Panama Bay

Panama is one of the three top retirement destinations in Central America today along with Mexico and Costa Rica. Despite some turbulent times in the latter part of the 1900’s, Panama has emerged as a stable and dynamic country in the 21st century that has attracted many retired expatriates to its shores. These numbers can be expected to grow as the country pursues aggressive policies and direction to attract Americans into a Panama retirement and expat living.

Panama Retirement and Expat Living:  The Economy of Panama

Although at one point in history, the mainstays of Panama’s economy were agriculture and resource exportation, today Panama’s economy is heavily based on service industries. Major service industries today include banking, commerce and tourism.

The per capita income (adjusted for purchasing power) of Panama is about $10,600 (USD) which is in about the same ball park as Costa Rica and slightly less than Mexico. This is in contrast to the USA which has a per capita income of about $46,000. The cost of living in Panama is lower than in the USA and Europe, but higher than that in the Southeast Asian nations.

Despite the difference in per capita income, Panama’s economy shows sign of becoming a more developed and mature economy. This is a desirable trait for expatriates who decide on a Panama retirement. What are these signs of a more developed economy? Most developed countries have economies where a majority of the country’s Gross Domestic Product comes from service industries. This is very much the case for Panama which accounts for over 80% of its GDP unlike most of the other countries in Central America that rely heavily on agriculture and manufacturing.

The foundations of this service economy are the Panama Canal, international banking, the Colon Free Trade Zone and tourism. The Colon Free Trade Zone is the largest of its kind in the Western Hemisphere – where goods are brought into Panama for re-export to other countries. Within this free zone, there are no taxes on companies or shipments of goods into and out of the zone. As a result, over $6.5 billion in goods flow through the zone each year.

The exchange rate remains fixed to the US dollar which eliminates the problems of fluctuating exchange rates and Panama’s banking system is well integrated into the world’s banking system.

Governmental management of the economy appears to be sound. Major investments have been made to expand the Panama Canal to accommodate larger ships and double the Canal’s capacity. The government has also introduced a number of reforms in the areas of taxation, social security, and free trade – reforms that are often problematic for many countries to implement.

Panama emerges as one of the best places to retire in Central America because this strong service industry base pretty much insures continued and strong investments in the nation’s infrastructure – banking, hotel accommodations, communications, transportation, and healthcare.

If you are considering a Panama retirement, these are some of the best economic attributes of the country: a strong service based economy, currency pegged to the dollar, a very strong international banking system, and continued investments in the nation’s infrastructure. The cost of living may not be the cheapest in the world, but it will be lower than that in the United States and makes it worthy of consideration for retirement abroad and expat living.

Panama Retirement and Expat Living: Food and Housing

The nature of Panama’s economy also has an impact on Panama’s offerings in cuisine. With an economy heavily rooted in international banking and trade, the country offers any expatriate a wide range of international dining options. If one prefers something more local, that is available as well. Seafood is widely available and part of both international and local food options.

A Panama retirement comes with a wide range of housing options. More modest styles of living are available in more rural settings, extravagant beachside villas are available in beachfront areas, and more mid-ranged prices for apartment and condominium living are available in the city.

In the city, an expatriate can expect to find a modern infrastructure in place that includes shopping, entertainment, communications, technology and transportation systems to support a modern lifestyle – and all within a little more than two hours flying time to the United States.

Panama City is referred to by some as a “Second Miami” – an indication that the infrastructure in place is modern and well developed.

Panama Retirement and Expat Living: Healthcare in Panama

Should you opt for a Panama retirement, you will find excellent healthcare facilities in Panama City that can provide healthcare at a lower cost than in the USA. For the average Panamanian, the country offers both public and private health care systems. Employed residents of Panama contribute to the public healthcare system through a tax on their incomes, and receive free healthcare and prescription drugs in return.

Expatriates are more likely to take advantage of the private healthcare system which is more expensive than the public system, but will provide them with access to modern hospitals such as Punta Pacifica which is affiliated with Johns Hopkins University. Punta Pacifica Hospital is focused on medical tourism in the region. Although not part of the free public healthcare system, prices in private hospitals can be about half that in the United States with a little shopping around. At present, no hospitals have received JCI accreditation.

Private health insurance is available and much cheaper than in the United States. Typical reasons for the lower cost are the lower costs of medical labor and the lack of litigious culture.

Panama Retirement and Expat Living: Social and Political Environments

The expatriate in Panama can expect to find a relatively safe environment for expat living and retirement. The crime rate of the country is also relatively low. The country’s strong economy tends to reduce the risk of domestic unrest. A Panama retirement is relatively safe with respect to social unrest – although the country is still a developing country.

The country has tried to make itself attractive to foreign retirees with a number of attractive retirement programs. Foreign pensioners are eligible for discounts on purchases, are permitted to purchase property and exempted from property taxes for 20 years, and are not taxed on foreign income. The country seems to be very conciously trying to attract American retirees to expatriate living in Panama.

Panama Retirement and Expat Living: Transportation and Communications

The transportation infrastructure in Panama is fairly developed in the major urban centers and less developed in rural settings. The telecommunications infrastructure also provides the expatriate retired in Panama with modern landline and cellular phone systems, internet connections, and cable television.

Panama Retirement and Expat Living: Summary

Strengths: Panama is one of the best places to retire in Central America. It offers a low cost of living, incentives for retirement in the country, a stable government and a robust economy that supports a solid national infrastructure.

Weaknesses: although healthcare is good due to the growth of medical tourism, hospitals have not received JCI accreditation yet. Although the cost of living is significantly lower than in the United States, it is higher than most of the countries in Southeast Asia.

Analysis: Overall, Panama is one of the best places for overseas retirement and expat living in Central America. The low cost of living, modernizing economy, and close proximity to the United States has proven attractive to many retirees.

(Photo by: eutrophication)

References and Bibliography

Panama’s Economy: A Singapore for Central America?, the Economist

Panama Economy and Risk Analysis, Latin America Monitor

Panama Forum

Panama: Medical Tourism

Panama: Political and Economic Conditions and US Relations

Other obvious reasons for the popularity of a Mexican or Central American retirement, is the lower cost of living in these countries and the close proximity of Mexico and Central America to the United States. Not only is it relatively cheap to live in this region, but it can be done close to family, friends, and American healthcare back in the states. When considered all together, these factors make Mexico and Central America one of the best places to retire abroad in the Western Hemisphere, if not the world.

For purposes of this article, Central America is the region between the Mexico and Colombia. This includes the countries of Belize, Honduras, Guatemala, El Salvador, Costa Rica and Panama. Usually, this region is considered part of North America, but it has been separated as a unique region for its economic, historical and/or cultural similarities.

Mexican and Central American Retirement – Overview of the Physical Landscape

Geology of Mexico and Central America for Retirement: Mexico and Central America are relatively mountainous and geologically active regions in the western hemisphere. Patterns of volcanism and earthquake activity are similar to America’s west coast. Like America’s west coast, both Mexico and Central America are located along tectonic plate boundaries that result in a great deal of geologic activity.

Anyone considering a retirement in Mexico or Central America should consider the regions’ geologic activity as part of their retirement planning for living abroad. Although the risk of a major volcanic eruption or earthquake event is similar to the risks in the western United States, the ability of these countries to respond to the aftermath of an eruption or earthquake is considerably less than in the United States.

Climates of Mexico and Central America for Retirement: The mountainous nature of the region produces a diverse environment. Although these are tropical regions, the physical landscape varies from lush tropical rainforests to cooler highland regions with an almost temperate type of climate to arid deserts.

During the hurricane season, hurricane paths will sometimes cross into the Mexico – Central American region. Thus, potential retirees will find a wide range of environments to select from. The greatest meteorological risks may be an occasional hurricane or tropical storm.

Location of Mexico and Central America for Retirement: The close proximity of Mexico and Central America to the United States makes them ideal locations for retirement. A retiree with health problems that may require sophisticated medical care will find it more convenient to fly back to the United States for healthcare.

Mexico and Central American Retirement – Overview of the Cultural Landscape

Mexico and Central America Prior to 1500: Central America was settled long before it was “discovered” by Europe. A number of advanced civilizations emerged in the area as far back as 1500 BC. These include Mayan, Aztec, Olmec, Toltec and other tribal groups that evolved into more complex city states.

Mexico and Central America After 1500: With the coming of the Europeans, Mexico and most of Central America fell under Spanish colonial control. The one exception was Belize, which became a British colony. Independence was achieved by most countries in the 1800’s. Although this is a relatively small region, each country does have its own unique history and culture reflecting indigenous cultures, Spanish colonial influence, and assimilation into the global economy.

The colonial imprint remains in the region and Spanish culture shapes most of these countries in terms of language, culture, and social systems. The original indigenous cultures have for the most part been reduced to isolated minorities or have been blended into the Spanish culture.

By the late 1900’s Mexico and most of Central America gradually evolved into relatively stable democracies. As in most developing regions, social and ethnic tensions do surface from time to time, but are now relatively small, localized, and isolated events. Retirees will generally find a Mexico or Central American retirement to be relatively free of major internal conflicts.

Central American Retirement – Overview of the Economic Landscape

The most “developed” countries in this region are Mexico, Costa Rica and Panama. Average incomes in these countries fall in the range from $12-15,000 USD per year. These countries are developing rapidly and have relatively stable democratic governments and economies. Infrastructure in these countries – such as schools, transportation and communication systems, tend to be more developed than other countries in the region.

The other countries have per capita incomes in the range of $3,000 to $9,000 USD per year. Although their capital cities tend to be relatively developed, on a national level most of these countries still have a way to go in terms of developing infrastructure and establishing a stable economy and government.

Mexico Retirement: Perhaps the most popular retirement destination in this region is Mexico. Of course, the fact that Mexico borders the United States and offers the retiree a warm and pleasant climate year round are natural attractions. But in recent years, Mexico has also pursued a very aggressive strategy designed to convince Americans to retire abroad to their country.

Despite the negative publicity associated with the swine flu and frequent hurricanes on the Gulf of Mexico coast, the number of American retirees selecting Mexico for living abroad grows steadily. The most popular area seems to be along the scenic Pacific Coast – sheltered from hurricanes and away from the overpopulation of Mexico City.

Mexico, like most countries competing for the American retiree, offers a special retiree visa that makes retirement simple and convenient. It does not have to be renewed frequently and permits the retiree to bring in household goods. If purchasing a home, there are American banks that will help finance the purchase. And, seniors are eligible for discounts on many purchases.

Perhaps most interesting is the fact that Mexico has begun to grow its long term care industry to provide health care to elderly Americans. It is still a new and growing industry, but the costs for assisted living plus round the clock health care is much lower than in the USA. Mexico is serious in its attempt to become one of the best places to retire in the region.

Costa Rica Retirement: Costa Rica has also gone out of its way to attract the American retiree to its shores. Unlike many foreign countries that heavily tax imported vehicles, the retiree may import a vehicle without taxes every few years. At present, nearly 25,000 Americans are living overseas in Costa Rica. Those who have chosen the country as a retirement destination may be permanent year round residents or migratory residents – flying south only during the cold American winters.

Unlike many countries with strong protectionist polices, retirees are able to purchase a home exempt from any property taxes. And following Mexico’s lead, retirees are able to bring in $10,000 worth of household goods without paying any duty. Their policy seems to reduce as many of the barriers as possible to immigration. Costa Rica might be the most politically and economically stable country in the region, and definitely is one of the best places to retire.

Panama Retirement: The third major retirement destination in this region is Panama. Here, American retirees may enjoy the benefits of an income tax free life. Panama also offers the same property tax and duty free benefits that Mexico and Costa Rica offer.

Panama also boasts a senior discount plan that offers 50% discounts on entertainment and hotel accommodations, 25-30% off local transportation as well as air travel, 25% off restaurant meals, and 10-15% off prescription drugs and dental/eye exams. Panama is very serious in trying to position itself to attract Americans who want to be living abroad in their retirement.

Central American and Mexican Retirement – Summary of the Retirement Landscape:

Central America is a nice retirement destination. Mexico, Costa Rica and Panama are the more developed countries with stable governments and economies that are actively pursuing policies designed to attract Americans who have decided to retire abroad. The other Central American countries are generally less developed, but offer an even lower cost of living than these three countries. For many Americans, a Mexican or Central American retirement offers an opportunity to get away, but remain close enough to home. For a tropical lifestyle, Central America is one of the best places to retire while remaining close to America.

(Photo by: Tostie14)

References and Bibliography:

Central America

Central America News

Example of a Central American Retirement Community

Geography of Central America

Mexico History and Culture