Panama – a great Opportunity? You decide!
My wife Verena and I just returned from Central America. We spent some time in Costa Rica but our main reason for the trip was to attend the annual real estate conference “Panama Spectacular 2008” in Panama City.
Driving from the airport to the city hotel, our first impression was a “wow”. So many skyscrapers and many under construction were impressive.
The conference started with an overview of the country and city and all its projects for the future. We had even two ministers speak to us, Mrs. Carmen Vergara, Vice Minister for Commerce and Industry and Banjamin Colamarco, minister of public Works.
This meant to us first hand information all done with the help of very professional and informative PowerPoint presentations.
After 2 days of country and developer property presentations we had two full days of bus tours looking at projects even 90 minutes west of the city along the Pacific Coast. Also two very impressive days.
Reviewing our experiences we come to the following conclusions.
The Panama Canal expansion project will be the economic driving force for many years to come for Panama. The project started late last year, but will only get into full swing this year and will last until 2014. More than 1.2 billion dollars will be spent in the year 2010 alone. The projected cost of the entire project is 5.2 Billion US Dollars. What we also learned though and which is more of interest to any investor or business person getting into Panama is the fact that this expansion and the additional volume of much larger ships being able to go through the canal will have an impact on the Panama economy of an estimated $25 Billion to $30 Billion until the year 2025.
The annual growth of Panama was over 9% last year and is expected to be 8% this year. The canal works will have a lasting growth influence for the next 10 to 15 years of above average growth.
Panama has 85 international banks, and 47 call centers, showing it is not all India for call centers by the way. Panama is one of the very few places in the world where 5 major international fiber optic cables are going through from the North to the South. Panama will always be connected, no interruptions of internet services ever as recently in the Middle East and India.
Colon at the Northern end of the canal has a large Free Zone, which many international companies use. It is the number #2 Free Zone in the world after Hong Kong.
By the way, Dell, HP and Caterpillar have production facilities in Panama and please note that 80% of all Panama business is done in the Canal Zone!
The country is also in the planning stages for two new oil refineries, one in the North, one in the South.
The growth is mostly based on services in the export industries.
Where are investors and buyers coming from? There is a strong influx of Investors from Chile, Argentina, Venezuela and Columbia. Buyers from Canada are now a significant part as well.
By the way, 42% of the skyscrapers, condo, hotel or condo/hotel and office combination towers are presold to foreigners.
These are the facts we learned about. What are the opportunities for SW Florida businesses and single investors?
The canal expansion is demanding goods and laborers and services for years to come. Go to the canal website and learn what and how you can connect: www.acp.gob.pa and go the www.mici.gob.pa for information about industry and commerce. 10% of the labor workforce on the canal can be foreigners; here is an opportunity to overcome our local slowdown. You need to speak some Spanish though.
There is a $189 million project at the downtown Panama City waterfront on the way, executed by a large Brazilian firm, which purchased all new dump trucks for the project. Do we have too may dump trucks in our market out of the boom times; we should offer to the Panama construction firms? This is just a thought. Panama is also building a brand new highway between Colon and Panama City, connecting both canal ends with a modern highway, cutting the driving time from two hours to just one hour.
Because of this waterfront reclamation project we feel that the new towers on Balboa Avenue are the future and best investments. Be aware though that older towers already on Balboa Ave. offer lower prices with the same views. Your savings per SQM (10.7 SF) will be about 30% and more.
There are quite a few new tower and single family projects east of the city under construction, on the way to the airport, which we have looked at, but do not see the same growth potential as for the new Balboa Ave. towers.
Overall the older parts of the city (in the back of Balboa) are in a revival process and offer great restaurants behind the new Balboa Avenue towers in grown settings with old tress and gardens.
The countryside:
Most developments happen on the Pacific beaches up to 90 minutes from the city. One reason for this is that the Pan-American Highway runs very close along the coast at this stretch of the country. Then the road turns inland and away from the coast. Here are established communities with fill in possibilities and new construction projects, where the first dirt is just being moved as we write this. You can choose between single family, condos and high-rises. You will be able to purchase a single family home from about $200,000 and up. Just one quick comment, Panama is not “cheap” anymore. This means that prices and projects have to be compared and evaluated very carefully. Most real estate prices have doubled in the last 3 years!
Further west, close to the border with Costa Rica, are very nice beaches, but no major projects and inland, in the mountains, is the small city of Boquete, which we liked a lot. It is an established community with newer developments along the mountain sides with outstanding mountain and valley views. On the way to Boquete you will find many newer developments as well, driving up hill for about 30 minutes until you get to the old caldera of the town of Boquete. We would not buy along this road; the locations offer ocean views, but are on a huge plane with a slight slope towards the sea, miles away. The actual area directly around Boquete is what we liked. This area is one of the most liked by Northerners and Europeans to retire to; it is much cooler and is not humid. The mountain sides are forested and houses get build into this natural setting.
About an hour’s drive from Panama west as well is the mountain community of Altos de Maria. The concept is good, but they are selling lots with no requested time frame to build on, so the community grows well by lot sales, but there are hardly any homes. We were not impressed and feel that selling lots alone does not help getting people there. We liked the climate, but it is too far out, away from shopping and services and too empty, like North Cape Coral 10 years ago.
During our entire time we felt safe and the Panamanians are a friendly bunch of people.
Our final comment is Panama City is a Baby Dubai, so worth considering for investment and/or starting a business venture.
