Sunday, July 29, 2007

Minister Blades corrects "residential tourism" aberration

Tourism Minister Ruben Blades explains in a letter published in the July 8 La Prensa (with an English translation in the IPAT site), how he has tried to correct the aberration which the term "residential tourism" has become.

The Former Papa Egoro Presidential candidate blames daily La Prensa for being an example of how twisted ("enredados") some people still are when trying to report about tourism, and about second residence; the mistake is made of affirming the "new tourist visa affects real estate sector". His response is addressed at July 5 articles by La Prensa journalist Raul Bernal and PrimaPanama general manager Paul McBride.

He points out that the insistence in confusing both circumstances, that of tourism and that of who seeks a temporary or permanent residence in Panama, is responsible for all the confusions and apparent contradictions which circulate on the Internet.

This blogger is concerned that the Minister will have an uphill battle in correcting the aberration which residential tourism. The term has 89, 400 hits in Google, quoted by sites such as:

Wikipedia: the economy of the region is turning towards "residential tourism" in which many people from northern European countries have a second home in sunny Murcia.
Government of Montserrat National Environmental Action Plan (NEAP): Much good land has been transferred for residential tourism and other development but there remains an ample supply for agriculture.
Egyptian officials: The minister added that obstacles surrounding visas, property ownership and even public transportation have all been eliminated, fuelling increased interest in residential tourism offerings, new luxury resorts and recently introduced services.
World Wildlife Fund: Second-house tourism has the greatest growth potential in the tourist industry of the Spanish southeast: of every 100 houses built in Alicante, 60 are for the second house market. Foreign tourists (80% from Germany and UK) own 240,000 houses in the province of Alicante, which is the province in Spain with the highest numbers of residents coming from other EU countries. This residential tourism, is normally characterised by high acquisition power.
Governor General of Antigua & Barbuda: My government also recognises that a huge opportunity exists for residential tourism. Both wealthy persons and retired persons in North America and Europe are seeking residences in tropical countries to escape harsh winters. In this connection, one hundred acres of land will be identified for development by major developers with the capacity to build and market such homes. Similar developments have taken place in Barbados, Jamaica and The Bahamas and they have resulted in large scale employment for locals in the service industry, expanded sales to the business community for the supply of goods, and increased and sustainable revenue to the government from property taxes. My government expects to launch this development project within the next few months bringing over thirty million dollars in revenue after all the lands are sold and earning almost four million a year in property taxes once the project is completed.
My government's objective for land-based tourism is to position Antigua and Barbuda so that within the next few years it emerges as one of the principal tourism destinations in the world. It recognises that, to do so, we need a trained and competent work force in all aspects of the hospitality industry including fluency in languages, expertise in the highest levels of culinary art, catering and management. .... The Investment Promotion Agency will work closely with our missions abroad to promote Antigua and Barbuda as a centre for foreign investment in tourism, residential tourism, financial services, e-commerce including internet gaming, and niche agriculture production.
Dimitris Avramopoulos, Tourism Development Minister, Greece: he and other senior officials or businessmen in the tourism industry believe that a largely untapped potential for development exists in integrated resort complexes, combining health tourism (thalassotherapy, spas, beauty parlours, rehabilitation facilities), conference centres, marinas, residential tourism (real estate sales or leases, including group retirement schemes), casinos and golf courses.
Invest in Golf: It is not rocket science, which is why other counties are starting to develop their residential tourism markets. Croatia, Turkey, Egypt and Bulgaria are all trying to develop their residential markets and attract foreign investors.
ProExport Colombia: FID and Residential Tourism: Seeking Retirees
Amazon: Books
III Conference on Residential Tourism: 1 whole day of panels and speakers about this aberration.
Cajamar Institute: Study on possibilities of residential tourism in Malaga
Tax Studies Institute: Study on tax barriers to residential tourism
Malaga on the web: Study on residential tourism
University of Madrid: Online course on residential tourism in Andalucia
Promotur: Powerpoint presentations and news from the Andalucia Association of Residential Tourism

Obviously, governments in Greece, Antigua, Colombia and other countries do believe in the benefits of residential tourism. We truly believe that taxpayer moneys would be better spent in immigration control technologies which do not require prospective buyers of US$250K homes to spend 4 hours every 30 days sitting at the overcrowded Avenida Cuba facilities of the Immigration department, if these controls are truly necessary to deter illegal immigration.

Friday, July 27, 2007

NEW COMMUNITY: Logistics hub in the making

Tuesday Jul 24 2007 07:10

By Adam Thomson

Think of Panama City and one of the first images is the crescent-shaped bay, defined on one cusp by the growing sky-rise residential area of Punta Paitilla and the picturesque old centre of 19th century pastel-shaded waterfront buildings on the other.

But if London and Regional, a UK-based construction company, gets its way, the city could soon outgrow its traditional boundaries to occupy a huge area of land just across the Bridge of the Americas spanning the Panama Canal: Howard, the former US Air Force base.

This month, the company, together with Jaime Gilinski, the Colombian banker and entrepreneur, signed an agreement with the Panamanian government to build what it hopes will become a new business and residential hub within just a few miles of the existing capital.

The company has three months to present its master plan for the 1,400ha site and, as yet, few details are known. But London and Regional has pledged a minimum investment of $405m during the first eight years of the 40-year concession. A further $300m will follow during the remaining years.

This month, after paying the government a one-off fee of $20m to seal the contract, Ian Livingstone, who heads the company said: "We hope to exceed the spending limits established with the government quite dramatically."

Indeed, Mr Livingstone and Mr Gilinski believe the value of the finished project could top $10bn, equivalent to more than half Panama's gross domestic product. The idea, they say, is to construct a large industrial park, a media village, a downtown area with plaza, restaurants and shops, a showcase building to mark the nearby entrance of the canal and a swathe of residential buildings – for both the wealthy and low-income segments of the population.

"Our intention is to create a community, and that won't work unless you have a representative mix of society and a critical mass to achieve a stable and permanent population," says Mr Livingstone.

That is a far cry from how the area looks today. Large white houses adorned with red-tiled roofs and built up on stilts line grassy streets named to make the US soldiers to feel right at home.

On one side of the area lie a 3.2km runway and four huge hangars which served as centres of aviation maintenance and storage up to 1999 when the US packed its bags and went home.

Economists and town planners say that one of the measures of success will be the amount of interest and the number of firm offers from companies looking to use Panama as its centre of regional operations.

Mr Livingstone says he has already initiated detailed talks with many multinationals. "We have had between 20 and 30 serious approaches from companies whose names everyone is very familiar with," he says.

If they end up moving to the site, it is likely to be for two main reasons. The first is Panama's increasing emergence as a logistics hub for the wider region. Since the government of Martín Torrijos came to power in 2004, it has set in motion a plan to encourage shipping and transport companies to use its strategic position as a centre of distribution.

The second could be a series of tax benefits. Officials say companies involved in industries such as aviation and related activities, and information technology, will not have to pay any taxes or import and export duties.

"What we want to generate is investment and employment," says one official, who estimates that the project could create between 20,000 and 25,000 new jobs.

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PROPERTY: Ideal spot for the second home

Tuesday Jul 24 2007 07:10

Charles and Sharon Erwin, two semi-retired residents of Mobile, Alabama, have spent much of the past few years travelling the world in search of a second property to which they can escape during the colder months. Between leisurely holiday trips and more active searching, the couple have visited more than 40 countries so far. But tonight, they are sitting in a cosy family restaurant in the hills of Panama and they sense that their quest for the ideal spot has come to an end.

"Have you ever met somebody you just liked immediately?" asks Mrs Erwin, an elegantly dressed woman with fine features and an intoxicating southern drawl. "Well, the Panamanian people are mostly like that."

Now 71 and 62, respectively, Mr and Mrs Erwin are part of an invasion of foreigners who are snapping up Panamanian real estate in every shape, size and location imaginable as part of what has turned into the most vigorous property boom in decades. "It is as if they were rediscovering America again," says Lourdes Fabrega, the restaurant owner who says an increasing number of her customers are foreigners on a hunt for property.

In Panama City, the capital, real estate developers have responded to the foreign interest as well as to strong local demand by building tower blocks of luxury flats on just about any plot of land they can get their hands on. Last year, construction permits surpassed $1bn, growing more than 10 per cent compared with the previous year. Iván Carlucci, president of Acobir, the national association of estate agents, says Panama is the target for 175 high-rise apartment blocks, which are either under construction or in the pipeline.

The surge has been so great that the government has had to establish special courses to cater for the growing demand for plumbers, electricians, carpenters and other construction-related skills. Diomedes Concepción, who heads the programme, claims that about 200,000 Panamanians will receive such training this year alone.

The fundamental reasons for the interest in Panama seem clear enough. Investors, particularly foreigners, are reassured by the fully-dollarised economy, the country's stable government, rapidly expanding economy, proximity to the US, hot climate and good healthcare provision. In addition, prices are relatively competitive in relation to those of neighbouring Costa Rica, which has been attracting foreign buyers for years. Juan Francisco Pardini, president of Business Panama Group, a one-stop investment shop, says property prices about five years ago were between eight and 10 times cheaper than those of Costa Rica: today, they are just three times cheaper.

Mr Pardini also points out that buying property in Panama is straightforward in terms of paperwork and bureaucracy. Typically, he says, charges related to purchasing real estate regardless of value are roughly $3,000 plus an optional fee of 1 per cent of the property's value for title insurance.

Inevitably, however, all the interest has produced inflation. The cost of steel went up 40 per cent at one point last year. Meanwhile, the availability of cement at the start of this year became critical. In February, Ms Fabrega, the restaurant owner, could not ensure a reliable supply for the small house she was building on her land. "If I wanted 10 sacks I could only get five," she recalls. "It felt as if there was no cement in the entire country."

Property prices have also risen. Mr Carlucci says that land prices have increased on average 100 per cent in the past two years alone.

Such rises have spawned talk of a bubble forming in the real estate market. The feeling has been reinforced by growing evidence that some investors – from the US but also, it appears, from Venezuela and neighbouring Colombia – are buying pre-sale condominiums in bulk to "flip" or sell them on as little as six months later.

On top of that, three highly publicised high-rise projects in Panama City have run into problems – though apparently for different reasons – and have either been cancelled or significantly altered.

All this has led many experts to express caution about whether the market can continue to expand at today's rates. As Guillermo Chapman, an economist and a former finance minister, says: "You should look at the housing part of Panama's growth with a critical eye."

Not everyone agrees, however. Mr Carlucci of the real estate association, rejects the idea of a bubble, arguing that the sector is both healthy and sustainable thanks to Panama's strong economy and real demand both from locals and foreigners.

Héctor Alexander, the finance minister, agrees. "The few projects that have run into problems are the exception to the rule," he says. "The construction sector is sustainable."

True or not, it is unlikely to make much of a difference for families such as the Erwins. Even with the price increases they still think it is cheap. And that, as Mr Erwin admits, is important to a man of his background. "I was brought up kind of frugal, and I just hate to spend money," he says with a smile.

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THE ECONOMY: Excessive wealth fails to filter down to the poor

Tuesday Jul 24 2007 07:10

It is early evening on a Wednesday night but Manolo Caracol is buzzing just the same. A group of more than 20 well-dressed Panamanians fills one side of the spacious, ethno-chic restaurant, and the sangria at their table has been flowing for a while. To the left, against a backdrop of primitive oil paintings and oversized buckets brimming with tropical fruit, a young woman cooks furiously while waiters skip between the tables in an attempt to keep up with demand.

Not so long ago, you could turn up unannounced at this cool, Colombian-owned restaurant in the best part of Panama's historic centre and be confident of getting a table. Doing that today might lead to disappointment: Panama's economy is expanding at the fastest rate in almost a generation, and business is booming virtually everywhere you look. "We're experiencing growth across the board, not just in one particular sector," says Héctor Alexander, Panama's finance minister.

During the first quarter of this year, the country's fully-dollarised economy expanded at an annual rate of 9.4 per cent after growing 8.1 per cent during 2006, and both government and private-sector estimates suggest that the end-of-year figure will surpass 10 per cent.

Exports grew 15.1 per cent last year in nominal terms, and strong growth in government revenue – during the first quarter of this year it was expanding at more than 19 per cent year-on-year – helped notch up a non-financial public sector surplus equivalent to 1 per cent of gross domestic product. In the financial sector, credit is growing apace and levels of capital and reserves are building up fast.

Crucially for Panama's newfound dynamism, prime lending rates are below 9 per cent, the lowest in years.

One clear motor driving growth is the robust world economy – in spite of the US deceleration – and in particular, the heady expansion of the global shipping trade. That has boosted activity for the canal by between 5 and 6 per cent in recent years. It has also spawned the growth of related sectors such as tourism and rapidly expanding re-export trade. According to Samuel Lewis, the vice-president, the movement of shipping containers this year through Panama will reach 3m units, up from just 700,000 at the start of the millennium. He expects that figure to increase to 7m by 2009.

Guillermo Chapman, an economist and a former finance minister, describes the second engine of growth as a sort of "the world has discovered Panama" phenomenon. The country's geographical location, stable political system, the dollarised economy, still relatively low levels of inflation – the rate has fallen slightly since reaching a two-decade high of 3.9 per cent in 2005 largely as a result of high oil prices – and benign interest rates have spawned a wave of foreign direct investment. Mr Chapman says FDI this year is set to hit $2.5bn up about 20 per cent on last year.

The most obvious sign of this is in construction. Look out from the 19th century waterfront buildings of the capital's historic quarter across the bay and the rate at which the skyline is changing suddenly becomes apparent.

Another is the sparkling sports cars and shining SUVs that fill Panama City's already crowded streets. Drive down Balboa Avenue, the road that links old and new Panama City, and you will see the latest Lexuses and Lamborghinis vying for space with fat-tyred Fords and Toyotas.

The trouble is that this ostentatious wealth is not quite everywhere. Look beyond the investment figures, glass skyscrapers and the fancy restaurants and poverty more reminiscent of the seamier side of Haiti comes into view.

In Panama City's old neighbourhood, wizened men eke out a living selling loose cigarettes from roadside stands improvised from cardboard boxes and planks of wood. Families live in dingy, airless rooms that, as often as not, serve as kitchen, sitting room and bedroom all in one. Go out into Panama's lush tropical countryside and it is a similar – and sometimes even more miserable – story.

"The gap between rich and poor here just gets wider," argues Miguel Antonio Bernal, a well-known lawyer and critic of the government. "Sure, there's growth but none of it filters down to the poor." Mr Bernal insists, for example, that unemployment is running at between 20 and 23 per cent of the country's economically active population.

The administration of President Martín Torrijos dismisses such assertions, insisting that the percentage of jobless is more like 6 per cent, a historic low. But it does recognise that many Panamanians continue to live in extreme poverty. The government also says it is working overtime to try to solve the problem. Mr Lewis insists that the Opportunities Network, providing a direct subsidy of $35 a month to families that can show that their children attend school regularly and turn up to doctors' appointments, is making a significant difference for 38,000 of the 78,000 families it claims live in extreme poverty. By 2009, when the administration's term ends, Mr Lewis claims the remaining families will be receiving similar help.

Two further shadows – the fear of a bubble in the vigorous property market and a slowdown in the global economy – could also loom in the coming months and years. Mr Chapman believes that a continuing softening of the US housing market would be likely to produce less demand from US baby boomers who have been snapping up retirement homes and second properties in Panama.

Meanwhile, Mr Chapman points out that a change of fortunes in the global economy is simply a question of time – though exactly when that will happen is clearly guesswork. So what does all that mean for Panama in the medium term?

With no clear sign of an impending slump in world growth and with China's emergence as an economic superpower continuing to underpin shipping activity – China is now the second most important client of the canal after the US – many private economists believe that the country can maintain growth rates of between 6 and 7 per cent. It is a rate that almost any government in the world would be more than pleased with.

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Gates unlocked to surprise prosperity

Tuesday Jul 24 2007 07:10

Rubén Blades sits in his air-conditioned office in the financial district of Panama City and then suddenly leaps to his feet. He seizes a newspaper on a nearby surface and, with one exaggerated movement, waves it from one side to the other.

"Did you feel that," he asks. "Did you feel it? That was the baseball bat being pulled back and we haven't even started to swing yet."

Mr Blades, the country's tourism minister, veteran salsa vocalist and national hero, is convinced that Panama is on the brink of great things.

It is easy to see why he is so confident. A combination of surging world trade volumes and a boom in port development, infrastructure and commercial and residential property is bringing Chinese-style growth to the country and inviting comparisons with international business centres such as Dubai.

Last year, the economy grew 8 per cent. This year it could expand by at least 9 per cent and probably more than 10 per cent, a rate of growth that would be the quickest in the hemisphere and among the fastest in the world.

"The world has discovered Panama," says Guillermo Chapman, an economist and former finance minister. "It is an upbeat panorama."

Underpinning much of what is happening in Panama is the new importance that its geographic location is assuming in the light of the growth of trade between Asian manufacturing centres and the markets of north America and Europe.

Since Panama took full control of its canal from the US at the end of 1999, overall traffic has expanded by more than one-third and, spurred in particular by the growth of Chinese manufacturing exports, the number of containers used to package electronics, textiles and other factory products transported across Panama has nearly tripled. Sovereignty has allowed the country to push ahead with ambitious plans to double the waterway's capacity.

A new channel is to be cut, parts of the existing canal deepened and widened and giant concrete and steel locks are to be put in place. These will be big enough to accommodate so-called post-Panamax ships – enormous vessels that are too big to fit the existing lock basins.

Nine months ago, President Martín Torrijos, a moderate left winger who took office in 2004 and has stabilised public finances, secured a political mandate for the $5.25bn project when he won a referendum on the issue. That will allow the first excavation works to begin later this year, although the entire project will not be complete until 2014 or 2015.

Full national control of the canal and the "Zone" – the strip of land alongside the canal that was once a US colony – is also giving Panama more opportunity to develop business related to shipping, ranging from shipyards to suppliers of provisions and bunker fuels.

"Businesses are showing an interest in the maritime cluster in a way that wouldn't have been possible before 2000," says Carmen Gisela Vergara, deputy minister of international trade.

Some of the most notable developments are taking place in the port sector. Operators say that Panama is becoming a regional hub, where container consignments can be broken down and reassembled and sent as part of smaller loads to smaller ports along the coasts of north and south America.

All four privately owned ports are planning to expand their capacity to handle more containers and three new Pacific coast ports are planned as part of multi-billion dollar investments designed to double container capacity by 2010.

In turn, though, the maritime hub, plentiful land, improving regional air connections and the growth of tourism is making Panama attractive to other businesses, such as finance, energy and property development.

HSBC and Citibank have both bought up Panamanian banks in the past year and some sizeable investments are being contemplated in the energy sector. Occidental of the US and Qatar Petroleum, for example, are conducting a feasibility study for the construction of a 350,000b/d refinery near the Costa Rican border, possibly costing up to $9bn.

Nowhere are the signs of Panama's new-found opulence more impressive than in the construction sector. Cranes dot the Panama City skyline with dozens of high-rise blocks being built. Much of the development is aimed at "baby boomer" retirees and second home buyers from the US, Canada and Spain, attracted by relatively cheap prices and a favourable tax regime.

Prices have risen in the past few years but, according to Juan Francisco Pardini, president of the Business Panama legal and property group, local properties sell on average for a third of the price that they would fetch in neighbouring Costa Rica, a much longer-established centre for north American retirees.

In total, according to Samuel Lewis, the vice-president, direct foreign investment is expected to reach $2.5bn this year. In construction, total investment projects in the pipeline – including those by local investors – amount to $10bn, he says. Reforms being piloted by Mr Torrijos' government could allow Panama to capitalise further on this fortunate convergence of circumstances.

It recently introduced legislation that makes it much simpler and quicker to set up small companies, for example. It has approvedlegislation allowing a streamlined tax, migration and regulatory framework for multinationals that choose to set up their headquarters in the country. And the government attaches special importance to the Free Trade Agreement with the US that the US Congress is expected to approve later this year.

Indeed, Mr Torrijos refers to the FTA – along with the canal expansion and energy plans – as being one of the "three motors" that can pull the country towards developed world status.

In particular, the FTA may help give some impetus to the complex business of legal and judicial reform on which Mr Torrijos has only just embarked. As Mr Pardini explains, the FTA is important for Panama because it will oblige the country to adopt "clearer rules of the game" in its dealings with foreign companies and investors, helping the government overcome bureaucratic or other vested interests that might oppose greater transparency, for example.

"The new generation of free trade agreements are about much more than trade," says Mr Pardini.

If Mr Torrijos' development vision is to come to fruition, he will have to ensure that prosperity is more widely shared, however. Panama is remarkably unequal. Although average per capita income is more than $5,000, 40 per cent of the population live in poverty. The division also has a geographical aspect, with particularly large concentrations of poor people in Colón on the Caribbean coast, and in some rural areas.

The danger is that rapid growth could at least in the short term make the situation worse. "Wealth is being concentrated more and more and this is very bad news," says Mr Chapman. "If we don't implement very effective policies, growth will make our society more unequal."

Mr Torrijos has begun to make some headway, introducing a selective income transfer programme in which 38,000 poor families are given $35 a month in exchange for ensuring that their children are vaccinated and sent to school.

Such programmes have been successful in Brazil, Mexico and elsewhere in Latin America but in general have been on a much bigger scale and Panamanian critics say the effort has to be more ambitious. "This is positive but it is not sufficient," says Raúl Leis, president of Ceaspa, a left-wing think tank.

As Latin America has found to its cost in thepast, large socially alienated and deprived communities can make political stability more precarious thanit seems. In addition, the government will need to ensure that the development of new businesses andnew communities does not overwhelm the energy and water infrastructure, for example.

Managing prosperity then could prove to be a difficult challenge. As Mr Pardini puts it: "When you haveso much unexpected growth there is no planning about how to deal with it. We are not accustomed to this."

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PANAMA CANAL AUTHORITY: Rapid pace of development

By Tuesday Jul 24 2007 07:10

With its mown lawns, neat red tiled houses and pristine avenues, the suburbs surrounding the Panama Canal look like a piece of Middle America from the 1940s or 1950s. But the calm image hides a transformation. Many – if not most – of the Americans who lived in the "Zone" have gone back to the US.

The government's Panama Canal Authority now runs the canal and the military-run commissaries (grocery stores), schools and hospitals of the Panama Canal Company have long since been disbanded or transferred to local hands. The canal is slowly becoming integrated with the economy, its growth providing ever larger quantities of public revenues, with income from transit tolls and dividends up by more than five times since 1999, rising to $569.7m last year.

A group of privatised ports and dozens of other maritime industries have begun to grow up around the canal. The pace of that development will accelerate next year as expansion plans get under way, with a new road linking Panama City to Colón, three new ports planned and at least one refinery also set to spring up nearby.

Carmen Gisela Vergara, deputy minister for trade and industry, estimates that there are 140 separate maritime businesses, ranging from shipyards to companies offering provisions. "Business is doing things that wouldn't have been possible before 2000," she says.

Underpinning the process though is the success of the Panama Canal Authority itself. Since it took full control at the beginning of 2000, the authority has defied right-wing critics and predictions of disaster, becoming a model of well-run public sector enterprise in a country and a region where bad examples are more frequent.

"They are doing a better job of it than the Americans did," says one US businessman and former navy officer who used to live in the zone. Under the Americans the company was completely self-sufficient, more or less entirely devoid of any entrepreneurial direction and insulated from new ideas. As late as 1995 the company was still using old fashioned punch card computers and, under US management, staff members were never given lap tops. "The whole thing was isolated from reality," he adds.

As part of the transition, the canal company's cargo ships, railway and what the businessman describes as "beautifully maintained antique equipment" were sold off. Kansas City SouthernMiraflores Lock – a potential magnet for tourists – is operating way under its potential. "Imagine this if it were in the States," says one long-time Panamanian-American resident. But a no-nonsense commercial approach typifies the authority's attitude to its core business of moving traffic through the canal quickly and efficiently. Productivity has risen sharply. Railroad – a private company – took over the railway, installing new track designed to move freight rather than passengers. The authority's reach is still wide, too wide in the view of critics who might argue, for example, that its shipyard should be sold off or that the restaurant and visitor centre at

Although traffic and revenues have risen, the number of staff – 9,278 –, is 7 per cent lower than it was 10 years ago. And as traffic grows, the canal has worked harder to manage the flows.

"We are focused on the customer. We try to operate a government business with the practices of the private sector," says Jorge Quijano, the executive in charge of the canal's expansion plan. "The company in the 1970s was self-contained. We could do anything. We didn't need to get anything from outside. Under the Americans and during the transition period [the canal was jointly run during the 1980s and 1990s] there was a break-even approach. Now it is a business that is for Panama," says Mr Quijano.

The growth in container traffic has offered new opportunities for port operators and, at both ends of the canal, facilities have been expanded. Both state-owned ports at Balboa on the Pacific and Cristobal on the Caribbean were sold in the mid-1990s to the Panama Ports Company, a subsidiary of Hong Kong-based Hutchinson Port Holdings.

If everything goes to plan, by 2009-2010, according to Ms Vergara, Panamanian ports will be able to handle 8m containers a year, more than double current capacity and 20 times the level of 1995.

Meanwhile, easy logistics, a strong telecoms network, as well as the government's generous tax regime, are widening the range of businesses setting up in the zone.

For example, a company from Singapore recently set up near the zone to repair and rebuild aircraft and is employing 1,000 Panamanian engineers. "We have never had this before. We are developing entirely new sectors," says Ms Vergara.

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Monday, July 23, 2007

Panama's Exploding Economy Attracts Investors

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Map of Panama and the surrounding area List of the world's fastest-growing economies
Lindsay Mangum, NPR
Howard Air Force Base
Joe Skipper

One of Panama's largest development projects will be constructed on the site of the former Howard U.S. Air Force Base. Reuters/CORBIS

Panama City skyline
Enlarge Steven Allan
Panama City's skyline is testament to the nation's construction boom. iStockphoto

Though it ranks 30th globally, Panama is one of Latin America's fastest growing economies.

All Things Considered, July 21, 2007 · Fueled by a rash of new construction, Panama's economy is thriving and attracting notice all over the world, but some say that the country's economic surge is straining its infrastructure.

The tiny Central American country is now one of the fastest-growing economies in the region, experiencing a growth rate of 8 percent last year. That rate is expected to be even higher this year, making it the Latin American powerhouse.

The economic boom comes amid efforts by the Panamanian government to market itself as a financial haven in an area of instability, drawing investors from across the region and the world.

A Construction Frenzy

In a cavernous sweltering hall on the former Howard U.S. Air Force Base, all of Panama's ministers and President Martin Torrijos gathered to sign an agreement to construct what will become one of the largest development projects in the country's history.

The project, worth up to $10 billion, will include a media city, an industrial area and a residential town on the shores of the Panama Canal, the site of the former base. For a country of only 3 million, its scale – the size of central London — is massive.

British company London & Regional will manage the project, and Ian Livingstone, the company's managing director, says the expansion of the Panama Canal, new refinery and ports projects, and a possible free-trade agreement with the U.S., all make Panama attractive.

"Panama is going through a big economic boom at the moment. It is a stable oasis for investment in a part of the world that isn't always quite as stable as Panama. We see huge opportunities," Livingstone says.

American money is also pouring in, and the wealthy of Bolivia, Venezuela and Ecuador, nervous about the direction of their own governments, are also investing.

More than anything else, construction is driving the boom, and the Panama skyline is showing the result.

"Right now, according to the government numbers, we've got 175 projects under construction, 120 more projects that have already been approved by the government," says Ivan Carlucci, president of the Panamanian Real Estate and Developers Association. "So right now, we are talking about … close to 400 projects that are in construction, to be constructed or waiting for approval."

Many of the buildings are high-rises whose skeletons are making Panama City look like an out-of-water coral reef. More than 11,000 apartments are coming online this year, and already they have all been sold.

Growing Pains

While positive in many respects, the economic boom is causing its own set of difficulties. At the main thoroughfare between the old and new sections of Panama City — where all the high-rise buildings are being constructed — traffic is bumper to bumper, and Panamanians have been noticing more and more that the new construction is placing a strain on the country.

"The infrastructure is not appropriate to sustain this growth and is not adequate to sustain all the building that is going on," says Carlos Guevara Man, a Panamanian analyst. "The sewer system, the road system, the public transportation system, the electric grid — the public infrastructure is not adequate."

Man says speculators are playing a huge role in the market, and some landmark projects have already been pulled because they simply weren't viable.

Though it's marketing itself as a first-world destination, Panama isn't there yet, Man says.

Panama is plagued by a high level of corruption and is run by a white oligarchy that is profiting from the economic boom. Its judicial system is in serious need of reform.

Countries in Latin America have a very poor track record of making sure that everyone benefits from economic growth, and Panama, with one of the most unequal distributions of wealth in the region, is no exception. Despite the money pouring in, so far that disparity has not changed.

"Most of the benefits of this growth are being appropriated by the people at the top … Most people at the bottom are not seeing these benefits. What they are seeing is an incredible rise in the cost of living ... They are not seeing increased salaries, they are not seeing increased opportunities ... and I think that creates a lot of resentment," Man says.

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Friday, July 20, 2007

Glitter and graft

Glitter and graft
Jul 19th 2007 | PANAMA CITY
From The Economist print edition

A country revamped as a service hub grows at Chinese rates

COMMUTER traffic crawls along Avenida Balboa, the coastal road that is the spine of Panama City, slowed by thousands of new cars. In the city's wealthier districts restaurants are packed, and it is hard to find a street without a skyscraper under construction. While some of its neighbours in Central America struggle with commodity-based economies, Panama is busy reinventing itself as a regional logistics and services hub.

That was a position it enjoyed in the 1970s, when an offshore financial industry briefly flourished. Then came the dark years of Manuel Noriega, a thuggish strongman toppled by an American invasion in 1989. Several undistinguished governments followed.

Several things have now come together to produce an extraordinary boom in Panama. The economy will expand by 11% this year and by over 9% in both 2008 and 2009, according to a forecast by LatinSource, a consultancy. That is faster than anywhere else in Latin America.

The first was the transfer of sovereignty over the Panama Canal in 1999. Since then, the canal has been run as a Panamanian business, rather than a branch of the United States' federal bureaucracy. President Martín Torrijos, who took office in 2004 (and whose father, a military ruler, negotiated the canal handover in the 1970s), pushed through a referendum last year which approved a $5.2 billion plan to expand the canal, doubling its capacity and enabling it to take much bigger ships. Work is due to start in August.

Other big projects are planned in the wake of the canal expansion. Occidental Petroleum, in partnership with Qatar Petroleum, plans an oil refinery, costing $7 billion, at Puerto Armuelles. A consortium led by Hutchison Whampoa, a Hong Kong company, plans to turn Balboa into the largest port in Latin America. China's government-owned shipping operator, COSCO, is competing to build a second mega-port, this one on the Caribbean coast—even though Panama recognises Taiwan. Copa, a local airline, aspires to turn Panama into an alternative regional hub for travellers deterred by the security hassles of Miami airport.

The second factor is that Mr Torrijos's government has been rather more effective than its predecessors. He has cleaned up the public finances, pushing through an unpopular reform of social security. He actively courts foreign investors. He has negotiated a free-trade agreement with the United States, which Panama hopes will soon be ratified by the American Congress. But he also has close ties to other regional leaders, including Cuba's Raúl Castro.

This week Spain's prime minister, José Luis Rodríguez Zapatero, was the latest foreign leader to drop by, with a coterie of businessmen in tow. New foreign direct investment more than doubled in 2006 compared with the previous year, accounting for 16% of GDP—a share that is twice as big as in any other country in the region, according to the UN Economic Commission for Latin America and the Caribbean.

The government has finally got around to developing the prime land once occupied by American military bases in the former Canal Zone. The UN is moving its regional headquarters into one; another will become a technology park. Last week the government signed a contract with London & Regional, a British property company, which plans to build housing and industrial units at the former Howard Air Force base. Some of the new housing is aimed at American retirees, who are flocking to Panama. Donald Trump, an American property developer, is planning a 68-storey hotel and resort.

But as the developers pile in, not everyone is cheering. Some worry that the property bubble will soon burst. Others note that a weak education system does not produce enough engineers or skilled workers. Contractors are likely to import skilled labour from abroad. But with 40% of Panamanians still living in poverty, and unemployment at 8.6% last year (though falling), that will not be popular.

A handful of families continue to control much of the country's wealth and benefit from cosy ties to government while most Panamanians struggle to make ends meet. Mr Torrijos proposes to increase the minimum wage of $300 a month. American diplomats worry that if the benefits of growth don't filter down, the resulting sense of injustice could fuel political radicalisation.

A bigger, related, worry is corruption. Foreign firms are beginning to complain that they are hampered by the informal links between government and local business oligarchs. Sam Taliaferro, an American who runs a property business catering to foreign retirees in Boquete, a hill resort, says that corruption threatens to choke off foreign investment. With three-dozen other investors, he has formed a group to campaign against what he sees as the gouging of foreign firms.

Though Mr Torrijos's government has a cleaner record than its predecessors, it has not been scandal-free. An uncle of the president controversially acquired vacant land, and went on to destroy protected mangrove swamp without the necessary permit. It is hard to judge how deep corruption goes, or how much of an impact it may have on foreign investment. But if Panama's boom is to propel it swiftly to developed-country status over the next decade or so, it would help if it rested on a stronger institutional foundation.

Wednesday, July 18, 2007

New digital drivers license available on July 23

Drivers will be granted new driver licenses with bar codes and other security features from July23 (in Panama province) and Ausgust 20 in the rest of the country.

The licenses are granted according to the first name (not the family name) of the cardholder.

The license will replace the current license at no cost to Panama citizens and "I-" visa holders who :

The Paz y Salvo Electronico website provides information on outstanding fines and other government dues, available to anybody who reads this blog or knows about the service.

Renewals must still be carried out submitting all payments and requirements of the old system.

More information is available in La Prensa July 11 and the Transito Authority.

More articles (in Spanish):
Delivery of licenses starts July 23
What you need to know about licenses
Plan for new digital license

Sunday, July 15, 2007

International debit cards as tools against underdevelopment

In 2005, migrant workers in the U.S. sent $52 billion back to Latin America and the Caribbean. Now governments are working to leverage that money to promote economic development. Foreign-aid donors are working with microfinance groups to find ways to make the most of the remittance boom. In Jamaica, the U.S. Agency for International Development is helping the Jamaica National Building Society channel remittances more cheaply through debit cards. Profits from the money-transfer transactions equip rural schools with computers.

At an IADB forum on remittances, a multinational network of migrant workers, businesses, credit unions, microfinance institutions and other financial players was featured using a debit card and the Internet to make everybody a winner. How does it work? Simple. At the core of the No Borders business there is a group of debit and stored-value cards issued through a network of affiliated partners of No Borders to individual cardholders in the United States and Latin America. Immigrant workers in the U.S. sending money home with the No Borders card are granted, at zero charge, one remittance transaction per month for up to $350 if they, and their beneficiaries back home, join credit unions in the No Borders network. The transaction costs are covered by a fee charged to financial institutions who want to join the network.

The cards can be reloaded and used for cash withdrawals and purchases at any authorized No Borders location, and can also be used as a payroll card for receiving payroll direct deposits. Funds from the cards can be transferred in real time to bank-issued debit cards, which can be then used for ATM withdrawals, purchases and other transactions.

The No Borders model also benefits cardholders in other ways, such as providing discount cards on health care, insurance, travel, and other products. In this way, affiliated financial partners benefit by increasing their share in the growing U.S. Hispanic market.

One of the most fascinating stories at the KDNC Second Business Workshop was told by Dr. Edward Wambugu, D.Ed., an educator in Chicago, IL. Dr. Wambugu travels to Kenya and five years ago he obtained three checking account debit cards from his bank in Chicago, and gave one to his contractor in Kahiga village, one to his brother in Kenya, and kept one with him. The contractor was responsible for building the shop, and his brother kept an eye to make sure that the project was going as planned. Dr. Wambugu instructed the contractor, and his brother, that they could withdraw money at a bank in Nyeri only when Dr. Wambugu called. He would authorize small quantities like $100 to $200 per month. The shop was done in no time ...

A front page article in the July 27 Wall Street Journal describes Citigroup's efforts to persuade "Mexico's long-neglected working class … to replace the rolls of pesos they fold into money belts with debit cards, credit cards and bank passbooks." It is part of Citigroup's experiment to "move down market in developing countries," including Brazil, India, China and other "fast-growing economies," the article says.

IADB President Luis Moreno points out that "Latin America’s thriving microfinance sector is a leader in this trend. In addition to extending millions of small loans to people shunned by traditional banks, microfinance institutions are now offering debit cards, housing loans and money transfer services aimed at leveraging the remittances Latin American immigrants send home, which last year rose to $53.6 billion. According to the latest IDB research, these remittances are forecast to surpass $60 billion in 2006."

With banks becoming imposing more requirements for the opening of international accounts for non-residents, reloadable debit cards provide an easy alternative for cross-border transfer of funds. Cards which allow to use more than 843,000 PLUS® ATMs worldwide, are helpful to have US funds available from Panama's local ATMs, at rates lower than Western Union and bank transfers.

TravelersCash™ – Travel Cash card

The prepaid travel card that gives you 24 hour access to your traveler funds in any local currency. This reloadable Card that isn't linked to your bank account. And if it's lost or stolen, your balance is replaced within 24 hours.

Tough times for sellers of Panama City skycrapers?

120 draft construction proyects have been approved for buildings above 25 stories and 80 more have been applied for.

The value of construction permits in Panama City for Jan-Apr 2007 is of 321.9 million - 30% more than for the same 2006 period. 15 skyscrapers above 50-stories are already in the pipeline.

Ministry of Labor Executive Decree 15 of 2007 seeks to address the increasing number of worker fatalities in skycrapers by requiring that builders of projects above US$1million have an independent Safety Official. The issue was brought to the public's attention after several days of small demonstrations by trade unions.

The Executive Decree imposes a US$10,000 contribution to an Occupational Safety, Higiene and Health at Work for the Construction Industry Fund, run by the Ministry of Labor. Where I come from, that is called a tax, which cannot be enacted by Executive Decree, and is therefore unconstitutional.

Builders are not happy...

In a related story, the Minister of Housing signed July 13 a resolution imposing a 14-story limit on buildings around the Andres Bello park of the El Cangrejo neighborhood, as well as 5-meter clearance.

Residents of the 60-year old neighborhood lobbied the government for this limitation, being the first time residents succesfully curb the current construction boom. Destruction of sidewalks, debris (or workers) falling off construction sites, noise of machinery during evenings, cement poured unto streets and sewers (with the resulting overflow of fecal matter) and other inconveniences have made Panama City construction companies a very unwelcome corporate citizen, affecting current neighbors and even incoming snowbirds seeking their balcony in paradise.

In the meantime, the III Justice Tribunal has to decide on the appeal filed by a Panama corporation against a May 31 judgment of the 8th Civil Circuit Judge, whereby some clauses of a purchase agreement are deemed "abusive". The case started when the Consumer Protection Authority received the complaint of the buyer of a San Francisco apartment who signed a form agreement prepared solely by the seller with no negotiation. The judgment deemed as abusive 5 clauses which provide for:

  • A 5% unilateral increase in the purchase price if the seller deems that building materials have increased in price,
  • The seller to withhold all previous downpayments if it unilaterally considers that the buyer is in default of agreement obligations,
  • Billing the buyer a 1% monthly charge on the amount outstanding after issuance of the occupation permit, whether the buyer uses the apartment or not,
  • The seller to unilaterally decide not to build and simply return all downpayments without interest and with the seller waiving all claims for said action,
  • All disputes to be subject to arbitration excluding the consumer protection courts.

We can expect that after the appeal is decided, the defendant sellers will file a cassation action before the Supreme Court, so a final decision will take years to be effective.

URLs (Yahoo registration required):

Thursday, July 05, 2007

Ice Tower Reader

For those following Panama real estate trends, here is a collection of links on what is to be the tallest building in Latin America:

F & F properties Ltd., Inc.
The Century Tower
Ave. Ricardo J. Alfaro, Tumba Muerto
9 floor, office 916
Panamá City
Panamá Republic

Tel: (+507) 262 4978 / (+507) 262 0976
Fax: (+507) 279 0565

The company

The Successful promoters of Platinum Tower, Century Tower, Bellagio Tower (Ander construction), Ocean One (comino soon) and the Mirage, F & F Propierties, Ltd., Inc., that mixed luxury, security and comfort, a combination which favours the pleasures of modern living, at excellent prices.

Renown for our prestige, solidity and reliability, and creators of exclusively designed projects with trademark excellent quality, F & F Properties, Ltd., Inc., exceeds the expectations of our clients. We are well aware of the demanding tases of clients who wish to live in an exclusive area at competitive prices. Our track record is Prof. Of our capacity to respond to these demands.

Characterized by our innovate style, F & F Properties, Ltd., Inc., has developed in only a fer years, architecural creations valuing over US $ 250 million, a track record that provides a guarantee for every project we also:
Interview with Saul Faskha, President of F&F Properties more! (Spanish)
Entrevista con F&F Properties

Lo que sí pretendo es ponerme en contacto con alguna cadena hotelera para crear el mejor hotel del país en la Avenida Balboa donde poseemos un terreno para construir un edificio de unos 104 pisos con apartamentos de entre 100 m2 y 200 m2 que podría albergar también un hotel, y cuyo nombre será “ICE”.
El reto de llegar a la cima
Pinzon Lozano architects assume the challenge of designing the Ice Tower.
Whereas amateurs continue to speculate in red-hot "bubble" markets across the American coastline, Panama City is truly one of the greatest real estate investment deals of the decade.... The plans are even in the works for Latin America's largest hotel and condominium project - the 101-story Ice Tower, now under construction on Panama City's prestigious Avenida de Balboa bordering the Pacific Ocean approach to the Canal.... As the city continues to draw yield-hungry investors and bargain-seeking residents, Panama City is quickly becoming the next "big" thing for international real estate investors. ... (Sovereign Society, April 7, 2006)

The Mossfon Report
Another mega building project in Panama City comes with the recent announcement of the construction of the ‘Ice Tower’ by Saul Faskha. This residential skyscraper with more than 100 floors will be a landmark structure, being the tallest residential building in the world and the tallest building in Latin America. Ice Tower will have the same altitude as the Empire State Building in New York City. This project is also slated for completion in 2009. (May 2006)
Is the ICE Tower on ICE?
The developer has somebody to write letters to him...

Mario A. Muñoz, La Prensa
The dream of a US$37.5 million, 104 story and 381 meter-high work vanished. “We are acknowledging buyers' rights and we are reimbursing our clients”, said Verónica Ng, engineer in charge, on behalf of the project, owned by F&F Properties.
Another building will be made "with prices in accordance to market reality."
Pilotec and Cemex Execute 1,150 m3 Concrete Pour at the Ice Tower
Ice Tower "Vanishes" in the local press.
The Real Estate Agents Association called for changes to the law which reduce the risk of buyers when a project is not built. The Consumer Protection Agency is analyzing some of the clauses in real estate contracts.
Consumer Protection Agency informs that real estate companies are modifying their contracts, after Circuit Judge 8 deemed as "abusive" clauses which allow unilateral increases of 5% in price and charges of 1.5% from the moment the occupation permit is issued.
On May 31 the 8th Circuit Court declared "null as abusive" a clause similar to that in Ice Tower contracts which gave preferences to the seller to unilaterally terminate a contract.
Ice Tower sellers only will refund downpayment to promissor buyers who sign quitclaim.
Homes Real Estate announces new Miami office and "their latest exclusive mega project at the party, the Iron Tower, which is set to be located on the trendy Avenida Balboa in downtown Panama City. F & F Properties latest signature construction project will stand 75 floors in height and come complete with a 250 room Hilton Hotel on site. Residential units in the Iron Tower will range between 100 square meters to 200 square meters in size making this one of the largest developments in Latin America. This star studded Grand Opening gala will be held at the Vizcaya Mansion in Miami with a special guest appearance by the face of the Iron Tower project, Paulina Rubio."
Javier Arias reveals that :
Ice Tower denies ever sending a letter to buyers of Ice Tower notrifying of the cancellation of the project,
The project is being reduced to 85 stories because of cost increases,
Buyer Bruce Young was forced by the sellers to sign a quitclaim in order to have his downpayment refunded,
Eng. Veronica Ng denied that a quitclaim was been forced on buyers to get their refunds,
Architects Pinzon Lozano designed a plan for the morphed "Iron Tower" dated July 17, 2007, but the sellers deny their validity.
Mario Munoz from La Prensa reports that one of the projects not approved by the Municipality, "the Iron Tower, the skyscraper which was to replace Ice Tower, was going to have its official launching in Miami this week, but the event was cancelled. The organizers said it had been a mistake.