Panama Investor Blog

One millionth canal passage gets free toll!

OK, I am kidding here. There was no free toll and no reported discount. According to La Prensa the passage of the "Fortune Plum" marked the one millionth ship that has traversed the canal since it's completion in 1914. This is an incredible accomplishment in technology and it has saved billions in dollars and many millions of days in getting goods from one side of the globe to the other. Congratulations to the ship and crew and especially to the Panamanian operators who have done a fine job in managing this wonder of the world. I might ad that congratulations should also go to my countrymen who built and operated it for the better part of the last century.

Cost of Civil Servants in Panama

I have often wondered how many government employees there are in Panama and how that number compares to other countries. Well, the first part of that query has been answered by an article in La Prensa today showing there are approximately 174,000 civil servants as of July which is 2.8% more than last year at this time. The only positive thing I can say about this growth is at least there is more being accomplished with this administration.

These folks eat up a major portion of the budget with over $900 million spent up until July. That would put the yearly payroll at about $1.8 billion for a population of 3.25 million. That comes out to one government employee for every 18 or so people with an average of about $10,230 per government worker. That's about 5.5% of the total population working for the government. With a work force about 1.3 million it comes to over 13%.

You would think that with so many on the payroll things would go smoothly in government offices, but of course the opposite is true. The more people there are, the more justification each needs to make for their position, which means a big slowdown for anything having to do with government. This is why it takes so very long to get any paperwork through the various ministries. Each person along the way has to review and stamp and of course the amount of errors are so high it is sent back numerous times for correction and in many cases just plain lost. In addition to this inefficiency the more employees the more corruption.  There are numerous studies showing this to be the case.

One thing we can always count on is that when new elections come (4 years more) there is a complete change in the civil servants as the winning party has many promises to keep, which means there are not many old civil servants kept on in any new administration. This is both good and bad. The good is you get rid of the rascals who had held sway for 5 years and they get to go back to being whatever they were before being anointed with power.

The bad news is those leaving office scramble to make as much as they can in their positions of stamping before they leave office. They know it means total chaos in the various ministries as everyone new has to learn on the job. If you want to get anything done you don't want to be getting permits when administration changes. It takes at least 6 months to a year to get things moving again.

We can only hope that the technological advancements the government is implementing with help with this in the future, although I rather doubt it. Experience has shown that governments always get bigger as do their budgets which means less efficiency and more bureaucracy. But that's the way the game is played around the world.

If anyone has found statistics for other countries it would be enlightening to compare.

La Prensa

MINERVA BETHANCOURTH
[email protected]

The return of the public sector does not leave the learning curve. Until July  174,000, , 7640 more or an increase of 2.8% compared to July 2009, the report of the Comptroller's payroll.

Compared with January 2010 when there were 162,000 66 staff, the state apparatus grew in July at 11,982 jobs.

The figure recorded until July becomes a new record by exceeding the maximum of officials who had the Panamanian State and registered in 2008 to 173,666 civil servants.

In includes wages, accumulated from January to July of this year recorded an expense of U.S. $ 990.4 million or a growth of 7.9% compared with the first seven months of 2009, when the cumulative total in wages was 917.5 million dollars.

In the budget execution report released in June by the Ministry of Finance called for institutions to design their budgets under the criteria of rationality in operating costs.

The message is addressed specifically to the Central Government which comprises the bulk of staff in some 73 institutions, while challenging the low performance in the investment budget of the various entities.

Panama continues use of banned toxic pesticides

I find it of great concern that Panama continues to use pesticides and other chemicals applied to food products that have been banned in the U.S., Europe and other countries. Even after last years ban on 18 pesticides, all of these products are still widely used according to this article in La Prensa. The main focus of this article is a ripening chemical that is being used improperly which has been found to be toxic. By soaking fruit in this chemical rather than using it only during flowering, farmers have found the fruit to stay fresher much longer at the expense of everyone's health.

Aet Elisa Tejera C.
[email protected]

Etephon agrochemical use, used to accelerate the ripening of fruits like pineapple, mango, orange, banana and vegetables, was banned this month.

The chemical was originally used to accelerate flowering of the fruit, but agricultural officials found that it was being used as a soaker, which caused concern.

The excess of this substance in the maturation of the fruit might cause problems in the digestive and nervous systems temporarily, especially in children 4 to 6 years.

Through Resolution 954 of September 9, published Tuesday in the Official Gazette, was established within six months after its enactment, to suspend the sale and use of this substance in ripening fruit in the postharvest stage.

To ensure compliance with the legislation, producers must inform the shops for which crop is used Etephon said Lucas Eduardo Mora, general director of Public Health.

However, in the sector are those who doubt the controls, especially because 18 highly toxic pesticides, the import and domestic use should be prohibited since April 2009, are still legal tender in view of a determined in the Ministry Development (MIDA) has not been signed.

Etephon use is so widespread that last year found that Measure including the Mercado de Abasto some sellers sprayed with the chemical green mangoes from Costa Rica to ripen faster.

Jorge Igualada, secretary of the Union of Nontraditional Agroexporters says that this product is used only in the flowering stage of the crop. Recognizes the harmful effect of Etephon in the ripening stage, so it does not show opposition to be taken off the market, if farmers have some evil of the chemical.

Canal generates about 30% of Panama's GDP

Not surprising that Transportation would represent such a large portion of Panama's GDP. According to a recent report from the Comptroller, the value of all goods and services produced in the country is estimated at 26 billion dollars at the close of 2010. Transport and communications represent the largest segment of GDP, followed by property and services (15.1%), commerce (13.3%) and financial  (7.9%).

During the second quarter of 2010,  transport, storage and communications rose 15.3% compared to the same period last year. Port operations for the quarter grew 25.2%, driven by the increased movement of 20 foot containers.

Although the canal brings in only 4% of that total, the multiplier affect is very significant. This includes expenditures made by employees from their income going to supermarkets, warehouses, restaurants, homes, schools and recreation.

When all is included it is estimated that the canal brings Panama about 30% of the entire GDP. According to local economists, 40% of the $5.5 billion expansion will work its way through the local economy over the next 5 years. That should guaranty Panama's continued positive growth.

Panama Tourism Revenue To Reach $2,4 Billion

By the end of July, tourism revenue grew 15% when compared to the same period of 2009. If sustained, Panama could reach $2,4 billion by the end of this year. Panama received $967,4 million in tourism revenue in the first seven months of this year, 15% more than 2009, when the country netted $837,7 million.

During these first seven months the quantity of tourists also increased to 991.000 visitors, a 10% increase when compared to last year.

Foreign Direct Investment increases 26%

Another indicator of a positive economic picture for Panama.

6:35 pm - PANAMA CITY, (Xinhua). "Foreign direct investment (FDI) grew 26% in Panama during the first half of 2010 compared with the same period last year, said on Thursday, Minister of Trade and Industry, Henriquez Roberto.

According to the official, during this period, the raising of capital from abroad totaled 1 Billion 44.5 million dollars, a figure that, Henriquez said, demonstrates the confidence that investors remain in Panama in the context of economic recovery world.

The owner of Trade and Industry said that the Panamanian government is working to create favorable conditions to attract FDI and improve competitiveness, offering investors an attractive business climate.

The minister explained that, among the instruments that promote the attraction of foreign capital, are the agenda of international promotion, attracting investments, the Law of multinational companies and special economic zones.

Recently, the World Economic Forum (World Economic Forum) admitted to Panama as the second most competitive nation in Latin America, after Chile, who occupies the first place.

Panama's economy grew 6.1% in the first half

It is surprising that Panama's economy continues to grow at such a fast clip considering the economic turmoil the rest of the world is experiencing. The combination of billions in infrastructure spending along with a significant increase in foreign direct investment should continue to keep things going for the immediate future.

La Prensa;

The Panamanian economy by accelerating the pace between April and June to complete a 6.1% growth in first half of the year, according to a report by the Comptroller General of the Republic.

The gross domestic product (GDP) reached $10 billion & 800 million, which is $ 571 million over the same period last year.

The best performing sectors were recorded transport, storage and communications, with a growth of 14%, commerce, with 10.2% and tourism (hotels and restaurants), an improvement of 9.6%.

Although there remains some uncertainty in the global economy, trade itself has been strengthened, and this is reflected in Panama's economy, said economist Roland Gordon.

On the negative side are placed on fishing, with a fall of 18.1% and financial intermediation, which decreased by 2.7%. As regards the second quarter, the economy grew by 6.3% over the same period of 2009. The GDP in this period 5000 was $ 80 million, $ 302.1 million more than the previous year.

Increases projection

The Minister of Economy and Finance, Alberto Vallarino, who acknowledged at a news conference yesterday in the first half did not run the desirable public investment, said that in the second half of the year is most noticeable impact of this and therefore not ruled that the economy close 2010 with a growth of 7%.

He predicted also that growth will be higher in 2011 and 2012, coinciding with the peak in the work of expanding the Panama Canal.

In November he will know if economic growth is generating more employment in the country. On that date, the Comptroller issued a new unemployment figure. In August 2009, the rate was 6.6%.

According to Gordon, the impact on employment is not as great because sectors such as industry and agriculture, which are generators of employment, are not rebounding.

Are there any 5 star hotels in Panama?

When it comes to hotel ratings in Panama you never know what to expect. The reason is that any hotel operator can say they are a five star hotel as there are no official rating services. That is about to change as the hospitality industry is taking it upon itself to rate hotels and provide consumers with more reliable information.

From La Prensa

About 30 companies, including hotels, guides and tour operators will participate in a pilot scheme to implement the tourism certification scheme that will evaluate the services offered by companies. Annette Cardenas, president of the Panamanian Chamber of Tourism, indicated that this pilot scheme will start in a period not exceeding three months.

For Solomon Shamah, administrator of the Panama Tourism Authority (PTA), this certification will verify tourism businesses meet the services they offer, because "there are hotels that advertise themselves as five-star when they are not."

There will be a committee composed of private business, the ATP and the Spanish company Applus, international consultancy specializing in certification processes, who set the parameters that will have to follow the companies.

According to Cardenas the lack of a culture of service and good treatment of the visitors are areas where improvement in the short term to ensure the development of this sector.

Forum on the good, bad & ugly of Panama real estate

The first Annual American Chamber of Commerce Real Estate Forum will be held on the 14th October at the Miramar Hotel. This forum is not to 'hard sell' real estate to the public, but rather, to acknowledge the elephant in the room.  The Committee realizes that there are a lot of problems and issues in the Panamanian real estate industry, and professionalism is rare here.  We intend to draw attention to these issues, and give attendees ideas for navigating the system ahead of time-- as well as some solutions for solving problems they might face if they've already purchased property here.

Conversely, we will offer some suggestions for Panamanian real estate professionals and developers who need to learn how to work with North American buyers.  The program will touch on what North Americans expect when they do business, and how Panamanian brokers, developers and support professionals can deliver it to them. Click here for more details.

Panama's tax reform clearly explained

There are a number of important changes to the tax code that have been implemented in the recent tax reform that directly affect anyone living or investing in Panama. The legal firm Pardini and Associates has done a fine job of distilling these changes down to an easily understood English format.

Panama’s New Tax Law Reform

By means of Law 8 of March 15^th, 2010, the Panamanian parliament members approved a substantial modification of our tax legislation in accordance to the guidelines established by President Ricardo Martinelli and its Minister of Economy and Finance, Mr. Alberto Vallarino.

The existence of some sort of enthusiasm to modify the tax legislation was known since the beginning of the new government, which based their initiative in the interest of raising funds for developing and fulfilling social projects promised in the political campaign, such as the construction of the subway, scholarship for all students, extending pension programs, among others.

The modifications were developed by the Ministry of Economy and Finance with the assistance of international consultants that together modified the following aspects of our legislation tax.

-  Reduce the income tax applied to middle class population
-  Reduce the income tax applied to small/medium enterprises
-  Increase large enterprises contributions
-  Increase tax rate to other business sectors
-  Increase VAT from 5% to 7%
-  Extend VAT to other products and services
-  Create new rules for income tax declarations (Deductions and others) 
-  Below you can find the most outstanding topics of the new law: