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Panama Guide

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Friday, April 18 2014 @ 04:04 AM EDT

Why Panama? The US Dollar is the local currency

Why Panama & Frequently Asked QuestionsHere in Panama the currency is the US dollar. They call it a "Balboa" but in reality it's the same stuff you're spending in Wisconsin. This simple fact makes Panama a very attractive location for investment, retirement, and tourism for lots of good reasons.
  • It's simply easier. One less thing to think about.
  • It's very convenient, much less hassle, no matter what you're doing.
  • No need for currency exchange.
  • No financial exposure to fluctuating currency rates.
  • All daily transactions, even in the local store on the corner or to buy a newspaper from the kid on the street are all done with the US dollar. So, you don't have to waste time and energy mentally converting into the local currency for every purchase. You can simply relax.
  • And of course, all bank accounts and investments are also in US dollars. It is possible to hold currencies and accounts from other countries if required, but for the most part business is transacted in the US Dollar.

    There are a million things to consider when you're moving to or visiting a foreign country. Language, time differences, weather, food and drink, customs and cultural differences, taboos, safety and security, travel and logistics, etc. Not having to worry about learning how to change dollars into Marukian Wombats is just one less thing to think about. It helps on the Keep It Simple, Stupid scale of good things about Panama.

    Named in honor of Spanish explorer/conquistador Vasco Núñez de Balboa, the balboa is the official currency of Panama. Its ISO 4217 code is PAB.

    The balboa has been tied to the U.S. dollar (which is legal tender in Panama) at an exchange rate of 1:1 since 1903, and balboas can be exchanged for U.S. dollars in Panama at any time at a 1:1 ratio. The balboa is divided into 100 centésimos; modern 1, 5, 10, 25, and 50 centésimo coins are the same weight, dimensions, and metallic composition as the U.S. penny, nickel, dime, quarter, and half-dollar respectively. The National Bank of Panama, on occasion, places one-balboa coins into circulation, which are the same dimensions as the U.S. Eisenhower dollar. Panamanian bills denominated in balboas have not been printed since 1941, and they are not in circulation. For currency bills, Panama uses the U.S. dollar.

    Panama; Monetary Policy

    Panama's monetary system is unique. United States dollar notes serve as the paper currency and are legal tender in Panama. The local currency is the balboa, which, since its creation in 1904, has remained tied to and equal to the United States dollar. Panama issues only coins corresponding in size and metallic content to United States coins. No foreign exchange restrictions existed in Panama in the mid-1980s.

    With no need for a bank to issue and protect the paper currency, Panama did not have a central bank. The National Bank of Panama (Banco Nacional de Panamá--BNP), a state-owned commercial bank, was responsible for nonmonetary aspects of central banking. The BNP was assisted by the National Banking Commission, which was created along with the country's International Financial Center, and was charged with licensing and supervising banks. In 1985 the level of M1 (currency and demand deposits) was US$410 million, while M2 (M1 plus time deposits) was US$1.95 billion.

    In a sense, Panama could not have a monetary policy, because it lacked the instruments to implement such a policy, such as money creation and exchange-rate manipulation. In effect, Panama's money supply was determined by the balance of payments, by movements in interest rates, and by the United States, which controlled the number of dollars available for the country's international transactions.

    Panama's monetary system has benefited the country in numerous ways. The country has enjoyed almost automatic monetary and price stability. International transactions have been facilitated by the use of the United States dollar. No short-term transfer problems are associated with the balance of payments. The foreign exchange constraint felt by most developing countries has been obviated by the dollars circulating in the economy and the ability to borrow.

    In the late 1980s, the financial system consisted largely of banking. Panamanian businesses relied relatively little on public stock or bond issues. No formal stock exchange existed; supervised, independent brokers handled the limited trading in regulated financial certificates, stocks, and bonds. In addition, some insurance companies, savings and loan associations, and unregulated consumer-finance companies were formed. The country's social security fund invested in government bonds and various development projects.

    Panama Currency and related information

    The Panamanian balboa (B) = 100 centesimos. The official paper currency is the U.S. dollar, which is accepted everywhere at the rate of B1 = US$1.

    Denominations; Coins: B1 and B10; 50, 25, 10, 5 and 1 centesimos. The centesimos coins are of identical size, denomination, and metal as U.S. coins, and the coins of both nations are used here interchangeably.

    Traveler's Checks and Credit Cards If you have U.S. dollars or U.S. dollar-denomination traveler's checks, then there is no need to exchange currency. Unlike most other parts of Central and South America, it is relatively easy to exchange other major currencies also, due to the extensive offshore banking business in Panama. Traveler's checks and currency can be exchanged at banks, exchange shops, and hotels, as well as international airports. Larger banks may offer the best exchange rates, but avoid black marketers at all cost. Consult your bank about current exchange rates before departure. Keep all receipts for reconversion. Banks do not cash personal checks.

    Most currencies can also be exchanged, but try to take only crisp and new notes, as wrinkled and soiled notes are likely to be refused.

    Credit Cards; American Express and Visa are the most commonly used credit cards; Diners Club and MasterCard are also easily accepted in most upmarket places in the cities, but smaller restaurants and shops may ask for cash. Some banks in the capital offer cash advances on credit cards, but make sure you bring your passport.

    American Express offices: Agencia De Viajes Fidanque Calle 50 Y 59; Urbanizacion Obarrio Tel: [507] 264-2444 Hours: Mon. to Fri. 8a.m. to 12:15p.m. and 2:15p.m. to 5:15p.m., Sat. 8a.m. to 12:15p.m. Other locations may be ascertained by Web: travel.americanexpress.com/travel/personal/resources/tso

    ATM Locations: MasterCard/Maestro/Cirrus Panama City: 95 ATMs of Sistema Clave. Web: www.mastercard.com/atm

    Visa ATM Locations Panama City: about 200 ATMs of ABN Amor Bank, Banco Atlantico, Banco Continental, Banco del Istmo, Banco do Brasil, Banco Exterior, Banco General, Banco Internacional de Costa Rica, Banco Nacional de Panama, Banco Panameno de la Vivienda, BANCOLAT, BANEXPO, BankBoston, Banque Nationale de Paris, Bipan, Caja de Ahorros, Citibank, Credicorp Bank, HSBC Bank, HSBC Bank U.S.A., MetroBank, Multicredit Bank, PanaBank, Pribanco, TowerBank. Web: www.visa.com/pd/atm/main.html

    Lost or Stolen Cards and Checks Most nonlocal telephone numbers are toll-free or collect; if not, the call is generally reimbursable. Inquire of your agent.

  • American Express (905) 474-0870 (Int'l. collect)
  • American Express Traveler's Checks 00 [1] (800) 828-0366
  • Diners Club [507] 263-7922
  • MasterCard [1] (800) 307-7309
  • Thomas Cook Traveler's Checks [1] (800) 223-7373 or [44] (1733) 294-451
  • Visa [1] (800) 111-0016

    Money Wiring to / from Panama The following contact information is derived from listings by MoneyGram and Western Union and is not intended to be complete. Inquire of these agents, or at your hotel or bank, for reference to an agent most convenient for you.

    Economy - overview: Panama's dollarised economy rests primarily on a well-developed services sector that accounts for four-fifths of GDP. Services include operating the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism. A slump in Colon Free Zone and agricultural exports, the global slowdown, and the withdrawal of US military forces held back economic growth in 2000-03; growth picked up in 2004 led by export-oriented services and a construction boom stimulated by tax incentives. The government has been backing tax reforms, reform of the social security program, new regional trade agreements, and development of tourism. Unemployment remains high.

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