Comparing Retirement In Medellin and Panama City

Medellín Versus Panama City—How This Young Turk Stacks Up

Our world doesn’t deal in absolutes. It’s all relative.

Meaning the only way to size something up is to compare it to something else. This is as true for retirement havens as it is for everything else.

I’ve spent the past week in Medellín, Colombia, celebrating the start of 2016 and enjoying the sounds, sights, and lights of the city this time of year. Few cities around the world do Christmas lights the way Medellín does Christmas lights.

How, though, does Colombia stack up against its live- and invest-overseas competition?

One of the most useful lines of comparison to draw would be between Colombia and Panama. For more than 15 years, Panama has been recognized (by us and others) as one of the world’s top retire-overseas options. However, we rate Panama #12 on our top havens for 2016 list… and Colombia #3.

That said, Panama remains a dominant player in the retire-overseas arena. How does Johnny-come-lately Colombia stack up?

That is, where might be the better place for you to think about investing your time or money? Let me try to help you find an answer to that question by drawing out 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 them as “among the least appealing people on earth.” I can think 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 ever ridden, I’ve looked for but have been unable to find even a cigarette butt or piece of gum 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 most of Panama City might be gritty.

In Panama City, Americans are everywhere. We have been part of the landscape in this city for more than a hundred years. We Americans are new to the scene in Medellín, but one thing Lief and I have noticed this trip is that there are notably more of us on the ground in this town today than there were seven years ago when we visited for the first time. In the restaurant where we took our kids for New Year’s Eve dinner, three tables around us were occupied by parties of Americanos.

The cost of living in Colombia versus that in Panama depends on the relative strength of the Colombian peso. Right now, the U.S. dollar is at an all-time high versus the peso. This is a remarkable window of opportunity to take advantage of all that Colombia in general and Medellín in particular have to offer. The cost both of living and of buying real estate in this country is a global bargain. Medellín is a city where it’s possible to live a luxury-standard lifestyle. Right now, that luxe life is seriously discounted.

In Panama, where US$1 is US$1, currency exchange isn’t an issue. This means no particular windows of investment opportunity, as we’re seeing right now in Colombia. On the other hand, because currencies move both up and down, of course, 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 been appreciating nicely for the last several years. Today, you’ll pay US$2,000 to US$2,600 per square meter to own in the neighborhoods where you’d want to own. This is up about 25% from last year this time… and I predict that a year from now these prices will be higher still. Central Panama City values are going to continue on their upward trajectory for the next few years.

In Medellín, meantime, you can own in El Poblado, considered the best address in the city, for as little as US$900 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 more than a dozen years ago.

One reason Panama has become recognized as a top retire overseas choice is because it is one of 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 “Friends of Panama” visa option, which amounts not only to the most user-friendly, turnkey residency option in the world today but also the most user-friendly, turnkey residency option in the history of residency options. Plus, it can lead to a work permit, which is a big deal.

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

One practical matter that is not as straightforward in Colombia as it is in Panama is to open a bank account. It’s difficult to impossible as a foreigner to open a local bank account in Colombia unless you have a personal introduction to the bank. If someone tells you otherwise, they’re speaking optimistically.

The alternative is to open an account with what’s called a “fiduciary,” the local equivalent of Charles Schwab. Unlike opening a bank account, this is straightforward and a reasonable strategy for dealing with local bills. The downside is that transaction fees can be relatively 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. I expect this will change in Medellín in the years to come, as more and more of us Norte Americanos arrive on the scene. Meantime, today, you’ll need to learn to speak at least some Spanish living here.

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.

During our first visit to Medellín seven years ago, Lief and I met with an attorney, Juan Dario Gutierrez, now a good friend. During an early conversation, Juan Dario asked us what his country could do to be more competitive in attracting foreign retirees. We told him it would help Colombia‘s case greatly if the country offered and promoted a retiree residency program… a la Costa Rica in the 1980s and Panama more recently. Today Colombia has such a visa.

We’re meeting with Juan Dario later today, and I’m going to make another suggestion. One thing his country could do to be more competitive in attracting foreign investment and global entrepreneurs would be to revamp its approach to taxation. A tall order, but it won’t hurt to plant the seed.

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: This is a moving target depending on the relative strength of the Colombian peso. Right now, Colombia is notably more affordable than Panama for dollar-holders…

Cost Of Real Estate: As much as 60% 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…

Ease Of Residency: Panama is one of 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 in the “Friends of Panama” visa program. However, Colombia is also a very straightforward option in this regard and has been working hard to make the process ever-easier. For sure, the cost of establishing residency is lower in Colombia than in Panama…

Ease Of Banking And Doing Business: Here, Panama wins, with its international banking industry (the exchange-of-information treaty the country signed with the United States in 2010 notwithstanding); 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); and its greater prevalence of English-language speakers…

Infrastructure And Accessibility: Another tie…

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…

Ease Of Settling In: Panama City is a kind of halfway house for expats, a very easy and comfortable first step overseas. Medellín is an emerging expat destination, though, as I’ve mentioned, 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?

I couldn’t say. 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?

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

P.S. This is the kind of comparing and contrasting we’ll do live and in person and with the help of many dozens of experts and expats from around the world during this year’s Retire Overseas Conference taking place Aug. 28–31, in Las Vegas.

Today we open registration for this, the biggest and most important retire-overseas event of the year. If you’re shopping for a new place to live, retire, or reinvent your life, no matter what your age or current circumstances, you want to be in the room with us over these four days in August. Our team will showcase your best options worldwide and answer every one of your questions about how, exactly, you go about relaunching a life in a new country.

Full details of the program we’ve conceived for this timely event are here.

You can reach our conference team with your questions by phone toll-free from the United States at 1-888-627-8834.

And you can register instantly online here. VIP places are available to the first 50 who register, first come, first served.