To evaluate our seven countries for our Business Index 2011 we consulted seasoned entrepreneurs who’ve made the move and learned the ropes, as well as worked through in-country attorneys.
We asked them about visa requirements, ﬁnancing, and how easy it was to set up a bank account. They told us about local taxes, business expenses, infrastructure and the local culture for doing business, Below is a by-country break-down based on the information these experts gave us.
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Panama was our stand out performer in this year’s Business Index. The gateway nation scored solidly across each of our eight categories—“Access to Capital,” “Ease of Start-up,” “Market Opportunities,” “Future Outlook,” “Rents and Leases on Commercial Premises,” “Language,” “Business Infrastructure” and “Local Business Culture.”
The reasons for doing business in Panama go on and on: The U.S. dollar is the official currency and consumerism is strong. There is a growing bilingual workforce. The infrastructure is unparalleled in the region—that includes everything from roads, power, and water service to the ultra-modern telecommunications infrastructure.
Organizations both local and international predicted—and rightly so—that Panama would be one of few countries in the region to pull through the world financial crisis unscathed. According to a report published this year by the prestigious Latin Business Chronicle, Panama is one of the region’s top three business destinations, ranking number one in arrival growth last year.
Both this international recognition and Panama’s buffer against the global slowdown have come on the back of a string of mega-projects such as the $5 billion Panama Canal expansion. Other mega-projects include large-scale port expansions, potential pipeline expansions and projects, and Panama Pacifico—a new city and logistics hub under construction on the Pacific Coast.
Major expansion works are underway at Tocumen International Airport while market researcher STR Global says Panama’s capital takes the top spot in the region for most hotel rooms in the development pipeline and most rooms under construction.
The government of Panama has set up a number of attractive programs and special zones in order to attract foreign investors and business people. Plus, businesses and individuals flock here to take advantage of the low taxes. For example—Panama doesn’t tax income generated outside its territory, and many residential properties come with property tax exemptions of up to 20 years.
Panama corporations do not pay taxes on any bank interest income earned either inside or outside of Panama (for example, zero tax on interest earned from savings accounts, including certificates of deposit. Neither does sales tax apply: Panama corporations do not pay taxes on product or service sales that are conducted outside of Panama or on taxes on issuance of shares, whether bearer or nominative.
It’s not hard to see that, above all else, Panama is an established business destination and a true land of opportunity. Plus, Panama’s business environment is unique in many ways. Panama’s Merchant Marine boasts a fifth of the planet’s fleet and is the world’s first open registry. Panama’s International Banking Center (IBC) is the most modern and successful international banking center in Latin America.
Panama’s renowned banking privacy draws investors from all over the world, and over 80 banks are thriving here. In fact, in the first quarter of 2010, Panama’s IBC assets totaled over $64 billion…more than double the nation’s GDP.
All told, the setting is ripe for anyone planning to do business in Panama.
Setting up a business here is quick and inexpensive. And since Panama is also a regional leader in Internet penetration, you can work from virtually anywhere. Close deals while sipping Mai Tais on a Caribbean island…telecommute from a mountain chalet overlooking a volcano…or email from your balcony while enjoying views of the rainforest.
For example, if you provide consulting services for clients outside Panama….say, in the U.S…or purchase and sell publicly traded securities on non-Panamanian stock markets, you won’t be liable for Panamanian income tax nor capital gains tax.
There are no special visas required to start up a business in Panama, although you do need to secure a business license. However, you can use the fact that you are setting up a business in Panama as a means of securing residency. Going this route means applying for what is called a Business Investor Visa. These come in a number of categories, one of the most common being the Micro-Investors Visa. The requirements of a business license state that business owners must employ at least three Panamanians (and pay their social security benefits), and that you invest between $50,000 and $150,000. If you comply with the regulations, you are then granted a one-year visa, renewable for six years, at which time you can apply for permanent residency.
Setting up a bank account is straightforward once you do your homework and come prepared. Most banks will require that you bring your passport with residency visa, plus a letter of support from your bank back home. However, banks are set to become more rigorous in the checks they perform prior to approving new accounts. This is because the country is attempting to make its banking system more transparent ahead of a planned free trade agreement with the U.S.
Capital isn’t as easy to come by in Panama—certainly not by comparison with the availability seen the U.S. over recent years. But if you can demonstrate an income stream, banks should look favorably on your application. The average interest rate paid for loans taken out in Panama in 2010 was 7.75%.
One big restriction is that non-Panamanians are not allowed to own or operate retail businesses selling food produce. There are ways around this slightly unusual stipulation but officially, a non-Panamanian citizen cannot have their name affiliated with the ‘Class B’ license needed to sell food products. Beyond that, you are free to enter any field of business you like.
Utilities for business purposes are charged at a higher rate than those for residential use. That said, they will still generally come in lower than back in the U.S. There are also municipal taxes applied to businesses. These taxes are set by councils themselves and as such vary greatly depending on the municipality you set up in, the size of your premises or offices, the amount of employees, and the type of business operation. Depending on the lawyer you employ, staring a corporation will cost between $500 and $1,500.
Leases on commercial properties are business friendly and, depending on the area you choose, they can be inexpensive. But even the upper end of commercial property in Panama is cheaper than what you would find in the U.S. For example, you can rent a slick, ready-to-occupy, 128 meter square office with ground floor access in the heart of Panama City’s financial center, for $2,650 per month.
Ease of Language
While Panama is a Spanish-speaking country, English-speakers are by no means scarce. Add that to the country’s burgeoning English-speaking expat community and Spanish fluency becomes much less the perquisite it can be for those setting up businesses in other parts of the Latin world.
Jon Hurst, a Panama-based entrepreneur, points out that because small local shops, restaurants and service providers tend to be popular among the family and friends of the people who own them, expats have to work hard to stand out: “You really have to offer something different and far superior in quality to whatever locals might have the same business idea,” he says.
But setting up a business in any country has its challenges, and they can loom that bit larger when you’re abroad. Jon adds, “Whatever business you start, expect it to be an adventure—and try not to lose your cool.”
For the inside track on gap-in-the-market business ideas in Panama and beyond, go here.
For Further Information Contact:
U.S. Chamber of Commerce:
Rainelda Mata-Kelly, Attorney-at-law
Telephone: (Int. access code+507) 216-9299
Fax: (Int. access code+507) 216-9298
Mobile phone: (Int. access code+507) 6618-0515
Office Address: Suites 406-407, 4th Floor, Tower B, Torres de las Americas, Punta Pacifica, Panama City, Rep. of Panama.
Read on here for more on investment visas in Panama.
Read more about successful entrepreneurs in Panama:
2nd Belize: Best for Language
English-speaking Belize proved a strong challenger in this year’s Business Index, coming in second place. It performed very well in three of our eight categories: “Ease of Language,” “Business Infrastructure,” and “Business Culture.”
Accessing capital is not difficult for expats, but interest rates are high. Applicants can access loans in both Belizean dollars or in U.S. dollars, but interest rates on the latter normally come in lower. Loans are currently running from around 11% and up, depending on your history with the bank and the level of risk they see.
Setting up a bank account can be slightly difficult—you will usually be asked for a letter of reference from your bank at home and you can expect to be put under the microscope because of money laundering legislation.
Anyone can own or start a business in Belize as long as they have a valid work permit, and it has been known for expats on extended tourist visas to set up shop. If you can demonstrate that you have investment capital to put into the country, the authorities tend to leave you to it.
You are not required to employ a certain number of locals and you can set up in any field of business you like, but, as elsewhere, it is probably wise to stay away from anything locals do well.
When you set up a business in Belize, you are required to secure a license from the city or town where you establish yourself. Although they vary in price, these permits are not normally costly.
Commercial premises are widely available in many of the more developed areas of the country, and reasonably priced. Costs are high for services like electricity, phone and Internet. Although heavily priced, the standard of these and other business related services is high.
English-speaking Belize, with its strong tourist potential, is definitely a growth area to watch. The business environment in Belize means a good idea combined with the right work-ethic will spell success. Expat Stewart Krohn, has lived and worked in Belize for 38 years. He points out, “If you are straight and patient and apply the same common sense and due diligence you would in your own country then you will not have any problems.”
For the inside track on gap-in-the-market business ideas in Belize and beyond, go here.
For Further Information Contact:
Barrow & Williams
Attorneys-at-Law & Notaries Public
Read more about successful entrepreneurs in Belize:
3rd Ecuador: Easy Start-up
Ecuador recently claimed first place in International Living’s Retirement Index for the third year running, but how well does this varied, exotic nation work as a location for setting up a business? Very well, as it turns out—Ecuador grabbed third place in our Business Index this year.
One of the areas where it fell down was in access to financing. “Almost all expat start-ups that I’m aware of are self-financed,” says David Morrill, long-time Ecuador expat and author of Ecuador: The Owner’s Manual. “Financing is available but interest rates are high, running in the 9% to 10% range. Also, foreigners must be legal residents to qualify.”
Once you are a legal resident, there are no restrictions in setting up bank accounts or owning and operating a business. There are a number of ways to become an Ecuadorian resident, or to stay in the country for extended periods, and the process usually only takes a few months to complete. Our recent experience is that the process has become a little more complicated and time-consuming than in the past, but it is still considerably easier and less expensive than those in most other Latin American countries.
Some countries impose restrictions on the type of business foreigners can set up (In Panama for example, non-Panamanians are not permitted to sell food products) but in Ecuador, for all intents and purposes, foreigners are treated the same as locals when they start a business.
You also won’t require any special visa and you don’t have to have a local partner. While some countries require that a ratio of local staff be employed, no laws of this type are in place in Ecuador. Although business regulations may seem permissive, caution is still required. “It is very important that the business owner have good legal and accounting counsel so he or she understands the laws and rules—these are enforced,” says David.
Rents are inexpensive overall, but higher in larger cities. Even still, we spotted a small commercial property for rent in Autopista Hospital del Rio in the Monay area of Cuenca—a great location for a massage therapy center, or maybe a wellness clinic. At 32 square meters, it was priced at just $200 per month (see here).
Lease terms are reasonable but there are higher commercial rates for electricity and gas…but these are not unbearable. Business taxes are reasonable but have increased in recent years. According to the World Bank, a medium-size company must pay corporate income tax of 25%, cover Social security contributions for staff of 12.15% and pay municipal assets tax of around 0.15%. VAT, meanwhile, is set at 12%.
In Ecuador, language isn’t the stumbling block it is in other Latin countries. “Most of my clients get around with a very small knowledge of Spanish, adds Velastegui. “Ecuadorians are very open to new people and make an effort to understand English.”
But keep in mind that not having Spanish might make marketing your business or service to locals who only speak Spanish more difficult.
Basic services are good in Ecuador, and there are business organizations (chambers of commerce) that provide support and advocacy. Internet is slower than in the U.S., and outages are not unheard of in some parts of the country.
Overall, the outlook is good for small businesses, properly researched, because of the rapid growth of the expat communities.”
“Who you know is very important,” adds Morrill. “Having a local partner, so long as he or she is tied into the local business community, can be valuable. The amount of corruption has been greatly reduced by the new government so paying bribes is not the option it once was, although there is still a little of that.”
For the inside track on gap-in-the-market business ideas in Ecuador and beyond, go here.
For Further Information Contact:
Stoller & Moreno, P.A.
4445 South Conway Road, Orlando, FL 32812, United States.
Ph: +1 407-999-0088
Read more about successful entrepreneurs in Ecuador:
4th Colombia: Land of Opportunity
Colombia is coming in from the cold—and with the country opening up to ever-increasing numbers of visitors and expats, this is now very much a land of opportunity. As a result, Colombia scored well in “Business Opportunities” and “Future Outlook”.
There is a reason why the world’s largest computer manufacturer, HP, selected Medellin for its Latin American Service Center (to employ up to 4,000 people). HP was drawn by the transportation, Internet, cost effective, highly educated labor pool, low cost of skilled labor, excellent climate, good value real estate, favorable tax structure, good communications technology, supportive local government. Many aspects of the business infrastructure that drew HP to Colombia will be just as useful to expats setting up smaller businesses.
It can be difficult to secure financing in Colombia—be it for a home or a business. Without an established Colombian credit history, foreigners will struggle to secure funds from financial institutions. In other words your money and credit rating in the U.S. do not mean much here.
Some banks have agreements with international financial entities and this can be a route through which foreigners can secure local credits/loans, subject to the international entity´s revision and approval of the client´s financial situation.
In the case of Bancolombia (one of the many banks in Colombia), there is an agreement in place which applies to U.S., English, Canadian and Spanish nationals. In these cases, a loan can be delivered if the foreigner’s monthly income outside Colombia is approved by the international entity. Beyond this, any bank will require a six month to one year credit history to allow access to loans.
You can start a business in Colombia with just your passport. If you do start a business, you can get a temporary visa as partner or shareholder in a company for up to two years. Once you have your Colombian visa you can apply for the national ID card, the cedula. Then you can open up a bank account. Some banks will open accounts with just a foreigner’s passport, although you will probably be asked for a good referral from your home bank to go with it.
You can set up a business in pretty much any sector in Colombia. Understandable exceptions are in defense and national security activities and in the processing, disposition and disposal of toxic, hazardous or radioactive waste not produced in the country.
The Colombian government also recently relaxed employment regulations and as-and-from 2010 you don’t need to employ a ratio or percentage of Colombians when you set up a business.
There are a number of costs you may need to think about when you set up a business in Colombia. The cost of incorporation is around $400 to $500, depending on the legal firm you use. There is also an initial business registration fee that could range from $200 to $5,000 depending upon the initial capitalization. Then there are two governmental/official fees: the Chamber of Commerce fees and departmental tax. The Chamber of Commerce fee is calculated like this: company’s capital x 7.5/1.000. The departmental tax is calculated using a slightly different equation, but results in a similar figure.
Colombia has great business potential. The Colombian government is bringing in tax breaks for new companies and for the first two years there are no taxes on earnings. Year three they hit 7%, year four 16% and year five 22.5% before regular tax payment resumes on the sixth year at the 33% tax rate. There are other incentives that kick in depending on the type of business.
Commercial leases are reasonable, except in some of the most expensive malls in places like El Poblado in Medellin.
In some parts of the country, particularly in urban areas, you can face increased tax and utility charges, and you may have to pay a tax that charges industrial or commercial activities developed by companies or individuals registered as merchants. This is called the Industry and Commerce tax, and the rate is around 1% of net income.
If your target market is tourists and expats, language will not be much of a problem. If you are targeting locals and hiring local employees then language will be critical. That said, more and more young people are learning English. Also, there are some professionals who speak English, such as some doctors and dentists, some large business owners and a handful of attorneys and architects. Most government officials do not so you will need a translator when dealing with them.
Money helps oil the wheels of business in Colombia, but it does not insure success alone. Having local connected business partners is a big advantage, as is having the right attorneys. Friendships here are earned and do not come easy. People are friendly but it takes time to be considered a friend. Politics will come into play and you must be prepared to deal with it.
Businessmen that decide to save money on crucial areas such as legal, accounting, financial, market research advice by working with pseudo-professionals usually encounter problems. Opt to pay for professionalism and you will have very few problems.
For the inside track on gap-in-the-market business ideas in Colombia and beyond, go here.
For Further Information Contact:
Paul Juan, Cartagena Realty
Office: Laguito, Edificio Playa Mar Apartment 603, (100 meters from The Hilton).
Telephone: (57 5) 665 0515
Cell: (57) 311 660 2756
Read more about successful entrepreneurs in Colombia:
5th Costa Rica: The All-Rounder
Costa Rica made it into our Business Index thanks to solid scoring across all categories and a strong placing in “Ease of Language.” The standard of English among Costa Ricans is very high, and is improving all the time.
It has other advantages, too. Both personal and business accounts are relatively easy to set up. Access to capital to start or operate a business will depend on the type of business and the collateral that will be provided. For example, Costa Rica wants to promote exports so it is easier to obtain capital for businesses that export products out of Costa Rica. But as long as an expat has legal residency in Costa Rica, then access to financing would be similar to that of a Costa Rican.
You have five options when applying for residency in Costa Rica. Among the five categories of residency, most expats opt for the Pensionado Program. It requires proof that you have at least $1,000 a month in income from a pension or other retirement plan. You won’t be able to work as an employee in Costa Rica, but you can own a company and receive dividends from it. If you want to invest at least $200,000 in Costa Rica, you can become a resident under the Inversionista Program, which applies only to investors, not their families. A lot of changes have taken place in Costa Rica’s residency requirements and more are in the pipeline. The latest information is available through the Embassy of Costa Rica in the U.S. (tel. (202) 328-6628; website: www.costarica-embassy.org).
To start a business in Costa Rica you must register with the Tax Department to get your taxpayer identification. You also need a Municipal Business License from the local government where the business is located.
Also, as long as you abide by the Costa Rican labor code, there are no restrictions as to the number or nationality of the people you employ, and you can open up any type of legal business you like.
Costa Rica’s main source of revenue is tourism, with the bulk of visitors coming from the U.S. Because of this, businesses targeting these people have proved very attractive to overseas entrepreneurs.
One downside is that rents on commercial premises are quite expensive by comparison with other countries in the region. Because high-quality premises are often in demand, it can be difficult to negotiate good terms. If you are outside the most hotly-contested city districts, you can negotiate more business friendly terms.
Another cost worth remembering is that electricity is charged at a higher rate for commercial premises. Expats should also be aware that some locals will attempt to boost up prices when dealing with foreigners. However, if you are well informed, you should be able to pay the same prices as locals for the goods and services your business needs.
The business outlook is good for Costa Rica. Many medium to large businesses have relocated from the U.S. to Costa Rica to cut costs, and this trend seems to be growing. However, for small business, there is an increase in bureaucracy, regulations and taxes which can make it difficult depending on the type of business.
For the inside track on gap-in-the-market business ideas in Costa Rica and beyond, go here.
For Further Information Contact:
Roger Petersen, Petersen & Philps Law Offices
Office address: San Rafael de Escazu, San Jose, Costa Rica
Mailing address: Apartado 643 – Centro Colon, San Jose, 1007, Costa Rica
Tel: (506) 2288-2189/2288-6228
Fax: (506) 2228-7094
6th Nicaragua: Bright Future
Nicaragua came in sixth place in this year’s Business Index and would have featured higher had it not fallen down in three areas—“Access to Capital,” “Ease of Language” and “Business Infrastructure.”
Like the Dominican Republic and Colombia, lending practices are rigid and credit is hard to come by for those without a credit history in the country. If you do manage to secure a loan, you can be looking at interest rates around the 14% mark.
It’s possible to set up a bank account before you’ve even secured residency, although it can be difficult. But once you have residency, it becomes easy.
When thinking about the type of business you would like to go into, it is worth remembering that you can’t be a lawyer unless you are a citizen. Beyond that, you can establish any business you like.
You should recruit the services of a local accountant who understands the complex tax and accounting rules and reports required to kick off a business. Most accountants in Nicaragua don’t speak English, but they also come a lot cheaper than they do in the U.S.
Although a special type of visa is not a prerequisite to starting a business, investor’s visas are offered by the authorities in Nicaragua. The law states that you must employ one local for every expat you take on, but in practice, this isn’t always the case. “I know many expats who have their own businesses without any locals, so I am not sure how much it is enforced,” says long-time resident Tuey Murdoch.
Utilities are higher the more electricity you use, so usually a commercial enterprise pays more. Commercial buildings also charge for guards, generators (even if not used) and use of the generator. You also pay a use tax on everything—for rent, legal fees or doctor’s visits.
If you require commercial premises for your business, you can expect to compete for the best slots—there are not many commercial buildings and they are often fully rented. Given the short supply, prices are not as high as you might expect and compare quite well with other countries in the region. Plus, once you sign on the dotted line, the lease terms tend to be quite business friendly.
If you are in a commercial building the infrastructure is of a high standard but if you rent a non-commercial building for a business, which is very common in Nicaragua, you may have to hire a building guard and maintenance staff, as well as set up the Internet and phone lines on top of your rental costs.
The future looks good for those doing business in Nicaragua but because the country is so dependent on tourism it is very vulnerable to changes in the global financial climate.
In Nicaragua, it is recommended that you either speak some Spanish or have a Spanish-speaking business partner. The exceptions to this are businesses that target purely the expat community, but some level of fluency is required even for these enterprises.
While knowing the right people helps, money always talks in Nicaragua. But, the best advantages you can give yourself are a good attorney to help negotiate and a good accountant to help you avoid the pitfalls.
For the inside track on gap-in-the-market business ideas in Nicaragua and beyond, go here.
Arias & Munoz
Kilómetro 4 ½ Carretera a Masaya, Edificio BAC, Quinto piso, Managua, Nicaragua, C.A.
Phone: (505) 22 70 – 04 80
Fax: (505) 22 74 – 41 23
Read more about successful entrepreneurs in Nicaragua:
7th Dominican Republic: Rife With Opportunity
Our seventh place country, the Dominican Republic is pioneer country. If you come armed with a decent standard of Spanish and your own start-up capital, this low-cost Caribbean nation suddenly becomes an exceptional place to do business.
Unfortunately, interest rates are extremely high in the Dominican Republic and common mechanisms like lease to own for buying equipment are relatively unknown. To finance a business most expats will need to have access to cash.
Setting up a bank account is simple and straightforward. All you need is a passport and two letters of reference—one from your personal bank in your home country and one from a professional such as an attorney or accountant from your home country. These requirements may vary slightly from bank to bank. Checking accounts do have fees but minimum balances are low; maybe $30.
“There are wealthy expats willing to put in seed money for small business start-ups,” says Yana Berbanek, an expat entrepreneur living in the Dominican Republic. “But that usually involves taking on a partner.”
Other plus points are that a special visa is not required to start a business and as long as you comply with national laws, there are no restrictions on the type of businesses you can set up. Occasionally you might find a business line, like transportation, that has a large and powerful union. The union is usually trying to protect local jobs so they can make it a little difficult for you (as an expat) to get started, but there are not prohibitions per se. Many expats partner with Dominicans to avoid this issue.
The only expense for a small business, similar to an American LLC, is the registration of your business name and the business entity set up. These can be easily handled by an attorney for around $700.
Another cost worth considering is that you may have to pay utility hook-up charges that you typically wouldn’t have on a house, and all services might not be available depending on how far you are from the core infrastructure. For example, you need to make sure you can get high-speed Internet at your desired location before you sign the lease.
“Power is unreliable,” adds Yana. “Outages are common and you will need to plan some sort of back-up power, like a generator, to ensure consistent power. Water is generally reliable but not potable.”
Internet and phone services are relatively good in major tourist areas and cities. Coverage gets spotty for Internet outside of major cities but mobile Internet is easy to purchase and you can usually find a signal by most roadways. Roads are fine in cities but some highways are in bad shape. The DR is making headway with new roads and improved access to popular areas of the country.
You are not required to employ any specific number of people when you register a business in the Dominican Republic. If you do require staff, you must employ at least 80% Dominican employees. This proportion can be lower, depending on what industry you are in, or if you have set up in a free trade zone. Employment laws favor the employee in DR, so a knowledgeable attorney who can help you navigate the rules, especially around termination of employment, is important.
Rents on commercial premises are inexpensive once you look around and negotiate the lease terms aggressively. It helps if you can get a Dominican to help you seek out the spaces since they can generally negotiate better prices and terms than an expat. Lease agreements tend to be renter-friendly. They usually require a guarantor for the lease.
Unfortunately, it is very difficult to set up a business outside of the major tourist destinations without a command of the language. You have to expect you will be purchasing, negotiating and hiring in Spanish as English is not widely known. French is the next best language to speak after English.
When setting up a business in the Dominican Republic it helps to know someone in the industry you want to compete in. In some towns, bribes to the local government will win you contracts. Businesses have been shut down by local authorities until “taxes” or “permits” are paid but it is rare. Generally, having a Dominican partner will help you ease through any local regulations.
Overall, the future looks healthy for those either looking towards, or already doing business here. The Dominican government seems to want to create jobs and encourage business development, and it is taking steps to encourage this. However, things are still at quite an early stage, so there are plenty of business opportunities around.
For the inside track on gap-in-the-market business ideas in the Dominican Republic and beyond, go here.
For Further Information Contact:
U.S. Chamber of Commerce, Dominican Republic:
Torre Empresarial, 6to.
Piso, Ave. Sarasota No. 25,
Santo Domingo, Dominican Republic
Tel: (809) 381-0777
Fax: (809) 381-0303
Read more about successful entrepreneurs in the Dominican Republic: