Panama's Growing Indigestion

Matt. I agree with you on nearly all of your points in this article. However, as far as the banks here in Panama getting "giddy" about extending credit, I have to disagree at least when it comes to invididuals. When I got my mortgage approval from Banistmo 3 years ago, I had to put 35% down on my condo price in order to qualify. I know that most individual investors here in Panama had to put down similar down-payments. That is a far cry from the "know-nothing" loans, called thus because buyers didn't even need to show recent W-2's or even a verification that they had jobs, in the United States. This means that although there may be, and I believe already has been, an end to the recent skyrocket in prices here in Panama, at least those investors have built-in equity i.e. downpayment in their properties. As far as commercial lending you may have a valid point. I am not aware of the standard procedures in Panama over this period for that large segment of loans. I agree that this will be a challenging time for Panama, but just wanted to respond with a reason for optimism. Thank you.

Thanks Miguel for the comment. There was certainly a good period in Panama, and to be honest I thought it included the time you got your loan - maybe I'm wrong, that banks like Banistmo were offering around like 90% (meaning investors had only to put down 10%). Whether individuals were buying pre-construction or land, I had heard many of the same stories of these numbers and had them verified by bank officials. That all being said, maybe it was their particular credit line or something that differs from yours, who knows. Either way, I think we're all optimistic here - thanks for the clarification! - Matt

Have to agree with your statements Matt. The effects of the credit crisis and it's wide reaching ramifications began to effect N.America later Europe, Latin America and now Asia. China has closed thousands of factories and due to civil unrest has just made it illegal to fire anyone from work. The world's number one manufacturer has slowly been shutting down and has had to inject over 500 billion dollars in an effort to re-stimulate their economy. While this may seem like a distant problem, we see the ramifications with the Baltic dry index down 90 percent (shipping) and just today the first container ship has made it's way through the previously ice locked passage of the Pacific to the Atlantic. So while the Canal expansion project is a great make work project that should help the Panamanian economy for the next few years, we need to ask ourselves what the true effects are going to be with regards to the huge slow down in global trade and how it will affect Panama's trade business. The real estate sector in Panama appears to holding on by a thin string that will surely take a tumble once the out of town buyers choose to walk away from their deposits on D-Day. The average Panamanian cannot afford to purchase these condo units on the average Panamanian wages. So, this is how market economics work and so while we all know what is bound to happen, and rather than harp on that eventuality, an optimistic outlook would be to hope that Panamanian government needs to invest in projects that will provide a higher level of education to its people and a willingness to open the country to more projects like the Howard Base. Lastly, the government needs to address the huge increase in crime. This is a major deal killer for both personal and business. Once Panama is known as a crime infected murderous city of thugs and drug related crimes, it will take millions of dollars and years to overcome this stigma. This has to be the number one priority for the newly elected government.