Panama Investor Blog

American reporter faces trial on frivolous charges --- again

My friend Eric Jackson is in the hot seat again. Eric is the publisher of the Panama News, an English speaking online newspaper about Panama. Eric has been publishing for many years and knows the ins and outs of Panama better than most anyone I know. Although I don't always agree with his personal views and editorials, I find him to be very honest and passionate about the subjects he writes about. He is an strong defender of Panama and its people and sometimes this can lead to problems. In order to be an effective reporter you have to live and work in Panama, but that can also make you an easy target for those who you report on and  who know the idiosyncrasies of the Panama judicial system. As I have lamented on my blog on numerous occasions, corruption in the judicial system is the greatest threat to Panama's future. Now it may be the greatest threat to Eric's freedom.

Eric provided me with the following brief in order for me to try and help him by shinning some additional light on some darkness. In a world where justice is usually handed to those with the largest pocket book, Eric is at a tremendous disadvantage. The only weapon strong enough to fight against those who use money and contacts over truth and justice is to shine as bright a light on the matter as possible. Maybe you can help too with either financial assistance or contacts of your own.

Reporter faces trial on frivolous charges --- again
Eric Jackson, who publishes The Panama News, has an August 20 court date that might possibly net him two years in prison. Having twice before been charged under Panama's criminal defamation --- "calumnia e injuria" --- laws and prevailed before trial on both occasions, this time the prosecutors have adopted the privately brought complaint as their own.

The accuser is one Mark Boswell, a Colorado "patriot" movement radio personality of the 1990s who, after promoting a conspiracy theory and spending time in prison, adopted the alias Rex Freeman and became an offshore investment guru to an Internet casino operator in Costa Rica. With Costa Rican authorities investigating him for financial crimes, he came to Panama, where he offers unlicensed investment funds and banking services over the Internet in open violation of Panamanian law.

Panama's criminal defamation laws, "calumnia" and "injuria," are actually two laws, the former about publishing false and defamatory allegations of fact, the latter about injuring a reputation, even by publishing the truth. A legacy of the Civil Code legal system, similar laws in other jurisdictions that use that form of justice have been repealed, reformed or converted into civil lawsuits for damages. In Panama, politicians and aristocratic families have found that, even when the charges are preposterous, such laws can be used to control what is written about them. A number of foreigners have also discovered this tool.

So how does a convicted felon like Boswell get past our immigration, securities and banking authorities? One can only guess, but two possibilities stand out. First, Panama's authorities have often tolerated frauds directed at foreigners. Second, it is said that everything is for sale in Panama. Other explanations may also apply here.

You can read more about this case and help Eric by going here.
You can reach Eric here.

Diesel prices climb above gas in Panama

An unexpected turn of events. Panama has always had lower diesel prices than gasoline which is contrary to what we see elsewhere in the world. This is because the government subsidized diesel fuel as it was mostly used for agriculture and the farmers have a hard time with expensive fuel on top of bad or no roads. In this article from La Prensa we see that for the first time the price of diesel is higher than gasoline which they attribute to demand. Although this may be a part of the reason, the fact that the government reduced the tax on gasoline, but not diesel has played a major part. I would expect some major demonstrations from farmers when the price of diesel raises .39 cents next week.

Diesel price hits record high as pump prices rise

Between now and June 11, prices of 91 and 95 octane gasoline will increase by 20 cents and 13 cents, respectively. Diesel fuel will see a hike of 39 cents.

"Diesel fuel is much more efficient than gasoline, and that is causing the demand for this product to increase much more than gasoline in terms of volume," said Francisco Ycaza, secretary of the Comité de Hidrocarburos of the Cámara Americana de Comercio e Industrias de Panamá.

A survey of gas stations in the capital yesterday by the Autoridad de Protección al Consumidor y Defensa de la Competencia found that a gallon of normal and improved diesel cost between $4.01 and $4.20; a gallon of 91 octane gasoline costs between $3.97 and 4.13 dollars, and the price of 95 octane gasoline ranged between $4.19 to $4.33 per gallon.

Yesterday's announcement of increase in fuel price means that 91 octane gasoline will go up to $4.33 per gallon and 95 octane to $4.46. Normal diesel will hit $4.55 per gallon, the highest fuel price in Panama's history, said the president of the Asociación de Consumidores Libres, Raúl Eduardo Molina, who indicated that diesel fuel has been more expensive than gasoline since the elimination of a gasoline tax.

Sam proposes flat tax for Panama

For some of you who don't know much about the flat tax, many European countries that have adopted it have been very successful in its implementation and have seen significant economic prosperity. The Cato institute along with the Heritage foundation have put together this short Youtube video explaining  the program with examples of its success. I would love to see the U.S. adopt this tax system, but I doubt that will happen with the politics of accountants and lawyers who lobby against changing the archaic system now in place. They just make too much money with the complication and litigation. Panama is in its infancy as far as taxation goes and I would hope that their leaders might seriously look at this type of program. Keeping the process simple will encourage investment and keep more people honest.

Take a look at the video.

Rice, the food of Panama politics

With rice being the staple dish of every Panamanian it is no wonder that the government is stepping in to control the escalating prices.

"While Panama is a relatively small country, its 3 million citizens each consume a staggering 155 pounds of rice annually. In a normal year, Panamanian rice growers produce enough rice to fill 90 percent of that need, estimated at 280,000 metric tons." From farm press.

Wow! I knew they ate a lot of rice but 155lbs makes Panama per capita one of the highest in the world. China and India are at only 132 lbs and they are known as big rice eaters.

In its effort to contain political unrest that might come from empty bellies, the government of Panama is said to be buying up all the rice produced in the country as opposed to having some of it go onto the open market with some being exported to the highest bidder. They will then sell it to the people at a discount to world prices. I don't know the numbers as to the exports of rice, but the article says that about 20% is being imported to meet the needs of the country.  Reuters also points out that many farmers complain that even though the price of rice has tripled in the world market, they are still having difficulties making a profit because of all the middlemen. Now the government will step in and eliminate the middle men and supposedly pass the savings on the the populous.

Our province of Chiriqui is the breadbasket of the country, producing most of the rice on nearly 70,000 hectares of land this year. Harvests are usually in October.  The government will also implement loans to help farmers plant even more rice in the future.

Excerpt; Facing pressure over the rising cost of living, Torrijos said the government will buy 100 percent of this year's rice harvest.

Panama's food prices rose 15 percent in the 12 months to April, the government says, prompting widespread discontent and occasional protests.

Read the rest of the story at Reuters

 

Ambassador Eaton nears end of term in Panama.

This article from La Prensa reflects on the last three years Ambassador Eaton has served in Panama and paints the ambassador in a rather subdued roll as someone who likes the carnivals, the food and the people, only mentioning a few of the many serious things he has had to deal with during his time here. But that is the way of politics.

I have met the ambassador in and out of the U.S. embassy on several occasions and found him to be a cordial, serious and straight forward person. Although a statesman he is does not beat around the bush when it comes to what he sees as injustice and wrongdoing. 

The ambassador worked diligently on getting the FTA package ready for the U.S. Congress and was thwarted by the very issue he rightly saw as holding back the country from further progress. Corruption was, and still is ambassador Eaton's number one enemy as is pointed out in this article. The ambassador rightly puts this one issue ahead of all others because it is the root of the many problems that continue to plague the country. It starts at the judicial system and works its way down even to the children in school. I know this first hand as I have three kids in the educational system here.

I want to thank him and his co-workers, many of whom will be moving on to other posts, for their great efforts and service here in Panama. One thing I can truly say about them all is that in my communications with anyone at the embassy, they were always looking out for the best interests of both countries. It is not just what is good for the U.S., but what is good for Panama.

LA Prensa

U.S. Ambassador William Eaton has announced he will leave his post of three years this July.

Eaton noted corruption as one of the issues that continued to challenge the country's development.

Gabriel Rodríguez/LA PRENSA

farewell: United States Ambassador William Eaton denied that there were any "major obstacles" facing the trade agreement between the U.S. and Panama, which is being debated by Congress. 1030441

In July, William Eaton will leave his post as ambassador to the United States in Panama. Having spent three years at his post, Eaton has more than a few stories to tell, especially of his two Carnavales experiences in Las Tablas, on the Azuero Peninsula. In a recent interview with La Prensa, he spoke on a number of issues facing the country, including the trade treaty with Panama currently being debated in the U.S. Congress and the problem of corruption as a cultural matter.

When asked about his proudest achievements, Eaton mentioned his struggle to negotiate a treaty promoting trade between the U.S. and Panamanian governments. The Asamblea Nacional approved it after two and a half years of debate, and now the treaty's fate lies in the hands of Congress. Eaton expressed optimism that Congress would ratify it, but said he couldn´t give a timeframe because of the concurrent U.S. presidential campaigns.

"The political climate in the U.S. now is very confusing because we are in an election season," he said. "But during the last few weeks I was in Washington with President Torrijos, and the climate surrounding the treaty was very pleasant. It is a priority for President Bush, and I hope that Congress will soon ratify it."

Inaugurating the new U.S. embassy location in Clayton was another point of pride for the ambassador, who described the move as a "strong symbol of good relations between the two countries" because Panamanian and American laborers had worked "shoulder to shoulder" during its construction.

On a slightly darker note, Eaton pointed to corruption as one of the issues that continued to challenge the country's development.

"There are still problems the issue of corruption in Panama, and this affects the climate for investment," he said. "It also creates problems for the country's image, but in that case I'm optimistic because there have been significant changes. The selection of Harley Mitchell as chairman of the Corte Suprema is a sign that Panama can tackle corruption. There won't be immediate changes, but I think the judiciary is now on track."

The U.S. ambassador described the problem of corruption as cultural, with its effects reaching right down to the nation's children.

"Those with power in the country continue to foster corruption, which signals to the entire population, even children, that it's acceptable to cheat. I think it is important to have NGOs [non-governmental organizations] that supervise these entities."

What will he miss about Panamanian life? The food, for one thing. "I really like la ropa vieja, los patacones, el arroz con coco and the ‘dulce de tres leches’."

Panama’s exports remain flat in first quarter

Fortunately Panama's exports continue to be strong in the wake of a difficult world economy. Certainly that is due to the fact that most exports are agricultural in nature and the commodity markets have stayed strong. This article gives us some interesting statistics about Panama's trading partners and their percentage of business. As pointed out, the U.S. is still Panama's largest trading partner taking in over 25% of her exports. I am surprised that the article speaks of China as a large trading partner even though they imported only 5% of the total exports. Could it be because China is making large investments and  monetary gifts to the country?

La Prensa;

Panama's exports remained flat for the first quarter of 2008 as compared to 2007, according to figures from the Contraloría General de la República.

Exports totaled $414 million, which was almost identical to the first quarter of 2007.

More than 25 percent of that total is exported to the United States, which is Panama's leading trade partner. The country exported $125 million worth of goods to that country.

Last Friday U.S. President George W. Bush campaigned for the passage of a free trade agreement with Panama, as well as Colombia and South Korea. He said that the passage of such an agreement would be critical to addressing poverty in those three countries.

Such an agreement would help Panama's exporters by eliminating harmful tariffs that are currently imposed on some products.

European countries and China are the next largest destinations for Panamanian products, according to the report. The Netherlands, the United Kingdom and Spain imported $78 million, $40 million and $32 million worth of goods respectively. China received $26.5 million worth of goods.

China has become one of Panama's largest trading partners despite the fact that no free trade agreement exists between the two countries.

Costa Rica and Puerto Rico were the two largest regional importers of Panama's goods, with each receiving about $5 million worth of products.

Sharp decline in economic activity for Panama's first quarter

As expected, the U.S. economic problems are moving south and having a significant effect on Panama's economy. Although construction is still carrying the country, economists must know that there is a significant lag time between economic activity and the construction cycle. The slowing sales of condo's won't be felt in the construction industry until many of the buildings under construction are completed and buyers walk away from deposits. Then many that are underway or not yet started will stop. I give it another 6 months or so and then the manure will hit the proverbial ventilator.

La Prensa;

Comptroller confirms sharp deacceleration

In case you didn't feel it in the air, you can see it for yourself on paper now: Panama's economy deaccelerated sharply during the first quarter of the year.

According to the Contraloría General de la República's monthly index of of economic activity, the 10.41 percent growth recorded for the same period in 2007 dropped to 6.9 percent for 2008.

The Contraloría attributed the deacceleration to "the significant increase in the price of oil and the North American economic situation."

The slowdown in the economy corresponds to drops in agricultural production, fishing, the net tons carried by ships that transited the Panama Canal, industrial manufacting of foods and textiles, fruit harvests and cattle raising, among others activities.

The sectors that posted the highest percentage of growth in the first quarter of 2008 were construction, mining and quarrying, hotels and restaurants, transportion, storage and communications. The Contraloría did not specify how much they grew.

Two new towers announced in Panama City

It has been quite some time since I announced a new tower in the city and on this, the 26th of May 2008, I get to announce two. Either these boys don't read the news or they know something I don't about the international markets, which could well be the case. They have certainly had their experience of melting markets in Spain so they know what it feels like.

One building is a partial office building and the other a condo hotel bringing another 155 total floors into the already over inflated condo market. Developers now believe that because it is hard to get a hotel room in the city, they need to get into the condo hotel business. What they are not considering is the fact that many new hotels are already under construction and the many buildings that were to be condo's with residents will be converted to rental units.

My intuition tells me that we will quickly go from scarcity and high costs of hotel accomadations to a glut and low prices as they begin to fight over the dwindling number of business travelers relative to supply.

La Prensa

Interplus will invest in two new buildings on property it acquired from Grupo Mundial.

An associate director says the buildings will include residences, offices, and a condo-hotel.

LA PRENSA

Lured:González said Interplus chose to invest in Panama because of its safety, economy, political stability, and rising real estate prices.1031068

The Spanish international real estate investment company Interplus will develop two projects on Avenida Balboa with an expected total investment of $280 million.

Enric González, an associate director at the firm, said "We have studied investments in Brazil, Argentina and Ecuador, but the legal and personal safety and the level of services in Panama is well above the rest of the countries in the region." The company also cites the country's strong economic growth, political stability and profitable real estate market in its pitch to investors as reasons to build in Panama.

Interplus has plans for one building 250 meters in height, with 75 floors, between Calles 26 and 27 on Avenida Balboa. Construction will begin next September, González said, and it's is already 30 percent sold. The structure will include 14 floors of office space. The building is called Horizon.

The other building, named Sfera, will be a 54-floor skyscraper with offices and 500 condo-hotel rooms. That project will occupy the space where the Importadora del Este building now stands. "We are negotiating with the top hotel chains worldwide to exploit the hotel," González noted.

Sfera was originally conceived as a residential building, the associate director remarked, "but we have appreciated the high demand for hotels and offices in the Panamanian market."

Interplus has also bought Grupo Mundial's headquarters on Avenida Balboa. The company is developing real estate in Poland as well, for the same reasons it said it is investing in Panama.

New regulations mean higher prices for strippers and domestic help

This article should raise a few voices of opposition to the new immigration regulations. With less than a week to review by the various private legal firms and the many peoples affected, the government appears to be moving fast to get the new regulations implemented. As is usual when speed takes precedent over prudence, their will be numerous casualties.  These two will surly bring forth the opposition. After all, who among the political elite does not like strippers and maids.

As this article points out, those immigrants who come to work as domestic help or club strippers (performer) will be greatly affected as the fees have gone up substantially and the income requirements make it impractical for many of them. The government claims the higher fees are justified because the costs of deportation are so high. I can imagine this to be true as they require the deported to be taken back to their home country via escort.

It cost me over $12,000 in travel expenses when I made the mistake of signing for a "domestic" hired by one of our residents. The domestic was from Bangladesh and when deported for overstaying their visa, a Panamanian immigration agent had to escort him to his home in that country. As the one who signed, I got the bill. To add insult to injury the official told me he had the opportunity to meet the family of the deported and spend a few days of R&R at my expense. But I digress;

With the additional costs placed on the night club operators and domestic employees you can expect both to raise their prices. For many that could be a one/two punch!

La Prensa;

Reforms impact workers

The Dirección Nacional de Migración receives an average of 30 applications a day from foreign residents seeking permission to work as domestic employees here.

Most of the applicants are from Colombia and Nicaragua, and will earn between $300 and $600 a month, according to studies by Migración.

But the flood of domestic labor into Panama could be significantly impacted by changes in the country's immigration laws that go into effect in August. The draft of the law significantly changes the requirements for foreign domestic workers to be legally employed here.

Among the new requirements is the payment of a $1,500 security deposit, which is an increase from the $300 bond that is currently required, as well as proof of the employer's solvency, which includes new income requirements.

Luis Corro, a former adviser to the Dirección Nacional de Migración, said that the deposit is in addition to the $800 that must be paid to a repatriation fund that can be used to deport a person.

Migración officials are said to be considering lowering the amount.

The $1,500 deposit also is required for foreign performers who will be working in shows.

The draft also stipulates that applicants must submit the results of examinations for AIDS and other sexually-transmitted diseases, but officials said this requirement is being deleted because a court ruling prohibited such tests.

 

Florida for Sale!

I know that Panama is not Florida and my continuing effort to point out what is happening in the Florida market may have nothing to do with what is going on in the Panama market. But on the other hand, The Florida market was built on speculation and I believe the Panama market is built on speculation too. Panama is just not nearly as transparent so it will take longer to find out what is really going on in this market. Here is another article from the Wall Street Journal about Naples Florida where speculation was rampant and now you can buy a luxury home for a song.

Excerpt;

The market's even worse than you hear. Which means, if you're a buyer, it's even better.

The biggest price drops haven't fully shown up in the official data because that stuff isn't selling at all.

Some condo developments out in alligator swampland -- excuse me, on 'pre development golf courses' -- have gone dark.

Meanwhile, hard though it is to believe, plenty of others in the market are still in denial.

Brokers will tell you about homes still being offered vainly at $899,000 long after identical units in the same building have sold for $500,000.

Read the rest of the story...