I Bless the Rains down in Panama

I’ve said that Panama has four seasons: Sun Glorious Sun, When will it every Rain, Rain Glorious Rain, Dear Lord when will we see the Sun. The dry season is hot and dry, and the fields and roadsides are burned casting a pall of smoke over much of the country. We are entering the dry season now (December) and it will be Sun Glorious Sun for the next three to four months.

By then we will be wishing for rain, to clear and damp down the dust, and to bring green back to the city and countryside.

When the rainy season does arrive, it will rain more each month for nine months than the highest precipitation months for London in the UK. Or to put it another way, for only three months of the year will the rainfall in Panama City be less than the highest monthly rainfall in London.

The rain in London pokes at you, for hours, with cold little stabs all over any exposed skin. It is also driven by the breeze or wind, so it hits you sideways and does so all day long. It is as if God poured a jug of cold water over you and then sent it around and around in the wind, to hit you from every direction. Certainly, London has downpours, the wonderful April Showers to bring May Flowers. But mostly, the rain is a long drawn out affair, and once it starts you know that the day will be spent indoors if at all possible.

Average London UK rainfall by month

Panama City rain is different. It is tropical rain. The best description that I have is that God drops a dumpster full of water onto you. It crashes down for 30 – 45 minutes, then stops. Except of course for the deepest part of the rainy season, when all you really want is a few hours of sunshine.

 (Average Panama City, Panama rainfall by month)

Let's look at what that means. The upper photo was taken during a rainstorm. Not a terribly strong storm, as you can actually see the buildings in the background. The lower photo was taken a few hours later when the rains had cleared. In a very strong rain, none of the buildings in these two photos is visible.

The test questions for a Panamanian driver’s license give a clue to the impact of the rain. When studying for the theory questions, there is a set of sample questions available online. One of the questions stumped me:

What is the impact of heavy rain on your car?
A) You drive slowly
B) Your car stops
C) You drive with your emergency lights on
D) Watch for other drivers

I was stumped. Well, yes, driving more slowly makes sense, and certainly watching for other drivers is important – critical in fact. Emergency lighting makes a lot of sense with the intensity of the downpours. But no, the right answer is B) your car stops.

At face value that just doesn’t make any sense.

My car, well, any car I’ve owned, can drive perfectly adequately through the rain. And why would my car stop just because it is raining. 

The real meaning of answer B) is that the roads will flood, and any lower land or poorly draining areas will flood. And they will flood quickly. While the municipal drainage systems are reasonably good, the volumes of water simply overwhelm them, and very quickly some of the key roads will be a couple of feet (most of a meter) deep with fast flowing water. 

Here is how your car stops:

Yet for all that rain, the most wonderful things about it are that the rains clear the humidity (for a short period) and the rain is not cold, though it does take the heat out of the air. It a real pleasure to sit on a balcony during a rainstorm and be able to stay dry and cool.

Panamanian Real Estate, the Central American Lobster Pot?

When looking around you in Panama City, it is impossible to miss the incredible number of skyscrapers and to miss the cranes and new skyscrapers that are under construction. Panama City ranks as number 21 in world cities with the most skyscrapers over 150 meters in height, with 50 such building, so far.

This is pretty incredible for a country with a population of just over 4 million, and a city with a population, if you include the entire surrounding area, of 1.5 million people, and a national GDP per capita of $22,000. This ranks Panama at number 80 in GDP per capita. Yet this clearly is not the case in the city and country. Average GDP is not $22,000 when wages for most workers range between $400 and $800 per month (with a "13th month" built-in bonus). 41% of the Panamanian workforce has not achieved even a high-school level education, a prerequisite for a growing knowledge working economy that can also sustain a consumer-driven economy.

Multi-year empty CBD office space

Yet there clearly is money sloshing about, or at least there was. Many of those very tall buildings are residential towers, with at least one being 62 floors with a swimming pool on the roof. Yet looking at those towers at night and counting the lighted floors, and it appears that the buildings are 30% - 40% occupied at best. 

The same situation holds true for office and commercial real estate (right), at least at the middle to higher end. A nearby building, with 24 floors of office space, has had at least 9 of those floors empty for the past 18 months or longer. In all probability, those 9 floors have never been occupied. Yet the building continues. The photo at right was taken early in the morning to clearly show the empty floors, with the sun shining through unimpeded by furnishings, partitions or internal walls.

Construction represents just under 20% of the Panama economy, a level that cannot be sustainable over the longer term. Yet that construction boom has continued year after year.

All the way back in 2007, Reuters reported that, even before the full impact of the Global Financial Crisis (GFC), Panama City was on track to bring more apartments onto the market than Miami in the 1995 - 2005 decade; over 11,000 units by the end of 2010. Not all of those units were built, but many were. And while the GFC certainly slowed everything down, building picked up again. Between 2017 and 2019, over 8,500 new apartments are expected to come to market.

Who is buying these units? In a city in which huge numbers of people live on the minimum wage of $2.50 (average) per hour, feeding the family is more important than aspiring to live in a high rise. Even professionals earn is the range of $1200 per month. 

So "average" people are not investing in these apartments and commercial buildings. But someone is.

Google Maps, 2018

Look at Panama's location on the map, sitting between Costa Rica to the west/north and Colombia to the south. Noriega was overthrown, officially, because he decided to participate a little too actively in the drug trade, instead of helping the Americans to stop that trade. Admittedly there is more than a little evidence that he worked with the CIA and others to ensure that drugs reached America. Yet when the Americans decided to remove him, it was not for his rejection of the "School of the Americas" (for training right-wing governments and their security forces in counter-insurgency and "public order"), it was because he refused to stop the drug traffic. The cultural and emotional scars of that invasion remain.

Noriega was a small-fry, and the drugs were going to come from Colombia and Peru no matter who was in power in Panama, and those drugs were going to, and continue to travel north via Panama and Costa Rica and other countries in Central America. And the resulting drug money needs to go somewhere.

We were recently informed of a finca (farm or undeveloped country land) for sale - hundreds of hectares. Literally a few kilometres along each boundary. Who was selling it? "Oh, he's a narco from Colombia" we were told, completely matter of factly. (we were looking for 4 - 5 hectares, not 500+ hectares).

For a narco, like any investor, the choice is pretty simple; do I concentrate my investments in one sector or one country, or do I diversify? Panama, and Panamanian property and construction provides a good diversification opportunity that is not under the control of the Colombian or American governments.

But not all the money parked in Panama is dirty. If you lived in Venezuela in the 1990 and early 2000s, it was a rich country. And there were many rich Venezuelans. There still are, though far fewer. But those that are still rich saw what was coming and moved some of their assets out of the country. Where did that money go? Certainly, much of it arrived in Panama as investments in residential property, and specifically in the new towers that were going up all along the Ave Balboa and overlooking the Pacific Ocean. 

"Clean" money, for the same reason, has flowed in from Colombia, Brazil and Argentina. Panama is a "safe" place to put that money, where it cannot be seen by your home country government (this might change) or by the Americans, who are trusted by no one in Latin America.

The downside for these investors, clean and dirty, is that there needs to be a market into which they can sell the asset, otherwise there is the risk of a "lobster pot" economy. It is easy to get in, but almost impossible to get out. Yet as most investors are looking for somewhere "safe" to park their money, Panama continues to appear to be a good place to park it. The economy continues to grow, albeit at a slower pace at the moment, and investment opportunities in commercial and high-end residential real estate abound.

Yet one day the government of Venezuela will fall and be replaced by a government that actually seeks to grow the economy by encouraging a functioning market economy. When that happens, Venezuelan money parked offshore will attempt to come home. That will mean selling assets outside of Venezuela, which will include property assets in Panama. We are already seeing examples of individuals seeking to sell, and it looks ugly.

Overheard was a conversation in which a gringo was lamenting the difficulty in selling an apartment bought seven or eight years ago. While background prices of property investment have increased for new-builds, existing high-quality properties cannot sell. This gringo was looking at selling for almost 20% less than the seven or eight-year-old purchase price.

This story is hardly unique, and while the likes of "International Living" and many gringos in Panama continue to laud the country and residential property market, the "lobster pot" continues to trap lobster after lobster.

For some people that will be acceptable - better a 20% loss on an investment in Panama that a confiscation of 100% of the asset in Venezuela. Likewise, such a loss by a narco is still an 80% retention of gains from the production and sale of an illegal product - drugs. Money laundering always costs a higher premium that moving clean money.

Still, the money flowed in, an almost constant river of money through the 2000s and 2010s. But last year (2017) the flow began to slow. What happened?

It seems, though I have no evidence to support this, that Venezuelans have simply run out of assets to get out of the country, while at the same time, Colombians, with the peace deal with FARC, have found home a safer place to invest. Argentina is back in crisis, and has spent so long in various crises that any easily movable financial assets have probably already found homes outside the country. If the crisis continues, there may come a time when Argentina actually becomes a magnet for investment.

Anecdotal evidence (that means someone close to the industry told me) suggests that in 2018, construction permits for new construction in Panama City are down by 50% on permits issued in 2017.

Does this foreshadow a squeeze in available properties, or saturation that will require a correction to soak up excess capacity? I do not know the answer, and there are probably three answers for every two people in Panama that you ask.

So to come back to the original point, the money in Panama is not coming from organic growth, but from external investment. Unfortunately for Panama, that external investment is in large part going into construction, and therefore is building wondrous high-rises and commercial property. It is not building the foundations for a self-sustaining economy. Cut off the foreign construction investment, and there is inadequate local demand or debt servicing capacity to replace the construction industry job that will be lost.

A country in which 41% of the working population does not have a high-school level education cannot sustain a "knowledge worker" economy or an economic pyramid. An upturned drawing pin (thumb tack) economic "pyramid" cannot sustain a construction based economy without a consistent and continuous flow of inbound investment.

Panama traffic is horrible

If there is a (tongue in cheek) truth, it is that every city claims to have the worst traffic in the world, and I can say that I have lived in some cities that could reasonably make that claim. None however compare with Panama City, and Panamanian drivers in general. Going to Google Maps, it frequently tells you that is will take significantly less time to walk between locations than it will take you to drive.

When we lived in the South of France, I used to say that I finally found out who taught the Malaysians to drive – the French from Nice. If that was true (probably not), I now know who the French took as their role model.

It is standard for a right hand turning vehicle to start the turn from the left-most lane (for those of you in the UK, NZ or Australia, a left hand turn from the far right lane). This is so common that we simply refer to it as the "Panama Turn" when it happens directly in front of us, sometimes requiring rapid braking on our part. Furthermore, the roads are actually configured to require the traversing of multiple lanes in fairly short distances, causing no end of start/stop driving.

My personal bet is that he was cut off.

Turn signals are, or course, optional. So optional that I suspect many cars don't actually have any turn signal mechanics inside the car. Swerving is common, as much to avoid potholes as to think about changing lanes and then deciding to stay in your current lane.

Some people have gone so far as to tell me that rear view mirrors are a waste in Panama, as the only thing you should care about are the cars in front of you. That certainly seems to sum up drivers - lane changes that cut you off, no blinkers, stopping anywhere, driving into traffic from side roads at speed, and of course the ubiquitous “Panama Turn”.

Remarkably perhaps, the traffic accident death rate per 100,000 peopleis 10, just under the US rate of 10.6, but far higher than the 2.9 rate for the UK, and below the rest of Latin America. So the horror of Panamanian driving is not the death rate, but the terrible traffic. 

While death rate are first world, sort of, the accident rate is pretty amazing, and the insurance and court system manages the volume poorly. Anecdotally, I know of a case in which a rear-ended insurance claim remains outstanding because the driver at fault simply ignores the court summons.

Flipping Cars onto their sides seems to a local speciality.

As the Panama economy has grown, so have the number of cars and trucks on the roads; a growth rate that has exceeded the rate of growth of paved road surface in the city. Partial solutions have included new roads, a confusing one-way system, widened roads, and increasing the number of lanes - where two lanes existed in the past, there are now three lanes. Three very cosy lanes. In some cases you can still see the original lane makers.

Add to this a history of corruption, with the issuance of17,000 "no test" drivers licenses between 2011 and 2014, and Panama City has not only a strained infrastructure, but thousands of drivers who have not passed even the most basic of driving tests.

I can attest to the "most basic of driving tests". The theory test includes such critical questions such as how far away from a truck carrying dynamite do you have to be before you can smoke a cigarette? (The answer is 150 meters, if you really want to know). Sure, there are real questions in the theory test, but many of the questions are contradictory and in some cases simply silly. For example, the proper answer to what is the impact of heavy rain? Your car stops. The only reason that this answer is sort of correct, is because the roads flood, and it you do not know from good experience just how deep that water is, don’t go there.

The only practical test required of a driver is to prove you can park. Yes, that is the only practical test. Park forward into a space. Park backward into a space. Parallel park. Full disclosure, I failed the parallel parking the first time; I mounted the curb, and had to return a week later to repeat the test. A Nissan Patrol is not a small car, and simple arrogance on my part was my undoing. The next time, we rented the smallest car we could find, and parallel parking was a breeze.

While this all sounds terrible, there is hope. Panama City has afantastic subway system, which is cheap ($.35 per trip, $.70 round trip), clean, fast and growing. The stations can cater for trains of 5 carriages instead of the current 3 per train. Current passenger numbers on the Metro are around 200,000 per day, in a city of 1.5 million. That number will increase with the expanding of the line, and the introduction of the second line, due in late 2018 in time to move the hordes expected for the Pope’s visit.

Still, the roads will be full, and fuller with each month and year. And with the driving style here, I am very happy with our beast, the Nissan Patrol. It is high enough for the puddles and floods, ugly enough that people cannot miss seeing it, and big enough that it tends to make smaller car worried about the outcome. All factors that give me much comfort driving in Panama.

(Photos are from one day only - from the Trafico Panama Facebook page)

Reputation v Reality - Panama and Banking

Opening a bank account in a Tax Haven is supposed to be easy. All hush hush, sly winks, funny bank account numbers. Or as the British might say - "Nudge, nudge, wink, wink, say no more, say no more". I would not say that was my expectation when opening a bank account in Panama, but I certainly was not ready for the level of Customer Due Diligence, KYC (Know Your Customer) and AML (Anti-Money Laundering) checks that were required. And here I were thinking, I'll hand over some cash and we'll open a bank account.

Still the (new) bank insisted the checks they insisted on making were completely normal, and that there had been no change in their process. The printed and many-times photocopied forms certainly appeared to support their position.  This in contrast to my experience opening a bank account in the UK with nothing more than a Belgian identify card. I walked in, sat down, handed over my Belgian identify card and a letter from my employer (which, frankly, I could have typed and printed from my own computer). With little other than asking me for my address, I had a UK bank account, with a debit card in the mail.

At this stage let me say that this was all above-board, as we were in the process of actually moving to Panama from the UK. I'll also confess that this was a month after the world wide splash of the "Panama Papers" and the sudden spotlight that this had shown on Panama in general, and on banking and legal services in particular.

Opening a bank account is one great example of just how the stereotypes of Panama simply are not accurate. Not only did they require identification (and a Belgian identify card was not sufficient, thank you), they required a letter of introduction from our UK bank. A letter that could never touch my hands, but that had to be sent from Bank to Bank. Imagine the humor when I asked for a letter of introduction from my bank. The conversation went something like:

"I need a letter of introduction for my new bank."
"We don't usually issue those."
"This isn't a UK bank."
"Oh, okay, in what country?" said as the service representative was looking up the procedure online.
"Umm, Panama."
Big smile from the service representative "Really? Panama, like, the Papers?" Big smile.
"Yes, really. You didn't need one, but they do."
"Really?"
"Yes, really, and it must go directly from this bank to that bank."
"Oh, so I can't just print it and give it to you?"
“No, and it must be mailed to them, on UK bank’s letterhead, and from the bank’s office. I cannot touch the letter.”

There is little question that the Panama Papers scandal has been a trauma for the country and the legal and financial services industry. Regardless of how many times people are reminded that "offshore havens" are rife, and that certain US States effectively replicate the functions of offshore tax shelters and money laundering havens, the stigma now sticks to Panama. A recent estimate says that 10% of global GDP is held in "off-shore" havens. Trust me, that money is not in Panama.

The Panama Papers have already toppled the government of Iceland, and last month, the Prime Minister of Pakistan was dismissed by the Supreme Court on the grounds of corruption exposed by the papers. numerous politicians and celebrities have been exposed as having "businesses" in off-shore havens, not all in Panama, but all exposed by the release (hacked theft or internal theft, this still remains to be confirmed one way or the other) of files from Mossack Fonseca, a Panamanian law firm that operated in at least 9 countries at the time.

Multi-national corporations with regional headquarters in Panama have considered relocating, and at least one appears to be on the brink of doing so. While that organization does not have significant operations in Panama, it is the Latin America and Caribbean administrative hub.

Meanwhile, Panama has, over the past decade, maked real, tangible progress in the area of Corporate Governance, lead by the IGCP (Instituto de Gobierno Corporativo-Panamá) and various financial supervisory regulators, and the OECD. The first Corporate Governance Code was introduced in 2010, and is enshrined in the Corporate Law.

In relation to the effectiveness of banking supervision, in 2006 the IMF reported: "Panama is largely compliant with the majority of FATF Recommendations for anti-money laundering and countering the financing of terrorism (AML/CFT), reflecting the efforts of the authorities and industry to put in place an effective AML system. Nevertheless, staff makes several recommendations..." Panama has since updated its legislation in line with the IMF recommendations.

In the associated area of Risk Management, the Panamanian banking supervisor requires all banks to provide a statement that they have an effective system of Risk Management. Further, this statement must be signed by the Board of Directors. This is included in the detailed in Chapter IV of Rule 7-2014 (August 2014).

So while Panama has been making serious progress on corporate governance, anti-corruption and banking supervision for many years, still the country has a bad reputation. Having the previous president sitting in a US jail awaiting extradition for corruption does not help. Nor does a culture in which the police regularly request bribes, and in fact give lessons on how to pay those bribes.

Clearly there is a long way to go, both in actual implementation of effective corporate governance, and in inculcating a culture that rejects corruption at the grass-roots level as well as at the most senior levels of government. But the country is not the Wild West, and if anything can be learned from the Panama Papers, it is a reminder that reputation made in years, but destroyed in seconds. Panama has been spending the years demonstrating that it plays by the international rules, and in fact enshrines those rules in law.

Going through the processes of getting a bank letter of introduction was not the end of their due diligence. My employer in the UK received a telephone call from the bank in Panama. Do I actually exist, and do I really work for this company? Could they confirm by email please, from a company email address?

Remember that this is required by a bank in an off-shore tax haven. All I can do is quote the UK bank service representative: "Really?"

"The Zone" is more than just a place

Once upon a time there was a special place. So special, that the people of the land and country on both sides of the place were not allowed to go there, unless invited or to work. The only people who could live there were aliens from another land. And they brought that other land with them, right down to mowed lawns, schools and supermarkets, bowling alleys and cinemas. But only the aliens were allowed to send their sons and daughters to the schools, and only the aliens were allowed to shop in the stores. This special place, we'll call it "The Zone" contained the single most valuable national infrastructure asset in the country. An asset so huge and costly to build, that it became one of the single most important strategic assets of the aliens, and of the world; more important than almost any infrastructure asset in the aliens own land. Now imagine that this asset could generate, directly, or enable up to 20% of the country's GDP, if it could be exploited by the country it sat in. Imagine also that this asset could, but did not, generate a continual revenue stream to the national government, that could be used for development, roads, education, rural electrification, ports, healthcare systems, the list goes on.

Oil is one of the only natural resources that is able to generate that kind of benefit for a country, but then only if the global oil market is delivering a price point that exceeds the extraction and committed costs associated with that oil. But as oil is fungible and (relatively) plentiful, too often countries have created spending commitments based on a oil prices at their peak, and not at their trough or even average price. The price of oil jumps, then crashes, then crashes and jumps again, and now is relatively stable at a level below the cost of production for many countries that rely on oil revenues.

Imagine instead a resource that is limited, stable, non-fungible, with a clearly definable economic break even point for consumers and users of that resource. And where was that special resource? In "The Zone" of course, out of reach of the country in which it sits, and completely under the control of the aliens with their supermarkets and schools and mowed lawns.

To make matters worse, the aliens were giving it away! Access to the resource was mandated to be provided at an operating break even price, not at a economic break even price for the user of the resource. This means that the users effectively gained a massive windfall at the expense of the country. Restricted access to that infrastructure and asset, and the inability to influence the pricing of the asset (or use of the asset) and inability to access a revenue stream for the government, was holding back economic development of the rest of the country.

So economic development outside "The Zone" progressed at a crawl, with the host country unable to enter "The Zone" without permission, unable to set the price of the resource, and unable to economically benefit from that resource.

The Panama Canal is that resource, and it sits in the middle of "The Zone", a strip of land 10 miles wide, which since the end of 1999 is once again Panamanian national territory. Before the handover, the Panama Canal was mandated to run as a break-even proposition, owned by the United States government. As much at $10 million per year in profit could be provided to the Panamanian government, if the Canal ran a surplus. $10 million on annual revenues of $350 million is not a very good return on the asset, and this was the maximum that was authorized to be paid.

 

Panama Canal Revenue; 1980 - 1989

In 1989, the Panama Canal Authority had revenues of US$329 million. With inflation, that $329 million in 1989 would equate to $638 million in 2017 dollars. Current, 2016, Panama Canal revenue was $1,933 million, based on traffic volumes; total tonnage has almost doubled, while total transits remains comparable to 1989. So for decades, the equivalent of $1.3 billion in national revenue was effectively being distributed to shipping companies in the form of subsidized low-cost canal transits.

"Including the passage of neopanamax ships by the new locks, the Canal recorded between October 2015 and September 30th, a total of 13,114 transits and 330.7 million CP-UMS tons (volume measurement of the Universal Systems Tonnage of the Canal of Panama), said the official information."

Today "The Zone" remains, but is now Panamanian national territory, and while most of the land was converted into, and remains a national park, development does encroach.

Most importantly though, the Canal now runs as a profit making infrastructure, delivering over $1.5 Billion into the Panamanian treasury every year. In addition to the direct revenue to the Panamanian government, the very existence of the Canal creates and enables a massive logistics and transport industry, accounting for over 20% of the GDP of the country.

That increase in national revenue is remarkably stable. While traffic volumes fluctuate, the swings are in no way as wide, up or down, as the price of oil. Nor is the price of transit fungible. There is only one Canal, and the options are quite limited if you want to avoid rounding the South American continent, or if transporting across the North American continent by train is too expensive and time consuming. Therefore the Canal is able to price its service based on the economics of transporting goods by any other method or route. This creates a very steady revenue stream, and the country has been able to put that to good use for national infrastructure development.

There is a long way to go for Panama, and as with all developing countries, the challenges are huge, not least education, health, infrastructure and employment (although official employment figures are health with an official unemployment rate in the 4% - 5% range for a number of years). Corruption is rampant, and while Panama is a major offshore financial center, the "Panama Papers" scandal of 2016 dented its reputation.

If anything positive can be said about the 85 years during which the Canal was under US control, it is that the administrative and operational systems were put in place and a level of discipline inculcated that has carried over to Panamanian administration. The Canal is efficient, profitable, and well maintained, and functions as smoothly under Panamanian control as it did under American.

"The Zone" remains, but is now an artefact. But also remaining is the question of just how developed could this country be if it had access to price and profit from the Canal for the 100 years that it has been in operation, and not for the 17 years that it has been under the control of the country in which it is located.

How to Bribe a policeman

Is "petty corruption" the same as major corporate or central government corruption?

When flagged down for a minor driving offense, an acquaintance was told by the male and female police officers that this would be a $75 fine. Okay, said the acquaintance, you’re right, I was wrong, write me the ticket and we'll all the on our ways. If only it was so simple. Driving in Panama City can be very difficult, and while a right turn from the inner of three lanes is considered normal, it is possible to break the road code, indeed this is what happened.

First, this is not a comment advocating corruption, or bribing policemen, or bribing anyone else for that matter. This is a comment on the reality of life in Panama, and no doubt in many other countries. Bribery is "normal" in so many places and situation; sometimes petty as I'm going to describe, while at other times major such as the brown envelop scandals of Siemens and Odebrecht, and the Asset Seizure Program in the United States.

Odebrecht is the current poster-child for massive corporate corruption, having bribed its way to successful bids for major infrastructure projects across Latin America. One estimate is that Odebrecht paid out over $780 million in bribes, with investigations and arrests under way in Brazil, Ecuador, Peru, Panama and other countries. This was corruption on a massive scale, and has already brought down at least one government.

Unlike corporate corruption, in too many countries, including Panama and the United States, to name just two, police forces are under-funded, and in many cases, police officers are poorly paid. In some cases, they are so poorly paid that they cannot, on their salaries, feed their families and buy their uniforms. An unfortunate position to place the protectors of social order, including general ethical standards.

In the United States, police budgets are boosted by something called the Asset Seizure Program ("Civil Forfeiture" program), a process by which police can declare that you had the intent to use your assets to commit a crime, or that those assets were gained as a result of criminal activity. Of course, if you can prove that you are innocent, in as much as you did not commit a crime to afford your car, and if you can prove that you did not plan to commit a crime such as buying drugs with the $200 (or $2000) that you have on you, then they will give those assets back to you. You will need to hire a lawyer and go to court, so in many cases, even fighting will cost you more than the assets sieved. US police forces boosted their budgets by $4.5 billion in 2014, more that the total reported value of property reported stolen in burglaries that year.

This can better the described as Kleptocratic behavior on the part of a government. Top-down corruption, if you will.

But coming back to Panama, and our friend stopped by the police.

"A ticket would be a bad thing for your record" the police said, "there is probably a better way to handle this". According to the story we were told, the driver then figured out what was being suggested, and decided to play along, with no desire or intent to pay a bribe. "What do you mean?" She is European, and Northern European, and the thought of bribing a policeman for any reason was deeply repugnant to her way of thinking.

Well, they said, if you were, for example, to pay the fine on the spot, it would of course be reduced, and there would be no need to add it to your permanent record. "Okay", she said, "can I pay it right now at the police station?"

Well that wouldn't be very convenient, would it? So they asked for her passport, which you are required to have with you at all times in Panama. She handed it over, and they looked at it, and handed it back. "There seems to be something missing" she was told. Again, she played dumb.

This carried on for a short while, with the two police looking at each other, wondering about just how dim this woman could possibly be. This was a perfectly normal transaction, and they were confused as to why this wasn't going to script.

So they passed her a red notebook, and in their frustration, said "Look, the way it works is that you put a $20 in the notebook, and everyone is happy." And with no option being given, and instead of the $75 fine that she would legitimately have had to pay for a real ticket, she took a $20, put into the red notebook as instructed, and handed the notebook back to the police.

And yes, that was the end of the story. They then very politely wished her on her way, as if nothing had happened. The law had been upheld, she had been fined for breaking the law. They did their job in pointing that out to her, and giving her an option that did not include wasting her time and theirs, and costing her more money. And they were paid what is in effect the top-up to their salaries that is expected.

Does any of this excuse or condone what was done. Was the FCPA (Foreign Corrupt Practices Act) law broken, or the UK Bribery Act broken? Most surely, a foreign official, two actually, were paid a bribe.

Am I suggesting a moral equivalence between the individual police extracting bribes when minor infringements happen, and the crimes of Odebrecht, Siemens and the US national and state governments? Actually, I would suggest that the bigger evil, not just because of the bigger amounts involved, is the US Asset Seizure Program. This is the nation-state acting as the organized criminal enterprise. Odebrecht and Siemens were crooked, not doubt about that, and used capitalist incentives to illegally entice officials to win sales. The local police who use these tactics to pay for uniforms, food and housing, and schooling for their children, all within an existing and established culture that has effectively established a price for infringements, is the lesser evil by far.

Corruption starts at the top, and the messages from the top determine if a society is corrupt. In the case of the police in Panama, are they individually more corrupt than company executives, or less (or more) than local and national police forces that use extra-judicial seizure of assets? The higher the corruption starts and is justified, the greater the rot it contributes to and create in a society.