Panama Investor Blog

A cell phone for everyone in Panama

That is one fro every man women and child in Panama. If true then this would certainly make Panama one of the most connected country on the planet.

From La Prensa:

According to the latest statistics, the country's four mobile phone companies are using a combined total of 3 million numbers, or one for every person living in Panama.

This comes after the National Authority of Public Services allocated some six million numbers to the four companies, including 2.7 million to Cable & Wireless and Movistar, 900,000 to Digicel and 300,000 to the newest entry into the market, Claro Panama.

According to Public Services officials, the entry into the market of Digicel and Claro has achieved the goal of improving service and lowering prices, as the companies are trying to attract new customers through a variety of promotions.

“All four companies currently offer 3G services, which allows users to send pictures and videos,” said César Díaz, head of regulatory strategies for the authority.

Big bucks in ship registries for Panama

This is another little known income producer for Panama that requires little effort beyond documentation and monitoring. According to this article in La Prensa, there are over 8100 vessels carrying the Panama flag world wide, making it the worlds largest ship registry by far and away. Each vessel pays an initial  government fee $0.20 per ton  (180 million tons) and then an additional yearly tonnage fee of $0.10 plus a 20% surtax. They also require they registry under a Panama corporation which cost $300 a year tax and legal fees of usually about $1000 or more.  Legal firms usually have a package fee of about $7500 for processing. Obviously there is a lot of money in ship registries that continue to generate income year after year with little additional effort beyond the initial setup. Why do so many companies use Panama registry? Taxes! They don't have to pay any beyond the yearly maintenance taxes and fees.

A quick back of the napkin calculation comes up with initial fees of almost $100 million plus yearly registry fees of $25 million and ongoing legal fees of $8 million. Such a deal!

Here is an article in today's La Prensa about Panama recently passing an audit for its ship registries.

Excerpts: Panama is currently the leader in registering ships worldwide. As of Oct. 31, some 8,159 ships were sailing in international waters with a Panamanian flag, followed by Liberia with 2,312 thousand ships and the Bahamas with 486 vessels. In gross tonnage, the Panamanian fleet was also the world's largest, with 180 million tons, representing 21.8 percent of the global total.

Road from hell to new cruise port heaven

According to an article in La Prensa, the government spent $15 million renovating the terminal for a two year commitment from Royal Caribbean for the Enchantment of the Seas which will sail a scheduled 20 times a year. With approximately 2500 passengers on each sailing that represents an investment of about $150 dollars per passenger over the two year commitment. Of course if they continue to operate past the two years the amortized cost would come down. But there is one other big fly in the ointment.

Over this two year period, 100,000 passengers must somehow get to Colon in order to set sail. As the article points out, there is no airport other than a very small one for private aircraft. This means that Roay Caribbean passengers must take a 1 1/2 hour bus or cab ride over a $380 million road under extreme construction that is not likely to be completed by the end of the two year commitment. The road is supposed to be ready by April 2009, but anyone who has driven over it knows that will not happen. I can just imagine the complaints from passengers and the dread they will have knowing they get to do it again when they disembark.

From La Prensa:

The new cruise ship terminal in Colón saw the embarkation of the first liner from its dock yesterday as the “Enchantment of the Seas” set sail for its first seven-day voyage from a Panama port.

The Royal Caribbean cruise ship is carrying nearly 2,600 passengers on a tour of the “ABC Islands” (Aruba, Bonaire and Curacao) and Colombia.

The Enchantment of the Seas will depart 20 times from Colón, which will translate into cruises lasting through April.

Steve Tarazi, president of Colón 2000, the port that is hosting the cruise ship, said that the government invested $15 million in renovating the terminal, which can handle up to three cruise ship departures a week.

Royal Caribbean has already pledged to use the terminal for the next two years, and the company has shown an interest in establishing a long-term relationship with the port if passengers continue to show interest in cruises that begin and end there.

From the institutional point of view, Arosemena stressed the need to be efficient in providing services to cruise ship passengers, including in the areas of immigration and customs.

“All institutions must be well coordinated, so that the flow of tourists into the country is fast,” he said.

Arosemena predicted the arrival of new cruise lines interested in using Panama as its base port in both Colón and in the Pacific coast of the country.

Tourism officials indicated that there is a need to increase the number of flights into and out of the country if the country is to develop as a base for cruise ships.

The chairman of the Panamanian Association of Business Executives’ tourism commission, Alberto Quirós, stressed yesterday the need to build an airport in Colón with the ability to receive charter flights.

“It's sad that the Civil Aviation Authority has not yet addressed this issue,” he said.

Royal Caribbean officials said that, so far, airline capacity has not been an issue. But they warned that if demand grows in the future, it needs to be expanded to keep the cost of tickets from going up.

Can Panama support another cruise port?

A story in La Prensa today states that the Tourism industry says another cruise port is needed on the Pacific side to handle demand. It should be obvious to anyone watching the economy that the cruise industry is struggling with declining passage being recorded every month. The article points out that 32 new cruise ships are on order which will grow the fleet by 8%, but these vessels had been ordered well before the economic turmoil began. It certainly is not a forecast of industry growth as the article tries to portray.

La Prensa

Talk of launching a Royal Caribbean ‘home port’ on the Pacific coast of Panama is premature, said the cruise line’s vice president Michael Ronan. This, in response to speculation following the recent inauguration of the Enchantment of the Seas cruise departing from the Caribbean port city of Colón.

The Panamanian tourism industry has repeatedly stressed the need to build a departure point port for cruises in the Pacific. According to Ronan, “There is enough potential. The cruise industry is growing substantially.” By 2012, an estimated 32 new ships are scheduled to be built, representing a growth of 8 percent.

Ronan stressed that a thorough analysis would have to be conducted to define the target market, establish a timeline, and determine what distinct product could be offered on the Pacific side to justify the need for a second home port in the small country.

Canadian charters to offer full-fledged flights

Excerpts from La Prensa

The Canadian airlines currently offering charter flights to Panama may start providing regular flight services during peak travel seasons.

Canadian Transport Minister John Baird announced that Air Transat would operate two flights a week from Tocumen, while WestJet reported it would schedule a single flight each week. Flights will operate between November and April.

Representatives for Air Transat, which has offered two weekly charter flights Montreal, Quebec, and Panama City, Panama, since 2003, said the new service will be similar to that currently offered.

As of September, some 33,649 Canadian tourists have arrived in Panama, according to the Tourism Authority of Panama.

Business travel shows strength ONLY in Latin Ameirca

South American business travel is the only bright spot in an otherwise declining segment of the travel industry according to the International Air Transport Association. Friends who have been traveling first and business class to and from Europe tell me getting seats is difficult.

Excerpts: The International Air Transport Association, which culled data about passenger traffic in first and business class on routes around the world, said business confidence fell sharply in October, and with the economic downturn worsening there likely will be a further decline in premium travel.

The number of passengers traveling on economy tickets fell four percent in September, IATA said, and total passenger numbers fell 4.4 percent in the month.

The report said the declines in premium travel volumes is expected to lead to a virtual standstill in premium revenue growth.

As for travel between the U.S. and Asia across the Pacific, there was an 11.6 percent decline in premium traffic in the month. Travel between Europe and Asia also worsened in the month, IATA said.

It added that smaller emerging markets that had shown strength are now beginning to suffer from the global economic downturn.

Premium traffic from the U.S. to South America is still growing.

Non-compliance at used car dealerships shed light on regulations

 An article about used car sales in Panama provides insight I would guess most buyer, especially foreigners were not aware of.

Cars older than 5 years may not be imported into the country for resale.-This would keep older more polluting vehicles from getting into the market. Somehow the old school buses (diablo rojos) have gotten around that provision.

Sellers must provide a 6 month or 15,000 mile warranty.-This must be the reason that there are no  trade-ins at new car dealerships. I don't know of any dealership who will take a used car in trade. The sales person usually will help find a buyer for your car if it is in good shape in order to make the sale.

Sale prices must be provided in plain sight. Very important if you are a gringo where prices can go up dramatically based on the perceived ability to pay.

Iberia and KLM to add flight to Panama route

While airlines are cutting back their flights all over the world, it comes as good news that Iberia and KLM plan to increase flights to Panama.

Excerpts from La Prensa;

Spanish airline Iberia has announced that, starting Jan. 4, it will add a flight on its Madrid-Guatemala-Panama route.

The company, which now flies on Tuesdays, Thursdays, Fridays and Saturdays, will operate on Sundays as well, it said in a statement. The announcement comes just five months after the airline added the fourth flight, and the expansion comes as the industry is going through one of its worst periods in history. However, the strong demand for flights to and from the region has meant that the airline felt it was a good time to expand.

A similar move was made by its competitor in the European market, KLM, which recently announced that it was increasing the number of weekly flights between Panama and Amsterdam from three to five.

In 2007, Iberia transported 253,000 passengers between Europe and Central America, a 17.5 percent increase as compared to 2006.

With the new flights, it expects to carry an estimated 357,000 passengers on the route in 2009, an increase of 6.5 percent from the estimated total this year and a 26 percent increase from the 2007 figure.

Read the complete story here

Panama terminal airport expansion may be victim of credit crunch

The world credit crunch may be affecting the planed expansion of the Tocumen international Airport according to recent comments by airport officials. The next phase of the airport expansion project were to be started by now, but the bidding process has been extended in order to attract more contractors. The project was to double the size of the terminal and be completed by 2010. This is the similar story we have heard from the canal expansion where more time has been needed to "allow for more bidding". Officials for both projects also point out that financing the projects is still a challange.

Will BA start operating direct flights to Panama?

That is a big question and if true, direct flights to and from London comes as very welcome news. According to this article from a real estate promoter in the UK, British Airlines is seriously considering this.

From Homes Overseas

British Airways could soon start operating direct flights from London to Panama, Rene Estripeaut of hospitality group Quintessentially told Homesoverseas.co.uk.

Estripeaut said: “In a recent meeting with the Panama tourist board, they informed me that British Airways has expressed a very real interest in launching direct flights from London Heathrow Terminal Five to Panama in the not too distant future.”

>Brits flying to Panama currently have to fly via Spain, USA or Holland. However, if the country follows emerging nations like Cape Verde, byopening up air traffic and introducing long-haul flights from the UK,then this is likely to attract even more international visitors, and further boost international demand for property sales in Panama.