Panama's Investment Future in Jeopardy

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Panama's Investment Future in Jeopardy

(6 votes)

Written by Matt Landau

Tuesday, September 30 2008

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Nowadays, everyone is pondering more or less the same question: should you invest your money (or in a lot of cases your time) in Panama? It's a topic of conversation you can overhear in the airport, at dinner tables, on the street and even in public bathroom stalls where I once heard a man raving about Trump while taking a dump.

"Of all those projects I can guarantee Trump will sell out first," the guy said to the person on the other end of the phone. He then paused, a silence which I assumed meant the other person was speaking.

"Where am I?" the toilet man said. "What the hell does it matter where I am? I'm in Albrook. I'm in a meeting in Albrook."

I rarely eavesdrop but this particular case angered me because we were not in Albrook, we were in Costa del Este (virtually the other side of town), and he was not in a meeting, he was on the toilet. Even though I'd never end up speaking to the toilet man, I knew right then and there I couldn't trust his kind.

The flow of information here is seriously siphoned and, depending on who you talk to and where their interests lie, you may get any assortment of answers to the question should you or should you not invest in Panama? People in the real estate and tourism industries will generally paint untroubled pictures while skeptics usually forecast stormy weather ahead. Panamanians are often patriotically optimistic while those who've had bad vacation or investment experiences are cynical almost to a fault. Opinions of Panama travel and investment are highly polarized and biased, thus unreliable.

Should you invest in Panama? Our answer is a resounding yes. In analyzing the prospect, we believe the positives to currently outweigh the negatives. We are not selling anything nor does the crux of our business plan hinge on travel or real estate referral commissions. We believe wholeheartedly in the success of Panama, however there are hindrances to development (or at least impediments to the country's image) that should be considered in any sound long-term vision. As with any investment, we recommend you weigh both sides of the equation in order to make an educated decision.

5 Potential Gold Mines to Consider:

1. Boomtowns: The Boquetefication of more small mountain and beach communities into thriving, sustainable travel and investment destinations will broaden the allure of Panama as a whole; a process not of exploitation but rather embracing and acting on potential.
2. Infrastructure: Increased development in rural areas (and the City) will lead to better roadways, transportation and access to Panama's gem-like hideaways; a factor which will increasingly attract travelers and investors to the far corners of the isthmus.
3. Injections: Projects like the Canal expansion, oil refineries, mines, and multi-national migration will inject loads of money, people, and confidence into Panama. With so many eyes and hearts set on the success of the country, sturdy development has many interests at stake.
4. National identity: Indigenous tribes, natural beauty, strong cultural and historical past combine to form an authentic people and country. This unique identity will be embraced and harnessed to its fullest extent in the travel and real estate sectors.
5. CAFTA: While great for the US, this would be even better for Panama. Prices will go down on US goods and becoming more of a manufacturing base could stimulate an already blossoming Panamanian economy.

5 Potential Hazards to Consider:

1. Election: Predicted anti-US sentiment, increased populist policies, potential immigration or tax alterations (both personal and business) as well as dangerous connections with neighboring ‘bad guys' have many investors and travelers waiting to see who wins the election next Spring in eyeing up long-term stability in Panama.
2. Retiree benefits: Currently juicy retiree benefits could transform and become less attractive; signs show it's beginning with recent changes in minimum monthly income requirements and immigration law.
3. Crime: With increased travel and investment undoubtedly comes more crime: see more and more drug busts taking place, petty crime on the rise, and "random gringos dying" here and there. Safety in the Republic of Panama will be tested.
4. Project failures: Some may say project failures are natural in economic development, however the stoppage of a big enough venture (or two) could spell major doubt in the mind of travelers and investors considering Panama the world over.
5. Trickle down effect: With the increase in foreigners and their money, monitoring how Panama's very serious income disparity evolves will be important. Skeptics claim the rich will get richer and the poor will get poorer, leading to more crime and the destruction of cultural milieu.

Various hotspots may have gone cold, but does that represent the investment outlook of the country as a whole? No. There are a number of new travel and investment seeds being planted in various regions in addition to the traditional powerhouse investments (still strong), all of which provide great bang for your buck. We've listed several of them below, which are by no means the extent of opportunities but are worth considering.

8 Genuine Areas with Legitimate Futures Ahead (in no particular order):

1. Casco Viejo: Limited supply, preservation laws, exclusive buyer credentials
2. Azuero Peninsula: Matched in beauty but unmatched in short-term development potential
3. Boca Chica: Costa Rica-like momentum, limited inventory makes for strong acquisition
4. Pearl Islands: Will turn into luxurious bubble and always retain ultra-rich clientele, independent of fluctuating world economies, world class fishing
5. Fringes of Panama City: Avoid traffic, prices, and nonsense of City life yet within proximity of amenities, mountainous areas mean cooler temperatures during day
6. Darien: Land is still dirt cheap, maintained feeling of jungle immersion, rumors of large-scale development about to be released to public, indigenous groups
7. Isla Taboga: Will inevitably evolve into Panama's jet set getaway, opportunities to remodel or build from scratch, entirely authentic ambiance
8. La Pintada: Comparable beauty to Altos de Maria (low prices), proximity to city, reports of road leading to Caribbean Coast courtesy of nearby mining interests

Comments (6)

G: Trouble Brewing Ahead

Don't be fooled, the world-wide credit crunch will spare no market, even Panama. With LIBOR spreads at an all-time high even the most credit worthy person will have trouble finding a loan whether in the US, Canada, Asia or Europe. Will oil's decline and future demand waining even Venezuelans who have been fueling the boom in Panama will feel the pinch. Stalled projects, unrealistic prices and an artificial boom created by speculators will ultimately cause the Panama City condo market to come back to a more realistic level. I auction properties in the US and have a condo in Panama. The exterior areas should fair much better. However, within one year there will be a glut of condos on the market. Those who are patient will be rewarded. See you at the auction.

September 30, 2008

Mateo: Hm...

One thing G, that the US economy may lead to is people fleeing traditional investment couches and trying new things (like real estate) seeing as though no terrible president or ignorant group of representatives can take that away from you (at least hopefully not). A great point you make is bringing the market back to a realistic level.

September 30, 2008

Lamer: prestige

An interesting read from the 2009 perspective. Back in 2006 Matt following Trump said: "The important questions to be answered are: Will this investment keep up with the changing times? Will rents keep up with inflation? And is this area stable, getting better or deteriorating?"
What has Punta Pacifica become? Can Trump alone support the value of a neighborhood without vision and effort from the local government? And this idea of 'prestige' makes me laugh in view of the current economic crisis. What has "prestigious" Punta Paitilla become?

January 07, 2009

Lamer: one more

I forgot to add that the gold mines Matt pointed out are still gold mines. This country is beautiful beyond description. Beautiful and unkept.

January 07, 2009

Pat Mabawbag: Lamer

It is a pretty country. All rustic, backwaters are. Clearly, if you think this place is beautiful beyond description then you are either blind, stupid, ramping, come from a $hithole, or, maybe, a combination of the lot.

March 07, 2009

M'Bosa Ichi: Mr. La Mer