Panama Newspapers, Miami real estate market, and news impacting different countries. When the story of the Panama Papers broke, the whole planet was shocked by the tricks of the rich around the world to cover their wealth and avoid taxes. This story comes after a group of investigative journalists from an influential newspaper go to great lengths to uncover the scandal.
When they finally got their hands on their story, many were dumbfounded. The story of the Panama Papers involves extracting data related to the secret transactions of a Panamanian company known as Mossack Fonseca. The company is a favorite of the world’s billionaires and millionaire clients who want to set up shell companies and offshore accounts to hide money from their governments.
There is a famous saying that rich people from all over the world speak the same language. The release of data from the Panamanian company proves the point. The client list features prominent businessmen, politicians, celebrities and heads of criminal networks. When the entire deal was absorbed, a European leader was forced to vacate his post; governments launched investigations, and others chose to initiate damage control measures.
Closer to home, the US Treasury acted immediately and began drafting rules for banks to reveal the identities of those behind shell companies. The department also sets standards for stopping the opening of offshore accounts.
Miami’s real estate industry is one of the most affected. The report details that some of the money used to buy expensive condos came from the people named on the list. It should be noted that even before being mentioned in the Panamanian newspapers, Miami’s real estate industry was under US government scrutiny for money laundering claims. The authorities are uncomfortable that people are buying large numbers of condos and luxury properties in Miami in cash with no trace. Considering that some of the lists cost millions, it’s curious how buyers can afford such a cash transaction without any legal documentation.
Miami Florida at sunset, colorful skyline of illuminated buildings
The US government is raising red flags in this type of investment in the Miami-Dade area and is regulating steps to trace the origin of money from buyers paying more than $1 million in cash. The authorities’ main concern is that because the money does not pass through the formal banking sector, it is considered suspicious. In 2015, approximately 53% of properties in the area were registered as cash sales.
When foreigners bought $6.1 billion worth of properties in Palm Beach, Broward, and Miami-Dade, there was a lot of suspicion about the source of the funds. Most of the money is thought to represent capital flight from Latin American companies. When the real identity of the property owner emerged, it took industry players by surprise. Paulo Alves Pereira, a Brazilian politician, and property developer is one such name. He was found to be the original owner of Mateus 5. Paulo stepped down as governor of Brasilia a few years ago after being accused of corruption. When the Miami Herald decided to investigate the report further, it found that at least nineteen foreign nationals who owned property in Miami were featured in the Panamanian newspapers. These nineteen people are suspects involved in fraud, bribery and tax evasion in the country. The investigation also found that many Brazilian clients who used the services of certain local real estate attorneys had dubious backgrounds. Most are politicians, politically connected individuals, and judges. The newspaper found that the Miami Association of Realtors organized an event to inform its investors about ways to circumvent new tax rules introduced by the government.
It is very easy for foreigners to buy property in Miami using a shadow legal entity. Secret trusts, limited liability companies, and offshore companies can buy any property in Miami without a problem. There is nothing illegal about the arrangement as long as businesses pay taxes and declare their assets. The fact that foreign nationals who invest between $500 and $1 million in US projects have the opportunity to become US citizens through the EB-5 visa program is also very attractive to Latin American citizens.
While many factors have contributed to the recent slowdown in the Miami Condo market, one of the reasons must have been the release of the Panamanian newspaper. Foreign buyers can no longer conduct business as usual. They found that there were more questions asked than last year’s deal. At the same time, many Latin American companies are going through difficult times both economically and politically.
Panamanian newspapers can influence condo prices in Miami which can drop to affordable levels. At some point, massive inflows pushed property prices to so high they were inaccessible to local residents. Rental rates can drop to affordable levels too when vacant condo owners choose to lower their rates to lure tenants. 2016 has seen the completion of many new developments and the market is about to reach saturation point.
Investors in new developments are now choosing to convert them into rental properties until the market adjusts. For now, it seems the impact of the Panama Papers has tarnished the image of Miami and its luxury condos. Whether the disclosure will have a significant effect on the industry remains to be seen. Authorities are sure to take a closer look at property deals concluded in Miami involving foreigners and cash. The Panamanian newspaper effect has left its mark for years to come.