Main Event Clash: Residency In Panama Or Colombia?

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The Question To Ask Today Before Investing Time Or Money In Colombia

If you’ve got U.S. dollars in your wallet or your purse, it’s like much of the world is on sale right now…

Including one country that has become one of my favorite places to spend both my time and my money.

I’m speaking of Colombia.

For me and Colombia, it was love at first sight.

Over the near decade since I first laid eyes on this beautiful country, I’ve become only more enchanted.

Shortly after Colombia first came onto our radar, I made a bold prediction…

Colombia, specifically Medellín, I reported, would soon take its place on the short list of world’s best places to live.

Back when I first made it, that prognostication created a stir.

How could I be recommending that expats and retirees think about taking up residence in the land of Pablo Escobar?

I wasn’t bothered by the naysayers or their confusion. Big new ideas are often met with resistance.

Today I’m no longer alone in referencing Colombia as a world’s best destination. The New York Times, Travel + Leisure, Forbes, and others have made similar declarations.

As a result, Colombia as a top-tier choice for anyone considering launching a new life overseas isn’t news. Colombia is enjoying the attention she deserves in this context.

Today the question isn’t: Does Colombia make sense as a place to live or retire overseas?

Today the question is: How does Colombia stack up against its live-and-retire-overseas competition?

Panama is a granddaddy among world’s best places to live or retire overseas… so let’s start our comparing there.

Specifically, let’s consider how Medellín, Colombia, stacks up against Panama City, Panama (my full-time home for the past nine years).

Both destinations offer loads of opportunity and options for both fun and profit.

Which one might be the better place for you to think about investing your time or money?

To answer that question, let’s look at the similarities and differences between these two cities that, in fact, couldn’t be more unalike…

Arriving in Panama City, you recognize instantly that this town is open for business, pushing for growth, and both embracing and chasing prosperity. Your heart rate quickens, and your mind works quicker, too, trying to keep up with the commotion all around.

Arriving in Medellín has the opposite physical effects. Your heart slows a bit, your mind settles.

Unlike Panama City, Medellín’s cityscape isn’t all high-rise condo towers and features nary a single building of glass or steel. From any height (the windows of one of the city’s luxury penthouse apartments for example, or the top of one of the surrounding hills), Medellín appears a sea of red clay tiles and red brick buildings interspersed regularly by patches of foliage and flowers.

The effect, again, is calming, peaceful.

You can learn a lot about a place both from and by its taxi drivers. They’re a top source of getting-to-know-a-city information and insights, and they’re also a barometer of the mood of a place.

In Panama City, taxi drivers are in a hurry. They honk their horns constantly. They weave in and out of traffic, from lane to lane, pushing for constant progress. They can’t abide sitting still or even slowing down. They run traffic lights and ignore stop signs. They also tend to be unhelpful, even rude.

A Panamanian friend describes Panama City taxi drivers as “among the least appealing people on earth.” I can think of a handful of exceptions, but, in general, I’d agree with my friend.

In Medellín, the taxi drivers, like their city, are gentler and calmer, happy to stop to offer directions or even to chat. In Medellín, you rarely hear the honking of a car horn, not by a taxi driver and not by anyone else either. It’s also worth noting that, in Medellín, taxis are not only ever-present, but also always painted yellow and metered, unlike in many of the places where we recommend you spend time.

Again, orderly… genteel.

Medellín is impressively green, with trees, plants, and small gardens everywhere, and remarkably clean. In the central neighborhoods, you see no litter. The metro, a point of pride for the local population, is spotless and like new. At every station and in every train we’ve ridden, I’ve looked for but have been unable to find even a cigarette butt or gum wrapper on the ground.

Panama is working hard to clean up and green up its capital city. The long stretch of parkland along the bay known as the Cinta Costera has dramatically changed the face of Panama City for the better.

Still, while one might describe Medellín as genteel, an appropriate adjective for Panama City might be gritty.

Now to consider these two destinations more practically…

When it comes to cost of living, Medellín has the advantage. Panama City is no longer a bargain choice. Meantime, Medellín is more affordable than it’s been in a long time thanks to the relative strength of dollar versus the Colombian peso.

Ah, ha! This leads us back to my opening point.

Right now, the U.S. dollar is at a near-historic high versus the peso. This is a window of buying opportunity that will not continue forever.

In Panama, US$1 is US$1 (because Panama uses the dollar as its currency). This means no particular windows of investment opportunity, as we’re seeing right now in Colombia.

On the other hand, if you intend to retire on an income fixed in dollars, this can be an important plus.

Both markets offer interesting real estate opportunities.

The real estate market in Panama City, after settling post-2008, has begun to appreciate again. Central Panama City values are moving up steadily and will continue to do so for the mid-term. Deals can be found, but your best opportunities today are outside the city, specifically on the coasts.

On the water in Panama City you’re looking at US$2,500 to US$3,000 per square meter.

In Medellín, meantime, you can own in El Poblado, at the best address in the city, for as little as US$1,000 per square meter right now (resale), thanks to the dollar’s surging buying power. In less central, more local neighborhoods, you can buy for less.

The real estate market in Medellín reminds me of the market in Panama City when we first began paying attention to it about 15 years ago.

Panama is among the world’s most welcoming countries when it comes to establishing residency. In Panama, the would-be expat, retiree, or entrepreneur has more than a dozen options for how to establish full-time residency, including the “Friendly Nations” program, a user-friendly, turnkey residency option that can lead to a work permit.

Colombia, too, though, offers excellent foreign residency options, including one for pensioners and another for investors. The minimum investment requirement in each case can be less than for comparable options in Panama, especially, again, right now, as these are Colombian peso costs.

One important practical consideration for the would-be expat, retiree, or investor to factor into his thinking is banking.

As banking has become more difficult and hassled in Panama in recent years… it has grown easier in Colombia.

Panama offers many banking options, but, in this post-FATCA, anti-money-laundering age, an American can struggle trying to access them.

In Colombia today, it’s a straightforward process for a nonresident foreigner to open an account with what’s called a “fiduciary,” the local equivalent of Charles Schwab. This is a reasonable strategy for dealing with local bills. The downside is that transaction fees can be high.

The other downside to Medellín compared with Panama City is that few in Medellín speak English, whereas, in Panama City, it’s possible to get by speaking no Spanish.

In addition, Medellín (again, very unlike Panama) is not a tax haven, and taxes are high. Living here, your tax burden could increase, depending on your nationality, where you hold legal residency, and where your income comes from. The country even imposes a wealth tax (after five years of residency).

Note, though, that moving to Colombia with only retirement income should be a tax-neutral event. Colombia, like most countries, doesn’t tax foreign retirement income.

Unlike Panama, Colombia imposes exchange controls. These are manageable if you plan and execute any investment in the country carefully and correctly. But, again, they’re not an issue at all in Panama.

Bottom line, here’s how I’d break all this down…

Panama City Versus Medellín

Cost Of Living: Right now, Medellín is notably more affordable for dollar-holders…

Cost Of Real Estate: As much as 70% less expensive in Medellín…

Climate: Way more comfortable in Medellín…

Quality Of Life: This is completely subjective and impossible to pin down. Nevertheless, I’ll go out on a limb and say that the overall quality of life is more appealing in Medellín than in Panama City…

Shop your options in Panama beyond the country’s capital, though, and the comparison becomes much less clear…

Ease Of Residency: Panama is among the easiest places in the world for a foreigner to establish full-time legal residency, especially if he comes from one of the countries included on the list for the “Friendly Nation” visa program.

However, Colombia is also a very straightforward option in this regard. Colombia has been working hard these past few years and continues still in its efforts to make the residency process ever-easier.

For sure, the cost of establishing residency is lower in Colombia than in Panama…

Ease Of Banking And Doing Business: Panama wins on this score, with its lack of any exchange controls; the absence in this market of any currency exchange risk (as Panama uses the U.S. dollar as its currency); its well-developed doing-business infrastructure; its big and growing universe of globally competitive labor (thanks to the Friendly Nations visa making it easy for educated and English-speaking job-seekers of any age from 50 countries around the world to work here); and its greater prevalence of English-language speakers…

Infrastructure: A tie…

Accessibility: Easier to come and go from Panama than from Colombia (or anywhere else in Latin America)…

Taxes: Panama is the screaming champion on this score, a true tax haven, while Colombia qualifies as a high-tax jurisdiction, with, for example, a corporate tax rate as high as 33%.

Again, though, if you’re a retiree making a move with retirement income, you probably don’t have to care about this…

Health Care: Top notch on an international scale in both cities.

Specifically, 5 of the top-ranked hospitals in Latin America are in Medellín.

Ease Of Settling In: Panama City is a kind of halfway house for expats, an easy and comfortable first step overseas.

Medellín is more an emerging expat destination, though it is more discovered and therefore easier to navigate as an expat or foreign retiree all the time.

Bottom line, though, Colombia is more challenging in this regard unless you speak Spanish…

Which city might be better for you?

As I remind you often, it depends on your personal circumstances, your priorities, and your preferences. What is your current situation and what kind of experience are you looking for overseas?

I can tell you that we’ve decided not to try to choose but, instead, have worked over the past several years to incorporate Medellín into our long-term retire-overseas plan.

As a friend in Medellín, another expat who also divides his time between that city and Panama City, put it recently:

“Do business in Panama City but live in Medellín. That’s the ticket…”

Lief and I would agree.

Kathleen Peddicord

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Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With 30 years of experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her daily e-letter. Her newest book, "How To Buy Real Estate Overseas," published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.