Panama Vows to End Use of Bearer Shares to Improve Transparency

  • President Varela speaks in Bloomberg interview in Tokyo
  • Country will set new disclosure rules by 2018, Varela Says

Juan Carlos Varela, Panama's president.

Photographer: Kiyoshi Ota/Bloomberg

Panamanian President Juan Carlos Varela vowed to end the use of bearer shares in his country after the publication of documents from a local law firm revealed billions of dollars in assets concealed in tax havens around the world.

The leak of more than 11 million records from Mossack Fonseca & Co. has sparked a global furor and raised scrutiny of Panama’s financial secrecy laws, including the use of bearer shares, which enable owners of companies to conceal their identity. The country implemented new rules on how the shares are registered in January, while it has yet to ban their use altogether.

“The future is that you have to know who is the owner of a company,” Varela said in an interview in Tokyo on Tuesday. “If we want to be able to protect the financial system and the legal system of our country, we have to fight for more transparency and not just in Panama, in other countries as well.”

Pressure is rising on Panama to help other countries prevent tax evasion and money laundering by stripping away financial secrecy rules. Varela said he will discuss bilateral exchange of tax-related information with Japan in a meeting with Prime Minister Shinzo Abe scheduled for Wednesday in Tokyo.

Tax Blacklist

“I will do whatever is necessary to ensure that our logistics system and our financial system is not used for any illegal purposes,” Varela said.

The president also said he expects Panama to conform to Organization for Economic Cooperation and Development transparency standards by 2018, without harming prospects for the country’s financial services industry. Panama was removed from the OECD’s blacklist of tax haven countries in 2012.

Varela is also in Tokyo to sign a final agreement for a $3 billion monorail project linking the country’s capital with a suburb and spanning the Panama canal. Varela said Panama has agreed to use Japanese technology, equipment and financing, while bidding out contracts for the civil engineering portion of the project.

Construction on the 27-kilometers (17-mile) leg of Panama’s passenger rail system could begin as early as this year for completion by 2022. Varela said he met with Hitachi Ltd. President Toshiaki Higashihara, Mitsubishi Corp. Chairman Ken Kobayashi and other business leaders in Tokyo on Monday to discuss plans for the project.

Panama’s economy is expected to grow about 6 percent this year, according to the International Monetary Fund, the most in the Americas, as it inaugurates a $5.3 billion expansion of its canal in June and starts other major infrastructure projects, such as the monorail. The flow of money into the country has helped GDP more than double since 2009.

Before it's here, it's on the Bloomberg Terminal.