Challenges Of Doing Business Offshore

This is Carnival week. Depending where in the world you find yourself, that’s more or less a big deal.

Here in Panama, Carnaval (yes, they spell it with an “a”) is a very big deal. I managed to avoid the drinking, the loud music, and the up-all-night craziness by staying in Panama City. Most all residents of the capital leave the city and travel to the interior of the country, where the real Carnavales are held in places like Las Tablas and Penonome.

The quiet has been nice, and it’s been much easier to get around the city without the usual traffic. On the other hand, the fact that all Panamanians have bugged out for their Carnavales celebrations means that most businesses in this town, including the banks, have been shut down for two or three days or longer. While the locals know nothing is open and take for granted that no work gets done during this period, the uninitiated foreigner can stumble into a productivity vacuum if he doesn’t plan ahead.

One colleague came to town last week to start his residency process in Panama. He didn’t accomplish what he needed to accomplish before he left because he hadn’t factored in Carnaval. He’ll have to make another trip to finish his visa work.

I’ve made the same mistake when traveling to research new markets—including, for example, in Colombia.

Colombia has 18 national holidays a year, meaning, essentially, a long weekend every other week. Kathleen and I managed to beat those odds. When renovating our apartment in Medellin, we arrived on the scene better than half the time to find we were in town for (another) holiday weekend. We still were able to get things done, but never as much as expected.

For Americans who, unless they work for a bank or the federal government, get maybe six holidays and two weeks’ vacation a year, the fact that the rest of the world gets a minimum of 12 holidays and four weeks of vacation is hard to comprehend.

You can guess my answer to that question. But that’s not my point. My point is that fewer work days is a reality you have to come to terms with when investing and doing business overseas.

If you plan to start a business in another country that will require staff, you’ll also want to be prepared for things like the “decimo” in Latin America. The decimo is an extra month’s pay that each employee receives as an annual bonus. In some countries, it’s paid in December. In Panama it’s divided up into three payments, one in April, one August, and one in December.

Sticking with Panama as an example, staff in this part of the world gets a decimo, a full month’s vacation, gobs of scheduled holidays (and sometimes extra ones just because the president decides to declare an unscheduled holiday), and allowable sick days of up to 18 per year (as long as the employee brings a doctor’s note…understanding that a doctor’s note is readily available for sale for a few bucks). Labor is definitely less expensive in Latin America than in the United States or Europe, but be sure you remember all these extras when working up your business plan.

If you have no entrepreneurial aspirations, then the abundance of holidays will affect you only when you need to cash a check or process a visa on one of the many long weekends.

My advice is not to sweat it. Extend your trip a few days to accommodate the downtime. Then join the party.

Lief Simon

P.S. If you want to try to avoid holiday interruptus, you can check here before booking your travel.

“Lief, being a subscriber, I had great ideas of retiring this year in Belize until FATCA and the Hire Act has stopped our moving of U.S. dollars to new accounts. Am hearing horror stories of U.S. folks trying to open accounts in Belize with U.S. dollar deposits.

“What is your advice and where do we look? Originally wanted to do a foundation in Panama and had paperwork ready only to seemingly hitting a dead end. Understand banks do not want U.S. depositors. Any suggestions?”

H.R.

As far as I understand things, all banks in Belize will be FATCA compliant, which means they will be happy to have U.S. clients. Most if not all banks in Panama should also be FATCA compliant and therefore, again, happy to take U.S. clients.

In Belize, I know that Caye Bank takes U.S. clients. For a local account in Panama, you could try most any bank. Right now I’d recommend Balboa bank, Multibank, and Banistmo.