The Panama Papers exposed the shady global business of hiding the riches of the world's famous and infamous, but many in Panama say those documents and the dealings of a handful of lawyers have unfairly damaged the country. NPR's Carrie Kahn reports that the global shaming comes just as Panama was winning international recognition for cleaning up its act.
CARRIE KAHN, BYLINE: Panama is bustling with construction. At least a half dozen cranes dot its picturesque oceanfront skyline teeming with glass towers. At one site, real estate broker Kent Davis steps into a construction elevator of a nearly completed 30-floor apartment building. Seventy percent of the apartments here have already been sold.Panama is on the rise, too. Its economy, expected to grow 6 percent this year, is the bright spot in Latin America. But Davis says the bad press brought on by the Panama Papers has been a punch to the country's gut, hurting more than just the shady operators in the offshore industry.
KENT DAVIS: Now they're paying a price, and unfortunately the whole country's going to suffer for a while.
KAHN: Panama got blindsided, says Felipe Chapman, an economist at Indesa, a local investment research firm. He says the wrongly named Panama Papers gives the impression that the world's rich opened all their shady companies here.
FELIPE CHAPMAN: Most of those corporations were not even incorporated in Panama. They were incorporated in the British Virgin Islands, in the Bahamas, in the Grand Cayman.
KAHN: And the vast majority of their money isn't in Panamanian banks either, he said. Compared to the fiscal havens of the world, Panama has made great strides to clean up its offshore industry, he adds.Two years ago, legislators did pass a series of laws cracking down on money laundering. The steps got Panama removed in February from an international list of bad actors. That prompted even the U.S. ambassador here to say that delisting would make 2016 Panama's year of redemption. Instead, two months later, the Panama Papers hit the international press.Many countries embarrassed by the leak, in particular France, singled the country out for wrongdoing. The Organization of Cooperation and Development, which represents the world's wealthier countries, struck too, insisting Panama sign long-stall tax information exchange agreements. President Juan Carlos Varela went on the defensive.
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JUAN CARLOS VARELA: Panama's success does not depend on irregular flows of money into our financial system. Our success story is based on the hard work of the Panamanian people, a noble people and peace-loving nation.
KAHN: He made his comments yesterday in a speech in Washington, D.C., and the same remarks back home last week, but opposition lawmaker Zulay Rodriguez Lu says Panama's leaders spend too much time hiding behind nationalistic rhetoric and should put more effort into enforcing the country's laws.
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ZULAY RODRIGUEZ LU: (Speaking Spanish).
KAHN: "Justice isn't truly applied to those stealing and laundering money here," says Rodriguez. She singled out the country's rich and politically connected. Until the Panama Papers leaked last month, the cofounder of the law firm at the center of the scandal was a close financial adviser to the president. Rodriguez says an investigation into his law firm's activities is also a sham. Repeated requests to speak with Panama's attorney general went unanswered.Panama has responded to the pressure. Last month it signed financial sharing agreements with Japan and the U.S. But president of Capital Bank, Moises Cohen, says Panama has always been willing to improve transparency. It just wants a level playing field
MOISES COHEN: Small countries sign and small countries implement these rules, and then the big countries like the United Kingdom or the United States don't fulfill and don't implement these in the right way. And that's a problem.
KAHN: Economist Felipe Chapman says Panama's offshore industry, now only a small part of the economy, will inevitably change.
CHAPMAN: It's going to die out for the uses that it's been criticized, but it will still flourish for the desired uses.
KAHN: But experts say as Panama cleans up its system, dirty money will find other havens unless the remedies are worldwide. Cary Kahn, NPR News, Panama City, Panama.