Panama offers natural beauty, tax breaks

By Brooke Ison and Mitra Taj, For the Tucson Citizen

Steve Arthur drives his black Toyota sport utility vehicle past the nine-hole golf course, the health spa and the church of his new neighborhood. The 1966 Amphitheater High School graduate points to the plot where his 3,000-square-foot home will be built.

"In any other place in the world, this is a national park," he says, indicating the lush mountains enfolding a cluster of quarter-million-dollar homes in the gated community of Valle Escondido in Boquete, Panama.

In mile-high Boquete, the tropics meet the mountains to create a landscape so lush even the air seems green. The weather is usually delightful. It's a far cry from Willcox, where Arthur grew up.

Last year, Arthur, a former TV producer, and his wife, Taylor, moved to Valle Escondido, the first of a growing number of gated retirement communities cropping up in the highlands and islands of Panama, a Central American country less than a third the size of Arizona.

Lured by Panama's natural beauty and foreigner-friendly tax system, Arthur and thousands of Americans like him are pumping hundreds of millions of dollars into the country of 3 million people.

In 1995, to encourage tourism as the departure of the U.S. military neared, Panama passed Law 8, exempting tourism-related businesses from taxes on profits and property. Second homes subleased part of the year and retirement communities such as Valle Escondido all fall under Panama's broad tourism umbrella.

Since the U.S. military left in 1999 after the turnover of the Panama Canal, Panama has been scrambling to find its place in the 21st century and diversify its economy beyond activities traditionally centered on the canal, such as its international banking center and the duty-free zone.

Tourism is one option. There is also something called "residential tourism" - communities such as Valle Escondido. Boquete, a former coffee-producing town of 18,000, has been ranked among the best places in the world to retire by Modern Maturity and International Living magazines.

At the restaurant in the town center, Arthur sips a Diet Coke. "You come past those gates, and this place is like Disneyland," he says.

Retirees have options

Those who eschew the gated-community ethic have other options. Erland Hinsch, who speaks in a drawl combining his native Denmark with South Carolina, is building a home with his Panamanian wife. Hinsch is a retired textile engineer - a business faltering in the United States as textile production moves overseas.

Hinsch is hooked on the town's tranquil setting. He drives his 1985 Land Rover over the bumpy dirt road just as a drizzling rain begins to fall in Boquete. Called bajareques, these daily refreshing rains cleanse the town and leave it looking like a living, breathing postcard of pristine mountaintops rising into the low-lying clouds.

"You can live well here for $1,000 a month. You can have maids, cars, a house - you can't even blink for that in the United States," Hinsch says.

Hinsch is supervising construction of a two-story, 2,800-square-foot home, contracting Panamanians for the construction. The cost? About $45,000.

Of the gated communities, he says, "It is just way too American. You don't come down here to live like an American; you adapt to Panama's culture."

Incentives lure retirees

Whichever living arrangements retirees choose, their incentives for coming to Panama remain the same: low cost of living, breathtaking beauty and a slew of enticements. Any retiree who can prove he has a pension of $500 a month for the primary applicant, plus $100 extra per dependent, would be granted a Panamanian pension visa, giving him residency.

Other benefits are also extended to retirees: duty-free importation of their primary vehicle and one car every two years after that, duty-free importation of household goods up to $10,000, discounts on loans and mortgages as well as discounts at movies, restaurants and travel agencies. Nor are they taxed on any income made outside Panama, thus allowing many retirees to have virtual businesses.

Cielo Paraiso is the newest and biggest of the two foreign-owned, gated communities in Boquete. Still in the developing stage, this 543-acre former cattle ranch offers lots of an acre or larger. Its developers, Canadians Colleen and Raideep Lal, say they are committed to preserving the natural beauty of the area.

Carving house lots only out of former pasture, not forest, and using the existing open space for the golf course, as well as drilling their own well so as not to tax the city's water system, the Lals say they see value in keeping the landscape intact and natural, where other developers just see money on the table.

"You risk jeopardizing the reason people come here if you try to put too much in," says Colleen Lal. They will sell only 147 lots in their 500-plus-acre development, she says.

'Atlas Shrugged'

Just down the road from Cielo Paraiso, Valle Escondido plans about 200 homes on 124 acres. Developer Sam Taliaferro says he gained the idea for his development from the book "Atlas Shrugged" by Ayn Rand, in which a capitalist creates a community within a hidden valley where like-minded individuals gather to create a new and better world.

Taliaferro emphasizes security as the main reason to live in a gated community. His development is protected by a guard station, roving nighttime guards, alarms connecting each home to the guard station and the geographic barrier of the mountains.

"You are considered rich, and therefore a target," says Taliaferro.

Taliaferro touts himself as a visionary. "Retirement will be the economic salvation of the country," the native Kentuckian says.

If 30,000 foreign retirees move to Panama, he figures, $6 billion will pour into the economy, about half of Panama's GDP in 2004. Half a billion annually, he says, would be spent maintaining the communities.

Taliaferro says he plans to capitalize on baby boomers entering retirement age by creating up to 20 retirement communities throughout the country. "Our plan is to make Panama the No. 1 destination for retirement outside the U.S. Unless the government does something very, very foolish to just stop it."

Recently he met with Panama's president, vice president and congressional departments to blunt proposed fiscal reforms, which would tax foreign investors along with Panamanians of all income levels.

"That's all I've been doing for two or three weeks now. Rewriting these laws to protect the foreign investors. And to protect the foreigners who come down here so that their pensions aren't taxed.

"The bottom line," says Taliaferro, "is, I can go anywhere. And so can other foreign investors."