PANAMA CITY: A huge data leak from a law firm in Panama suggesting it hid billions of dollars in assets of global politicians, sports stars and entertainers threatened Sunday to dramatically boost the country's reputation as an offshore haven for money laundering.
Panama, a small nation of just four million people, has a booming financial services sector that, including revenue from its famous canal, accounts for nearly 80 per cent of gross domestic product.
It has one of the best sustained economic growth rates in Latin America, low inflation, and uses the US dollar as its currency.
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Successive governments have strenuously sought to portray the country as a business-friendly financial hub akin to Singapore that actively encourages banking and investment.
But they have found it hard to shake a widely held image of Panama as a place where shady deals are done in secret to hide money from tax authorities and launder the proceeds of the rich, the powerful and the criminal.
After coming under heavy scrutiny in recent years from other countries, especially the United States, Panama has cleaned up its act somewhat, enough to get off an international "blacklist" of suspected money-laundering states.
In February, Panama was also taken off a "gray list" of nations with lax financial laws, but still flagged as having deficiencies in fighting money laundering.
Sunday's revelations, published under the title "The Panama Papers," could put the progress it has made at risk.
Although the media investigation into the data leak notes that many of the transactions may not in themselves be illegal, they were often politically unpalatable -- and were facilitated by Panama's tardiness in fully applying international transparency rules.
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Despite foreign pressure Panama has dragged its feet on exchanging financial information with other countries and lifting its banking secrecy.
"Panama has become the most opaque place on earth," the director of the Center for Tax Policy in the Organization for Economic Cooperation and Development (OECD), Pascal Saint-Amans, told France's iTele network on Sunday.
The Tax Justice Network, an advocacy group, in December said: "Panama thumbs its nose at transparency."
Transparency International, a corruption watchdog, ranks the country 72 out of 168 in the world (168 being the least transparent), with a pretty secretive financial system put at 14 out of 71 jurisdictions.
Last month, Panama's Foreign Minister and Vice President Isabel De Saint Malo told BBC radio her country was "completely committed" to exchanging financial information. But she said Panama was "concerned about the cost to our financial institutions" under proposed reporting guidelines.
She was also asked specifically about the Panama-based law firm at the center of the data leak scandal, Mossack Fonseca, and its role in a huge bribery case unfolding in Brazil involving the state oil company Petrobras.
"I think that needs to be cleared up," she admitted in the March 7 interview.
She stated, however: "Our financial sector abides by the highest standards internationally."