Panamainfo’s Blog

Just a week before the May 3rd.  elections, presidential candidate Ricardo Martinelli predicted he would win the Panama presidency by a “tsunami “. No one believed him. The polls showed him ahead but after all, the last time he ran for president in 2004 he got only 5% of the vote. But that is exactly what happened- he won by landslide- 60% in a 3 way race- the highest margin of any race in Panama’s recent history

Martinelli won because he convinced the Panamanian people he would  do all the right things for both the populace and the business community- that  he was the person  who could  solve the countries mounting problems including rampant corruption, increasing crime, a public school system that is the most expensive and one of the worst in Latin America and a Panama City transportation chaos that means city dwellers spend 10 years of their life on a bus or car getting to work.

Mr. Martinelli ran a campaign  with a slogan about “Change ” just like President Obama.  In fact according to an interview in The Panama Post, his models are Barack Obama “because he showed change is possible, Winston Churchhill “for his tenacity”, Otto Von Bismark for unifying Germany and next door neighbor Alvaro Uribe, the very successful of President of Columbia.

Change is what Panama needs as it stands at a crossroads- a country with one of the most promising futures in Latin America, but only if Mr. Martinelli can solve its current very pressing and serious problems.

Mr.  Martinelli, age 57  is one of Panama’s most successful businessman having built the country’s largest supermarket chain.  He did his undergraduate studies at the University of Arkansas and an MBA at the prestigious Costa Rica INCAE school of business afilliated with Harvard University. He is a brillant, no-nonsense, take charge type of guy.  His election is hailed  as a turn the right after a string of Latin American governments have turned to the left in recent years.  He is pro-American, will work hard to get the Free Trade Agreement with the US signed this year and he is going to bring modern management and business know-how to solving Panama’s problems.

Panama watchers are heartened by his actions since his  elections including a choice of ministers- some of whom are brilliant like economist and banker Alberto Vallerino as the head of the all important Ministry of the Economy and some of whole are   “out of the box” appointments like Lucy Molinar as Minister of Education- a popular and formidable TV journalist of enormous integrity.

Mr. Martinelli’s election made news in the Wall Street Journal, New York Times and Time. Indeed, many investors looking for a good place to invest money these, are taking second look  at Panama now because of his election.  Among other things, he plans to  will start building right away a metro to solve the devilish Panama City transportation problems, 5 new airports for the burgeoning tourism industry and a highway network including  coastal route to connect Panama’s attractive Caribbean.

Mr.  Martinelli takes office July 1st. From there on, there’s going to be plenty of interesting news out of Panama.

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Why Buy Real Estate in Panama?

Because Panama a Safe Haven in Uncertain Times

Who is investing in Panama these days? Smart money. Panama has seen an increase of wealthy investors looking for a both a safe place for their investments and a place of secondary residence.

In an April 2009 article in New York Times, Sam Taliaferro, an American developer in Panama  said

“We’ve certainly seen a slow down in for homes in the $200,000 range.  But we’ve seen a pickup in another market. The market we’re seeing now is a market of wealthy individuals who are looking for safety. They’re looking for a safe haven. They want to park their assets somewhere else because they see a train coming down the tracks.

They’re also looking for what would be a second home that will become a primary home. They’ll make this their primary home and be a resident outside the country and maybe keep a home in the United States or wherever they’re from.” 

Real estate investments in Panama carry risk but not in comparison to the risks of the US stock market. US stock market returns averaged just 3% in the last decade- before this current market meltdown when most gains were wiped out. 

One cautionary note is the Panama City condo market which everyone agrees is way overbuilt and in a major slump. But that means it is close to time to begin picking up some bargains.

Panama is attractive for investment because while it is an emerging market it is also a proven market. It has has the highest growth rate in Latin America in the last 5 years. Today it is one of the few economies that is still growing- most experts say it will grow at least 3% in 2009.

Why is Panama doing well and will continue to do well?  To start there are  numerous major infrastructure projects in the works including the 5 billion dollar expansion of the Panama Canal, oil pipelines, a major special economic zone, port expansions and hydroelectric plants. Panama is also fast becoming the business capital of the Latin American and Caribbean  region. 17 major international corporations have recently made their regional headquarters in Panama including, Proctor and Gamble, Caterpillar, Dell, Hewitt Packard and 3M. ( Miami  was the defacto capital until 9-11 which means companies can longer get US visas with any consistency.

The strong Panamanian business sector including an international banking sector of over 100 banks, is solid having not made the mistakes of its of the banks up North.

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International organizations, the Panama government and local and international consulting firms are predicting Panama’s economy will grow between 1.2% and 5% in 2009. This is well below the 9.2% it grew in 2008, but better than most other countries where economies are contracting not growing.

The predictions:

A local website, Panama Economy Insight is predicting growth of only 1.2% for 2009 but a growth of 9% in 2110 and 2111.

Standard and Poor is the most pessimistic for 2009 with a prediction of 3.5%

Local consulting firms Indesa and Deloitte say 4%.

CEPAL ( Latin American Economic Commission, and the analysts at Credit Suisse and Citibank all predict 4.5%- 5%.

According to an article in La Prensa March 25th, Panama’s Finance Minister Hector Alexander says ” Considerando all the is happening worldwide with the recessions in the major world economies and other countries in the region, this is very good and shows Panama’s (economic) strength.

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Folks,

Below is a list of confirmed 8 megaprojects and another huge one in the works for 2008-2010.

Panama is a tiny country- if only half of these projects actually get built it will do very well, but most of these projects are going to happen

Megaprojects in Panama Confirmed for 2008-2010:

1.Canal widening: 2.8 billion

2. Petaquilla mine: 3.5 billion

3. Government infrastructure projects : 3 billion

4. Electrical plants: 945 million

5. Rodman Port: 100 million

6. Manzanillo Port Expansion and other ports: 611 million

7. Puerto Armulles oil pipeline: 100 million

8. London Regional project in Howard: 750 million ( a whole city) They broke ground last week.

9. Another project not yet nailed down: Puerto Armuelles Refinery: 8 billion ( Investors; Occidental Petroleum and the country of Qatar)

Negotiations are continuing for this biggie but they are coming along well .

10. Tourism is growing at 10% a year - a million a year and they spend 10 times more than Costa Rican tourists ( mostly because most tourists are businessmen). Panama’s tourism authority just released an excellent tourism master plan. Panama has more attractions than Costa Rica and its tourism industry is in its beginning stages.

After looking at this list, you know why our Panama City hotels have been so full.

Nancy

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Panama like all countries will be effected by the US and worldwide economic downturn which looks like will continue for a couple of years.  However, in my opinion Panama will continue to do well economically inspite of the this worldwide downturn. Why? Several reasons. First, inspite of the US situation, these years will be a time of real growth in the developing countries of Latin America. Brazil will lead the way, but a number of factors make this a growth time for Latin America in general.  The first reason Panama will do well is that Panama is becoming the Business Capital of Latin American and Caribbean Region.  Every week I hear of a new company big and small that is making its corporate HQ in Panama.  There are several reasons this is happening. Miami used to be the business capital of Latin America, but since 9/11, businesses in Latin America can no longer consistently get visas for thier employees to go to Miami or anywhere in the USA for that matter. So Latin America needs a new business capital and Panama has it all- the most central location, a modern, relatively safe capital city to live, work and do business and a national airline- Copa with more direct flights to Latin American and the Caribbean than any other airline in Latin America.

Most of the growth in tourism in recent years is actually  “business tourists” coming to Panama City. Panama’s tourism will also continue to grow-  Panama will become not only a top business destination but as infrastructure and airports are built outside Panama City, it will become a beach, mountain and ecotourism destination as well. Fact is Panama in these areas, has more to offer Costa Rica, and is  just now beginning to develop its tourism potential

Apart from the current development of Panama as the business capital of the region, Panama itself has a number of mega-projects in the works that will mean jobs and a constant flow of capital- starting with of course the 5 billion Panama Canal expansion,  some major oil  pipeline and multimodel transport projects and perhaps a mega-refinery project. Panama has a population of only 3 million- so just a few major projects can make all the difference. In fact, according to CEPAL , Panama’s poverty rate has dropped dramatically in the past 5 years- from 37% to 27%.

Panama has major problems that will make economic progress for all still difficult , The poorest are  hard to reach as they are mostly the Indian population on rural, isolated reservations, but with smart planning and a will-to-care they can be reached. Panama’s education system is one of the worst in Latin America in academic results even though Panama spends more than most countries on education. But again all Panama needs is leadership to address this problem because it will have the economic means in the coming years.

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