Panama Investor Blog

Tower construction stops on Ave Balboa

Nothing really new here other than the fact that the local press is discovering what most of us already knew. Buildings that have not started probably won't.

La Prensa

While prices have not dropped, the pace of construction on lots on Avenida Balboa has slowed considerably.

At the height of the country's construction boom, the street was supposed to be home to six of the region's tallest buildings. But those plans appear to be on hold for the time being.

The site of the proposed “El Palacio de la Bahía” project, which was supposed to be the tallest building in the region when completed, is currently being used to store equipment being used in the Coastal Belt project.

No date for the start of the project has been announced.

Panama revolt of 1959

This week marks the 50 year anniversary of a very interesting story about Panama that I had not heard before. There have been many attempts to "take over" Panama in the past few hundred years, but none that involve such people of notoriety as actor John Wayne and Margo Fonteyn, one of the world most famous ballerinas.

I found two interesting links that tell the story. First is a video showing American military with some Cuban "gorilla's" who apparently were hired to help with the revolt. In the short video, I could swear one of the Cubans is Che. Click here and check it out yourself.

Then comes this story "Bullet ballet" from Time magazine dated May 4rth 1959.

Excerpt:Margot Fonteyn—Dame Commander of the British Empire,* star of Covent Garden's Royal Ballet, top ballerina of the Western world—cast a large, limpid brown eye through her camera view finder and pressed the little button. A flashbulb's white glare froze a busy scene against the black of a tropic night on the Gulf of Panama, in the Pacific. Dame Margot's husband Roberto ("Tito") Arias—scion of one of Panama's 20-odd leading families and recently (1955-58) his nation's Ambassador to the Court of St. James's—was happily at work transferring machine guns, pistols and other trappings of rebellion from an outboard-motor boat to a shrimp boat.

Read the rest of the story here

Visualizing The Grid

I came across this interactive energy site which shows the various electric energy generating plants throughout the U.S.. You can see the energy sources, distribution, plant types and sizes. Oil represents a fairly small percentage of electric generation with most of it generated by coal and gas fired plants.  Very cool!
Click here to go to NPR

Gold rises as China changes paper for metal

It is starting to look like China may be shying away from U.S. bonds and according to this article,  increasing the gold reserves. One would wonder why they would not have done this a long time ago, but keeping the price low while buying lots of the golden metal may be the reason. Gold had been down about $60 this last week, but this news has brought it up considerably.

China reveals big rise in gold reserves

By Jamil Anderlini in Beijing and Javier Blas in London
Published: April 24 2009 09:31 | Last updated: April 24 2009 19:06
China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival of bullion after years of fading importance.
Gold rose to a three-week high of more than $910 an ounce after Hu Xiaolian, head of the secretive State Administration of Foreign Exchange, which manages the country’s $1,954bn in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.
The news could spark interest in gold among other central banks. “When the largest holder of foreign exchange reserves discloses an increase in gold holdings, other countries may decide to think more carefully about underweight gold positions,” said John Reade, a precious metals strategist at UBS.
The increase in China’s gold reserves has come primarily from domestic production and refining. However, the news raises questions about the future of Beijing’s foreign reserves policy.
Ahead of the G20 summit in London this month, China suggested global reliance on the US dollar as a reserve currency should be reduced.
China has been diversifying away from the dollar since 2005, when it broke the renminbi’s peg to the US currency and officially marked it to a basket of currencies, but it still holds more than two-thirds in US dollar-denominated assets by most estimates.
As its trade surplus and forex reserves ballooned in recent years, Beijing continued to buy huge amounts of US Treasury bonds while raising the proportion of purchases it allotted to other currencies and to gold.
China’s accumulation of gold has taken place as European central banks have gradually cut back back gold sales following a 1999 agreement to prevent the market from being flooded after prices were dragged sharply lower after the UK decided to sell part of its reserves.
“China’s announcement signals a broader shift in central banks’ attitude towards gold,” said Philip Klapwijk, chairman of GFMS, the precious metal consultancy.

Want Less Corruption? Shrink the Size of Government

From our friends at the Freedom and Prosperity organization comes this new video about corruption in government.

Martinelli proposes Flat tax

I have reported this bit of news before, but now it is appearing in the illustrious Wall Street Journal. I believe this to be a very important step for Panama that could dramatically improve prospects for foreign direct investments. Panama's tax laws are getting more confusing each year and ask 3 accounts a question about taxes and get three different answers. A simple Flat tax can eliminate the uncertainty and it is uncertainty that hinders investors.

Excerpt from the WSJ:

BOGOTA (Dow Jones)--Panamanian businessman and free-marketeer Ricardo Martinelli, the leading presidential candidate, proposes to impose a flat tax system in the country if elected, his top economic adviser said in an interview.

"We want to simplify the tax code because it will reduce the informal sector and tax evasion," Frank De Lima, Martinelli's top economic adviser, told Dow Jones Newswires in a telephone interview.

The flat tax rate, probably at between 12% and 17% for persons, with a full exemption for revenues below a certain level, and between 18% and 22% for companies, would have a neutral level on tax ...

read the story here...

Panama exports fall 58%

And that number represents only the first two months of the year. Panama's main exports are agricultural products and the world slowdown coupled with some government snafus have crippled the industry. The solution will be more government subsidies to help the farmers but the solution lays in producing more crops that are in demand on a local basis, which will lower the countries imports and deficits.

Excerpts from La Prensa:

Economist Víctor Cruz noted that the decline is mainly due to the global financial crisis, but said the situation was further exacerbated by the lack of access to financing by the export sector. The loss of tariff preferences with the European Union also hurt the sector.

“We must take into account that the financial crisis has impacted Panama's major markets, the United States and Europe,” Cruz said.

The export of products such as coffee, shrimp, melon and watermelons have fallen more than 40 percent, according to official indicators. Only the exports of beef and fresh fish showed an increase.

CNN asks, Where is John Galt?

Anyone who has read Atlas Shrugged clearly sees the similarity of the book with the reality of today. According to this article in CNN, the book is selling like hotcakes as the world is trying to look into the future to see what it hold, and it is not pretty.

Excerpt from CNN;

The quotation is wrong. As any reader of Ayn Rand's "Atlas Shrugged" can attest, the correct line is "Who is John Galt?" but the point is well taken.

In the midst of the credit crisis and the federal government's massive bailout plan, the works of Rand, a proponent of a libertarian, free-market philosophy she called Objectivism, are getting new attention.

"If only 'Atlas' were required reading for every member of Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial mess a lot faster," Wall Street Journal columnist Stephen Moore wrote in early January.

It's obviously getting attention from the general public. Rand book sales are "going through the roof," said Yaron Brook, the president of the Ayn Rand Institute. According to Brook, "Atlas Shrugged," her most famous novel, has sold more copies in the first four months of 2009 than it did for all of 2008 -- and in 2008, it sold 200,000 copies. It's been in Amazon.com's top 50 for more than a month.

Not bad for a 1,100-page doorstop of a book that came out in 1957, by an author who died in 1982.

Read the story here...

Immigration backlog still a problem

Of all the complaints I hear about Panama bureaucracy, immigration delays top the list. No matter what an attorney tells you, you end up waiting many months longer than they told you when they took the fee to get you your residency. To be fair, it is usually not the fault of the attorney, but the fault of the government offices who are in charge of handling the paperwork. While we businessmen work diligently to get people interested to invest and to live live in Panama, it seems the government is working just as hard against these efforts by delaying what you would think to be a simple procedure.

Each new administration promises to make things easier and yet nothing seems to change except those doing the paperwork. The current administration built a new facility with new systems to the tune of over $13 million, but they are not up and running yet. Now with a new election and new administration taking over, you can be sure that chaos will reign for some time as those going out of office will try and make things difficult for those coming in, and those coming in know little or nothing about the job at hand. The challenge is that Panama does not have a civil service that is maintained from one administration to the next. Elections are usually won by promises of government jobs and that goes from top to bottom.

With all our new technology you would think that a system could be implemented that would take a great deal of paper pushing out of the process so the job could be done in a timely fashion. Maybe the new administration will come up with a better way of handling this important part of bringing in foreign investment.

Excerpt from La Prensa "Director pledges to end delays": Because of complaints about the backlog of residency applications, the National Immigration Service has announced that it will extend its workday to 15 hours in order to reduce the waiting time for requests.

The lawyers held the protest to pressure the agency to reduce the backlog, which has been a problem for years but was exacerbated when it received a flood of applications prior to changes in immigration policies that went into effect in August of last year.

Immigration received an estimated 26,000 residency applications between January 2007 and March 2009.

Read the rest of the story

Developers under fire regarding maintenance fees, again

When buildings near completion the maintenance of the structure begins. Developers who have not sold out their buildings find themselves between a rock and a hard place. On the one hand, they need a good reputation and a well maintained building in order to sell remaining units, yet when sales come to a standstill, they are in the unfortunate position of having to carry unsold inventory and maintain them too. Most people have little sympathy for the developers as they are seen as making a lot of money off the buildings and they should have contingency plans in place for a possible downturn. But experience has shown that having contingency plans  is usually not the case. Developers live by building and selling and building again. Few Panama developers have experienced a boom and bust like we have seen these last few year and none anticipated it would end so abruptly. We will continue to hear about actions against developers by property owners as more and more of them default on their promises leaving the buyer holding the bag. Beautiful buildings facing the sea will deteriorate rapidly if not maintained and the glitter of city lights will be tarnished by shortsightedness and greed.
The one possible solution is to lower prices dramatically and start a new buying boom for those who really are looking for a deal. Better to sell for less than not sell at all.

Excerpts from La Prensa:

Complaints mount against luxury apartment developers in the coveted seafront neighborhoods of Punta Pacífica and Costa del Este, the majority of them over maintenance costs for the common areas and facilities.

Owners of property in the P.H. Aqua Mare of Punta Pacifica are particularly irate after they claim to have paid an additional fee for developer Btesh & Virzí to equip and furnish the lobby, gym and recreational area prior to moving in. More than a year later, those promises are still incomplete.

Several apartment owners in that development also allege that Btesh & Virzí owe upward of $300,000 in maintenance fees on properties that remained unoccupied between February and December 2008.

Read the rest of the story here