How’d you like to retire – at age 18? Enjoy a lower cost of living…better weather…safer cities…lower tax rates…or just a change of scenery? International Living, a publication founded by Bill Bonner over 20 years ago, recently published its Annual Global Retirement Index. The top spot may surprise you – in more ways than one. Publisher Kathie Peddicord reports…

The best place in the world to retire today? Panama.

No kidding.

If you’ve not been there, I can guarantee you that it’s not what you expect. And I’m not talking about "retirement" in any traditional sense. No rocking chair by the pool followed by golf in the afternoon (unless, of course, that’s what you want to do).

Nor am I talking about retirement at any traditional age. As a retiree in Panama, you’re due 50% off in- country transportation; on buses, boats, and trains; 25% off in-country airfares; up to 50% off hotel stays; 25% off restaurant meals: 15% off hospital bills; 20% off doctor’s visits; 50% off movie, theater, concert, and sporting event tickets… even 50% off the cost of closing on the purchase of real estate in this country. All this, and you can "retire" in Panama – at age 18.

Of course, the tender age of 18 may be a little extreme… but we know many 40-somethings who are making immediate plans. It’s fairly simple. Because they’re retiring younger, Americans are also choosing to retire "different." That is one of the main reasons Panama tops this year’s International Living Global Retirement Index.

Tropical weather, yes, and a low cost of living, too… but these reasons are only the beginning. Contrary to popular expectations, Panama boasts a level of reliability and efficiency you don’t find in this part of the world. It is a major international business and banking center, one of the few continuing to resist the pressures of the OECD.

It has a stable economy, with the U.S. dollar as the currency since 1904, and a government keen to attract foreign investors and residents – so eager to do so, in fact, that they offer a long list of benefits and incentives to that end.

It helps that Panama is also a diverse and beautiful country, with mountains in the interior, beaches along both Caribbean and Pacific shores, and a bustling capital with a skyline more reminiscent of Miami than any Central American city we know.

But one of the more attractive features of the country is that real estate is still cheap. Panama is in a severe recession, brought on by the departure of the American military and their families from the Canal Zone. These 50,000 servicemen took their U.S. level salaries with them when they left, leaving a big hole in the Panamanian economy. And, more recently, the in-the- basement price of coffee on the world market has dampened the economy even more, as coffee is one of Panama’s biggest exports. All of which means that real estate prices are low and negotiable.

In the interior of the country, especially, farmland can be a world-class bargain…maybe $500 an acre. In Panama City, penthouse condos in full-service, well-located buildings with views out over the city, and the bay can be had for less than $150,000.

It used to be that Americans with a spirit of adventure retired to Costa Rica. Some still do… but they often reconsider quickly. Costa Rica is no longer the pensioner’s paradise it was in the early 1980s. Prices are high. Bureaucracy is stifling. Taxes are burdensome. And the famed pensionado program is defunct.

Panama is looking to position itself in this niche. It has put together the most appealing program of special benefits for foreign residents and retirees you’ll find anywhere in the world today.

Apart from the ranging list of discounts I mentioned above, you also get the typical tax exemptions for bringing your personal belongings and household goods into the country when you take up residence and an exemption every two years of duties associated with bringing a car into Panama.

Importantly, Panama’s pensionado law stipulates that anyone entering the country as a qualified pensionier today is guaranteed that status as long as he chooses to stay in the country.

That was the final kick in the pants in Costa Rica. When the Costa Rican government did away with their pensionado laws… they didn’t grandfather the existing pensioners. In other words, all those Americans who moved to Costa Rica in the 1980s to take advantage of the program were suddenly liable for taxes they’d been assured they wouldn’t have to pay.

Not so in Panama. Panamanian residents – be they qualified members of the pensionado program or not – pay no taxes on foreign-earned income and are exempted from property taxes for 20 years.

Panama, by the way, is physically safe. Safety is often an American’s first concern when he hears the words "retirement" and "Panama" in the same sentence. The truth is, Panama is probably the safest place in all of Latin America for both tourists and foreign residents. We’re not alone in our assessment. The Pinkerton Global Intelligence Agency rates it so.

In 1990, 2.2 million Americans lived outside U.S. borders. That number is nearly 3.5 million today. It’s a remarkable demographic shift, if you think about it.

All these wandering expats are looking for a lower cost of living… better weather… safer cities… lower tax rates… and, primarily, a change of scenery. A lot of Americans have made a lot of money in the last dozen years. And, increasingly, these mostly Baby Boomers are beginning to take stock. They’re recognizing that they’ve accumulated the resources – the net worth, the available capital – to retire almost anywhere they choose. And they’re choosing a little adventure.

They’re also choosing to keep working. Probably not doing what they were doing before they retired, but they’re keeping busy. After years of focusing primarily on making money, they’re following their dreams. Maybe they always wanted to run a charter fishing or dive operation…or a guesthouse. Maybe they’ve day-dreamed of trading antiques or owning their own vineyard. Maybe they want to write, paint, learn a language…

Maybe they’d like to try their hand at buying, renovating, and flipping apartments…or old farmhouses.

Every day, I speak with Americans who are reinventing themselves in their chosen overseas retirement havens. Panama fits the bill here, too, with more than 40 laws, all recently passed, to encourage and protect foreign investors, including special incentives for investors in real estate in one neighborhood of Panama City in particular – Casco Viejo.

This barrio is the oldest European settlement on the Pacific coast of the Americas, a World Heritage Site. The Panama government is working to attract foreign investors to help with the renovation and restoration of the centuries-old colonial-style buildings that line the streets and central squares here.

If you’re interested in a change of scenery yourself, perhaps you should put Panama on your list of destinations to consider. As I said, it’s not what you think, and quite frankly, it’s a pleasant surprise.


Kathleen Peddicord,
for The Daily Reckoning
October 17, 2002

P.S. When you tally the pluses and the minuses (as we at International Living have just done, for our 11th Annual Global Retirement Index), you find that Panama has more to offer the foreign retiree right now than any other country in the world.

Of couse, that doesn’t mean you have to retire here. After all, tropical living may not be your thing. As Bill mentions above, France is ranked second in our Index this year. Although given Bill’s comments, I hesitate to elaborate. France, for many, especially many Americans, is synonymous with the good life. In many ways, you can’t beat la vie francaise.

Our Global Retirement Index this year considered 30 countries and eight categories (Real Estate; Special Benefits for Retirees; Cost of Living; Culture, Recreation, and Entertainment; Health Care; Infrastructure; Safety and Stability; and Climate). Also in the Top 10, following Panama and France, were Canada, Portugal, Australia, Italy, Nicaragua, New Zealand, Malaysia, and Chile.

Editor’s note: Kathleen Peddicord is the publisher of International Living, a publication that, for the past 20 years, has identified and reported on the world’s best opportunities for living, retiring, investing, traveling, and buying real estate overseas.

"This is a bear rally, not a new bull," says Ian McAvity, referring to the rally that may have ended yesterday. "It is similar to Tokyo’s Nikkei 225 rebounding from 14,000 in 1992 to 21,000 in 1993 after crashing from 39,000 at the end of 1989."

Thom Calandra also found hedge-fund manager Keenan Hauke with a similarly bearish point of view: "You can look back 300 years, back to the London Stock Exchange and in this country, and every time a new bull market starts, it starts with new leaders. This one started with what, Microsoft and Yahoo?"

Our guess yesterday was that this rally would continue. It was, of course, only a hunch…an intuition. We don’t know what this market will do any more than anyone else, we remind ourselves.

"Dostoevsky’s spent his entire literary career," began Rev. Ernie Hunt’s sermon at the American cathedral of Paris a couple of weeks ago, "proving that the major struggle in our personal lives is not between good and evil but between humility and pride."

We cannot recall the rest of the sermon, but the first line stuck with us.

Mr. Market, we believe, intends to make fools of us all. He sets out first to build up our confidence – by letting us think we understand what is going on. Investors became so confident in the late ’90s that they didn’t bother to look at balance sheets or ask questions. They were sure stock prices would always go up. Now, they’re still pretty sure that they always go up – "in the long run."

Mr. Market, we believe, is in the process of teaching them a lesson in humility. He will not let up until they are completely and utterly humbled.

But the bears are not safe either. As stocks go down and investors come to their senses, those of us who thought we saw it coming become more and more confident. After a while, we begin to feel as though we have been let in on God’s Own Plan…

If we are lucky, we get a slap in the face immediately and stop hallucinating. If not, we are proven right again and again…until we are able to make Really Big Fools of ourselves…

Today, the newspapers and TV stations follow "consumer confidence" numbers as if they hold the secret to the future. In a sense, maybe they do, because the more confident consumers become, the closer they get to their own humiliation. Over-confident consumers borrow too much, spend too much…and eventually come to regret it. Exactly when that will happen, we don’t know…But one way or another, Mr. Market will humble us all…



Mr. Eric Fry in New York…

– The bulls took a breather yesterday, as the troubles in Techland continued. The Dow retreated 219 points to 8,036, while the Nasdaq gave back more than 4% to 1,232. Yesterday’s sell off put an end to the biggest four-day Dow rally since 1933.

– "It was nice while it lasted," writes’s Igor Greenwald. "[Unfortunately], the market’s four-day winning streak, a triumph of hope over experience, collided Wednesday with Intel’s diminished business prospects."

– Intel shares tumbled 18% after the Nasdaq bellwether came up two cents shy of analysts’ consensus estimate for its third-quarter earnings. And in what has become a hallmark of recent earnings reports from tech companies, Intel warned that business conditions remain very challenging.

– Most US companies simply aren’t buying as many computers and other hi-tech gizmos as they used to. Maybe consumers are continuing to buy things they don’t need with money they don’t have, but corporations are guilty of no such imprudence. Most corporate buyers are refraining from spending the money they don’t have. The result is that companies like Intel are having a tough time…

– The recent stock market rally was not a terribly surprising event, given the fact that so many market participants had become so utterly overwhelmed with fear and loathing. Such extreme market sentiment often presages major trading rallies.

– Just how negative had folks become? Here’s one indication: According to a recent poll by the Associated Press, almost two-thirds of Americans said it was a bad idea to invest in the stock market. AP, reporting the results of its own poll, writes: "People were asked whether, if they had $1,000 to spend, they thought it would be a good idea to invest it in the stock market. The poll for the AP was conducted Oct. 4-8 by ICR/International Communications Research of Media, Pa. The poll found that only 29 percent said it was a good idea and 64 percent said it was a bad one."

– Ironically, $1,000 invested on any one of those days would be worth more money today. Even so, we would not quarrel with the poll’s finding. We would suggest, however, that owning a mutual fund today is probably a less bad idea now than it was four and a half years ago. Back then, most folks believed that buying stocks was a terrific, all-weather opportunity.

– According to a Gallup poll conducted in April 1998, two-thirds of those polled said that buying stocks was a good idea. The cheery optimism of those days has perished – a victim of the bursting bubble. Today, three out of ten folks polled by the AP say they are worried that they will have to retire at a later age than previously planned because of the market’s steep slide.

– "The number who say their family’s financial situation has been affected is four in 10," AP reports, "although only one in 10 say it was affected in a ‘major way.’" Even so, the fact that one in four families admit to being affected in a "minor way" should be enough to put a major dent in consumer spending. Note, for example, that U.S. chain store sales slipped 0.9 percent in the week ended Oct. 12, after a 0.8 percent gain in the preceding week. A little bit of weak consumer spending goes a long way toward slowing the entire economy.

– The steadily rising bearish sentiment among investors may have been sufficient to trigger a short-term rally, concedes Andrew Kashdan of Apogee Research, but the widespread contempt for stocks that typifies bear market bottoms is not yet in evidence.

– "A bearish view of stocks may no longer subject you to ridicule at cocktail parties," he writes, "but judging from the mutual fund data, the Great Day of Capitulation has yet to arrive. That’s not to say that such a day is absolutely necessary to kick off a new bull market. But the lack of all-out submission to the market gods only increases the likelihood of an even longer, more drawn- out bear market. Although redemptions over the last four months totaled about $90 billion, for the year-to-date, net redemptions (i.e., outflows minus inflows) amount to only about $25 billion."

– In other words, most investors are staying in the market hoping for a rebound, rather than cashing out altogether… Hope endures, which means that the bear market also endures.


Back in Paris…

*** More bad news from Seattle. Unemployment went up again in September, from 6.7% to 7.4% – giving Washington State what could be the highest unemployment rate in the nation.

*** Meanwhile, across the wide Pacific, China announced that its economy is growing at a 7.9% annual rate, with industrial production up 12% year over year. Prices are falling in China, by 0.8% according to the latest tally, but its deflation is being exported abroad. Exports are rising at nearly 20% per year.

*** The Chinese seem to be en route to taking over the entire world’s manufacturing. More and more items that you buy are made in China. And they are getting cheaper and cheaper.

*** "It reminds me of New Hampshire," said Addison this morning. Addison felt as though he were back in the woods. We were listening to an infernal racket coming from a tree-trimming crew on the rue St. Martin. They must have thought they were lumberjacks felling giant redwoods – revving up their chainsaws and grinding away. What they were really doing, we discovered, was cutting off branches so slender they could have been taken off with hedge clippers.

*** "Did you know that a motorcycle, crossing Paris in the middle of the night, can wake up about 100,000 people?" Luc informed us.

*** Why would anyone retire to France? I ask no one in particular… It’s not cheap. The weather’s mostly no good. And have you ever tried to reason with a French immigration officer or tax adviser? And yet it ranks number two on this year’s Global Retirement Index published by International Living… more below…

The Daily Reckoning