Liechtenstein, When A Tax Haven Rights Its Ways And Sheds Its Shells

The former capital of letterbox companies has reinvented itself, minus the tax evasion. Liechtensteiners are discretely delighted by Panama's troubles.

Schaan, Liechtenstein
Schaan, Liechtenstein
Sylvain Besson

VADUZ â€" It was fiscal slaughter, a purge in the name of financial transparency. In five or six years, Liechtenstein saw half of the letterbox companies that made it a tax haven of choice â€" and of questionable repute â€" disappear.

"We've gone from 90,000 companies to about 40,000 now," explains Katja Gey, director of the Principality's Office of International Financial Affairs in the capital Vaduz.

The interest in these structures has largely vanished since Liechtenstein gave up on attracting undeclared money. While the Panama Papers are rocking the offshore world, Liechtenstein seems to show us another way.

It's been a largely forced march towards conformity that allows Liechtenstein to look down not only on Panama the straggler, but also on Switzerland, of which it long was a satellite.

For years, the tiny nation wedged between Switzerland and Austria was, with Panama, a specialist in the sale of dummy corporations. With just 3,000 Swiss francs a year ($3,100), a European client â€" typically a small or medium-sized business owner with a million bucks in undeclared income â€" could create his Liechtensteiner foundation.

Swiss banks used to order such companies by the dozens via Liechtensteiner fiduciaries, attorneys who could bring companies to life with nothing more than a rubber stamp, and who would sign the balance sheet each year. The state would charge 1,000 francs ($1,040) per company, for a total annual revenue of about 90 million francs ($94 million). The honey pot has largely dried up since then. With the end of bank secrecy, "one third of our clients have gone to Switzerland where foundations had their accounts, one third turned legal, and the tax authorities caught another third," a state employee says.

Those who left dispersed across Malta, Latvia, Cyprus, and of course Panama, a shelter for hardcore "tax evaders" who wanted to continue doing what they'd been doing. "In terms of money laundering and fight against tax evasion, Panama is now where Liechtenstein was many years ago," says Gey. The Principality was itself the target of a massive data leak in 2000 that exposed how offshore finance worked.

The former tax haven now wants to be a good pupil of international fiscal cooperation. And the forced clean-up has angered fiduciaries. Some have lost up to 80% of their customer base. Others survive only thanks to the task of liquidating foundations, which can be extremely arduous when it comes to big families and big money.

This transition will soon come to an end. By 2017, one year before Switzerland, Liechtenstein will start applying the automatic exchange of information. As a member of the European Economic Area, it must abide by European rules and thus create a central register eventually of all beneficiaries of accounts and companies registered there, a measure that Switzerland has yet to contemplate.

Liechtenstein still has ambitions to act as the world's attorney for the wealthy. Only now, it wants to do so with offshore structures that will actually serve their declared purposes, including the protection of family heritage in case of inheritance. "We used to be like a big supermarket, now we're more like a boutique," Gey concludes.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.

It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park


Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!