The Panama Papers scandal. A closer look to the economic and social impact of the Panama Papers in the country.

Abstract

April, 3rd 2016. One of the biggest financial scandals hit the news: 11.5 million confidential documents were released by the Panamanian law firm Mossack Fonseca, under the name of “Panama Papers”. These documents contained information about more than 214,000 offshore companies, included the names of the leaders of five powerful countries, and exposed shareholders, managers, government officials, etc. The aim of this paper is to provide a complete description of the economic and financial history of Panama as one of the most famous tax havens from the ’70s till present time, with particular regard to the recent evolution of the financial and banking system and the new international anti-money laundering legislation. Finally, it will go deeper into the phenomenon of the Panama Papers and will analyze the economic and social impact of the events that took place this past year. Weren’t tax havens supposed to be over? What happened to the transparency policies and multilateral agreements that countries had to follow in order to be in line with the requests of the OECD? More specifically, what’s the implication of such a big scandal in the Panamanian economy? Will the population be affected, and if so, in which way? Recent evaluations say that after this, firms with subsidiaries in Panama, the British Virgin Islands, Bahamas, and Seychelles suffered a drop of firm value at 0.5-0.6% around the leak. What does this mean? What will be the future implications of this drop? The complexity of these kinds of events brings about structural changes in the behaviors and lifestyles of the native community of the country, compromises the world’s vision of the country itself, and consequently influence the economy as a whole.