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A First-Hand Look at Latin America's
Fast Growing Financial Hub
Dear A-Letter Reader,
Last week I was in Panama for several days, my 10th visit to that republic in the last five years.
This attractive country has been transformed from an American "colony" into major Latin American nation, over the last 30 years. Panama is now a world class tax and asset haven, sitting in the midst of a major economic expansion and construction boom unparalleled anywhere in Central or South America. Panama's gross domestic product (GDP) will grow this year by at least 6% and more next year. The Latin Business Chronicle agrees. It reports that the IMF has predicted that "...Panama is set to grow more than any other country in Latin America."
Panama also registers high on the freedom scale. On the Heritage Foundation/Wall Street Journal 2006 Annual Freedom Index, Panama receives high scores for business and fiscal freedom, freedom from government interference, and on financial, investment and monetary freedom.
Commercial operations are generally subject to clear rules. Personal and corporate income tax rates are moderate for locals. Foreigners generally pay zero income tax. Government expenditures are also fairly low, and the country experiences only a marginal amount of inflation. The law welcomes foreign capital and imposes only minor restrictions on investments. Panama is a major regional Latin American financial hub and has used the U.S. dollar as its currency since 1904.
Panama Real Estate Is Booming: But with No Sign of a Bubble Popping Yet
During my visit to Panama the big question on many folks' minds was whether this nation's continuing economic boom, especially, its real estate sector, may be a "bubble" about to burst. In my opinion, I think there may be some cooling of that boom, especially in Panama City condo sales and prices. The bargains are getting harder to find as some local prices approach those in South Florida. But you can still find deals at a quarter or a third less than comparable U.S. ocean front and ocean view prices.
Numerous, multi-story condos are going up everywhere in Panama City. The Pacific and the Canal waterfront is beginning to look like a miniature version of the Shanghai building boom I witnessed in China over a year ago. Construction cranes are everywhere. Donald Trump's announcement of his planned Trump Towers in Panama City (shaped as a giant ship's sail) has only turned up the heat, as well as condo sale prices.
Some local observers argue that Panama's road and utility infrastructure, (especially in the Panama City area, home to 1.5 million people), is inadequate to meet the thousands of condo units under construction. On my way in from Tocumen Airport I counted at least 40 towering condos under construction. All of these will require new and better roads, sewer and water facilities, pollution control, health care and commercial establishments. The government has just announced a multi-million dollar road building program to meet such concerns.
Five years ago there were no major mega-malls in the city. Now there are three that can compare with almost any U.S. mall. On recent trips here I received very good health care service, with a doctor's fee and the prescription costing half what it would in the U.S. As to pollution, the waters around the city look as clean as they ever have -- which is not all that great, but hardly worse than what can be found in some parts of the United States. My one complaint is that the monopoly Bell South cell phone service is less than adequate.
Come On Down! The Panama Boom Continues...
Everyone I talked to in Panama agreed that the overall Panama boom will continue, even if real estate cools a bit. The question is how long the boom will keep on booming. Major international companies, retirees from across the globe, expatriates looking for second homes, and real estate investors have long since discovered the advantages and lower costs of Panama -- and they are still coming.
One factor that should assure continued growth is the planned expansion of the famous Panama Canal. Last October the citizens of Panama voted, by a margin of over 70%, to expand the Panama Canal to allow the largest modern ships to pass through. Assuming sound financing can be obtained, (China, Japan and the U.S. are all interested in contributing the US$6 to US$10 billion needed), eventually the Canal expansion could mean tens of thousand of new jobs in a nation the size of South Carolina with only 3 million inhabitants.
Once again I have seen the Panama boom first hand and I can assure you it is continuing. The question is, how long before the best bargains are gone? As they say on the long-time CBS game show, The Price Is Right: "Come on down!"
That's the Way It Looks from Here
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