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Wednesday, November 26 2014 @ 01:21 PM EST

How NOT to do Business in Panama

Money Matters By DON WINNER for Panama-Guide.com - I often promote Panama as having wonderful potential for business and investment. I think there are some fantastic opportunities here, if you know what to look for and how to take advantage of them. However there is a recurring theme I've seen several times. In a nutshell, unscrupulous Panamanian lawyers convince foreign investors to trust them and to believe everything they say, then they lead them into situations requiring long legal battles where the only person guaranteed to make any money is the lawyer. A good friend of mine in Panama recently got involved in a joint venture in a business involving the purchase and management of some heavy equipment (dump trucks.) The deal was supposedly going to be - the investors from the US plunk down the capital to buy the trucks, get them all set up and ready to run, and the local expert here in Panama would get the contracts, manage the business, and handle everything in order to turn a profit. The investors from the US would practically have to do nothing, and they would be making a lot of money. But a funny thing happened on the way to the bank. The guys from the states started getting exceptionally nervous for no apparent reason. Later it was learned their unscrupulous Panamanian lawyer was trying to "cut out" the local rep, get him removed from the business completely, and the lawyer was telling the US investors "you don't need that guy, I can do it all for you." Those guys (idiots) listened to the lawyer and they have since embarked on a path that can only be described as legal self destruction. They acted against the one person who was actually trustworthy and who would have done them no harm, but instead they decided to place their trust in an unscrupulous lawyer who is really only looking out for his best interests (and not those of his clients.) Their case is a perfect example of "how not to do business in Panama." (more)

The Panama Rep Didn't Steal A Dime: You should know that in this deal the person who was here on the ground in Panama who was supposed to be running the show (my friend) did nothing wrong. When it became apparent that the guys from the states intended to remove him from the company (at the urging of the unscrupulous Panamanian lawyer) they did so illegally, and in a manner inconsistent with the documents of incorporation for the Panamanian company. They basically did it from one day to the next without giving the other partner ten days notice as required. But most importantly, my friend here on the ground in Panama did absolutely nothing untoward, and the only reason the US investors got nervous was because the real crook was whispering in their ears. In fact, these idiots turned on the guy they should have been trusting, in favor of the guy who is now about to screw them over by the numbers. In that respect I can only say they now deserve everything they have coming to them, and more. They got stupid, made mistakes, and now it's going to bite them in the ass, hard.

A Man's Word Still Means Something: I do business here in Panama on a handshake and on verbal commitments all the time - mostly with other gringos. If a serious business owner tells me they will do something then I take them for their word and follow through. They do their part, I do my part, and everyone is happy. However in some rare cases, sometimes happens feeling of mutual trust and confidence begins to melt away for whatever reason. Normally if that happens then I'm the first one to walk the other way - I don't want to do business with anyone I can't trust. If I feel like I have to nail someone down with a contract to ensure their performance, then why am I doing business with them in the first place? Business arrangements should be mutually beneficial, and if one side or the other is no longer happy or comfortable then it's best to do something else. Life's too short.

Get A Second Opinion: If you are about to write a check to a lawyer to embark on some kind of a large legal battle here in Panama, I would always recommend that you seek and obtain a second opinion form someone who is not a lawyer first. I don't mean to get a legal opinion from a non-lawyer, I mean get a common sense opinion from someone who is not going to make a whole lot of money if you take your case to court. Obviously lawyers get paid when there's conflict. If there were no courts or legal battles then the lawyers would all starve to death and become cab drivers (or politicians.) Many times your best strategy would be to avoid legal battles at all cost and to settle out of court and over a cup of coffee, as honorable men, with the agreement sealed with a handshake. Lawyers don't get paid for handshakes - so they are not very likely to steer you down that path. They will start the same conversation with "well, we can open a criminal case, and a civil case, and an administrative case," etc. Make sure you bring your checkbook to that meeting.

Don't Get Me Wrong: If you're in Panama you're going to be needing a lawyer. There are things you will be doing such as immigration and real estate deals that will require their services. If you are entering into a business transaction then you'll need lawyers to establish corporations. review contracts, and to do other things. However if you're going to open a legal action against someone, it almost always makes the most sense economically speaking to see if you can work things out first. I'm not saying that all lawyers are bad people - on the contrary. Most of them are just doing their jobs, and of course they work for pay. But I do have a real problem with lawyers who steer their clients INTO bad land deals, for example, knowing that they will be able to charge legal fees for ten years as the cases work their way through the courts.

Hopefully It Will Work Out: As I wrote this article I purposefully left out the names of the people involved in this case, hoping my friend will be able to send this to the (idiots) who are about to self-destruct, by taking the advice of a bad lawyer who is leading them astray. The US investors (idiots) have already made so many legal (criminal) and technical (civil, administrative) mistakes they are almost certainly guaranteed to lose everything here in Panama if it does go through the court system. In the end the only person who is guaranteed a payday is the lawyer, and the courts will decide the damages and who gets what. But here's my point - none of this is necessary, at all. Actually, thanks to the (dumb) actions of the US investors, who are acting on the advice of their unscrupulous Panamanian lawyer, they have basically laid all of their assets on a silver platter for my friend. But of course they don't know that, they can't see it, and because they have decided to believe everything their Panamanian lawyer tells them, they think they are in the cat-bird seat. As I sat there listening to this whole thing, I just hung my head in disbelief, wondering how anyone who considers themselves to be smart and worldly could be so flat-out stupid. Amazing. If you're going to do business in Panama, this is not the path to follow.

Copyright 2009 by Don Winner for Panama-Guide.com. Go ahead and use whatever you like as long as you credit the source. Salud.

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How NOT to do Business in Panama | 4 comments | Create New Account
The following comments are owned by whomever posted them. This site is not responsible for what they say.
How NOT to do Business in Panama
Authored by: Anonymous on Thursday, December 10 2009 @ 08:26 PM EST

Don, it is me Michael of Sambuhause...you want a real Panama investment business horror story.....interview me, for what I have been battling for the last three years. Trust No One......

How NOT to do Business in Panama
Authored by: susangg on Thursday, December 10 2009 @ 11:04 PM EST

I agree with most of what you say. I see Panamanian lawyers getting away with all kinds of crap that would get you disbarred quick in the USA, and incompetent, unethical and just plain crooked lawyers figure prominently in many of the legal troubles expats find themselves in.
But not this: "If I feel like I have to nail someone down with a contract to ensure their performance, then why am I doing business with them in the first place? "
Don, you know better than that.
Engaging in ANY kind of financial or business transaction without a contract is a bad idea. You've heard the old adage "good fences make good neighbors." Well, good contracts make good business associates too.
Doing a deal without a contract is asking for trouble. Of course, a contract is not a substitute for an honest business partner, nor will it always protect you against an incompetent or corrupt lawyer. But its a good step in the right direction, and will help you stay out of court (or if you end up in court, help you settle a lot quicker or win if it comes to that.)
A contract spelling out who does what, and who owns what, is not only to protect you from your business partner, its to protect you against all kinds of contingencies that might come up in a deal or business relationship that you might not have contemplated. Like what if you die, or your business partner dies? What about third party creditors? What if the tax man comes calling? What if your business partner gets sued by somebody else?
Anybody who is planning to get involved in a transaction or deal or business relationship needs a contract. The day when you could place your financial assets on the line with just a handshake have long been over....
What was it your favorite US politician said? "Trust but verify." That's what a contract does for you.


---
"Dissent is the highest form of patriotism."
(Thomas Jefferson)

How NOT to do Business in Panama
Authored by: Don Winner on Friday, December 11 2009 @ 06:41 AM EST

In response to Susan about the need for a contract;

Did you have a written contract with Eric Jackson regarding your advertising with him on his website? I doubt it. But I really don't know, maybe you did.

I recently ran a banner for a small business, a bar. The manager of the bar thought he would be able to get a local beer company to pay for the advertising campaign. He gave me the green light, told me to start running the banner, and that he would pay at the end of the month. Normally I require payment up front but in this case I made an exception. Eventually the beer company said no, that they would not pay for the advertising. Then all of a sudden the bar manager didn't want to pay as agreed, and even though he created the problem himself, I simply took down the banner, didn't charge him for the advertising I had done, and told him to forget about it, no hard feelings.

It didn't cost me practically anything to learn a simple lesson about that guy. A person with good business ethics would have said "hey Don, I thought I would be able to get the money from the beer company, and since that didn't work as expected and now that I'm gong to have to pay for this out of my own budget, I just don't have the money to do it. So, here's what I owe you, let it run through the end of the month, and please kill it."

But that's not what this guy did. He got weird and squirrelly and I beat him to the door. Now, for a very small price to me, I learned an invaluable lesson about him. I will now never (ever) do business with that dude again, under any circumstances. No contract required.

Remember Mike Ramo? That guy ripped me off for $1,000 by abusing my confidence in him. Even thought that happened back in 2004 I remember it like it was yesterday. Again, no contract, I paid the price, and in effect that was the cost of my "education" about that guy. A small price to pay to learn an invaluable lesson that will be valid for the rest of both of our lives.

My deals are usually relatively small and done face to face with people I've known for a long time. I place an unusual amount of value in trust, confidence, business ethics, values, morals, and most of all personal honor. I recently made a mistake with regards to an advertising campaign and I told the client that I would basically be doubling his exposure for no additional fee, because "when I screw up, it should be a good thing for you in the long run." My barometer is simple - you should be able to tell my father anything you want about be, and as long as the details of the event are truth and fact, then he should be proud of my actions.

So, you're right in that a contract will protect you and cement the different details of your business dealings. Thankfully, I can usually be more efficient and nimble, and everyone walks away smiling. In my business the companies I promote should become very successful over time, mostly due to their own hard work, and helped along by the promotion and advertising services I provide for them. If any advertiser thinks they are wasting money by advertising on my website, then I'll be the very first one to tell them they should do something else with their hard earned money. In this business it has to be a win-win or it simply doesn't make any sense at all.