We regularly collect overdue invoices in Panama, on behalf of collection agencies, international financial institutions and export companies.
Panama is in several ways different from surrounding countries in Latin America, because of the particular nature of Panama’s economy. It is an open economy, dollarized (which means that the dollar is the official currency), with a favorable tax climate for foreign investors, and a well-functioning professional infrastructure.
However, often, collecting an outstanding debt or overdue invoices in Panama is a challenge. Here is why.
Protective privacy laws: how to get info on a debtor?
First of all, it is extremely difficult to obtain official information about companies incorporated in Panama. Privacy laws are strict and very protective of companies and individuals doing business in Panama. When collecting a debt, without proper information it might be difficult to locate a debtor, or obtain contact details or up-to-date financial information on a debtor company or individual.
Location: the Panama-based debtor company vs the beneficial owners
Secondly, as Panama is a very populair offshore location, with many businesses incorporating companies in Panama for privacy protection or tax reasons, the actual beneficial owners of a your Panama-based debtor company may in reality be located outside Panama. This means that although you are looking in Panama to collect a debt, and address your letters and notices of default, or other formal debt collection notifications to the debtor company in Panama, in reality you will have to find ways to contact the beneficial owners of the debtor company and try to negotiate amicably, as legal proceedings against an offshore company in Panama is often not feasible or economically attractive.
The registered agent: buffer between creditor and beneficial owner
Thirdly, when you contact the debtor company in Panama in an attempt to collect a debt, you will often find yourself communicating with a so called “registered agent” in Panama (often a law firm) with (very) limited powers and who cannot and will not provide any substantial information or answers. The registered agent will pass the information and notices on to the beneficial owners of the Panama-based debtor company, and they will and often cannot do anything more. On the other hand, they will and cannot provide you (under Panama’s privacy laws) with names and contact details of the beneficial owners.
Protective privacy laws, the actual location of the beneficial owners as opposed to the Panama-based debtor company, and the involvement of a registered agents may make it challenging to collecting a debt in Panama. However, understanding Panama’s economy and corporate structures, having professionals locally and having the relationships with local law firms and registered agents can make the difference. We have succesfully collected in Panama and would be happy to assist you as well.
If you are interested in learning more or discussing issues that rise when attempting to collect an international debt in Panama, or in general you would like to know more about debt collection in Latin America & the Caribbean, please connect with Cobroamericas on Linked-In or follow us on Twitter.
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