Panama Investor Blog

Cruise ports get it wrong along with IPAT

An article in La Prensa today quotes port authority excuses for declining numbers in cruise ships. There are a number of reason for the decline none of which are mentioned in the article but are obvious to any in the industry. You can read a well written piece about the cruise industry difficulties with Panama on Richard Dietrich's blog. But, what I find so telling is the mentality of the authorities and operators that people are coming to panama to visit the city. Here is a quote.

"Bonilla noted that one of Panama's weaknesses is the relatively few tourist attractions in Colón in comparison to the city of Panama. “Ideally, the terminal would be closer to the city of Panama, so that tourists would prolong their stay, generating more revenue for the country.” Another problem might be the distance between the airport and the port, Bonilla said. But Terracina commented that with the expansion of the Corredor Norte and the road between Panama and Colón, the trip between Tocumen International Airport and Colón will take only 45 minutes."

For some unknown reason Panamanians believe that foreigners want to come and visit the city which is shown time and again to be untrue. They want to see the countryside, the old forts and the indigenous peoples. Certainly the Panama Canal is an attraction, but it does not take a day or two to get your fill of the big ditch.

From La Prensa

The number of tourists who arrived at Colón 2000 in April 2008 fell 46.7% compared to April 2007.

The total number of cruise ship visitors for 2008 is expected to exceed last year's figures.

 

LA PRENSA

Slight drop:Because of a decrease in the number of cruise ship passengers who visited Panama last April, the total number of tourists visiting the country that month fell 0.1 percent, according to an official tourism report.1047549

The Panamanian tourism authority is pinning its hopes on the arrival of two major cruise ships at the port of Colón 2000 in October and December of this year.

That's because the number of tourists who arrived in Panama by sea so far this year as compared to the same period last year has declined nearly 12 percent. And just last April, according to the Instituto Panameño de Turismo (Ipat), the total number of tourists who came to the country on cruise ships swooned 42.7 percent in April 2008 with respect to April 2007.

In April 2008, the number of tourists who arrived at the port of Colón 2000 alone, which is the principal point of entry for cruise ships visiting Panama, fell 46.92 percent, from 39,000 in April 2007 to 20,700 this year , according to a Colón 2000 report. The total number of tourists that Colón 2000 has taken in all this year has fallen 11.78 percent.

Sources at Ipat say that various cruise ships cancelled their visits because of bad weather.

Because of escalating prices contracts must be revised

This article points out that many of the contractors performing public works in the country did not have an escalation clause in their contracts and did not count on the huge increases in construction costs that have been seen over the last year or so. Of course when this happens they just stop the work. We see it happen here on residential projects as well. In the end the one requesting the work will end up paying.
The question that needs to be asked and answered is what price contingencies do the canal contractors have in place to protect them. You can bet that any international company will be covering itself from increases in material costs over the time it takes to fulfill these contracts. I believe the canal had a 28% contingency plan for material increases. I don't think that will be nearly enough.

The state authorized contracts for public works projects that had no contingency clauses.

Benjamin Colamarco, who was in charge of those contracts, now admits they will have to be revised.

LA PRENSA

benjamin colamarco1047768

Evidently neither the Ministerio de Obras Públicas (MOP) nor some of the businesses it contracted for various public works projects thought to include any contingency clauses in their agreements covering unforeseen cost increases, availability of materials, labor problems or construction delays.

With the steep rise in the price of oil and construction materials, coupled with shortages in labor and supplies, those contracts now have to be revised. Many projects will cost considerably more than first expected, and they are falling behind schedule.

“The original contracts didn't include price adjustment clauses. As a consequence, in order to make those kinds of adjustments, you have to add addenda, and that is one of the factors causing delays in the completion of the work,” confirmed Benjamin Colamarco, head of the Ministerio de Obras Públicas (MOP).

Another factor is that the Panamanian construction sector can't keep up with the real estate boom. “Between 2006 and 2007, the construction sector grew nearly 20 percent annually. That generated a lot of demand, and, since the existing operational ability of many businesses had already reached its limit, construction activity began to fall behind,” Colamarco acknowledged.

Because of these circumstances, many state contractors are having problems delivering their promised work on time and within budget.

“When a project is going to be done, evaluations are made at least a year before the order to proceed is given. So, if I give the order to proceed this month, the assessment that worked for [the terms and requirements of the contract] was done in June 2007, and the prices then are now completely out of date,” explained Colamarco. “In that time, oil, asphalt, cement, steel, and stone aggregate have increased markedly.

Officials from the MOP will meet with officials from the Contraloría General de la República and the Ministerio de Economía y Finanzas (MEF) próximamente to address the issue and try to come up with ideas for avoiding further delays in public works projects.

With respect to the request made by business groups to include price adjustment clauses in the contracts, Colamarco had no comment.

Another Condo project canceled and residents continue protest in reverted areas

This article is about the continued battle by residents of the reverted areas against the supreme court decision to change the zoning law of the areas. Allowing high rises in an other wise low rise residential area has caused those folks enough grief that they have been protesting for weeks. They may not have to worry though because there are cracks beginning to be seen in the condo market in the city that may force the cancellation of many of these projects. I received a note today that the Canal 360 project has been canceled due to "rising construction costs" and to" zoning laws in Amador hills" where the project was to be erected. I know of investors who got into that project over a year ago who were looking to make money by flipping who will now get only their money back plus 6% interest. 

Residents continue protesting zoning changes

As of yesterday, residents of Albrook and Clayton and their supporters have been protesting in front of the Corte Suprema for two weeks.

The protestors insist that a recent law that changes the zoning rules in their neighborhoods is unconstitutional and opens the way for unwanted high density developments in what are known as the reverted areas, that is, property that the U.S. government “reverted” to Panama when it turned over the Canal and its administration.

“The Palacio de Justicia is for correcting errors, not for condoning horrors,” the protestors shouted yesterday. They said they would continue protesting indefinitely.

Residents of the reverted areas suffered a setback last week, however, when the Corte Suprema affirmed the constitutionality of the law when it resolved a complaint brought before it by legislator Leopoldo Benedetti.

Yet they have not given up hope. Two other complaints of unconstitutionality, brought by residents and their lawyers, are still pending before the court.

In the first judgement, four of the nine Supreme Court justices abstained from voting: Hipólito Gill, Esmeralda de Troitiño, Luis Mario Carrasco and Oydén Ortega, who apparently consider the law unconstitutional.

Construction hampered by weak infrastructure

This article from La Prensa says the slow down in demand for apartments or "reshuffling" is because of poor infrastructure in the city. The economist Ruben Lachman is quoted as saying “The demand exists, but the problem is on the supply side, because of bottlenecks related to the construction of streets, parking, lack of water, and other inconveniences that aren't very attractive to foreign investors or buyers,”

Many still delude themselves into believing that there is a huge demand for over priced apartments in the city and will use any excuse to justify the fact that things are not going as rosy as they would like you to beleive. The fact is that the lack of infrastructure and traffic problems exasperated by the construction of all of these buildings and infrastructure is having a huge impact on those poor souls unfortunate enough to have to live in the city. It is not affecting buyers because few ever intended to live in them anyway. The house of cards is starting to fall and within a short time will be shown for what it really is.

From LA Prensa;

Construction has a rough road ahead, according to various experts, not least of all because of the lack of infrastructure to support it. And that's not to mention the “market correction” being seen in Panama.

Economist Rubén Lachman of Intracorp Estrategias Empresariales is predicting a notable reduction in the number of homes being built, especially in the upper brackets, because of infrastructure problems.

“The demand exists, but the problem is on the supply side, because of bottlenecks related to the construction of streets, parking, lack of water, and other inconveniences that aren't very attractive to foreign investors or buyers,” Lachman remarked yesterday in a business symposium organized by the Cámara de Comercio, Industrias y Agricultura de Panamá.

The economist gave assurances that “there is no cause for alarm,” because the country is not experiencing a bursting bubble but “a mild reduction that could last some three to four years.”

Lachman recommended rapid urban planning so that investors aren't put off.

The Cámara Panameña de la Construcción (Capac) also acknowledges that the pace of construction is slowing, but that apart from the lack of infrastructure, the market is experiencing a “reshuffling” with regard to construction processes.

“Companies are being forced to revise the traditional processes to which they're accustomed,” said Walter Medrano, president of Capac. He added that public offices have to evolve within the new parameters, too.

Osvaldo Marchena, a real estate developer who attended the symposium, said the coming slowdown could be positive since it would give the country time to address various problems, including transportation.

Stats show master plan to drive away residential tourism effective

Thanks to Lily for sending me this information and her comments below.

These figures are from the latest edition of the Panama Post and cite the National Immigration Directorate as the source of the information.

Tourist Visas for Pensioners:
                 2005            2006            2007
USA             759            968             258       
Canada        534            695             348

It would certainly seem that the efforts of the immigration department and the IPAT directorate are paying off, at least among this particular group.  Soon, they will have to find someone other than Gringos to hold accountable for Panama’s woes because there won’t be any Gringos here to blame!

If anyone has any contrary data please send it in.

Tourists as targets: update #1

I received this email from Tomas Portillo who paid a visit to the local Boquete Police to find out just what's going on. I have corrected some English errors. My Comments and recommendations are below his report.

Tomas;
Today I met the Chief Police of Boquete, Major De La Hoz and here is what he told me regarding the so called "harassment" to tourist or expats living in Boquete. The order (fort this action) came from the Immigration Department in Panama City, even the director herself was here doing the operative.

He told me there is nothing unusual to  ask for IDs-passport if you are in a foreign country. He said he himself in the states has been pulled over and ask for id, even as a tourist.

"Most of the expats living down here think is a no mans land, no law or authority". He even showed me copies of Most Wanted Americans overseas- sex offender, drug dealers, etc.  documents signed by the FBI director.

"In the end it is to protect all the citizens and foreigners living on this quite and peaceful place-so far".  Last weekend they had a road block and kilos of drugs, local fugitives, and thieves stealing goods from the nearby areas where pulled over and taken to custody.

Thanks,
Tomas

There have been many comment on my previous post regarding this issue similar to the sentiment expressed by the police chief where he states "there is nothing unusual to  ask for IDs-passport if you are in a foreign country. He himself in the states has been pull over and ask for id, even as a tourist."

My bet is that he knows nothing about the U.S. and its constitution, because it is in fact quit the contrary. It is illegal to profile people and ask them for ID in the U.S. and most other developed countries. The exceptions are if you are entering the country in order to verify who you are, and if you are driving a vehicle and are stopped for a traffic violation. Even then, they do not ask for immigration papers, but only if you have a valid drivers license.

The police Chief goes further suggesting that the area is full of FBI most wanted criminals who believe Panama is a safe haven and they can come here and do as they wish. He believes that everyone is guilty until proven innocent and the only way to catch criminals is to treat everyone as if they are one and see who gets caught in the net. He goes further to state how effective they have been at catching thieves and drug dealers and how this is protecting us and we should be happy about it. How many military states have we heard this line of rhetoric from?

Now, I understand the argument that Panama does not have this in their constitution or bill of rights and it is perfectly legal for them to do as they wish regarding this matter. But it seems to go against state policy as Panamanian officials  say they want to increase foreign investment and tourism into the country. They even claim tourism to be one of their largest income producers surpassing the canal revenue.

If I was not invested in this country I would certainly take a pass on doing so if we find the higher authorities are condoning this type of action. If I were a tourist I would return home telling my family and friends that Panama is a beautiful country with friendly people, but they still act as a military dictatorship and it appears as a dangerous place.

A friend of mine sent an email to IPAT about this issue and here is the response from the Deputy General Manager;

Thanks for your Email.We started immediately to do something about
it. Regards Fredrik

Arq. Carl-Fredrik Nordström
Sub-Gerente General  Deputy General Manager
Instituto Panameño de Turismo -IPAT
Ave. Samuel Lewis y Calle Gerardo Ortega
Edificio Central, Nivel 100
( Teléfono: (507) 526-7110, (507) 526-7000
) Fax: (507) 526-7121
8 www.ipat.gob.pa
* cfnordstrom@ipat.gob.pa

I suggest all of you write an email to Mr. Nordstrom and let him know what you think of these jackboot tactics. The question we want answered is this.

Is this action authorized by the state or is this just one mans/womens misguided actions? If it is authorized by the state I will be reconsidering where I will reside and invest. What say you?

Nicaragua: The Inherent Dangers of Being a Militant Mecca

I sometimes post news on other countries in Central America that I find might be of interest to expat's considering buying property in those lands. Since last years election of Daniel Ortega to the Presidency of Nicaragua, I have been following the events there more closely. Nicaragua is a beautiful country and a visit there two years ago amazed me at the number of foreigners investing in the country either as developers or as home buyers. Since the election we have seen little sign of the old Marxist Ortega turned Christian, but a sign of the old leftist has come to light when he recently grated asylum to several FARC rebels.

I subscribe to a  regular intelligence report from an organization called Strafor who cover geo-political events from around the world. They sent me this report on Nicaragua this morning that I think is important for those considering residing there. I am posting it here with their permission.

Terrorism Intelligence report from Stratfor

By Fred Burton and Scott Stewart

Diplomatic relations between Colombia and Nicaragua are once again in the news, with the two countries trading broadsides over the Nicaraguan government’s recent decision to grant asylum to three female members of the Revolutionary Armed Forces of Colombia (FARC).

Nicaraguan President Daniel Ortega in June said that the FARC members in question reportedly survived the March 1 attack on a FARC camp just over the Colombian border in Ecuador that resulted in the death of Raul Reyes (Luis Edgar Devia Silva), FARC’s No. 2 and one of its most long-standing and experienced operational commanders. After the March 1 raid, Nicaragua briefly severed diplomatic relations with Colombia in protest of the country’s violation of Ecuador’s sovereignty.

Ortega accused the Colombian government of conducting “state-sponsored terrorism” against the FARC members in his explanation of why he granted them asylum. To emphasize this point, Ortega further accused the Colombian government of plotting to assassinate the three FARC members in Nicaragua. He then stressed that the three need Nicaraguan protection so they can serve as witnesses in a future trial of Colombian President Alvaro Uribe Velez for “crimes against humanity.”

Canada inks new air agreement with Panama

This is good news if they tie in some scheduled flights into the deal. None are mentioned in this article.

By: Adam Ledlow

OTTAWA, Ont. – Canada has inked a new air transport agreement with the Republic of Panama, a long-standing bilateral partner in Central America.

The announcement was made today by the Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, and the Honourable David Emerson, Minister of Foreign Affairs and International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics.

The agreement puts in place a new, modern framework for scheduled air services between Canada and Panama, consistent with Canada's Blue Sky policy.

"The new agreement will benefit passengers, businesses, air carriers and airports through a greater range of travel options," said Minister Cannon.

Airlines from both countries can serve any point in each others' territory, with greater flexibility for establishing airfares, and greater certainty surrounding operational business issues. The agreement also includes strong safety and security provisions, reflecting the importance both countries attach to these subjects.

"Canada greatly values its long-standing relationship with Panama," said Minister Emerson. "This achievement further reflects this government's commitment to open new air links with key bilateral partners to facilitate growth in trade, investment and tourism."

With air travel, trade and investment between Canada and Panama growing, this agreement marks another step forward in Canada's engagement in the Americas. The agreement also complements Canada's recently launched exploratory discussions with Panama on a possible Free Trade Agreement. In 2007, bilateral merchandise trade between Canada and Panama totalled $115 million, with Canadian exports accounting for $86.4 million and imports totalling $28.7 million. From 2005 to 2007, Canadian merchandise exports to Panama increased 44%.

Air carriers from both countries have shown an interest in operating scheduled air services between Canada and Panama, and are currently reviewing their plans in light of the new agreement.

Panama growth up 9.8% for April

If you can believe the numbers, the growth rate for Panama at 9.8% above last year for April is significant although as this article points out, with a March rate of only 2.2% something does not seem quit right. The comptroller blames it on the Easter Holiday, but I hardly think that could swing the countries economy by 7%. If so we are in deep dodo as holidays come just about every other week here.

From Reuters;
Excerpt; Analysts said the figures for March, which on Tuesday were revised upward to 2.2 percent growth from 1.9 percent reported last month, may have been artificially low because of the timing of Easter holidays this year compared to a year earlier.

Read the rest at Reuters

Hard Rock hotel to start sales

I received this press release yesterday.

For Immediate Release

HARD ROCK HOTEL PANAMA RECEIVES PANAMA APPROVAL TO BEGIN SALES
Project is the first major international brand to locate on the Pacific Ocean

Panama City, Panama Monday, June 19, 2008 – The Hard Rock Hotel Panama, a 499-room luxury condo hotel resort development on the Pacific Ocean has won approval to start condo sales from the Panama Government and Housing Authority.  The destination resort will incorporate iconic contemporary architecture, cutting edge amenities including swim-up rooms, a Rock Spa, and a range of other innovations designed to create a new standard, not only for Panama but for the entire Caribbean/Central American Harregion and the rest of the world.

With the extreme shortages in hotel accommodations in Panama, timing could not be better for the   government approval for the project, which will bring significant investment and employment to the Pacific beach area.

“I am very fond of Panama and its people, and proud to be involved in bringing the Hard Rock Hotel Resort to the beach in Panama,” says developer Bryan, “I know that this will be both a perfect place for this wonderful resort, and a great resource for the people who live in this area.”

When completed in 2010, the hotel will be join nine Hard Rock Hotels currently operating worldwide and a number of others planned to open at roughly the same time. The hotels translate the idealistic brand elements of the much more informal Hard Rock Café’s (“Love All, Serve All”) into a four-star travel experience. Hard Rock Hotels are consistently ranked at the top of the markets they serve in occupancy and average daily rate. (The company’s reputation and performance was a key reason a previous condo hotel offering in San Diego sold out its available units within hours.)

The eco-sensitive design of the hotel will incorporate Panamanian culture from Spanish colonial to Kuna motifs within a very up to date, expansive context. Most of the units within the project will have ocean views, the exception being a small, exclusive section centered on the state-or-the-art Rock Spa ®. Planned attractions include a 200,000 square foot pool, 2 signature restaurants, expansive Rock Star suites, a sky bar, and the Hard Rock’s world famous service.