long as they are making money for themselves, they are not interested in providing that protection. By the way, for months near the end of the military dictatorship (1989), the government froze all liquid assets in Panama. As a consequence, people lost access to their money in local banks.

“Performance in the past is no guarantee of future performance.”

I am not saying that banks in Panama are bad. Even during a world crisis -several of them- Panamanian economy and Panamanian banks have managed to weather it easily. Panamanian banks play as safely as they can. I still haven’t heard of a Panamanian bank that has gone bust. But, that has happened for at least one cooperative, and the poor clients suffered the consequences. That can happen to a local bank, yet people prefer to trust blindly. In financial services, there is a saying which is often indicated in the small letters, and you just read it before this paragraph.

Conclusion

Despite the claims as to the banking capital of the Americas, no bank in Panama insures your deposits. If you bring money, your best bet is to be financially savvy (most people aren’t) and make diversified investments, then only deposit what you need for your operations. But then again, I am not a financial advisor.

This situation could be remedied if the Panamanian banking system changed its policies to guarantee the deposits. If the system wants to compare itself to world-class systems, then this safety guard must never be compromised.

Additionally, there should be a transparent method to let world-class payment platforms like Stripe & PayPal to be able to interoperate with Panamanian banks without the need for a third party (that would then charge extra fees).

All my articles at Medium are free to read. My articles are not behind a paywall because I cannot participate in the Partner Program due to the above mentioned banking issues.