Pornguy,
No, I am not living there but have incorporated there. Incorporation is quick, easy and cheap but getting a bank account is a very difficult process ... they told me that since 9/11 banks are getting lotsa pressure from their american "friends" to take measures against "terrorist money" & things ...
I understand that you need the following to get a Panamesian citizenship:
- Negative AIDS test
- Good-conduct certificate (I guess your wife won't get this from her government )
- Some $1000 per month stable income from sourced outside of Panama (you will have to proof this) ... for example: a pension, interests from bonds, ...
I suggest you join the following Yahoo! group, read the archives and then ask some questions ... I am sure they will be helpful:
http://groups.yahoo.com/group/viviendo_en_panama/
I also suggest that after getting as much information as possible, you both go to a Panamaesian embassy and talk to them, especially about your wife.
Good luck to you & your wife!