This is taken from my full blog post here
Residency Options For Panama
Perpetual Tourism
In Panama, it is still perfectly legal to live on a tourist visa but you must renew every six months. To renew your visa, you must exit the country and stay out for at least 3 days before you can come back in.
The most popular route for renewal is the Paso Canoas Border with Costa Rica. Both Costa Rica and Panama have entry and exit requirements that I will list below:
Costa Rica
Proof of $300 solvency. A printout of your bank statement, Paypal balance and cash have all proven to work.
Airline Itinerary back to the United States or your home country. Onward travel to other countries no longer works.
A $7 exit tax must be paid upon exiting. There is an office across the street of the Paso Canoas office. Ask the locals if you cannot find it.
Panama
Proof of $500 solvency. A printout of your bank statement, Paypal balance or cash have all worked for me.
Airline itinerary back to the United States. Panamanian Immigration is now very strict about checking tickets if they suspect that they are fake. It is now best to buy a real ticket from United Airlines or any airline that offers cancellation with a full refund. Some airlines will only offer refunds within 24 hours so be careful.
Sometimes they will want photocopies of your passport. I found that this is seldom required but sometimes they ask for it. There is an Internet Cafe near the office that can make copies.
Panama scans your full fingerprints of both hands. This is now being fully enforced. If this makes you uncomfortable then do not come to Panama.
Paso Canoas is a neutral zone that is also a full fledged city. You may freely walk within the area and shop at the supermarkets, malls, go to the bars, there are even a couple strip clubs and legal brothels within the border area. There are hotels that cost anywhere between $20-50 per night if you do not want to go to San Jose.