Tailored for Panama: Offshore Banking at the Crossroads of the Americas

With the steady integration of a deregulated world of hypermobile capital, offshore banking has become an increasingly significant part of the geography of international finance. Many interpretations tend to treat offshore banking centres as identical sites of investment that can be easily substituted for one another by completely mobile, fungible capital. This paper explores the nature of offshore banking in one largely overlooked centre, Panama. It charts the historic context that led to the creation of Latin America’s most important centre of international banking, emphasizing the unique qualities that stand in contrast to hyperglobalist interpretations, including the Canal and the role of the US dollar. Second, it summarizes the regulatory changes initiated in the face of global neoliberalism, including the absence of a central bank and recent reforms designed to attract foreign capital. Using primary and secondary data, the paper maps Panama’s growing role as a net capital exporter, charting domestic and foreign loan markets. Finally, it also addresses the trade-offs between confidentiality, and transparency in the context of illicit activities frequently alleged to occur in offshore banking centres, which in Panama revolve around drug trafficking and money laundering. It concludes by noting that even in an ostensibly seamless world, offshore banking exhibits the place-based embeddedness of financial capital within local institutional relations. Within the growing literature on the geography of money (Leyshon and Tickell, 1994; Leyshon, 1995, 1997, 1998; Corbridge, et al. 1996; Leyshon and Thrift, 1997; Cohen, 1998;), the globalization of finance has received pride of place. Few industries are as internationalized as banking and securities, industries that have exhibited enormous technical and institutional changes over the past two decades. While a considerable literature has focused on the role of global cities in this regard (Daniels, 1986; Sassen, 1991), others have pointed to the steady emergence of small, often marginal places – offshore banking centres – hitherto sequestered on the peripheries of international money markets that have gained steadily in stature and importance (Roberts, 1994). Harvey’s (1982) famous work The Limits to Capital unearthed the ways in which money and social power are deeply intertwined, highlighting the importance of finance as a means of reproducing uneven development, attenuating the spatial and temporal crises of capitalism, and accelerating the turnover time of capital. Such work spurred an on-going interest among geographers in the ways in which money circulates at several spatial scales ranging from the local to the global. The globalization of finance has focused in large part on deregulation and the erosion of national monetary controls (Gill, 1992; Swyngedouw, 1992; Agnew, 1994), the ways in which nation-states have surrendered much of their authority to international corporate elites through the adoption of neoliberalism in various forms, what Rosenau and Czemiel (1992) term ‘governance without government’. The globalization of finance has helped to spawn various myths about the relations between capital and space. Castells’ (1995) work on the ‘space of flows’ contributed significantly to a reorientation of theorizations of money as part of a broader web of social relations that at first glance appear to be placeless. What may be termed ‘hyperglobalist’ interpretations of international financial flows (cf. Held et al. 1999) centre largely upon the putative irrelevance of place in a seamless, borderless world in which electronic funds dance from centre to centre without obstacle, the ultimate annihilation of distance (Ohmae, 1990, 1995; O’Brien, 1992). Such views tend to portray regions as passively accommodating to the global prerogatives of capital rather than actively shaping those forces at the local level. Between these two poles of money as placebound and money as placeless lies an intermediate scale of analysis that incorporates aspects of each, a term Swyngedouw (1992, 1997) coined ‘glocalization’. This paper explores the origins and changing status of one largely overlooked centre of international banking, Panama. The historical geography and institutional dynamics of banking in this nation are closely bound up with the geopolitics of Panama at several scales, from its long subordination to the USA to its emerging role as the premier banking centre of Latin America. The paper invokes the lit-