Monday, May 15, 2006 Vol. 8 No. 96

In Today's Letter: Comment: Panama: An Ideal Tax Haven Currencies: Brazilian Currency Resurrects Wealth: Cuba Digs For Oil off Florida Coast Privacy & Rights: New Identity Theft Crusader

Panama: Leading World Tax Haven

Dear A-Letter Reader:

Once again, I am writing to you today overlooking the Panama Canal. I have a panoramic view of the Pacific Ocean entrance to the Canal from the Intercontinental Miramar Hotel on Avenida Balboa in Panama City. I am here early preparing for The Sovereign Society's Total Wealth Offshore Symposium to be held here later this week, May 17-20, at the Playa Bonita Resort. Over 300 attendees and speakers from the U.S. and many other nations will be here - the largest number ever in the five years we have held these Panama meetings.
Regular readers know that we recommend Panama as one of the world's leading asset protection and tax havens. Its inviting menu for offshore investors features trusts, international business corporations, world class banking and even family foundations to manage wealth. Unlike far too many other jurisdictions, Panama stands by its iron-clad financial privacy laws, waiving them only for probable cause of criminal activity and a judicial determination. And Panama does not tax foreigners who live here or base their businesses here. What's more, Panama welcomes foreign retirees with discounts and tax exemption and thousands of American expats now live here in low cost comfort and sunshine.

But when I recite this impressive litany, invariably I'm asked: "How do you know that all this won't change? What if Panama sells out?" Of course, nothing in life is certain, except eventual death. Not even taxes.

Absent a worldwide 'level playing field,' Panama has refused consistently to commit to the Organization for Economic and Community Development (OECD) demands for an end to what high-taxers call 'harmful tax competition' -- meaning the imposition of taxes on foreigners where none now exist. Panama has also refused demands for automatic exchange of tax information about foreign nationals with accounts or investments here, a prime goal of the EU, the G-7 nations and the OECD.

The major question has been whether the U.S. can convince Panama to sign a tax information exchange agreement (TIEA) with Washington, which would give the IRS the power to demand information about U.S. persons with accounts here. Washington has failed for the last six years to obtain this goal and it's highly unlikely Panama will bend any time soon, if ever.

The peculiar history of this tiny (3 million people) nation the size of South Carolina, (with asset protection laws dating back to the 1920s) makes it a wary friend of the U.S. America and Teddy Roosevelt created the nation of Panama for its own Canal convenience, but nearly a century of colonial control left behind a healthy skepticism on the part of Panamanians towards Uncle Sam, the Colossus of the North. Both that closeness and distance works to maintain Panama as an ideal, Americanized tax haven that's not under the thumb of any other nation. Unlike the hapless British overseas territories who are now being stripped of their offshore financial attractions, one by one.

I'll say it again: life is making do best with what is at hand. For those who want legal tax savings, asset protection and privacy, history has made Panama an ideal 21st century offshore haven in a world where few remain. That's why we're meeting here later this week.

And that's the way that it looks from here in Panama.
BOB BAUMAN, Editor

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Brazilian Currency Emerges as World's Strongest Unit Since 2005
Hard to believe that just ten years ago, the Brazilian real had more zeroes affixed to its currency than America's combined national debt! Plagued by hyper-inflation in the late 1970s and 1980s, a plunging economy and spiraling interest rates, Brazil lived in the economic abyss until the early 1990s. But amid the most spectacular bull market for raw materials since the 1970s and a booming global economy, the Brazilian real has been the strongest currency in the world vis-à-vis the U.S. dollar.  Since 2005 it is up 30%. Brazil is Latin America's largest and richest economy, and the world's 7th biggest economy. The country exports a host of commodities, including pulp and paper, nickel, lead, zinc, copper, steel, coffee, cocoa, sugar and many other resources. The country is now energy self-sufficient after successfully introducing sugar-based ethanol to power over half of its automobiles.  Brazil is one of the few major commodity-producing nations to export both industrial commodities and soft agricultural commodities. As exports have boomed over the last four years, the country has enjoyed a bulging current account surplus and has been able to sharply reduce its foreign debt, even managing to retire its outstanding dollar-denominated Brady bonds. We expect Brazil's economy to continue to do well as commodities kick into 5th gear. However, we're not buyers of its currency or stock markets at this point simply because the country's currency and stocks have been soaring for the last five years. It's a bit late in the game to find good long-term value.

Oil Wars Heat Up as Cuba Contracts China to Drill off Florida Coast
The Oil Wars continue to flare up this spring. Cuba has recently contracted China to drill for oil and gas in territorial waters just 150 nautical miles off the Florida coast. Though deposits are estimated to be modest, Cuba's energy needs are minimal, driven mainly by an agrarian and tourist-based economy. Still, the plans to drill for Black Gold come in the wake of several governments pulling out all the stops to monopolize domestic energy supplies and rewrite contracts with foreign oil companies amid the oil bull market since 2002.

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• White House increases Strategic Petroleum Reserve by 42% even with oil near an all-time high, hinting that prices could go much higher still.
• "Energy Alley"-supplying a third of U.S. oil-is still recovering from Katrina and Rita. Yet the Weather Service predicts the 2006 hurricane season will be just as harsh.

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