Panama Investor Blog

"Direct Foreign Investment" Sustains Economic Growth in Panama

How can the Gross Domestic Product (GDP) grow 6.2% in a country where construction workers paralyzed most of the ongoing projects, including the expansion of the Panama Canal; a nation where the crisis endures in the Colon Free Zone (CFZ), due to a great debt of Venezuela to companies operating in the Free Zone, totaling USD 1,7 Billion; and where hotel occupancy is at its lowest point (67% in 2010 and 53% in June 2014)?

How can Panama be the country with the highest economic growth in Latin America and the Caribbean, if in the first half of this year - exports of goods in the nation grew only 0.1%, agricultural production continued to deteriorate, had to take cost-saving measures energy, falling production of hydraulic and thermal energy; and transit of vessels through the canal declined in the first six months of the year?

How is it that Panama's economy grows 6.2%? The government has just approved a cut in public spending of about $ 500 million, based between their technical arguments, which was not fulfilled in the first half with the programming of the collection of current revenues of the central government.

FOREIGN DIRECT INVESTMENT

What, then, is the macroeconomic variable that sustains economic growth in Panama of 6.2% in the first half? 
It Is Foreign Direct Investment (FDI), which grew 26% in the first six months of 2014 compared to the same period last year.

To get an idea of ​​the impact of FDI in the first half of the relationship of this variable with respect to real GDP was 15%.

In recent years, FDI has been a significant variable in the growth of the economy.

From 2000 to 2013, it went from $ 624 million to $ 4.65 Billion, an increase of over $4 Billion during these thirteen years, an expansion of 646% in this period.

One explanation of why FDI grows so strong in Panama is because foreign companies are constantly buying Panamanian companies. This phenomenon has involved almost all activities of the country, but mainly in the banking, industrial and trade sector.

If it is good or bad to depend on foreign investment for the growth of a country, that is another debate. At this time Foreign Direct Investment is what keeps Panama growing…

 

--> www.thepanamainvestor.com CLICK HERE and CHECK IT OUT!

 

Retirement has a Throne

Every year a country of this Planet is proclaimed the #1 place to enjoy the rest of your life after retirement, and its no big surprise that Panama earned this title amongst our civilization. The Annual Global Retirement Index (now on its 23^rd year) ranks the best international retirement destinations, and together with factors provided by InternationalLiving.com ranging from the price of groceries and average temperature, to utility costs and the friendliness of locals, the editors assess the results. After they do all the math, the result concludes that there is simply no other place where retirees can get more for their buck.  PANAMA is the place to be!

Panama is rapidly becoming a Capital for the world to invest into and this brings lots of incentive programs to make it a place worthy of spending the rest of live in. Having the American dollar as a currency and English as a widely understood language, it’s a magnet for retirees moving from the US and the world. This Central American nation has several significant reasons for obtaining this title, such as its pensioner residence program that offers discounts on real estate loans, medical expenses, pensioners entertainment expenses and much more. But most significantly the immigration process has been simplified for foreigners.

Panama has introduced new visas in the past year, that have made it easier to gain residence; and having a population of around 4,000,000 with a growth of 75,000-80,000 a year, has been a factor that encouraged major advances in infrastructure and boosted the economy in many ways. But besides many factors that make this country a “Happening” place, the low cost of living, the heavenly climate found across the country and the incredible scenery all around are key factors of this judgment.  

Some quotes from an Article on Forbes regarding this announcement are:

 

“If you’re planning to retire abroad—because you want to live better for less, diversify your investments or enjoy a greater degree of adventure—you should consider Panama…”

 

“Panama ranked No. 1 this year because it offers a “great combination of variety and value,” “No matter what it is you’re hoping to find, Panama is a good place to look for it.”

 

The Top 10 places on the list were:

1- Panama

2- Ecuador

3- Malaysia

4- Costa Rica

5- Spain

6- Colombia

7- Mexico

8- Malta

9- Uruguay

10- Thailand

Contact us if you are considering Panama for your next social or economic adventure! – we will gladly help you out, and point you to the right direction based on what you desire.

Is Panama experiencing a commericial property bubble?

It appears that Panama's real estate bubble has shifted from residential towers to commercial office space and hotels. A trip through the city shows many towers under construction and although a good number of them are residential projects getting closer to completion, there are many that are either hotels or commercial towers. Hotel occupancy in Panama has been on the decline and occupancy rates that were in the 80% plus has now dropped to the med 60% level. On top of this decline is another 10,000 plus hotel rooms coming on line over the next year or so. The Megapolis alone is 1500 rooms and it is one of several dozen hotel projects underway. Then there are the commercial towers which depend on the continued flow of multinational companies coming to Panama to open up shop. Thus far Panama has done well with filling up this commercial space, but just as in the residential and hotel construction, the developers appear to have gone overboard in their estimation of absorption and odds are there will be a lot of overhang in the market within a year or so as these buildings come online. I believe it is reasonable to expect prices of hotel rooms and office space to become highly competitive over the next year especially if the world economy gets the double dip many are expecting.

This article speaks to the HOPE that many have for the continued flow of multinational companies to relocate to Panama.

From La Prensa;

Roberto Gonzalez Jimenez
[email protected]

The skyline of Panama change at top speed. Under the cranes that are on the horizon, few would dare to diagnose that the world has experienced one of the worst economic crisis in history.

Part of this phenomenon can be attributed to the dynamism of tourism and corporate projects. "Faced with declining high-standard housing, the sector was redirected toward the construction of hotels, shopping centers and office buildings.

And for residential housing of a modest profile, "said Jaime Jované, president of the Panamanian Chamber of Construction.

"This movement, together with investment in public works, has allowed the construction industry to remain at acceptable levels," he added.

Some of the stars of the future skyline of the city will be office buildings, with innovative designs such as the Revolution of 50th Street Tower, a 52-story tower that offers high offices of 145 thousand square meters.

Also on 50th Street stands the Financial Tower, with 56 floors will house, among others, the offices of Tower Bank.

Punta Pacifica is building another giant of office tower: the Oceania Business Plaza, a project with two towers, one 56 story's and another of 44.

The corner of Balboa Avenue and Aquilino de la Guardia is a clear example of the shift in construction.

In this batch was planned the Ice Tower, a building of over 100 floors for hotel and residential use.

Declared infeasible, the developer changed the project to one of 63 heights in the same structure combines a five-star hotel and office space of 108 thousand 400 square meters.

In Costa del Este, another sector of the city where corporate activity grows, the market, among others, the Costa del Este Financial Park (45 floors) and the Prime Time Business Tower (20 levels).

CAPACITY MARKET

All these projects, ranging in price from $ 2500 and just over $ 3,000 per square meter, will be delivered between the end of this year and 2012.

In 2013 there will have to add the offer of the Financial Tower, the skyscraper to be built by the Government in the former headquarters of the U.S. Embassy on Avenida Balboa, which will become the tallest in the city.

The government has planned the sale of 40 thousand square meters of offices to the private sector to finance part of the construction of the tower.

With an offer of that magnitude in the next three years, the question is whether demand will be strong enough to absorb it, or whether, by contrast, have a situation similar to the reality in upscale residential sector, where many apartments remained unsold.

The industry insiders say the level of sales of the projects indicates that the market can absorb the new supply. Bet, moreover, the success of Panama as the headquarters of multinational companies.

"Panama is becoming a business hub with companies setting their base of operations for the region," said Ivan Carlucci, former president of the Panamanian Association of Brokers and Real Estate Developers (Acobir).

Since 2007, through Law 41, Panama offers tax and labor incentives for multinationals to provide services to third countries from Panama.

According to recent reports by the Ministry of Commerce and Industry, about 40 companies have benefited from this law to settle in Panama.

Only in 2010 have received their license as Multinational Companies Headquarters in Panama firms such as SAB Miller Central, Otis, Ericsson, Adidas and Sanofi Aventis, among others.

Not in all cases these companies occupy large office spaces or large staff bring to the country.

Some have done so, as the case of Procter & Gamble's U.S. East Coast.

To Carlucci, who estimated that only a multinational can claim between 3000 500 and 6000 meters squared offices, with the arrival of these companies also streamlines the rental and sale of apartments.

The challenge of Panama and its authorities is to continue the promotion abroad and not worsen the conditions that have made Panama an attractive place for investment.

"Flipping is dead"

As everyone knows flipping a condo before completion was a world wide sport and Panama was a hot spot as other places quickly cooled when money became tight. But as this article in International Property Journal points out, the party is over here in Panama too. I posted many times about the speculative bubble I saw building back in 2007-8. I am not Nostradamus, but it was obvious to anyone who looks at the world from a conservative standpoint that it was just unsustainable.

There will be a great deal of mostly mediocre product coming on the market in the next two years and deals will be had. The good news is that Panama  is not depending on construction as an economic engine as in the past. The many infrastructure projects although creating loads of debt, will help drive demand for apartments as more and more multinationals come here seeking opportunity where few exits in the rest of this crazy world.

Excerpt from IPJ:

A new report doesn’t mince words about the state of the residential investment market in Panama.

“Flipping is dead,” concludes the analysis by Alternative Latin Investor.

There is “unanimous consensus” that the market has “fundamentally changed,” the report says.

And, the report notes, Panama’s commercial property market remains strong. “Commercial units are still being completed and absorbed at a stable rate with a good majority of preconstruction buyers also committed end users, whether that be to occupy or lease,” the report says.

Panama's luxury apartment glut expected to be between 5-8000.

That's according to the Wilson Ruiz, vice president of the association of Real Estate agents and developers in Panama (ACOBER). As can be seen in this graph from La Prensa below, building permits have dropped significantly this year, but less than one would have expected under the global economic circumstances. Of course many of these permits are for lower income housing, which continues at a strong pace due to government subsidies on interest rates.

Most of the expected glut of high rise luxury units are still under construction and all are behind schedule by anywhere from one to three years. From what I can determine many still have a long way to go before completion. ACOBIR is not overly concerned about this as they believe the units will be absorbed by the ever increasing number of people coming to invest in Panama and the fact that the buildings are coming to completion at various times will provide more time for absorption. Government officials  believe the additional infrastructure such as the new metro, cinta costero and sewage treatment will help spur sales. Still, 8000 new apartments over $250k is a lot of property to move over the next few years. Miami is certainly having it's challenges moving a similar number of units, but that is Miami and this is the center of the universe.

Panama property tax could net 1% of GDP

Panama's new tax reforms rely heavily on increased sales tax and collection of property tax. The challenge in the past has been collection as there really is not a system in place to do assessments and billing. There has always been a tax on land, but the powers that be in the past never valued it and rarely collected taxes on it. I am very much opposed to property taxes and would rather see a higher sales tax, but that would hit the general population harder and it is thought that property owners have more assets and can afford to pay property tax. Once a system is in place for assessment and collection, it becomes an easy matter to increase mil rates to cover spending by government. In any case, Alberto Vallarino, the head of MEF, expects the property taxes to generate a 1% of GDP. in 2010. Last year they collect about $100 million and in 2010 they expect it to be $250 million. That is a 150% increase in collections. Panama's GDP last year was about $25 billion.

New Chiriqui beach project to start soon?

The Philipe Rodriquez property near Boca Chica was rumored to be sold to a Chinese group several years ago. They were to build a golf course, marina, homes, condo's etc., but things never seem to get off the ground. Today in La Prensa comes an announcement that Philipe and a "group from the Netherlands "will be making things happen on the property very soon there.

I know the property and it is in a strategic location for a project such as this. Overlooking the Pacific Ocean right at the mouth of the estuary and the small fishing village called Boca Chica ,it would certainly bring much needed life to that area. The main question, beside having sufficient capital, is timing and can they build sales momentum needed for success in this economic climate. At the end of the article it says the company is starting three other projects in Panama. This sounds very aggressive to me.

From La Prensa: Aet Elisa Tejera C.
  [email protected]

  The beaches east of the province of Chiriqui have captured the attention of local and foreign investors.

  On land near the beach Horconcitos, in the district of San Lorenzo, the projector will be built residential and tourist Boca Chica Marina Club & Resort, through an investment of 50 million dollars.

In an area of 200 hectares consortium Destiny Visions Hotels Resorts, comprised of Panamanian and foreign capital (Netherlands and USA), plans to build a residential project for the middle class, upper middle and foreign.

  The project concept is to offer a mix of tourist residences with recreational areas, where they can make water activities livestock and farm, said Felipe Rodríguez, one of the investors.

  The work in its initial phase will include construction of 700 homes valued between 150 thousand dollars and 200 thousand dollars.  Each lot will have  one to two thousand square meters.

  In addition, the building project will offer restaurants, a marina club and livestock, and three-story resort with 10 rooms.

  Activities tie, fattening cattle and milking are some that can be made in this project, which aims to boost tourism in an area where farming has been the main economic activity.

Investors have already begun technical studies to obtain building permits, said Rodriguez.  "The investment agreement between employers has already been signed and are in the stage to perform technical studies to obtain building permits and begin work in January 2011" he said.

  The Enrique Malek airport expansion in the city of David, and the extension of the Pan American highway will be two works that benefit the development of this real estate project, said the businessman.  In turn, the consortium plans to start another resort in the Santa Isabel, up the coast in the province of Colon, and one in the region of Azuero, Cambutal Area in the province of Los Santos.

Why you won't see rock bottom prices on condo's in Panama

Miami has certainly had  problems with over-speculation on construction of high rise condo's. The news has not been good for developers for some time now, but it is very good for bargain hunters. How about condo's that were selling for $224,300, or $329 per square foot now at auction starting at about $50,000 or $63 a square foot. This is well below the cost of construction and a super deal for bottom feeders.

Could this happen in Panama? There are several reasons why I don't think it will. Miami is in a completely different world of bank financing and sales transparency and Panama is a shell game with a shrewd group of happy go lucky conspirators. A Miami developer MUST make sales or go bust and in Panama it is just not the case.

Surprisingly few banks are on the line with the developers in Panama and those that are have plenty of hard assets and cash flow to back the loan. Many of the buildings were financed with old money from cash abundant Colon Free Zone operators and some others may be financed by ill gotten gains where sales are not so critical as owning a clean asset. Foreign developers (mostly European) looked at land and construction costs as "cheap" compared to their home countries and brought construction money with them. Pre-sales with 30% down may even pay for a great deal of the construction costs because costs were running under under $1000 a square meter and many apartments were sold for two and three times that. There is no MLS, and without transparency the only way to know how slow sales really are is to wait until the buildings are completed and see how many lights are on at night. Even before the boom, I was astounded at the few lights on in the apartments in the city. How was it possible that there were so many empty apartments, yet rents were not cheap and neither were apartment prices down.

The developers with  significant unsold inventory may only be saddled with high building maintenance and taxes on the land that has gone up significantly with the new tax reforms. That is a small price to pay for a $50-100 million dollar asset that can be used as collateral in the future.  Even the government does not really care if they are sold because they gave property tax exoneration's for 20 years. It is a grand conspiracy where the developers will not be crying, the banks won't foreclose and nobody is the wiser.

So who are the losers? Just a bunch of "greedy speculators" who bought apartments hoping to make easy money on the quick sale before building completion. Few people have sympathy for speculators who bragged on how much easy money they were making during the boom times. After all speculation is a high risk game and as many have or soon will find out, you can lose it all with that kind of gamble. In fact when you look at most of the Panama apartments for sale on the internet they are being offered by speculators just hoping to get out with some of their money back. There are not a lot of completed units on the market as many of the projects are as much as two years behind schedule.

So all the concern about all the buildings and the thousands of people living in them using up water, electric and sewage is something we should not to worry too much about. Traffic won't get much worse and should get much better with the new metro. And best of all, as travelers make their way from the airport to the city they will be wowed by the cosmopolitan look of Panama City and wonder at the prosperity of this small country. These Panama folks must be geniuses to be prospering in a world of financial difficulty. And just maybe some wide eyed visitors will pony up and buy a condo at inflated prices because there is little or no discounting going on, at least from the developers.

Sales slow in Boquete-Buyers market!

According to this story in La Prensa Tuesday, homes sales has slowed dramatically in Boquete since the economic tsunami made landfall. Real estate agents say it is only down 50%  and the mayor says more like 90%. They both may be right because the mayor's office issues building permits and real estate agents sell finished products. A number of people have had to sell their second homes in order to take care of other bills back home. I know that our market of $200-400K homes has virtually dried up. Now we see over a million dollar homes moving. This is not surprising as we market to those with money who are wanting to protect it.

We have seen a significant slow down in new home construction and those developers I know are operating at a snails pace trying to conserve cash until things turn around. What does this mean for prospective buyers? The time is ripe to buy as you can take your pick and negotiate great prices and terms. I would bet that within a year, Boquete will be back to being a bargain that it was when I began building Valle Escondido and marketing Boquete as "twice the lifestyle, half the price".

I find it rather amusing that the town has hired additional engineers to help with the expected flow of building permits and now they have nothing to do. Welcome to the world of capitalism. You never really know what the market will do in the future.

Home sales slow in Boquete

Driving through Boquete, it is hard not to notice the "for sale" signs on a large number of houses.

The fact that these signs are in English, and not Spanish, is a testament to the real estate boom that has taken place here in recent years. The fact that these signs are in English, and not Spanish, is a testament to the real estate boom that has taken place here in recent years.

But now, the global financial crisis has started to take its toll. But now, the global financial crisis has started to take its toll. José Branca, president of the newly created Chiriquí Association of Real Estate Brokers, said that sales to foreign residents has fallen “dramatically” in the last six months and, in comparison with the past seven years, activity has declined 50 percent, he estimated. Joseph Branca, president of the newly created Chiriquí Association of Real Estate Brokers, said that sales to foreign residents has fallen "dramatically" in the last six months and, in comparison with the past seven years, activity has declined 50 percent, he estimated.

At least three residential projects have stopped work altogether, and many others are moving at a very slow pace. At least three residential projects have stopped work altogether, and many others are moving at a very slow pace. Mayor Manuel Ruiz has an even more pessimistic view, saying that “90 percent of the projects have been affected.” Mayor Manuel Ruiz has an even more pessimistic view, saying that "90 percent of the projects have been affected."

Cool the boom in Panama

Panama, Saturday, Jaunary 19, 2008
La Prensa
"Is not recession, but economy slowdown"  Felipe Chapman emphasizes that a new reduction of rates of the Fed would lower the price of the cost of financing in Panama.

Tejeida said that a recession cycle in US could cool the real estate "boom" in panma.

La Prensa [email protected]

The former- general manager of Panama Stock Exchange, Felipe Chapman,  differs from those who speak of American recession and considers that the markets are "overreacting" to the performance of the economy of that country. "In the United States is a deceleration, not a recession and I do not believe either that one comes. In the worse of the cases, there will be a thoroughness of the growth, but not a backward movement ", concluded.

Unlike the financier David Saied, Chapman thinks that the measures that the Bush administration is applying and the Federal Reserve (Fed) are those that corresponds. "Within the arsenal of tools that they have to face this situation, they are using the correct ones. With those 150 billion dollars they would mitigate the fall of the consumption and would help the most vulnerable sectors to face the critical situation that they have with its houses ", said. But he agrees with Saied and Miguel Tejeida in affirming that Wall Street will continue falling. As far as the reductions of the banking rates of reference of the Fed, its vision is optimistic.

"That would lower the price of the cost of financing in Panama. It would not be an immediate adjustment, but in months one would feel here ", indicated. Like an indirect effect, the contraction of the consumption that would come tied to a recession cycle in  US could cool the local real estate boom.
"Most of real estate that is being sold to foreigners in Panama are acquired by Americans who, at the time of a recession, would trim their expenses and would exclusively keep their money for personal consumer goods and mortgages there, not abroad", Tejeida said.
However, the ordinary Panamanians could see themselves favored; if the boom cools off, the prices of the houses would begin to lower.