What kind of currency is used in Panama?
When folks travel to a foreign country, they expect, of course, that each country will have its own national currency. Well, here’s another great thing about Panama: for an American, the bills and coins are going to look very familiar!
The US Dollar is used as national currency in Panama, along with the Balboa, a familiar name and look in Panama…but not because of the very popular local brew here (Balboa beer!)…the name goes back to Vasco Nunez de Balboa. See sidebar. The Balboa is pegged to the US Dollar at par. In other words, a shiny 1 Balboa coin has the same value as a one Dollar bill which has been in a washer and dryer several times. Please note, this has nothing to do with money laundering!
An interesting background on this money
Since Panama’s independence in 1903, the Panamanian Balboa has been tied to the US Dollar as legal tender at an exchange rate of 1:1. There is a huge assortment of coins in circulation. In addition to all US coins, there are one and 5 centesimos (or centavos) and 1/10, 1/4, 1/2, 1 and 2 Balboas in the mix. If you use all these coins for spending money, you will need some extra enforced pockets! I personally never liked dealing with coins…it’s so much easier to carry $100 in one bill than in coins. My coins normally accumulate on my nightstand until they find their way into a bottle to be transported to the friendly banker down the street. I love to keep my banker busy counting my pennies. Actually, I just had a bottle delivered to US Bank and the count was $225!
Actually, in 1941, then President Dr. Arnulfo Arias pushed the government to issue their own paper money. An issue of up to 6,000,000 Balboas was authorized. 2,700,000 Balboa paper bills were issued and printed in October 1941.
One week later, Ricardo Adolfo de la Guardia replaced Dr. Arias as persident in a coup which was supported by the US Government! The new government of Panama immediately stopped the circulation of Balboa bank notes and burned all unissued stocks. Only a very few of the so-called “Arias 7-day notes” survived the fire.
Since that event, US bank notes are used to buy whatever you want to buy in Panama.
Vasco Nunez de Balboa
Vasco Nunez de Balboa was born in 1475 in Spain and became the first European to see the Pacific Ocean by crossing the isthmus of Panama. Balboa explored Central America extensively and ended as an interim governor of Darien (a part of Panama today). Alas, his life ended in 1519 when he was tried sentenced to decapitation by a rival, basically to settle jealousies among the politicos sent to Panama by the King of Spain. Today he is much revered as a sort of “father of the country” in Panama.
How to Spend Those Balboas & Dollars!
There are many wonderful things in Panama that seem to be worthwhile to spend our money on, depending what your intentions are when you travel to Panama. Adventures are around almost every corner: nature hikes and tours of rain forests, sightseeing, recreation! There is great diversity and rich history in Panama!
For relaxation and water sports, there are 2 coastlines totaling 5,637 Kms.
For retirement purposes, there is probably no other country offering a better choice of great housing, wonderful climate, modern medical clinics, healthy food–all at prices we haven’t seen in the US for many years.
Last but not least, I haven’t seen a more interesting place for investments in many years!
For Norma and myself, our main purpose of coming to Panama was to get out of Snow & Ice in Colorado. After living almost 20 years in one of the most beautiful ski areas in the world, we felt it was time to check out a country where you can go outside without boots and parka and where you can enjoy outdoor activities without needing several layers of clothing! We found the perfect place in Panama…not just a specific area in Panama, either. The entire country is wonderful, diversified and the people are friendly and welcoming!
We are not the only people who have had this great experience. There are many people in Panama who have exchanged their northern homes for steady sunshine and a year-round temperature of around 85 degrees! Our quest for warmer weather was no topic any more after spending some time in Panama. It’s just sunny and comfortable!
Even with the perfect weather, we were curious about economic values in this country and how we can help friends and clients to secure some of their financial resources in a profitable way and to have it available for retirement.
Economic Growth & Outlook
Every day we experience excitement about the economic growth in Panama! The economy in Panama grew 8.4% in 2013 and is on track to grow even more in 2014.
Economic Values and friendly investment climate in Panama have led to many questions from our clients in the US and Europe, asking about the economic future.
Which leads us back to the original question of “What kind of currency is used in Panama?” This begs another question: What happens to Panama if the US dollar dies?
This question is of greatest importance not only for Panamanians, but also for the thousands of foreign investors and expats living in Panama. This is a topic that is discussed on a government level in Panama as well as at investment banks with present and future investors.
I am not certain that the US Government has an interest in the future of Panama’s currency other than the IRS showing their power worldwide if FATCA is not followed.
What if the US Dollar sinks?
If the US Dollar should lose value due to some world event, Panama could use their own currency, the Balboa. The strength of the Balboa would depend, just like in any other country, on the faith and trust people will have in this currency. It also depends on Panama’s gross national product, its national debt, its assets and its economic outlook.
If there would be a drop in the value of the US Dollar, it would not be as a result of the economic situation in Panama or anything about Panama! Using the US Dollar in Panama since 1904 is strictly an act of convenience. Besides the US Dollar, Panama has the Balboa circulating as well–the coins are minted in Panama and the paper money comes from the Federal Reserve Bank in New York. In 2011, Panama started to circulate the 1 Balboa coin, followed by 2 Balboa coins.
Panama is in a perfect position to replace the US Dollar with the Balboa at any time. If such a change/split would become necessary, the value of the new currency in Panama, the Balboa, would be exclusively on Panama’s strength with regard to the US Dollar.
Valuing an independent Balboa
Here are a few economic facts on Panama to give you an idea of how an independent Panamanian Balboa could be valued:
- Panama’s government debt is rated “Investment Grade”
- According to Standard & Poors and Fitch, Panama has the fastest growing economy in Central America at close to 10% annually
Unemployment is below 3%
- Panama is not an industrial country. It depends mainly on service, banking, transportation and maritime registration
- The poverty rate in Panama continues to decline
- The literacy rate is over 94%
- Inflation rate is around 5%
- Present major projects in Panama include the expansion of the Canal at a cost of $5.5 billion and other approved infrastructure projects for around $14 billion
All of this attests to the fact that the economy is moving and growing and developing in a positive direction.
Another amazing thing to ponder is that Panama walked away from the 2008 global financial downturn with no noticeable damage!
PANAMA TOPS LATEST GALLUP HAPPINESS POLL!
Panama ranks first among 135 countries on subjective well-being…not just how much wealth or health people have, but how they feel about their lives.
Published by USA Today last week, this poll was conducted in 2013 by the Gallup-Healthways Well-Being Index, a Tennessee based company.
Countries in Latin America and in Northern Europe rank highest:
2. Costa Rica
Food for thought!
For more information on investing in Mango Farms in Panama, reply to this newsletter. We will provide you with fascinating details!
If you have a question of general interest, please send it to us at email@example.com and we will answer it in one of our future editions.
Does Panama have good international flight connections to and from the US? asks R.S., CA
Panama is a true international hub for air travel! The international airport at Panama City is called Tocumen. This airport is currently undergoing a major expansion with a new terminal being added to accommodate increased air traffic.
Besides several daily flights to and from the US and Canada, there are regular non-stop flights to most of the countries in Central and South America and to many different countries in Europe as well!
Denver, CO is the latest city to be added to the direct non-stop flight route to Panama, with United, via Copa Airlines (Panama’s premier airline) beginning service in early December 2014.