When vice president Juan Carlos Varela won the presidential election, plenty were happy, some were upset, and some….well, some didn’t know how to feel about it.
After all, Panama has seen unprecedented growth under Ricardo Martinelli, the outgoing president. During his term, Panama become home to the fastest-growing GDP in the hemisphere. Massive economic strides were taken, and Panama deepened its reputation as an attractive place for foreigners to live and invest.
With Martinelli out of office and Varela stepping in, we have to ask: What will become of Panama’s steadfast growth? Will it sustain under Varela? Will the government maintain its welcoming attitude towards foreigners?
About Juan Carlos Varela
Varela is a free-market conservative who, throughout his campaign and vice presidency, has demonstrated strong social interests and commitment to democracy.
In short, he vows to eliminate corruption, instill a new level of transparency within the government, and serve the lower-income populace through various public programs.
Varela’s Potential Economic Impact
For some, the change of government raises concerns on the longevity of Panama’s pro-business, foreigner-friendly stance. My opinion is that Varela would have a hard time making any considerable changes to the policies and projects that have proven to be beneficial.
For one, long-term projects such as the Panama Canal expansion, Panama City’s new metrobus, and the Panamerican Highway enhancements are already contracted and will therefore be seen through. Such endeavors will continue to have a positive impact on Panama’s workforce and economy. Moreover, Varela’s party represents only 12 of the 71 seats in the legislative assembly, whereas Martinell’s party has taken 30. Such an imbalance will make it difficult for Varela to incite any major changes, meaning the practices that are most conducive to Panama’s wellbeing are unlikely to change.
What about expats?
During Varela’s campaign, little was said about his stance on foreigners. My opinion, however, is that visa and foreign tax policies are unlikely to be tampered with.
Friendly Nation’s Visa
Martinelli’s Friendly Nations Visa, which provides fast-track residency to citizens of certain countries, has proven to be a positive driving force in Panama’s economy. It has incentivized countless foreigners to invest in Panama, sparking rapid real estate growth and prompting new businesses and employment.
Panamanians must account for 90% of the workforce of any company, thereby lessening the chance of locals being pushed from the workforce. This helps to prevent any distaste towards foreigners by Panamanians- ensuring that foreigners and citizens work together in a mutually beneficial manner. Put simply, there is no real reason to put an end to fast-track residency, and every reason not to. While Varela technically has the power to eliminate fast-track residency, the decision to do so would not be well received by neither the legislative assembly nor the majority of Panama’s key economic players.
Panamas has stirred international interest thanks in part to its conducive banking environment and favorable tax laws. Given that these are long-standing policies, I find it unlikely that any major change will be seen under Varela.
Panama’s celebrated 0% tax on foreign-earned income has been around since long before Martinelli took office. It’s also proven to be one of the most game-changing policies Panama has, one that has sparked massive foreign investment and economic growth.
In essence, there is no evidence of Varela wanting to oppose any of Panama’s pro-growth or foreigner-friendly policies. Any attempt to restructure the practices that are most conducive to Panama’s well-being would be met with overwhelming opposition from his legislative assembly, the configuration of which outnumbers Varela’s party.
As far as I can tell, Panama’s strong economy and open-arms mentality remain resilient. I wish President Varela good luck for his upcoming term, and look forward to watching Panama continue to raise the benchmark for Latin America.
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