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A principal factor in Panama’s predicament of late is that speculation, not unlike ordinary street magic, creates an illusion. Just the other day, I was watching some home improvement show on TV, when the host, a jittery man named Skip, jumped out from behind a sofa and began a segment on How to create the illusion of height in small spaces.

”Go on Skip,” I told him. “I’m listening.”

He then proceeded to do a variety of clever adjustments such as picture placement, lighting, and curtain hanging which, in the end, made what started off as a perfectly-normal sized room, look enormous!

By creating the illusion of demand in Panama through paradise articles and overly-positive press releases, various media outlets are helping escalate prices and thereby fortifying, what I consider to be, a dangerous sort of optimism. With over $250 million pouring into a country where disappearing acts are as widespread as the common house scorpion, one has to ask at what point is enough, enough?

There are currently over 170 residential tower projects aimed at the foreign market either under construction or in pre-sale in the Panama City metro area, about 30 of which I can see out my bedroom window. I sit there with my clipboard, searching the skyline for any new indicators, and when a crane comes into sight, I get excited like I’ve seen a deer or an albino fox: Woah, there’s another one!

The market value of all this real estate is estimated to be over $5 billion, and assuming that a generous 50% of all new units are under contract (each with 10% down on their contracts) that means, well, a shitpile of money flowing into this country as we speak. But where does it all go? No one knows.

Most out-of-country propaganda, be it in the North America, in Europe, or even online, has done something extraordinary in building Panama’s investment boom to be, not only a perfect jewel with no scratches, but also a very tangible and concrete jewel that one can touch and hang around their neck. TV shows, magazines, and even Panamanian developers promoting the country in Miami and LA have built an incredible illusion—in essence, covering up this unreal estate boom.

Skip the interior decorator slash illusionist would go nuts here: he’d absolutely love it!

Go hang out at the airport as I regularly do, and watch clueless tourists wander into the tropical heat and take the first bait they see, be it a flyer, a booklet, or a gregarious taxi driver with a friend who has a brother whose mother is selling titled land in Pedasi for $3/m2. They have been primed with this illusion, this sleight of mind much like in a magic show, so that when it’s time to make a decision, they’re completely sold on the magnificence of it all.

So maybe the recent project cancellations are a nice caveat? Maybe some of the truths behind the reality of this real estate boom are starting to rear their dirty heads and this is actually a good thing for Panama—to instill a sense of realism along with all the hype? For the time being though, I’m content watching Skip every afternoon and counting cranes.

Comments (6)

max freeland: operations Matt... another great article, keep up the good work 1 July 07, 2007 Leon: ... As usual, I didn't understand the point. The recent cancellation of preconstruction buildings can not affect the existing real estate prices 2 July 10, 2007 Maryb: Are you looney? Leon? If you seriously don't understand the implications of these failures and the ones that will ensue on real estate prices in Panama city, you are an idiot. 3 July 11, 2007 Leon: ... Yes I don't understand the implicatons on the current real estate market because those buildings were not yet constructed. In fact, if they construct all those buildings that they plan to construct the consequences can be unpredictable. To me it seems quite normal that some of those projects fail. 4 July 12, 2007 Mateo: Leon the Lion Leon, I think you have a good point: that it's natural for projects to fail in a boom like this. But in such early stages of development, I think these failures could have serious impact on the industry as a whole. Say, for example, they actually tried to build the ICE TOWER to it's full height, thus making it the baddest boy on the block. What then, if a floor caved in, or part of the building fell, killing everyone inside. CNN, MSNBC, they'd all be here to cover it. I believe that this type of overstimulated growth (growing faster than an industry should) could lead to one of these disasters (as shortcuts are inevitably taken) which will surely put off all potential investors and perhaps, just perhaps, that'd be all she wrote. 5 August 02, 2007 Ezra: If I might... Its not just the safety issues, as we´ve seen in recent weeks as it affects the construction workers, and its not just that the infastructure can´t support all of the new buildings (take a look at daytime traffic), and its not just that old historic quarters are being levelled for space for new condos, and its not just that my favorite bar has been levelled so some guy can have a view of the backside of a building that has a view of the bay. Its called consumer confidence. Ok, one project like ICE gets cancelled, thats fine. But then 3 more in as many weeks go the same way. 6 August 03, 2007

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