📊 Soybeans, Panama Papers, and Trickle Down Economics (3)

In April of 2016, the global financial world was shaken by what would come to be called the Panama Papers (though the Panamanian government was never super thrilled about that name).

The International Consortium of Investigative Journalists, in partnership with news organizations in multiple countr

ies, published over 11.5M leaked documents from Panama-based law firm Mossack Fonseca & Co., at one point the world’s *4th-largest offshore services provider. Within these leaks were hundreds of thousands of offshore entities—so-called “shell companies,” popular for hiding financial assets overseas.

Many of these firms were operating legally. Many, however, were not, with European white-collar criminals, sanctioned North Korean bankers, and cousins of Syrian dictator Bashar al-Assad among those whose activities were revealed to the public. Even former Argentinean President Mauricio Macri made an appearance.

Which brings us back to Panama. The country has long held a reputation as one of Latin America’s oldest tax havens, owing in part to the economic trade center surrounding the Panama Canal. Since the publishing of the Panama Papers, the country has made a concentrated effort to reduce tax evasion and enhance transparency, even making it off the Financial Action Task Force’s blacklist for countries with intense money laundering activities.

Now for the numbers. As you can see, the number of new registered corporations in Panama have fallen from roughly 20K to below 15K last year. Meanwhile, roughly 5K registered firms in the country have been dissolving each year. Part of this, of course, comes from the push-and-pull of the market, with pandemics and economic crises in recent years not helping.

But there’s also the reality that, since the landmark investigation that led to the Panama Papers being published, international firms and global elites have thought twice about stashing their money in the country. As with other offshore destinations, Panama seeks to balance a healthy business climate that attracts investment with its responsibilities to the world. Tax havens hurt real people across many countries, and Latin America’s major economies must crack down on offshore corporations if they want to leave room for local, honest firms.

It’s official! Latinometrics has been invited to its first speaking gig. Ernesto will be speaking at Nomad Capitalist Live in Kuala Lumpur, Malaysia 🇲🇾 to discuss Latin American economic trends. The event will take place September 6 - 9.