This article was written by me, Susan Guberman-Garcia. I am not a
Panamanian lawyer, a real estate developer, or a real estate agent. I
have no property currently for sale and do not plan on having any for
sale in the future. I write from my perspective as an expat who lives
here, and who has bought and sold property here. My husband and I own both ROP and titled property, in the Bocas archipelago and live on Isla Cristobal. This article is simply a summary of what we have learned from our experiences and those of others we have talked to, including our own lawyers. It is just one person's opinion, so take it with the proverbial grain of salt and rely on your lawyer for advice in real estate transactions.(Read entire article)
Here are 8 great attributes to any smart Panama investor. Coming to know a
lot of these folks, and with many of them as personal friends, it can be
helpful to look at the commonalities of those who truly succeed in the
Panama real estate market, to delineate them from everyone else.
Buying real estate in Panama can be frustrating, there's no doubt about it,
and everyone, whether they're a smart investor or not, thinks they want
something "special". In reality though, with more and more competition in
the market, that "special" deal is getting harder and harder to find.
Investment opportunities that are "special" most often are not on the market
for long because they sell so quickly. Sometimes they're sold through a
broker but more often than not, they're sold direct (from seller to buyer):
the listing not even making an appearance on the public market.
The Panama real estate market today is commonly referred to (by me) as the
Wild Wild West. It's an era where modern day gunfighters, outlaws, and
desperados prey on the weak. It's an era where things like romance,
misfortune, and legends have a way of making dreams (and sometimes breaking
them). But to the smart Panama investor, there are ways to differentiate
between the real and the far-fetched; between a good investment and a bad
one.
1. Smart Panama investors know the importance of patience. They are not in
any hurry to make an investment. While this doesn't mean they procrastinate
or, delay the buying process, it does mean that when the ideal investment
happens arise, they are able to jump on it like a real estate puma.
Sometimes this means buying a last minute flight. Sometimes it means
canceling a last minute birthday party.
2. Smart Panama investors know how to smell out a deal. Much like bargain
shopping, they know that in such a ground-level real estate market, an
amazing deal does indeed exist! They seek investments not in the mainstream
flow, but rather off the public radar. Oftentimes, these back road deals are
the result of gossip from friends or acquaintances: smart Panama investors
know how to socialize and work their way into the so-called Panama
grapevine.
3. Smart Panama investors rarely waste their time; they let professionals do
the dirty work. They are not stupid in searching for that "special" deal in
that they are not interested in knocking door to door (or land owner to land
owner) to ask "if it's for sale". They find a reliable real estate agent to
do this hunting for them, and concentrate their time and money on other
things such as their vacation.
4. Smart Panama investors know how to find the right agent. They research
Panama real estate agencies and ask to speak with managers in order to work
with top sellers. Once they find those top sellers, they research their
previous clients. These top sellers are often the most motivated and the
most knowledgeable, thus ahead of the trend in terms of new product.
5. Smart Panama investors never pay the full asking price. They practice the
same negotiating techniques they might use at a flea market or a used car
dealership. Whether this means asking for a discount up front or presenting
various pricing proposals, the smart Panama investor knows that everyone in
this country—from the rural farmer selling his land, to the large developer
with a project—is, at some point or another, willing to compromise.
6. Smart Panama investors are always willing to walk away from a deal. They
know the value of a good deal just as much as they know the danger of
getting emotionally tied into a bad one. They never invest in something that
they cannot afford to lose and they rarely let emotion influence their
decisions.
7. Smart Panama investors can read between the lines. They have a sense of
why the investment opportunity has presented itself and often size up these
parameters in order to use them to their advantage. They are able to sense
if the actual owner of the property has died or is in desperate need of
cash, thus coming up with a calculated offer significantly less than the
asking price.
8. Smart Panama investors have a vision and can see opportunities which
others cannot. If the investment was a straightforward one, someone would
have already made it. They are able to combine research and experience with
creativity and imagination to predict the outcome of an investment. "No
great discovery was ever made without a bold guess." – Isaac Newton.
Matt Landau is an investment consultant based out of Panama City, Panama and
his website http://www.thepanamareport.com is dedicated to providing honest
insight into investing, travel, and culture in the Republic of Panama.
Does Panama really have a strong middle class? Is the income gap in Panama really as bad as people say it is? Will the country's economy and ensuing political status collapse because of too much money over the next few years?
These are questions that we get here every day and up until now, we haven't been able to answer them with any sort of conviction or exactitude. There are plenty of sites that will post their opinions as though they've spent 40 years working for various nations, specializing in economic development but usually, that's just not the case. Thanks to a good and well-qualified friend of The Panama Report, we can finally put some of these issues to rest.
A friend of mine is an expat currently living in Panama. And he has in fact spent 40 years working in more than 40 nations of Africa, the Middle East, Asia, and Latin America for the UN, the US foreign aid program, as well as a whole long list of non-profit humanitarian groups. In each of these nations, he has focused on economic development and conveniently the various "classes", particularly those in the lower ranks. He is intimately familiar with stacks and stacks and stacks of statistics, the people who develop them, and the methods they use. Frankly though, while these statistics are presented as if they were fact, he knows the bulk of them, like the ones that address the 'middle class' in Panama, are nothing more than pure guesswork (and that's being generous). Many of them are "massaged' he reveals, to meet various professional, personal, and political agendas.
Investigating the claim made by a number of people that Panama has a large or strong middle class, I once asked him, what is the definition of “middle class”? (This being because I always felt like the middle class (whatever that means) was more evident and noticeable in, say, Costa Rica).
“There is no agreement on what "middle class" means" I learned. "But the definitions that are used vary greatly and are not supported statistically in any objective fashion. As just one example of many, the so-called "gini coefficient", used by many organizations to demonstrate income inequality, is an excellent example of an apparently objective number based on ignorance and numbers plucked from out of the air. By that measure, Azerbaijan is more egalitarian than Sweden and both India and Zimbabwe far more so than Panama."
People who work in these countries laugh at all this. He went on to add that the percentages given of those "below the poverty line" ignore the fact that 1) there is no agreement as to where to place that line and 2) there are no accurate statistics as to how many really fall below whatever artificial line is created. This too, applies to the United States where there is no exact quantifiable definition for the term 'middle class' or even 'poverty'.
I have always been approached with questions regarding the so-called income gap in Panama, so I asked how it compares to the rest of the world, and more importantly, its implications in Central America.
“The gap you see in Panama is nothing compared to the gap you can see in India...nothing. Yet no one is worried that India can't handle its rapid economic growth (the growth rate in Panama is at 7% annually which is roughly equal to that of India's). Belize is a basket case and the last place in the region I would live.
What about places in Mexico like Cabo San Lucas? They've got to have it together there right? Well, to begin Mexico has massive problems with powerful home-grown drug cartels. There's a sharp left-right divide, a sharp rich-poor divide, a sharp north-south regional divide, no party with anywhere near a majority of their legislature, a President hanging on as best as possible, a dependency on rapidly changing oil prices, a continuing problem with the US on immigration, the list goes on and on. I expect Mexico to work its way through this, but it's nowhere nearly as stable and solid as Panama. Costa Rica is yesterday's story and has nothing that Panama doesn't. To top that off, Panama has the Canal, the Free Trade Zone, a much better infrastructure, a lower crime rate (especially against expats), a better retiree package, and so forth."
"So, to put it bluntly, coming from an authority on the subject, there isn't a nation in Central America that wouldn't happily trade economies with Panama, to say nothing of socio-political stability status."
A lot of people ask, if Panama is equipped to handle this giant influx?
“Panama will absorb the coming money. How many nations collapse because of too much money? Even the weakest (Nigeria comes to mind) somehow manage to carry on. Panama is in much better shape than Nigeria and that is an understatement. Panama is not a "Third World" nation, it is an emerging market. Note the word "emerging". This is a human society. It will grow in human fashion, with all its fits and starts, just like every nation that has had to deal with success."
To sum this all up, every professional in the business with decades of experience working in a wide variety of nations, agrees about Panama. Of course you'll get your skeptics, the same guys who claim the Knicks will never win another NBA Finals and that Tupac will never come back to life. Pessimism is healthy. There are also those who believe that all problems and hitches can be solved with one all-encompassing remedy. The members of this magic bullet society are important too.
The majority of those qualified though, agrees that Panama definitely has a middle class and it is large and growing. They also agree that Panama has a lower class and poverty, but this is no surprise.
Like "poverty", "middle class" is a vague term, open to interpretation among professionals. But for laypeople like us, things are now a little bit more clear.
Not all properties in the Republic of Panama are of private domain and are subject to registry in the Public Registry Office. Many beach front properties, islands and real estate in special tourism zones such as “Bocas del Toro” and “Portobelo” are owned and managed by the national or local municipal governments and only “possession rights” are granted for a determined period of time over these lands.
Possession rights are basically land-use acknowledgments which are essentially recognized based on the occupation and use of a certain area of land over time.
Persons interested in investing in projects located in these restricted areas should be very careful to ensure that the award of the “possession right” or “limited ownership” be duly granted by the pertinent national or local municipal government authorities. In this sense, it is important to verify the following aspects before investing in this type of real estate:
That the award of the piece of land is issued by the correct authorities.
That the award contains a complete description, including limits, boundaries, encumbrances, and other important details of the land. A complete blueprint shall be drawn and approved.
That the activity to be undertaken by the purchaser is allowed, that is, that the construction or building to be made is acceptable to the national or local government.
That the award be extensive for a period of time suitable for the purchaser.
Due to the lack of uniformity regarding the granting entity for “possession rights” it is of utmost importance to review each purchase individually and make recommendations specifically for each land option. The length of the transaction process for the possession rights transfer will vary and can take up to 3 years (!), depending on many factors, such as the date of recognition of the possession rights, inspection by the granting entity (Office of Catastro), among others.
Many land developers in these special areas have undertaken the task of procuring the possession title documents and transfer the ownership of the same by means of the sale of a Panamanian corporation and its assets. Special caution should be taken with these transactions as the Panamanian corporation could have undertaken other businesses besides that related to the property and there is no official registry of the commercial undertakings of the same.
Buying property is not a process to be rushed. You need time to research the market as a whole and your particular destination of choice. You should also spend time researching the companies in the market place – using the right professionals will save you time, money and stress. Investing time at the beginning of the process will save you time later.
No matter what anybody tells you, no matter how easy it all seems and no matter how lovely the agent seems, ALWAYS use an independent lawyer to represent you throughout the purchase of your property overseas.
It is the lawyer’s job to protect you and inform you.
You will need to pay the lawyer a fee – accept that as part of your purchase costs. This is not an area in which to keep costs down.
The definition of ‘independent’ is that the lawyer represents you and only you.
2. Do the numbers
Make sure you know your budget before you start looking at properties – this should include at least a provisional mortgage offer if you’re borrowing money.
Don’t then be tempted to buy more properties than you can afford (particularly on off-plan properties) hoping to sell the extra properties before completion unless you fully understand the risks as well as the rewards (see point 5).
If borrowing money, your repayments will stretch over several years, years in which lending criteria and borrowing costs may change. Discuss the long term repayment with a financial specialist before proceeding.
3. Beware exchange rate movements
The rates do not need to move substantially to affect the value of your purchase. When you start looking, £100,000 may buy you a certain property – a 10% drop in the value of the £ against the Euro, for example, may then put that property out of your budget. If you’ve already signed contracts to buy, this could cause you a problem. Speak to specialists in this area and secure your rate of exchange early.
The rate fluctuations will also affect the costs of mortgages (if you raise the mortgage overseas and earn your income at home). Again, speak to a foreign exchange specialist to highlight the risks and to take appropriate action.
4. Use professional agents and developers
There are few, if any, guarantees when buying property, at home or overseas. Using an independent lawyer (see point 1) significantly reduces the risks you take on an overseas property purchase and employing a professional agent or buying from a professional developer will also help you.
Ask lots of questions. 3 year old children are known for asking lots of questions (why? why? why?) and you should follow their lead when talking to agents about a purchase. Initially, focus questions on the company itself, not the properties for sale. Dig around for details on the founders of the company and the track record of the company. Ask for client testimonials (real ones) and make sure you find out in detail exactly what service they offer. Don’t just take their word for it – ask for details on their service in writing, preferably in the form of some type of ‘Terms of Business’.
If you are buying property overseas as an investment (as many people have done in recent years), you need to bear in mind that big returns may come with significant risks. Be careful to assess the possible downsides to an investment property as well as the enticing investment numbers that could be achieved if all goes to plan.
Take your time and follow these tips and there is no reason why you’ll be taking any more risk buying overseas than you do at home.
PANAMA CITY, Sept 19 (Reuters) - Foreign Direct Investment (FDI) to Panama grew 19.4 percent in the first six months of this year compared to the same period in 2006 to $598 million, the government said on Wednesday.
The banking sector and the Colon Free Trade Zone, one of the world's biggest import-export parks, were the two biggest earners, attracting $137.8 million and $180.8 million respectively, the Comptroller General's office said.
Foreign direct investment is one of the principal drivers of Panama's booming economy, which according to the U.N. Economic Commission for Latin America and the Caribbean (ECLAC) will have the highest growth rate in the region this year.
Panama is expected to post 8.5 percent growth this year, buoyed by a $5.25 billion expansion of the Panama canal, a growing real estate market and continued growth in the banking sector, the U.N. says.
There Are Too Many Positive Things In This Country
Back to the Future
Article by Roberto R. Roy, engineer, builder and member of the Panama Canal Authority (ACP) Board of Directors.
Almost without realizing we are on the verge of beginning an incomparable era in the history of Panama. In a country where the national pastime is talk about what is wrong, the truth is there are too many positive things happening now to ignore them.
All happening at the same time:
A) Our eternal and incomparable geographic patrimony combined with a stable democracy.
B) The labor of many previous generations leads us to complete sovereignty of our territory, possession of the Canal, and now, its expansion in the near future.
C) The demographic changes caused by the American baby boomer generation and their migration to areas with lower costs of living.
D) Spain's new wealth, few opportunities for new projects in Europe, and as well as high construction and retirement costs.
E) China's rise to status as an economic superpower and the unprecedented increase in commerce between Eastern Asia and the United States.
F) The relative peace and security of Panama. Where else have you seen a country where Jews and Arabs are friends, even business associates? Something we need to teach to the rest of the world.
G) Panama's neutrality and role as a mediator in the region culminating in the unanimous selection of Panama as member of the UN's Security Council.
H) Maturation of the service economy (Canal, ports, Colon Free Trade Zone) with 100 years of using the dollar and a solid banking system.
I) Ideological conflicts in other parts of the region that divert investment to Panama, money that previously went primarily to Miami.
J) Strict security measures in American airports and the difficulty for Latin Americans to obtain visas have led to Panama's surge to prominence as a distribution hub for passengers and cargo.
K) Excellent incentive laws for retired foreigners and the stupendous service provided by lawyers to investment firms and retirees.
L) Foreign investment and high re-investment rates of the Canal Free Trade Zone earnings into the real estate market. Soon in refineries.
M) A new generation of business people and government leadership that believes in the nation.
N) A resurgence, still slow, but growing of cultural events and the arts. And what about Irving Saladino and the immortal Roberto Durán?
O) And, as a result of all the previously mentioned factors, a rebirth in pride in being Panamanian, this time with a firmer foundation.
Don't be mistaken.
All of these things caused in us a rebirth as a country everyday more respected, more important, and seen as a land of opportunities. In spite of our size. We are at the dawning of a new Panama that within a short period of time we will not be able to recognize.
Just speak with some ex-Zonians and they will tell you that they cannot believe what is happening here. Open elections, successful administration of the Canal (about which a complete failure had been predicted), new ports, a boom in Boquete and the Highlands, beach developments, without even mentioning the beautiful capital city, without doubt the most modern in Central America and the area.
Other example. When Copa Airlines stocks were offered in the international market one of the things that most impressed Copa's own Panamanian executives is that not one foreigner investor, not one, spoke of "country risk"... a phrase that in the past has cost us two or three points in higher interest rates.
We have completed the long Canal struggle. The Panama Canal Authority (ACP), 100% Panamanian, is a proven transparent organization and the pride of the country in the international community. The Canal will shift now, as it should, into something purely strategic and beneficial. The Canal and its route through Panama are our oil. Simple. But we have to be sure that the annual earnings brought to us by the Canal are fairly invested and that their effect is distributed amongst all.
Remember when Panama was a bad word? Once in 1999, when I told a Houston taxi driver that I was Panamanian, even 10 years after the invasion, his only comment was, "Ahhh....Panama....Noriega!" Ground swallow me up.... surely the image of a machete was unforgettable.
But now New York cab drivers will speak to you about the Canal expansion with the air of experts.
There it is, like the time of the Spanish conquests and afterwards in 1903, Panama is thrown again into the center of the action...but the difference this time is that now it's a Panama of Panamanians. Back, but to the future.
What was known as "the Embassy's line" is now over. It's a positive change, equally for as the US as for ourselves. We are business partners and excellent friends.
The ability to make crucial decisions like those made daily in the Canal and that directly influence the economy of many nations and big businesses is an important privilege and at the same time a big responsibility. Another example- our new mission in the United Nations Security Council. In general, very good international work. It would seem that now is the time to do something definitively with China, the new defacto commercial superpower.
But in this route there are still many things to fix and a more just society to create. This is the fundamental mission if we would like to truly improve. We have to revolutionize the education system and improve the justice system, creating new opportunities for our own people.
I am very optimistic about the future. But this is my advice to youth: forget about waiting for mana from heaven, not this nor any future government is going to fix your problems, much less give you a handout. The only way to escape from poverty is by your own efforts, with discipline and dedication.
Source: La Prensa, Panama, Wednesday November 22, 2006, Opinion Section
So, My name is Panama ? You bet it is…and long live Panama!
Tapping Into Panama's Wealth
What sets Panama apart from any other nation under the sky? From an investment perspective, Panama offers strategic advantages to the foreign investor. These advantages revolve around Panama's undercapitalized wealth and the mechanisms by which such wealth can be released.What sets Panama apart from any other nation under the sky? From an investment perspective, Panama offers strategic advantages to the foreign investor. These advantages revolve around Panama's undercapitalized wealth and the mechanisms by which such wealth can be released.
Property Rights as a Store of Wealth
In The Mystery of Capital, By Hernando de Soto, the author points out that in wealthy, Westernized nations, a piece of property not only provides a physical utility (e.g. growing crops, sheltering families, or housing factories), it can also be mortgaged, which provides the property owner with a surplus value known as capital. Capital becomes a surplus value because the money raised from a mortgage can then be used to fund a new business venture, expand an existing business, or make an investment. A property that can be mortgaged releases several times more value and potential than the basic physical functions of the property.
De Soto also explains that nations in which property titles are not consistently recognized by the marketplace become nations with undercapitalized wealth. The inability of property owners in developing countries to obtain clear and recognized property titles inhibits their opportunity to capitalize their assets by restricting them from obtaining a mortgage. Without a mortgage, few individuals or businesses are able to fully realize the capital locked up in the value of their property, which prolongs poverty, stagnates property values, and stunts economic growth.
Property Rights and Mortgage Financing in Panama
Panama is an anomaly in Latin America when it comes to property rights and mortgage financing. The fact that Panamanian property owners can readily transfer property titles, and the fact that those titles are sufficiently secure to be mortgaged by a bank, puts Panama several legs above the rest of Latin America in its ability to capitalize its wealth.
De Soto points out that it is not the property title itself that enables capitalization, it is the underlying documentation and legitimacy of property rights that enables a property owner to receive financing from a bank. The critical advantage to owning property in Panama is that Panama's property titles are standardized, accurately recorded, publicly available, and easily recognizable by the law. So secure are property titles in Panama that a bank will accept the title as collateral for a loan. This fact alone is taken for granted in Western nations, but it is a rarity in developing countries around the world.
In Lima, Peru for example, the procedure to form a legally obtainable home requires five stages of bureaucratic red tape, the first stage alone comprising an amazing 207 steps! In Venezuela, a buyer with good credit must make a 75% down payment to obtain a mortgage. By contrast, Panamanians with good credit can obtain financing for 80% of the purchase price of their home, and titles are accurately documented in a Public Registry. In other words, Panamanian real estate has additional value due to the strength of its property laws and the willingness of banks to recognize property as collateral, which enables owners to release valuable capital that would otherwise remain dormant.
Leverage and Debt in Panama
Leverage represents the degree to which debt may be used to make a purchase. Buyers of real estate in the United States, Canada, Europe, and other Western nations use a high degree of leverage, often borrowing 95% or even 100% of the purchase price. The degree of leverage used is a direct function of the interest rates offered by lenders. Therefore, when interest rates dip relatively low, it enables buyers to maximize the amount of leverage used to acquire a property and maximize the total debt load to the buyer. In an efficient market, low interest rates will drive real estate prices higher, all other factors remaining equal.
While the Panama real estate market has been positively influenced by low worldwide interest rates, the degree of leverage used by most property owners in Panama is far lower than that of the Western world, though much higher than most developing countries. Refinancing is not as common in Panama as in Western countries and buyers have been less likely to maximize the amount of leverage used to purchase real estate. The link between interest rates and real estate prices is not as firmly established in Panama, which represents an undercapitalized value in the Panama real estate market.
Financial Capital
Financial capital is the capital we are most familiar with, and Panama has plenty of it. As one of the world's premier offshore banking centers, few other nations in Latin America possess the sheer volume of monetary deposits possessed by Panama's many resident banks. Bank deposits in Panama can be borrowed to fund businesses, to purchase real estate, to buy stock, or to purchase inventories. In addition, Panama's laws protect the free movement of capital, which means international investors are free to deposit or withdraw their money from Panama without restriction.
The availability of financial capital further separates Panama from its Latin American neighbors. The propensity for development in a country with substantial bank deposits is much higher than a nation with limited banking facilities. With such a competitive banking industry, investors and property owners in Panama are more likely to receive loans than their counterparts in most other Latin American nations. Related to real estate, the ability of Panamanian property owners to extract capital from their property ownership that helps fuel property price appreciation.
Intellectual Capital
The CIA World Factbook estimates that in 2004, more than 77% of Panama's economy was generated from service industries. Banking, international trade, shipping, logistics, tourism and other services are the cornerstone of the Panamanian economy. Services are different than goods because they require knowledge and skills, not physical resources, in order to compete in the marketplace. Knowledge and skills are known as intellectual capital.
As noted by the Latin Business Chronicle, "The star of the per capita ranking is undoubtedly Panama. The country has the 13th-largest economy in Latin America and yet it scores third [in Latin America] on the GDP per capita list". Panama has become one of the richest countries per capita in Latin America, not because of its natural resources, but because of its considerable intellectual capital. The highly specialized knowledge, skills and training possessed by the people of Panama distinguish this nation from the vast majority of its Latin American counterparts. Intellectual capital, particularly when combined with other forms of capital, can be powerful creators of wealth and asset appreciation over the long run.
Infrastructure
Roadways, water, electricity and communication in Panama are by far the most advanced in Central America. A drive through Nicaragua, Guatemala, or even Costa Rica will quickly demonstrate Panama's superior infrastructure. Infrastructure is often the basis for property price appreciation and direct foreign investment from the private sector. Much of the region's fiber optic cable networks meet in Panama, and the capacity of former U.S. military facilities are perfectly designed to manage advanced communication equipment. Advanced infrastructure further capacitates Panama to capitalize on its assets and increase its long-term prosperity.
The Reversion of the Panama Canal
Not only does the Panama Canal provide enormous amounts of steady cash flow for the Panamanian government and private sector, the surrounding land and infrastructure that was reverted to Panamanian control on January 1, 2000, represents a fantastic undercapitalized resource to the Panamanian economy.
The Panama Canal Zone represents approximately 7,000 buildings within 233,000 acres surrounding the shores of the Panama Canal. The infrastructure includes roads and highways, airports, electric services, water systems and sewage. The presence of shopping centers, schools, houses, offices, hospitals, medical facilities and recreational facilities such as tennis courts, golf courses, swimming pools and movie theaters creates enormous potential for recreational lifestyles and investment.
In addition, the land and buildings in the Panama Canal can be purchased and mortgaged, making the property much more valuable than its physical utility. Mortgaging releases capital which provides surplus value that can be invested in business ventures, new construction, renovation and other improvements. Job creation and economic surpluses arising from development in this Zone provide the fundamental undercurrent for real estate price appreciation.
Natural Capital
Geographically, Panama truly is the Bridge of the Americas with its location at the fulcrum of the North and South American continents. This positioning offers significant and permanent advantages as a hub for trade, transportation and other services. For example, Copa Airlines, one of the most successful airlines in the Americas, has based their headquarters in Panama. Already a dominant player in global marine shipping, Panama is poised to capitalize on its favorable geographic location for air transportation as well. Panama's geographical location provides it with a natural advantage over other countries and further represents potential for wealth generation and capitalization of its assets.
Climate-wise, Panama is below the hurricane belt, earthquakes are rare (the reason why Panama City is the only city in Central America with high-rise buildings), and its only volcano is dormant. Unlike much of the Caribbean, which suffered severe damage earlier this year during multiple hurricanes, Panama enjoys a low risk of natural disasters.When insurance companies evaluate the risks associated with owning property in Panama, Panama receives favorable terms due a historically low number of natural disasters.
Ecologically, Panama serves as the only land corridor for rare species of birds and other species that migrate between North and South America. With more species of birds than all of North America and over 10,000 species of vascular plants, Panama sustains an incredibly diverse ecosystem upon which neighboring systems rely. Panama is fortunate to have retained some of its precious ecological diversity while the bulk of the world's tropical rainforests and ecological diversity rapidly depletes.
Intact ecological systems in Panama will not only attract increasing numbers of international tourists, they attract researchers, students, and international conservation organizations, while providing a host of health and economic benefits to the nation as a whole.In addition to other forms of capital, Panama is endowed with an abundance of natural capital, adding to its overall potential for long-term stability and sustainable development.
Baby-Boomers and Panama's Lifestyle Advantages
Panama has only begun to tap into the wealthiest market segment ever witnessed on planet earth. The middle to upper class baby-boomers who are looking to ramp up their lifestyles during their Golden Years have already begun to invest in Panama. Less than five years ago, hardly a tourist could be found in Panama. Today, Panama has consolidated its status as an emerging destination for retirement and international tourism, which is one of the single biggest factors attributed to the recent escalation of real estate prices in selective zones in Panama over the past five years.
Panama continues to attract a growing number of baby-boomers who are looking for an investment that will not only appreciate in value, but an investment that will provide them and their families with immeasurable lifestyle advantages and personal enjoyment. Panama has one of the best residency visas for pensioners, a vast array of exotic tropical beaches and highlands, a diverse combination of cosmopolitan and natural living, plus top-notch medical, transportation, and communication services. With access to both the Caribbean and Pacific coastlines, more than 1600 islands, and convenient connections to more than 30 international destinations around the world, Panama is a gateway to an enormous range of possibilities for the baby-boomer retiree and lifestyle-oriented traveler.
The Bottom Line From an Investment Perspective
Panama's unique combination of characteristics, especially the opportunities for property owners to mortgage property, dramatically improves its potential for wealth realization and property price appreciation in the future. Panama is in a unique position to realize its wealth, and has long provided the basis for increasing amounts of foreign investment. The lifestyle advantages offered by Panama are its final trump card, making it a worthy destination for the unmatched purchasing power of the baby-boomer retirement and travel markets.
Source:www.panamaatyourservice.com
It is difficult to compare three countries with such diverse people, landscapes and economies…but we’ll try here. I personally really like all three, and currently split my time between Costa Rica and Panama. Whether you are deciding upon residing or investing in (from north to south) Nicaragua, Costa Rica or Panama, you will certainly enjoy the moderate year long weather. All three countries have highlands that offer a reprieve from the warmer coastal temperatures. All three also share similar rainy seasons (May- November) and dry seasons (December-April).
Of the three, Costa Rica ranks as the most expensive place to purchase property, with Panama in 2nd place, followed distantly by Nicaragua. Although Nicaragua has the most affordable property, Panama and Costa Rica offer greater security, government stability, and in general, superior infrastructure. Nicaragua is showing signs of tourism and investment growth, while Costa Rica continues to be strong and Panama is growing at breakneck speed and could catch Costa Rica soon.
North Americans definitely stand out more in Nicaragua, for natives mainly occupy it and they receive more attention amongst the people. In Panama, the presence of North Americans is routine and due to the incredibly diversity of Panama City, it’s almost possible for “gringos” to blend in. In Costa Rica, North Americans and Europeans are a regular and almost accepted part of the social fabric and it is hard to find a place so remote that there is not one gringo or at least a fluent English speaker. All three situations can be seen as an advantage or disadvantage, depending on your personal preference.
Nicaragua is a relatively poor country, whereas Panama’s economy, driven by the Canal and banking services and use of the U.S. dollar is quite strong. Costa Rica does a fantastic job in tourism and the government there has done a fine job of promoting Costa Rica when compared to Panama. This can also be seen as a disadvantage for some investors, as nearly everywhere you go in Costa Rica, tourism has driven up prices. Panama is known for having serene, secluded beaches, where only you, the sand, and water reside.
Tourism is by far the most developed in Costa Rica, with dozens of destinations and hundreds of hotels nationwide. Regional airlines whisk clients to many of these destinations and tourism businesses are all fairly well run. This is not the case yet in Nicaragua or Panama, although tourism is growing in both countries. Panama has one huge advantage over all three in that the highway system is excellent.
Healthcare in Panama and Costa Rica is excellent, meeting even First-World standards. San Jose has a Baylor-related hospital and Panama City one from Johns Hopkins. Not yet the case in Nicaragua, although healthcare in all three is certainly more affordable than in the U.S.
English is spoken the most in Costa Rica, then Panama, and Nicaragua falling far behind where hardly anyone speaks English (yet). Cost of living in Nicaragua is most affordable, although access to some goods and services can be difficult. Costa Rica still has some affordable places to live, but prices are rising. Panama is surprisingly affordable, but it’s dual economy (one for poor, one for rich) means that you need to know where to go to live on the cheap. You can have a beer for $1 or $8, depending on the locale. The downside of cost of living in Panama City is that because of warmer temperatures, you’ll probably need air conditioning. Not the case in San Jose, Costa Rica. One of Panama’s greatest advantages is that thanks to the Canal and low tariffs, it’s easy to get just about any product imaginable, from electronics to building supplies.
All three offer excellent opportunities for investors, depending on your capacity for risk, adventure and desire for short or long-term returns.
So you’ve found your dream property in Panama and you need to know what steps you need to take to ensure that it is going to be transferred safely and securely in your name (or the name of the legal entity of your choice).
We have compilled a list of our top-ten prerequisite checks that will guide you through any real estate transaction in Panama:
1. Title check: If the property is titled (have an “escritura” registered with the Public Registry (Registro Publico), having the title checked is a very simple process. Simply request the "Finca" (lot) number, and have this investigated at the Public Registry. This will show any encumbrances (mortgages or liens) on the property, as well as show the ownership history. It is also useful to confirm the registered surface area of the property, and that the person who is selling the property is the actual owner.
2. Rights of Possession - You cannot "purchase" rights of possession. But you can have them transferred to you. It is particularly important that you check the history of "ownership", and inquire regarding any disputes. Also, have the rights of possession registered with the local Municipal Government. The contract of the transfer should be done via notary. You particularly need to make sure that this owner hasn't already transferred his "ownership" to other people before you.
3. Talk to the neighbours - Tell people you're looking at property in the neighbourhood and ask how they like it and if they know anything about the property or problems in the area. Are there any boundary disputes with the current owner? Are there any issues (availability of electricity, water, cable, internet connections) which you should be aware of? We recommend that you talk to other foreigners that have bought in the area. They probably have jumped through all the hoops and could give you valuable insight.
4. Surveys or Subdivision Maps of the Property - Get a survey if property inspection shows boundary issues may be involved (e.g. fence lines, encroachments, shared driveways), especially in rural areas, or if you're counting on a certain minimum parcel size for future subdivision or other reasons. Make sure that the fence line actually follows the property boundary. For beach front property with Possesion Rights, ensure that the servey (or “plano”) is done through a reputable surveyor and that the local Government Surveyor (Catastro) have verified the survey. This is particularilly important when dealing with properties that may fall within the “law of 22 meters”.
5. Check out the reputation of the property surveyor - Not all surveyors are fully qualified, and it is difficult to get a good surveyor.Sometimes the surveyor is in cahoots with the property owner, and other times they are simply incompetent.
6. Planning & Zoning issues - Related to the land & surrounding area (e.g. permitted uses, variances, conditional use permits, proposed general or specific plans changes for the area). Especially important if undeveloped or redevelopment area nearby or for special purpose property (home occupations, granny flats, non-conforming uses, etc.). This is especially important if you are in the city or near a natural reserve.
7. Environmental Impact Studies - May impose special restrictions on use, vegetation, deforestation, or other issues. If you are building more than simply a residential home, you need to check whether an environmental impact study is necessary for your project.
8. Building permit & certificate of occupancy history - Especially important for older homes with add-ons or conversions. Check the local building inspector's office.
9. Soils & Geological studies - Of particular interest are soil percolation tests, especially where you have to put in your own septic system. This will also alert you to earthquake, soils, flood zones, toxic sites, and environmental reports.
10. Reputation of builder, seller and real estate professionals involved - Talk to others, e.g. realtors, attorneys, the local city council - Ask how long they have been in the community and how they deal with problems which might come up. Are they reputable or have they been involved in scandals previously? If so, what kind of scandal? Look on the internet.
Generally speaking, Due Diligence is a must when looking, negotiating and purchasing property in Panama. We also recommend that you retain the services of a qualified attorney or legal professional that will guide you through the process of background checks, government databases etc.
Purchasing property in Panama: titled land, rights of possession and commodity speculations
by the US Consulate
The following is general information on purchasing real estate in Panama. It is not to be construed as legal advice. The different categories of land make it imperative to engage professionals for more detailed information. Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.
Generally, there are two very different ways to buy real estate: 1) the purchase of titled property, and 2) the purchase of rights of possession (derecho posesorio). Titled land, and the process of buying this, is similar in concept to that in the US, and land and deeds are duly recorded with the Public Registry (Registro Público). "Rights of possession" is an entirely different process, a kind of squatter's or concession rights. For rights of possession on the mainland, it might be possible to convert this later to a titled property; on islands and coastal and border areas, it is much more difficult if not impossible. Many areas in and around Bocas del Toro, including beachfront and island properties, are government property, and cannot be owned, although there are very limited and complicated exceptions. One should not buy "non-adjudicable" lands (áreas inadjudicables) unless the purchase is from the Government of Panama. Ultimately, there is only one way to acquire property in Panama to the fullest extent of the law: titled land. Rights of possession is not titled land.
TITLED PROPERTIES
Panama has a reliable Public Registry system, and this office maintains a record of all titled properties throughout most of Panama. Information regarding titled properties is readily available through the Public Registry, and is a fairly routine process to undertake through due diligence on a lot or property (finca). Your attorney can issue you in writing an abstract title of the land, along with any and all liens, mortgages, covenants, encumbrances, maps, verification of tax payments and utility bills, special characteristics, ownership history, fence lines, encroachments, shared driveways, and registered surface area, and can verify that the person who is selling the property is the actual owner.
RIGHTS OF POSSESSION
Not all properties in Panama are of private domain and thus are not subject to Public Registry registration. Such properties are public property, and can rarely be owned or titled outright. In such cases, it might be possible to obtain "rights of possession," a kind of squatter's or concession rights, as an alternative to title, permitting one to acquire a right to possess based on the occupation and use of a certain area of land over time. (Think of trying to "buy" parts or all of the Grand Canyon, New York's Central Park, or the Washington Mall. You obviously cannot. However, a US rancher can buy grazing rights in a US national park, a company can buy limited use of national lands for mining or drilling, and a company can gain a concession to build a restaurant within a national park. But none will ever hold title.) Much of the property in and around Bocas del Toro, beachfront properties, islands, and areas in rural, agricultural and special tourism zones, are government-owned. In some cases, titles are held by families from many generations back and obtaining rights of possession might be possible, but the buyer would still have to pay for the land when and if, he or she obtained the title. This is a risky method of acquiring real estate.
It is important that all properties undergo a title search before purchasing. There are potential conflicts in owning rights of possession. Properties can be subject to third-party and and/or conflicting claims of ownership, and the vagaries of Panamanian law and local politics. It might be possible that the original owner return to claim it, or the government could exercise its right to re-occupy it without compensation or warning. For titled property, no one can do this without following a condemnation process similar to that in the US, with the owner compensated for land and improvements. Rights of possession are handled and recorded by the Ministry of Agriculture's Agrarian Reform Office, not the Public Registry.
Although Panama law allows nationals and foreigners to purchase titled property in many parts of Panama, it is important to note that Article 121 of the Panamanian tax code states that foreigners and Panama corporations with foreign ownership cannot purchase property located less than ten kilometers from borders, or on most islands. Although some have contested the constitutionality of this law, until this situation is resolved, buying such property remains a risk to foreign investors. Exercise caution of "Panamanian corporations" that appear to grant entitlement to such lands.
Another important difference between titled property and rights of possession is that the latter cannot be mortgaged. This makes sense: if you do not actually own the land (hold title), you cannot mortgage it. The buyer should ensure that the activity contemplated is allowed, that the construction is acceptable to the government, and that the award be extensive for a period of time suitable to the purchaser. The length of the transaction process for the possession rights transfer varies and can take months, depending on many factors, such as the date of recognition of these rights and the granting entity's inspection, etc. Many land developers in these areas have already procured the rights of possession documents and transfer the ownership of them by means of the sale of a Panamanian corporation and its assets. Aside from the problems with this (stated above), be aware that corporations might have other businesses besides that related to the property, and there is no official registry of this.
LANDS IN NON-ADJUDICABLE AREAS
Known in Spanish as "áreas inadjudicables" or "áreas insulares," these are lands that the government has set aside and are NOT subject to title or rights of possession.
CONTRACTS IN ENGLISH HOLD NO LEGAL WEIGHT IN PANAMA
All juridical processes in Panama are conducted in Spanish. For any real estate transaction in Panama, a contract written solely in English carries no legal weight, and is generally not recognized. All contracts for property must be in Spanish on a formal public deed, and signed before a public notary, in order to be legally enforceable and to be filed at the Public Registry.
GET PROFESSIONAL HELP
Buying real estate in a foreign country should not be guesswork. As when purchasing real estate in the US, common sense should be the guiding factor. Again, engaging a reputable attorney and licensed real estate broker is recommended. Even some Panama City-based real estate lawyers might not be fully familiar with such intricacies as land law in certain areas, e.g., Bocas del Toro.
Panama's Bar Association and Supreme Court advise that the Supreme Court issues a "Certificate of Good Standing" to lawyers. The Court receives complaints about lawyers and decides whether to sanction them. This certification may be requested via fax or mail from the Panamanian Supreme Court from: Lic. Carlos Cuestas, Secretario General de la Corte Suprema de Justicia Organo Judicial, Calle Culebra, Edificio 236 and 237, Ancon, Panama, Republic of Panama. Tel: (507) 262-8358, Fax: (507) 262-2505. Note that such a certification is still no guarantee.
The Embassy also maintains a list of lawyers; write us at panama-acs@state.gov for the list. The Embassy assumes no responsibility for the professional ability or integrity of the persons or firms whose names appear on this list. They are, however, selected with care.
Real estate transactions in Panama are usually done in two steps. The Promise to Purchase Agreement is a preliminary contract between the buyer and seller, and gives the buyer time to work out financing and due diligence before committing to buy. It also can be used to get the seller to meet certain commitments and conditions before the sale occurs, and list "contingencies" under which the buyer can be released from obligation to buy if questions are not resolved, or if hidden defects are later found. Only when the buyer is completely satisfied should the sale close. If the buyer is satisfied, a Purchase and Sale Agreement (or Contract) is made in the form of a public deed and registered at the Public Registry of Panama, at which time the buyer becomes the owner.
The safest way to pay is by an irrevocable letter of payment issued by a bank, contingent on receiving from the seller proper title to the property. The bank holding the funds issues the irrevocable letter of payment to the seller and pays it as soon as it is presented with the registered public deed transferring title to the buyer. The buyer often opens a bank account (or gets a mortgage) and then formally requests that the bank issue this letter, which is considered to be an appropriate form of payment. If the buyer does not obtain a mortgage, he pays the bank for this service.
Real estate agents normally get paid only when the sale closes. Contracts signed are legally binding documents, and you should ensure that you have read and understood them completely before signing. While a good real estate agent can help you through the steps of buying, he cannot provide you with legal advice; an attorney does that. Escrow and title insurance are not generally used or needed in Panama, as such functions are performed by the bank and Public Registry, as described.
COMMODITY SPECULATIONS
Commodity investments and speculations, such as for noni and teak, require extreme caution. For these crops, proper growing climates and soil conditions are very specific. Teak is not native to Panama. Projections and assumptions about noni and teak involve highly uncertain factors such as availability, price, vagaries of season, changes in government, crop yields and quality. There are no guarantees.
Most expats from Common Law jurisdictions are used to acquiring real estate property by way of escrow. Very roughly, an escrow agreement is an agreement wherein money or some other asset is given to an acceptable third party (an escrow agent), with instructions on when to disburse funds (or release assets) in its care and to whom. These instructions should clearly indicate that disbursement or release should occur upon the occurrence of certain specific condition(s) or contigency(ies). However, if the agreed upon condition(s) or contingency(ies) do not occur, the escrow agent should not disburse or release.
In plain English, an escrow agent is usually given money by a property buyer (or when what is purchased are shares in a property owning corporation, a share buyer), with specific instructions on when to pay. In Panama, titled property only changes hands legally upon the filing in the Public Registry of the public deed which reflects its sale, so it is advisable that an escrow agent only disburse upon recording.
Further to the above, I would like to dispel a commonly held assumption: that escrow agents in Panama have some fiduciary or trustee-like duty in regard to the money they receive. In fact, Panama has no regulation establishing fiduciary duties for an escrow agent comparable to that existing in Common Law jurisdictions. Thus, a Panamanian escrow agent's responsibilities are basically those agreed upon between the client (be it the buyer only or both buyer and seller) and the escrow agent. I strongly recommend that expats not give money to an escrow agent without a crystal-clear contract which spells out what that escrow agent is supposed to do at all times and in all scenarios.
Although not well known in the Bocas del Toro archipelago, most Panamanian real estate transactions are completed using another payment mechanism: the irrevocable payment letter (IPL).
The IPL is an instrument issued by a Panamanian bank , which for a time period, irrevocably commits to pay someone (usually the seller of a property, but sometimes the seller and a mortgage lender) a predetermined amount upon the occurrence of a contingency or condition (usually, the filing in the Public Registry of a property sale).
The two most common scenarios where IPLs are issued are:
When no loan is granted to purchase a property, in which case the "buyer" deposits the money in a bank account, which is then pledged to the bank and which backstops the IPL. Banks usually charge a small commission for issuing an IPL in this case and for disbursing upon registration; and
When a loan is granted to buyer to complete a purchase, in which case the loan is guaranteed by a mortgage on the purchased property. In this scenario, the purchase public deed also includes a mortgage on the property in favor of the bank.
As a rule of thumb, in case of IPLs without financing, the seller controls the public deed (i.e., submits it for filing). In case of an IPL with financing, the lending bank controls the public deed, since the bank's guarantee is the mortgage contained in that very public deed.
Source:The Panama Report
So you want to take part in the Panama real estate boom while profits are still inevitable but you don't currently have the money to pay for it? In our world of credit purchasing where money can materialize for those willing to sign their souls future income over to a bank, anything is possible. In Panama, foreigners have the same rights as citizens when it comes to purchasing and owning property. Also, because the property titles in Panama are standardized and recognizable by law they can be accepted as collateral for a loan. These facts, along with Panama's reputable banking system help to make the process secure and respectively hassle-free compared with its Latin American neighbors.
Thanks to the increasing demand, the process of obtaining a mortgage by foreigners has been simplified over the years. Banco General representative, Ana Patricia de la Guardia, said several North Americans come in to apply for a mortgage for a property in Panama every day. Each request for a mortgage is dealt with on an individual basis. The better you can prove your ability to pay off the loan, the more likely the bank is to entrust its money to you. Most banks will offer 70 to 80% financing to foreigners (requiring a 20 or 30% down payment) on existing and pre-construction properties.
Leniency is often granted to retirees and others who plan to live in their property. If you make it obvious that you just want to flip the property for a profit, the bank may only offer you 50% financing. If land is purchased with no plans to develop, banks may limit financing to 50% or none at all.
In Panama, interest rates are not fixed by the government and fluctuate depending on many economic factors. Over the past 20 years the interest rate has fallen from 13% to 7% and just recently rose by 0.2%, according to de la Guardia.
The rate currently agreed upon by banks is 7.5%, but most banks will cut you a better deal. Because so many factors are considered in the negotiation, the offer that you agree upon with your bank is unlikely to resemble that of a person buying a very similar property. Some banks like to offer a very low first year rate and then adjust if after that year, others start you at one rate and readjust it every six months.
One investor was offered a 4.5% interest rate the first year on his 10-year property loan. The second year, the rate was adjusted to 8%. Surprised by the lofty jump, he went to complain and was given a 7% fixed interest rate if he added one more year to the duration of his mortgage payments. Most banks will work to keep you happy so you keep your money with them, but you should be careful and do your research. The history, stability and overall reputation of a bank say a lot.
The actual process of applying for a mortgage requires that you provide any and all documents proving who you are, your credit status and your total income and assets. Each bank will have a specific list of requirements, but the more you show them, the easier it is for them to get a good idea of who they are dealing with. Communicating with your bank representative is important to fill in any holes, but you will need proof to backup what you say. One bank representative said that she has had people who were denied a mortgage come in crying "But I have this property, and this much in the stock market", but they didn't originally submit any proof of these assets and the whole approval process had to begin all over again.
Banks will allow you to send copies of your documents via e-mail or fax to start the approval process, but at some point they will require that the original, signed documents are in their office. The documents can either be presented in person or shipped via DHL or FedEx.
If you change any details from the start of the application process, everything will have to be redone. One common mistake is not being clear about whose name the land and mortgage will be registered to. Only married couples can take out a mortgage together. The obvious benefit of putting two names is that the couple's joint salary will give them a better chance to be approved for the loan on a property that may be out of one individual's purchasing capability. If one person suddenly can't make the trip to Panama to complete the necessary procedures, the mortgage will have to be re-applied for under the spouse's name only.
The bank's lending committee will review your application, and assuming everything has been completed correctly, most banks will have a response within five days. The less of a liability that you prove yourself to be, by providing ample proof of who you are and all your valuable assets, the more likely you are to get approved and receive the best possible financing terms.
The reasons for being denied a mortgage in Panama are probably similar to your home country. Someone with a very low credit score or negative references, or an income that won't cover the monthly costs of a property, will probably be denied, offered less financing or urged to find a cheaper property.
The lending committee's official response comes in the form of a letter to the client with the agreed upon conditions which must be signed and returned. Before everything is finalized, the client must open a bank account in person at the bank, which can be completed in one meeting. Opening the account is free, but you will want to be sure you arrive in the country with enough money to deposit. Some banks may require up to $500, while others, only require a minimum of $50 to open an account for citizens and foreigners. A minimum balance may be required in the future that totals three monthly payments on your mortgage.
Clients must also take out life insurance for the full value of the property and fire insurance for 80% of the construction costs. A doctor's appointment in Panama is usually required, for which the person must obviously be in the country. This must be done through a Panamanian company, even if you already have life insurance elsewhere, because of a law requiring Panamanian insurance companies to update the bank as to any changes in the status of your health or insurance. This restricts clients from canceling the insurance after establishing their mortgage. The benefit is that in the unfortunate situation in which the investor dies, the insurance company will pay off the property, which will then belong to the person designated in the investor's will.
For a healthy young adult, life insurance may amount to $70 per month, but the price varies based on the health of the client and the price of the property. So assuming you are no longer in your mid-20s and one heart bypass surgery later the whole insurance world is labeling you a liability, plan on paying about $100 each month on insurance. Banks, including HSBC and Banco General, often have affiliate insurance agencies, and will cover the cost of your first medical check up. Fire insurance is about $8 per month.
Once the bank is satisfied and has your signed terms of agreement letter, it should take one to two weeks for the promise of payment letter to get to the developer. The property must then be appraised and required permits and certificates must be presented by the seller. Usually, any fees for this are incurred by the bank.
Either the buyer or someone with power of attorney must be in the country to sign the deed and register the property under their name or their corporation's name in the public registry to close the deal. If the property is under both the husband's and wife's name, both must be present to sign.
You should be prepared to pay about 2% of the property costs to cover closing. The actual fee to register a new property in your name is incurred by the buyer and is around 1% of the property value. You should have a qualified lawyer review all paperwork before signing. If you do not speak fluent Spanish to understand the contract, you are required to hire a translator, which can range from $100 to $250. No documents written in English are recognized by law in Panama.
There is no specific time frame for the whole process and each step depends on the one before it. Things will probably go quicker if you can spare the time to meet with your bank in person to develop a relationship and get all your questions answered at once, and to make sure your application package is complete before submitting it.
It is possible to complete the whole process with only one trip to Panama: to open a bank account, get a doctor's appointment if necessary for the life insurance and present the official documents that were requested and sign the title registry. Yes, the documents can be mailed and the registry can be signed by someone with power of attorney, but you might as well do it all at once if you have to be down here anyway. All of this can be accomplished in one week.
Once everything is signed, all payments should remain the same except if you don't have a fixed interest rate. A bank cannot change the amount of funding they give you unless you decide to finance less. However, in a situation where the client's financial situation changes dramatically the bank can recall the loan (loss of job, etc.). Also, if the client is buying a pre-construction property and something about the building changes (perhaps it is found out that the contractor never had proper building permits) the bank can recall the mortgage, but will generally offer you the same amount on a different property. These are rare but possible occurrences.
Banks also often set up a 2 or 3% fee for paying off your mortgage before its prearranged termination. However, if the early payments are discussed or planned in advance, they can often be waived for specific reasons, not including the fact that you just flipped your property for a $50,000 profit. Sometimes this is not stated clearly - another reason why you should have a lawyer review all documents for you.
Overall, do your research, present yourself honestly with all the proof you can think to get your hands on, and be prepared. The mortgage process for foreigners is improving daily, so some of the horror stories about the length of approval are no longer valid. If you are in the position to pay off your loan, you should have no problems getting your mortgage approved.
Each bank has their own list of requirements and not all cater to expats arriving to Panama. All banks ask that a bank account be opened with them as additional collateral, which in turns means that a new customer must provide all due diligence and know your customer documents.
Generally speaking here are the pre-requisites for obtaining a morgage in Panama:
A. Source of Funds Identification
This process is necessary to identify the source of funds and also to measure the large of the account. Basic documents are as follow:
1.Personal Accounts
Personal accounting balances
Personal Income Tax Declaration
Last two month personal bank account statement.
2.Corporation Accounts.
Copy of the Registration of the Corporation
Balance Statement of the corporation. Must be stamped/duly signed by an Authorized Accountant.
Last two month personal bank account statement.
B. References.
1.Personal Accounts
Personal Bank References
Personal Credit Office References (from a credit bureau office).
2.Corporation Accounts.
Corporation Bank References.
Commercial References of a Service Provider or important client.
Corporation Credit Office References (from a credit bureau office).
C.Copies and Other Documents.
1.Personal Accounts
Passport copy (copied in the bank premises.)
Driver License (copied in the bank premises)
Copy of a utility bill.
Fill out of internal account opening forms.
2.Corporation Accounts.
Copy of a utility bill.
Copy of product brochures, annual corporation book or any other important document related to the operations of the corporation.
Fill out of internal account opening forms.
D. Mortgage Loans.
1.Basic Documentation
Draft of Sale Contract.
Fill out internal forms.
Most recently-made appraisal (if required)
Copy of the Title (if required)
Opening of Bank Account (information above).
2.Basic Parameters (subject to negotiate)
Competitive Interest Rates
Term up to 30 yrs for personal and 15 yrs for commercial
Loan amount up to 70.0% of property value.
Life insurance of debtor for total amount of loan endorsed to the bank.
Fire Insurance for 80.0% of construction value per appraisal submitted endorsed to the bank.
Panama is one of the best places in the world for retirees today, combining a low cost of living, near-perfect weather and one of the world's best discount programs for retirees, with up to 50% off everything from public transport to movies, mortgage rates, doctor's visits, electricity, restaurants and airfares.
When you compare Panama with its neighbors, you'll see that it has more amenities than traditional retirement spots such as Mexico and Costa Rica, with lower costs and crime rates. In Panama, you'll encounter less red tape and less interference from local authorities.
To encourage long-term foreign investment, Panama requires no special authorizations, permits or prior registration for foreign investors. The Investment Stability Law, passed in 1998, protects foreign investors from any change in tax, customs, municipal and labor rules for a period of 10 years after an investment is registered. Major companies doing business in Panama include Federal Express, DHL, Sears, Price Costco, BellSouth, Kansas City Southern Railways, Continental and American Airlines, Warranty Company of the Americas and Hutchison Whampoa. Plus, you'll find just about every American franchise you can imagine on the streets of Panama City.
And there are other incentives for foreigners to spend time here, invest here … or retire here. For example:
- Newcomers who buy or build a new house won't owe any property taxes for 20 years.
- Residents pay no taxes on foreign-earned income.
- Tourism investments have 20-year exemptions from import duties, fees for construction materials and equipment, and income, real estate and other taxes.
- The U.S. dollar is legal tender in Panama, which insulates its economy from global shocks. During the Asian monetary crisis of 1998, Panama became one of the healthiest economies in Latin America.
Panama's pensionado program
Once you become a resident "pensioner" of Panama under the Tourist Pensionado Visa, you are eligible for the most appealing program of benefits for retirees available anywhere in the world right now.
Now, you may be thinking: "Pensioner? Retiree? That leaves me out."
Not necessarily. The rules for becoming a "pensioner" and qualifying for this visa program in Panama are probably not what you'd expect.
In fact, anyone over the age of 18 may apply and can qualify as a pensionado in Panama. All you need is a guaranteed pension income of $500 per month ($600 for a couple). It must be a pension from a government agency (e.g. Social Security, disability, armed forces, etc.) or a defined-benefit pension from a private company. Sorry, but an immediate, fixed annuity doesn't qualify.
As a qualified pensioner in Panama, you would be entitled to:
50% off entertainment anywhere in the country (movies, theaters, concerts, sporting events, etc.)
30% off bus, boat, and train fares
25% off airline tickets
50% off hotel stays Monday through Thursday, 30% off Friday through Sunday
25% off restaurant meals
15% off at fast-food restaurants
15% off hospital bills (if no insurance applies)
10% off prescription medicines
20% off doctors' consultations
15% off dental and eye exams
20% off professional and technical services
50% off closing costs for home loans and more
Crossroads of the Americas Panama is also perhaps the most accessible retirement haven for Americans.
There is a frequent nonstop service to Panama City's Tocumen International Airport. It's a 2½-hour flight from Miami on American Airlines and COPA, Panama's national airline, which also flies from Los Angeles and Orlando, Fla. Continental flies from Houston, and Delta flies from Atlanta. Aeroperlas and Mapiex Aero are two domestic carriers that offer daily flights throughout Panama.
Beware, however, that as accessible as Panama is to the U.S., it's still a foreign country. There are certain cultural differences that you can either accept and embrace . . . or try to ignore and become miserable and frustrated.
Time moves at a more leisurely pace in Panama. A one-hour wait might mean two, and a simple meal out with friends can turn into dancing "tipico" at a local disco until five in the morning. It takes a certain disposition not to lose your cool when, for example -- and this happened to a friend living in Panama City -- the computer repair man phones to say he is estoy llegando (on his way over to your house), only to arrive two days later without explanation . . . but ready to work.
Cost of living
Panama has one of the lowest costs of living in all Central and South America: A U.S.-style home can be built for about $40 per square foot; unskilled labor costs $6.40 per day; a full-time live-in maid costs $120 to $160 a month; a beer at a bar costs 35 cents; a cup of coffee, 30 cents; a haircut and shave can cost as little as $2; an afternoon at a beauty salon is $8; electricity is about 10 cents per kilowatt-hour; water bills are $18 per year; telephone service costs roughly $30 a month; Internet access is $14 a month; wireless is available for a bit more; cellular-telephone service costs about $30 a month plus a per-minute charge of around 22 cents; and cable TV will cost you about $30 a month.
As a foreign resident, if you buy or build a new house, you won't pay property taxes for 20 years, nor will you pay taxes on foreign-earned income. Personal income tax is based on a sliding scale from a minimum of 4% to a maximum of 30%. A Value Added Tax of 5% to 10% is charged on most products and services. Transfer taxes on real estate are paid by the seller, and there is no inheritance tax or gift tax.
Mountains, beaches or the big city?
The three best places to buy real estate in Panama are: the mountains of Boquete, the beaches of the Pearl Islands, and the First World metropolis of Panama City.
Boquete: Boquete sits in Panama's mountainous Chiriqui region at an elevation of about 3,500 feet. It's quiet, unspoiled, uncrowded. Mountains, rivers, waterfalls. Lush green hills and great masses of red and purple flowers. This is coffee country, and in harvest season the Indians come down from the hills to find work. The men call and sing to each other as they pick. Their children run through the fields and play in the streams.
The climate in Boquete is ideal, spring like year-round with reasonable daytime temperatures, cool breezes, and chilly nights. Beachfront living is nice, but the mountains of Boquete are hard to beat. If you like Colorado, you'll love Boquete.
Three-bedroom custom-built houses start at $138,000 and ocean-view lots are under $30,000.
Pearl Islands: If you're searching for sand and sun, Panama has that in abundance.
The island of Contadora, the seventh biggest of the 90 named islands in the Pearl Islands archipelago, is in the Bay of Panama, just off the coast of Panama City.
This is the stuff of travel-magazine cover photos: turquoise waters, 13 white-sand beaches, secluded coves, bright red and yellow fishing boats, swaying palm and cashew trees, giant coral reefs, coconuts, mangoes, parrots, hummingbirds, pelicans, sea turtles and bright tropical flowers . . . with occasional sightings of gray and orca whales just off the island's shores.
Today the island is a closely guarded secret playground for wealthy and famous political leaders, writers, entertainers and businessmen -- not just from Panama but from all over the world.
Renovated beachfront villas start at $160,000.
Panama City: Panama City is probably the least expensive place in the world to live in a First World city. Here you'll find world-class restaurants, every imaginable luxury, hundreds of multinational businesses . . . all at about half the price you'd pay in Miami, or any other U.S. city for that matter.
Furnished studios start at less than $60,000, beachfront condos from $77,000. A two-bedroom, 1,300-square-foot apartment in the banking district in a building with a pool and gym costs around $150,000. A two-bedroom apartment with views of the bay and maid's quarters costs $160,000 (and rents for $1,100 per month).
Whether you're a seasoned property investor looking to add a little sparkle to an existing global portfolio or a first-time investor searching for that elusive win-win opportunity, it's important to assess opportunities based upon a risk/reward philosophy. Basically, you need an area and development that is going to rise in value but that doesn't carry too much risk - for example, consider avoiding first time developers, do cost per square foot (or meter) comparisons vs. rival developments etc.
With all that in mind, investors in the US and UK are now all talking about Central America, and particularly Panama City (Panama) as the next really hot real estate market.
I've spent a year investigating this, visiting the area, speaking to the appropriate organisations, meeting with developers, comparing developments etc. and I believe these investors are absolutely right to be considering the area. These are some of the reasons why:
The Panama government has been instrumental in kick-starting inward foreign direct investment into the real estate sector. This influx of investment generates its own momentum in terms of capital appreciation. The good news doesn't end there, however; major infrastructure development is ahead, including: Better roads, creation of new economic zones with tax incentives and special high tech facilities designed to nurture a high-tech economy boom. Significantly, there's also the widening of the Panama Canal (a stone's throw from Panama City investment opportunities). A mammoth project, due to run for the next 10 years, spelling very positive news for sustained high rental yields and occupancy rates.
All of these plans illustrate that the Panamanian government are committed to a sustained program of making their country more desirable, their people more wealthy and their economy more stable. These are all great indicators that the fledgling investment property sector in the country is being built upon solid and sustainable foundations.
Solid Economy
Panama City is one of the most modern urban centres in Latin America, boasting around 150 banks from all over the world. Panama is known as the financial heart of Latin America and, as such, ranks as one of the most important banking centres globally. Of course, also home to the incredible Panama Canal, Panama commands enormous strategic importance. In addition to this pivotal role within Latin America, Panama also benefits from the lowest inflation rate and hence, undeniably the most stable economy in Latin America.
Stable Currency
The national currency (technically the Balboa), is matched on a 1:1 basis with the US$, and for all but minor transactions, the US$ is normally used. Naturally, being allied with the world's foremost currency has its benefits, and the net result has been monetary and price stability almost unique in emerging markets.
Personal Safety in Panama
Panama is a very safe place to be out and about. In a recent global survey, Panama was given a safety rating in the highest class (along with the United States), thus meaning it's amongst the world's safest places. These results come direct from the Pinkerton Intelligence Agency.
Tax Incentives
In addition to all the background factors that make Panama a great investment prospect, one should also consider that it offers significant benefits in financial legislation terms too:
There are significant tax incentives offered to investors in Panama. First, there are no exchange controls in existence. Second, foreign investment is welcomed and can be freely repatriated, so extracting gains from Panama is no problem. Third, Capital Gains Tax is very low. Finally, 20 year exoneration is also available for property tax on some new construction projects.
Retirement Benefits
Agencies around the world rate Panama the number one place for retirees, and for good reason. Aside from the near perfect climate, personal safety and not to mention the hospitality of the locals, there are a host of additional government benefits to retirees in Panama. Small wonder the property market is responding as retirees are buying their second homes there.
Other questions:
What to do in Panama?
Panama offers a wealth of opportunity for the visitor. World-class shopping, eating out, sport fishing and some of the finest golf courses in Central and South America. For those of a more adventurous disposition, then there's wildlife watching in the rain-forest as well as excellent diving opportunities. If you're looking for great beaches then look no further than the islands of Panama Bay; amongst the finest beaches on the planet.
What is the cost of living like?
Well, taxis are $2 anywhere in the City, live-in maids are from $300/month, restaurants are very cheap etc. In fact, the country was awarded the perfect score recently in an independent analysis into Central American economies, in that is offers the highest salaries and the lowest cost of living for any country in Central America...
What's the sort of cost involved for buying a property?
I concentrate solely on pre-construction units right in the City. If you want water-front, prices range from $120/sq ft to $400/sq ft. Inland, from around $90/sq ft. I'd focus on the water-front ones in the range $175-225/sq ft, as these represent best value, considering all factors. Avoid the Trump Ocean Club offering, as it's not great value, isn't in a great location and is way, way over-priced.
Closing Costs/Mortgage etc.?
Closing costs are around 2% of the purchase price, and mortgages are available (subject to status) at rates of around 6.25%, 80% LTV over a maximum period of 30 years.
What's the weather like?
Hot all year around. Dry in the peak season (Nov-Apr) and wetter in the other months. When it rains, tends to be very heavy for a short burst, then dries out quickly given the heat. All in all, it's about as good as it gets, and perfect for golf (my passion). And, the City has never experienced a hurricane or earthquake. Despite this, most developments are built to Florida hurricane standards.
Summary:
For investment, retirement or as a second home, Panama City should definitely be considered. Summary points are:
1. It's a capital city investment, with plenty of high-earning locals
2. Low purchase cost (from c. $100 per sq ft, even in prime residential areas)
3. High yielding (residential units can achieve a 7-8% yield)
4. Borrowing available (high LTV, low interest rates)
5. Major infrastructure changes ahead; widening of the Panama Canal, better roads, huge influx of retirees from North America and a solid economy
6. Various taxation benefits
7. Amazing retirement package
8. Costs are rising very quickly, and taking prices with them.
I've personally bought a unit in the City, and have advised countless others on where to buy, what to do, which advisers to use etc. I firmly believe it's a fantastic place to invest right now, prices are rising and will continue to do so, and feel it's probably today where Dubai was 5 years ago for real estate investment. In other words, there's some good profits to be had.
Written by Andrew Richardso, Managing Director of www.property4wealth.com and Expert Adviser for The Property Investor magazine and can be contacted via email at andrew.richardson@property4wealth.com
PANAMA CITY -- Long a freewheeling shipping hub and offshore banking center for the Americas, Panama is enjoying a building boom on a scale unmatched since the construction of its famous canal 92 years ago.
The country is luring investors and expatriates worldwide, with interest further boosted by the recent approval of a $5.2 billion plan that will double the canal's capacity.
A real estate frenzy fueled by easy credit from Panamanian banks, government incentives, and a saturated US housing market for retirees has attracted speculators and prospective residents from California to Dubai. They are snapping up preconstruction bay-front apartments, highland villas, and the latest luxury development from Donald Trump -- a $220 million residential, office, and hotel complex called Trump Ocean Club, with towers shaped like a yacht sail. Two rival Spanish projects are vying to build the tallest skyscraper in Latin America at about 100 stories.
Construction moguls and estate agents say Panama City is a sure bet for investors, offering discount prices for quality of life and healthcare rivaling the United States', more than 100 international banks, tax breaks, and stunning Atlantic and Pacific coastlines.
But urban planners and long time residents warn that overbuilding could ultimately strain the country's roads, water supply, and other infrastructure to the breaking point with devastating consequences.
Almost no one seems to be heeding those alarms.
Cranes, building sites, glitzy sales offices, and real estate package tours aimed at foreigners are everywhere, from Avenida Balboa in downtown Panama City to suburban Punta del Este. Laundered drug money from neighboring Colombia built some of the early mirrored high-rises in the 1980s, but today's buyers include fixed-income senior citizens from the United States searching for a less expensive place to retire as well as billionaires from Monaco and Cannes.
David Btesh, a partner in Pacific Point, a high-end condominium project under construction on a landfill in downtown Panama City with units ranging from $300,000 to $1.1 million, said foreigners are looking for a haven from a world they perceive as unsafe because of crime at home and global terrorism.
"They're not going to Europe because it's too expensive, Canada's too cold, and Mexico's only Spanish-speaking," while many Panamanians speak English, Btesh said.
"Panama is a dollar economy with a democratic government. There's every kind of food, a modern airport with about 54 flights a day, and the second-largest free-trade zone in the world after Hong Kong," he said.
US citizens represent two-thirds of foreign resident visas issued in Panama in recent years, officials say, with at least 1,379 Americans moving to the country since 2003. Celebrities from Mick Jagger to Bono reportedly have purchased property in resort areas outside the capital.
The canal, central to the country's history, also looms large in the current boom.
The United States supported Panama's declaration of independence from Colombia in 1903 in exchange for US control of a canal connecting the Atlantic and Pacific oceans. In 1914, the US-built canal was completed, and the zone remained under US control until 2000.
In October, a majority of Panamanians voted to finance the construction of a third canal lock over the next decade that will allow the 50-mile lock and lake system to accommodate bigger ships and double toll revenues within 20 years, according to government estimates. Ricaurte Vásquez, minister for canal affairs, said the referendum "is a vote of confidence" in the local administration of the canal that has raised interest in Panama as an investment destination.
About 107 residential building projects of at least 20 stories, valued at $3.2 billion, are under construction in metropolitan Panama City, according a survey by Prima Panama, a real estate promotion company. That construction activity accounted for one-fifth of Panama's annual gross domestic product.
The report also found that about 11,000 apartments are scheduled for completion within four years -- the same number that were built over the past 11 years in metropolitan Miami, by comparison, where a glut has softened the market. The survey found that the average price of a new condo in Panama City is $289,111.
The cost has raised concerns about who will be able to afford to live in Panama.
Some will be the jet-set buyers targeted by the Trump complex, which is selling preconstruction condos from $400,000 to $8.7 million. The K Group, local developers of the project, says Americans including Trump, top the list of buyers at about 40 percent, followed by Canadians, Europeans, and Latin Americans.
Other buyers are expected to be baby boomers from the United States seeking more value for their retirement money. Modern Maturity magazine ranked the town of Boquete, in Panama's highlands, as one of the world's top retirement destinations.
Kit Marchel, a 35-year-old real estate investor, said she sold her Los Angeles condo last year for $3.3 million and bought an 8,000-square-foot villa at a southern Panama beach for $335,000. Since then, she has acquired 17 properties in resort areas and the capital, with plans to resell, rent, or redevelop them.
"The communications work, you can drink the water from the tap, there's no currency exchange issue, and it feels a lot like home," she said. "I've made a commitment to this country. . . . I did my research first. There's one baby boomer retiring every six seconds -- add those numbers up."
But a question nagging even the bullish is whether public services and demand can keep up with rising supply and prices. Already the capital suffers from traffic jams and fumes from untreated sewage that is dumped into Panama Bay. Public transport is sorely lacking, and the water supply is insufficient in poor neighborhoods.
"It's a time bomb -- you cannot meet the demand of all these high-rises with the infrastructure that exists," said urban planner Jorge Ricardo Riba, a former top official with the National Planning Office. "What happens when people start to live there?"
If the US economy weakens, he said, "there may not be enough buyers. I see a lot of empty apartments in the future."
Sandra Snyder, an American relocation consultant in Panama City who has written two books about expatriate life in Panama, also worries that the country's infrastructure cannot keep up with the pace of building. "This is such a lovely place, and I hate to see what's happening with this frenzy of building," she said.
A few developers say they are looking beyond the quick buck and want national and local officials to forestall problems before they arise.
José Bern of Empresas Bern, a hotel and real estate giant, said his biggest problem is finding workers to complete his projects on time and within budget. Panama City "is experiencing some growing pains, and it will get worse before it gets better," he said. "But maybe that's good, to slow things down."
Sarah Cox, a consultant with International Living, a publishing and seminar company, says the government has promised a new bridge, a wider main artery, a revamped bus system, a waste-water treatment plant, and a cleanup of the bay.
Cox acknowledges that speculation and overbuilding could bring down Latin America's new boomtown. But for now, she said, "I don't see that they'll stop building until people stop buying. . . . It's like picking up dimes in front of a steamroller. As long as you can stay ahead of the steamroller, you're fine."
Law 21 of 2008 to extend the number of projects with a 20-year property tax exemption was finally enacted and is in force.
Law 21 still does not clarify which exemption applies to homes with building permits dated between September 1, 2006 and June 30, 2009.
To qualify for this exemption:
a) the BUILDING permit has been issued before July 1, 2009, AND
b) the REGISTRATION of improvements in the Public Registry is completed BEFORE December 31, 2011.
Since registration can take around 1 week, in practice the Occupation Permit would be from 1 week before, in order to comply with the deadline for registration.
The law will only enter into force when signed by the President and published in the Official Gazette.As of now, Bill 386, "whereby Law 6 of 2005 on Tax Equity is reformed and another provision is enacted" is not in force.
Unlike the previous schdule of exemptions which had September 1, 2005, as threshold date for construction permits which would qualify for the 20-year exemption, Bill 386 has a confusing text which applies :
the normal 5-15 year exemption to residential improvements with building permits issued AFTER September 1, 2006,
the 20-year exemption when the building permit was issued before JULY 1, 2009.
What happens with homes with building permits dated between September 1, 2006 and June 30, 2009? Presumably they would be subject to a 20-year exemption only if they register the improvements by the 2011 cutoff date. If they miss the 2011 date, the normal 5-15 exemption applies.
Despite this extension, residential improvements have the normal limited exemptions of:
15 years Up to US$ 100,000.00
10 years From US$ 100,000.00 to US$ 250,000.00
5 years Above US$ 250,000.00
Non-residential improvements keep exemptions of 10 years.
A caveat: These exemptions only apply to the value which the builder declares for the improvement, NOT to the full value which the buyer pays for the property. For example: if a builder underreports that a condo unit is worth US$70,000, but signs a bill of sale to transfer the unit for US$120,000, property tax would be applicable as follows:
US$30,000 would be free of taxes because of the minimum threshold for property tax,
US$40,000 would be free of tax for 15 years (or 20 if the builder registered the improvement before the 2010 deadline).
US$50,000 would be subject to property tax from the date of the purchase because they are not part of the original value of the improvement.
So if you already purchased a property believing the 20-year tax exemption spiel from your friendly realtor or developer, get a statement ("estado de cuenta") from the nearest Ministry of Economy and Finance (MEF) for the "finca" where your unit is located. It is likely that the builder has not even notified MEF about the new owner, so you may have to show up with your title deed. Property tax statements are NOT sent by mail so outstanding taxes, interest and surcharges may be piling up as you read this...
Extension to file appraisals
Procastinators lost here. The dream of many developers to have extended the December 31, 2007 deadline to claim an alternative property tax rate vanished with the new version of Bill 386. Property owners who file an update appraisal before that cut-off date are entitled to 40% savings in property tax, with a reduced rate of:
0.70% over the property value above US$30,000.00 up to 50,000.00.
0.90% over the property value between US$50,000.01 and US$75.000.00.
1% over the property value US$75,000.00.
The cut-off date had been extended several times since the original 2006 deadline (See: June 30: Last day to file for property tax reductions). Since appraisers tend to list inflated values, this increases the assessed value with the government which is used to estimate the gain realized when the property is sold later.
The catch: The amended value cannot be increased by the Government for 5-years, which means that after that period, the Government will have a database of the properties which are likely to have increased values.
Investing in foreign real estate involves a lot of risk, and what you don’t know can really hurt you. When investing in Panama, it is critical that you understand the the possible pitfalls in the purchasing process. Here are six common mistakes to avoid:
Mistake #1: Your real estate agent insists that financing will be no problem so you don’t check with the bank. Solution: Though individuals may have been able to get 95% of the property price financed in the past, banking polices and practices have changed. Don’t accept banking advice from anyone other than a bank representative. Be cognizant that agents may have ulterior motives or outdated experiences.
Mistake #2: You choose the first agent you find in Panama, take his/her word on everything and eventually buy real estate without consulting with anyone else. Solution: Because Panama has no multiple listing service, the market has a poor flow of information and agents have the upper hand on buyers. Talk to multiple agents to hear multiple perspectives as well as property listings.
Mistake #3: You assume that the price that you are given is accurate.
Solution: Don’t overlook the true selling-price of property. This goes for completed units, pre-construction property and raw land. Ask your agent what commission percentage they make on the deal to determine whether or not that might influence their decision on what to offer.
Mistake #4: You deal only with an agent or middle-man, neglecting to contact the true owner of your property/project directly. Solution: Always meet with developer/owner. In pre-construction, it’s important to know who will be building your unit and if you can trust them to do a good job. When purchasing land or finished homes, it’s important to learn the true price of the real estate to ensure that no one is pocketing a secret commission on the deal.
Mistake #5: You purchase real estate in your personal name, thus subjecting yourself and your family to serious risk should anyone go after you legally. Solution: Consider buying real estate using a corporation: Panama is an offshore haven and buyers should take full advantage of that. Starting a corporation (it costs $1,000) and buying real estate in its name will serve two purposes: it protects you and your assets and it lets you transfer shares of the corporation to a new owner if you sell any or all the property.
Mistake #6: You find a good development and buy a plot to build your dream retirement home. But suddenly, some crazy guy buys the adjacent lot and builds a giant purple house with a big metal gate fence, devaluing your property as it is forevermore “the house next to the crazy guy’s compound”. Solution: Verify with developers that the development has construction restrictions. You don’t want attributes of your neighbor’s property detracting from the value of your property, and if you have taste, chances are your plans for a house or fence will be approved in your development.
When your address changes from “128 Elm Street, Farmsville TX 76508” to “El Cangrejo, la Vía Argentina, la primera calle después del parque, a una media cuadra norte del almacén, frente a la casa amarilla de tres pisos, apartmento tres D, ciudad de Panamá, República de Panamá”, receiving your Christmas cards from family in the States may not be as simple as it used to be. Christmas cards, however, are probably not your main concern. When you choose to live in a foreign country, many items are simply unavailable or out of your budget when available locally. The fact is that sometimes you will need to receive documents and packages quickly and securely. Luckily, there are several solutions:
A P.O. Box in Miami:
In Panama, several companies offer mail-forwarding services. These private mail companies provide you with a PO Box address in Miami to receive your mail and then forward it to Panama within 48 hours. Most companies will deliver the mail to your home. The cost for this service is based on the weight of your correspondence, which generally runs around $3-4 per pound depending on the terms of your contract. It is a good idea to know how much mail you expect to receive in order to select the plan that suits your needs. Keep in mind that magazines with several hundred pages can weigh up to 2 pounds each. Another benefit of maintaining a US mailing address is that you will not be charged a fee by your credit card company for having an address overseas or receive your frequent flier statements in Spanish.
Internet purchases:
While shopping is great in Panama, there are occasions when you need to shop online. There are several things to keep in mind when placing an order. The first is to know the weight of your purchase as well as the size of the box. With that information, you can consult with your mail-forwarding provider as to the expected cost of delivery, taxes, and customs fees. The cost of bringing in merchandise varies depending on the item, but expect to pay between 10-20% in taxes. If you do not have a credit card from the US, it is often difficult to place orders online. Some of the larger mail-forwarding services place your orders online for you using their credit cards.
Air vs. maritime cargo:
Depending on how quickly you need to receive your package, you can opt for what is called maritime shipment. Your package will arrive safely, but will take a week or two longer. However, the savings in freight costs can be significant for large, heavy items over eleven pounds. You will still have to pay taxes and customs fees. Once again, it is important to consult with your mail-forwarding provider, since the address for delivery via maritime shipment may be different from the one you would use for shipments by air cargo.
International couriers:
Sending correspondence from Panama using your mail-forwarding provider is generally done using their discounted rates with DHL and FedEx. Some mail-forwarding companies offer a less expensive option using the Priority Mail service in the US.
Deciding on a service
If you have decided to use a mail-forwarding service, it is a good idea to ask for references. Friends and business acquaintances may offer insight into which companies are more reliable than others. You may also want to visit the office and ask how their operations work.
A mail-forwarding service is a good way to stay in touch with friends and family back home. It is very helpful to be able to receive urgent items in a safe, economical way. If you do your homework and ask the right questions, you will overcome one of the challenges of living abroad.
All documents issued abroad, should be submitted duly apostilled or authenticated by the Embassy or Consulate of Panama in the country that issued it and by the Ministry of Foreign Relations of Panama. All documents issued abroad in language besides Spanish, must be translated by a certified interpreter recognized by the Panamanian Department of Justice.
The Apostille is demanded in Panama for foreign Police Records (even if you are an angel and have never been convicted), Birth certificates, Marriage certificates, Social Security letters, and lately even letters of reference from banks.
U.S. State Department explains: Documents issued in one country which need to be used in another country must be "authenticated" or "legalized" before they can be recognized as valid in the foreign country. This is a process in which various seals are placed on the document. Such documents range from powers of attorney, affidavits, birth, death and marriages records, incorporation papers, deeds, patent applications, home studies and other legal papers. The number and type of authentication certificates you will need to obtain depend on the nature of the document and whether or not the foreign country is a party to the multilateral treaty on "legalization" of documents. (A) If your document is intended for use in a country which is a party to a treaty called the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents ("Hague Legalization Convention") (countries listed below), obtaining a special "apostille" certificate is generally all that is required.
US federal documents (such as a Social Security letter) may be authenticated only by the US State Department. However, other documents which a have a notary signature are authenticated by the Department of State of each individual state. The same may apply in federal nations like Canada, Australia and Germany.*
You can get the Apostille by yourself using a self-addressed stamped envelope and paying by check, or a privately-owned notary service.
Once you are in Panama, the Embassy of your country cannot issue an Apostille for your document. This has to be done BEFORE you arrive to Panama.
If you want to just forget about the whole Apostille thing, you can take your chances with the list of Panama consuls. Call them up first to figure out if it is better to deliver the document yourself in person, or if they can handle return postage. If they lose your document, there is no authority you can complain to!
Source:mypanamalawyerblog.com
Have you ever done a "do it yourself" remodel on an apartment in Panama City. That's what I'm doing right now. I've got one construction guy who is acting as a foreman, bringing in the particular specialists we need to do things like install air conditioners, gas lines, electrical, cabinets, etc. He and his crew are doing all of the construction and mechanical, stuff like welding, pouring cement, ripping up old floors, knocking down walls - all of the heavy lifting. Once all of the parts and pieces are in their proper place then we shift to the fit and finish - paint, fixtures, lamps and lighting, decoration and details. If you can manage this kind of thing yourself you can save thousands of dollars and still be very involved in the decision making process - things like choosing higher quality "hidden" details like wall sockets. The difference is 100% higher cost - the "good" ones cost about $2.00 per, while the cheap Chinese (crap) ones cost about $1.00, so the total cost of putting quality fixtures in the entire house goes up by exactly one buck, multiplied by the total number of outlets in the entire house (what, maybe 15?).
Manage It Yourself, Not Do It Yourself: There are a lot of electrical and mechanical home repairs I can do myself. Pouring a new cement staircase is not one of them. I have learned after having done several of these projects that the best way (for me) to pull something like this off is to manage the project myself, and pay others to do the work and labor. I buy all of the materials myself, which allows me to shop around, find the best price, and be selective when it comes to the quality versus price continuum. I can pick and choose where I want to "upgrade" little things that have been a pain in the ass before. Like for example you know those little valves that go under your bathroom sink that you can use to turn off the water to the faucet? The "cheap" ones are made out of nylon (plastic) and the "good" ones are made primarily out of brass. And again, the cheap ones cost $1.50 or so, and the "expensive" ones cost $3.00. I have learned over time that the "cheap" ones will break and leak as soon as you touch them, so I decided to spend the additional $1.50 per unit (like 12 total units in the entire project) to save myself headaches in the future. A little bit of additional investment now, hopefully returns in the future.
On The Other Hand: Remember back in the 1970's when "Made In Japan" was synonymous with "crap"? Well, Japanese manufacturers discovered quality and the rest is history. Korea went down the same road, and now China is doing the same thing. When I went shopping for floor and wall tiles (for the kitchen and bathrooms) I found that Spanish or Italian tiles started at about $10 per square meter and went up from there. And, the "cheap" Chinese tiles were down below $5.00 per meter. I held them in my hands, felt the "heft" and quality of the pieces compared side to side, and also spoke to experts who were going to install them. The differences are small, almost insignificant, and practically invisible once installed. And in this case we're not talking about $1.50 here or there - I had to buy and have installed more than 100 square meters of tile so the difference in materials was going to be about $500 bucks.
Improving Chinese Quality: The Chinese wall tile factories are starting to "figure it out" when it comes to their manufacturing processes. The colors are becoming more consistent - there are less variations from one piece to the next. The same thing goes for the dimensions of the tiles themselves - if they are not exactly the same size (height and width) then any difference is greatly magnified once they are installed on the wall at eye level. According to my installer, who works with everything from fine marble and granite all the way down to installing thousands of square meters of "cheap" materials for low cost housing developments, the Chinese products are getting better but it's still somewhat of a crap shoot. You have to be able to spot the differences at the moment you pick them out. So, he came with me to the store to show me the differences.
Electrical and Wiring: Another place you don't want to skimp is in the electrical connections. These things are going to be wired up and then stuck inside of the wall, maybe never to see the light of day again for twenty years. In my case the actual wire is fine - solid 10 or 12 gauge copper insulated - and most of the house still had the original wiring from when the building was built new. But in some parts of this particular building the previous owner had done what I call "brujo" wiring - just stringing things together using substandard materials and techniques, all hidden behind drywall or buried. My answer to that - yank it all out and let's do it right. More expensive, but as the son of a Fire Chief I don't mess with things that can cause fires or death. So, I don't skimp on the electrical stuff, except for maybe that I have enough confidence in my wiring skills to install light fixtures, switches, and outlets myself so I can save myself some money there.
Get A Guy With A Truck: Do you own a vehicle you would be willing to load down with more than a ton (total weight) of floor and ceiling tiles, mortar, and grout? Or, would you be willing to load your Crown Victoria full of bags of "caliche" (busted up old cement walls) that need to be thrown out. I have a Jeep but there are still some jobs that require just a guy with a pickup truck and a helper to haul from there to here, or to throw it away. In a remodeling project there will be a lot of things that appear "perfectly fine" for someone else to use. I now have a guy with a truck who will come running to do either a delivery or a disposal. He comes with one helper, and between the two of them they can "magically" make things disappear. He's on solid ground ethically speaking, and asked me three times "are you sure" about throwing away the old ceramic sinks that were in the bathrooms. Yes, I explained, I don't like the style or color and I'm going to replace them. I know anyone can basically just wash them and put them to use, and you are free to either use them yourself, sell them, give them away, or do whatever you want. Don't worry about it... He charges a fair price for the work they do, and he now comes running any time I need a truck. You're going to be needing someone like this. Once you find him, program it into your cell phone.
See Past "Butt Ugly" Some of the best deals out there are the ones that "show like an outhouse on the pig farm." Basically, any "normal" people who walk in there will run away screaming. For me, that means "highly motivated seller." In Panama all construction is, in the end, just poured cement. Floors, walls, columns, beams - all solid cement. Sometimes in order to be able to see it, you have to be able to ignore a generation or two of bad taste and poor maintenance to get to the real deal underneath. My motto is "when in doubt, rip it out." Then you know what's down there later.
The Materials - Install Ratio: In Panama you will learn that the cost of doing a major remodel like this comes down to two major factors - materials and labor. And from my experience the general rule of thumb is whatever you spend on materials, you will spend about an equal amount to have that thing (whatever it is) installed. This goes for things like walls, cement stairwells, flooring, tiles, etc. And I'm only talking about construction stuff here, not appliances. Also, plumbing and electrical fixtures tend to be a little higher but still in about the same ballpark. Buy a new toilet for $70, and it's going to cost you about $70 to have it installed, more or less. If you can negotiate your way below the "50% ratio rule of thumb" then you are doing pretty good.
Buy Your Own Materials: Adding in a hidden "markup" on the cost of materials is one of the first places builders will try to play "screw the gringo." Take the time to visit several outlets that well the basic construction materials - bags of cement, bags of sand and gravel, wood, nails, wire, steel rebar, etc. Get an idea of what things should cost and then either go get it yourself or have your builder present you with a list of materials and then the receipts. Armed with that information you should be able to spot any major discrepancies.
Nickel and Dime Construction Site Theft: There are times when a construction worker will "accidentally" grab a screwdriver, throw it in their pocket, and then take it home. While it might not represent much of a loss, it happens. Be prepared for a little bit of missing materials or tools that simply go away unaccounted for. If you get a real hard-on over a $1.50 screwdriver and start firing people then you will never get your job done.
Leave Security for Last: While doing the job, make sure to describe to all of the construction workers the security elements you are going to put in place - alarm systems, a dog the size of a horse, your drunk and blind mother-in-law with a shotgun and an attitude; basically anything you can think of. Explain to the construction workers that you will be making your apartment practically assault-proof, and that you never keep anything there anyway. Every (and I mean every) breaking and entering or home invasion case I've investigated here in Panama had construction workers running around in one form or the other. They are the ultimate providers of inside information, whether they are doing the crime themselves or not. Convince those guys that you are the hardest nut to crack, and that it's not worth it.
Thank you to Don Winner of Panama-Guide.com for this great contribution.
Long a business and trade hub, Panama has been booming ever since the United States gave it full control of the Canal Zone in 1999. It is precisely because so much of Panama's economy has been focused on canal-related activities that opportunities in other sectors, from real estate to finance to a host of basic services, have gone largely untapped. And among the many foreigners coming to tap them—as well as to enjoy the good life that Panama offers—are a sizable number of Americans.
These Yankees, it turns out, are part of a larger American phenomenon: a wave of native-born citizens who are going abroad in search of new challenges, opportunities, and more congenial ways of life.
In his recent book Bad Money, political commentator Kevin Phillips warns that an unprecedented number of citizens, fed up with failed politics and a souring economy, have already departed for other countries, with even larger numbers planning to do so soon. But that may be putting too negative a reading on this little-noticed trend. In fact, most of today's expats are not part of a new Lost Generation, moving to Paris or other European haunts to nurse their disillusionment and write their novels. Some may be artists and bohemians, but many more are entrepreneurs, teachers, or skilled knowledge workers in the globalized high-tech economy. Others are members of a retirement bulge that is stretching pensions and IRAs by living abroad. And while a high percentage of expats are unhappy with the rightward tilt of George Bush's America, most don't see their decision to move overseas as a political statement.
Southward trend. Europe still draws many of these American emigrants, but even more have relocated in Canada and Mexico. Others are trying out Australia, New Zealand, or one of the new economies of Asia, while a growing stream flows southward to Central and South America. John Wennersten, author of Leaving America: The New Expatriate Generation and a retired historian who has taught for many years abroad, says Panama is the "new new thing" for those who are part of what he calls "a long-term trend."
Exactly how many people are part of this trend is hard to say. Precise emigration figures have never been easy to come by in the United States. "It's been an implicit assumption that people come here to stay, not to come and go," says Mike Hoefer, head of the Office of Immigration Statistics at the Department of Homeland Security. The government's last trial effort to count Americans overseas, in 1999, was deemed inordinately expensive. Elizabeth Grieco, chief of immigration statistics at the U.S. Census Bureau, puts it bluntly: "We don't count U.S. citizens living abroad."
But if the government is not counting, others are. Estimates made by organizations such as the Association of Americans Resident Overseas put the number of nongovernment-employed Americans living abroad anywhere between 4 million and 7 million, a range whose low end is based loosely on the government's trial count in 1999. Focusing on households rather than individuals (and excluding households in which any member has been sent overseas either by the government or private companies), a series of recent Zogby polls commissioned by New Global Initiatives, a consulting firm, yielded surprising results: 1.6 million U.S. households had already determined to relocate abroad; an additional 1.8 million households were seriously considering such a move, while 7.7 million more were "somewhat seriously" contemplating it. If the data collected in the seven polls conducted between 2005 and 2007 are fairly representative of the current decade, then, by a modest estimate, at least 3 million U.S. citizens a year are venturing abroad. More interesting, the biggest number of relocating households is not those with people in or approaching retirement but those with adults ranging from 25 to 34 years old.
According to Robert Adams, the CEO of New Global Initiatives, the motives of relocators are almost as hard to pin down as the numbers. "The only Americans who understand what's going on are those living abroad," he says. "There is no movement, no leader. It's just millions of people making individual decisions to do it."
Now living mostly in Panama City, Adams finds that the reasons people give for moving abroad often change, particularly among those who stay overseas for any length of time. In fact, he says, those who claim they came for a specific reason—for example, dissatisfaction with American politics—tend to be least happy with what they find in the new settings. By and large, most successful Americans abroad "are running to rather than running from," Adams stresses.
A new "West." Some observers even wonder whether words such as migration, emigration, and expatriation accurately describe most Americans' ventures abroad. Today, moving from the States to a place like Panama is almost tantamout to moving from the East Coast to the West Coast 50 years ago. And the Internet, Skype, and satellite television make it easy for people to stay in touch with the homeland. "While people are looking for something new, they're not giving up their citizenship," says Adams, who prefers the word relocation to emigration.
While American relocators are in some ways typical pioneers looking for a new "West," they are also participants in a larger, international development, "a global economic shift," Wennersten writes, "that is fostering real economic growth in heretofore-neglected areas of the world, like Latin America, Eastern Europe, and Southeast Asia." U.S. citizens are certainly not the sole beneficiaries of this shift, but they are active players in countries where the privatizing of former state-run industries and the opening of new capital and trade markets are creating an array of opportunities. "From computer consulting firms in Hong Kong to bagel shops in Budapest," Wennersten notes, "Americans are helping to revitalize or sustain economies that are receptive to Western entrepreneurship."
Talk to some of the successful American relocators around the world and the broad generalizations about them tend to hold up—though not so much as to overwhelm the huge variety of experience and achievement that distinguishes their lives. Michael Sheren, 45, who worked for Chemical Bank in New York in his early career, came to England in 1997 primarily to apply his background in leveraged buy-outs to the European market. Now working in the London office of Calyon Crédit Agricole, a French bank, he credits his American training and drive for giving him a leg up in his work. America's image abroad has suffered during the Bush years, he acknowledges, but he finds that Europeans still value the can-do spirit of Americans. "People equate Ameri-ca with success, even now," he says.
While business is what initially drew him to England, Sheren is now deeply attached to the British way of life. That includes everything from a generous government-backed system of social supports for all citizens to a mentality that is more comfortable with leisure. "I consider the quality of life here significantly better than what I would have over there," he says.
Panama is on the brink of great things.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 Panama and inviting comparisons with international business centres such as Dubai.
Last year, Panama's 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.
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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
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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."
Panama's economy will continue to grow, say analysts, resisting the global downturn led by US economic woes."The strong economic performance of the last few years continues, despite the deteriorating global environment," said International Monetary Fund (IMF) officials last week in a public statement."Panama was one of the fastest growing economies in the world in 2007 with real growth rising to 11.2 percent, following an average growth rate of nearly 8 percent in 2004-06 ... Growth in 2008-09 is projected to slow somewhat, to about 8 percent, with the Canal expansion and related investment activities partially offsetting the effects of higher oil prices and the slowdown in the U.S. and the global economy."
The IMF has also upped predictions for Panama's economic growth to 8.3 per cent for this year, up from a more modest estimate of 7.7 per cent in April's World Economic Outlook Report.
"Despite a deteriorating external environment, economic prospects are favorable," concluded IMF board directors, "thanks to the Canal expansion project and associated investment, as well as improvements in competitiveness reflected in expanding export services such as tourism, communications, and transportation."
IMF directors commented that Panama's financial sector has not been negatively affected by the global financial turmoil, noting the 'remarkable turnaround' in the non-financial public sector as well; these factors, combined with the strong economic growth, contributed to Panama's improved credit rating from Standard and Poors earlier this year, earning the country a BB+ (stable).
Analysts at Deloitte Touche Tohmatsu, a global auditor, also estimate an increase of 8.5 to 9 per cent growth for Panama in 2008, in their Economic Perspectives 2008 report, "marking the sixth consecutive year of strong growth".
According to the latest report by Indesa, a Panamanian advisory and financial services firm, the economy is expected to grow 8.4 per cent in 2008 and nearly 10 per cent in 2009, putting Panama at the forefront of economic growth in Latin America , along with Uruguay and Peru, which posted first quarter growth results of 11 and 9.2 per cent respectively.
Panama's 2007 gross domestic product (GDP) topped $19.7 billion in 2007, and is projected to surpass $24 billion this year.
The driving sectors in Panama are construction, mining, financial services, transport and telecomnunications, and hospitality. Last year, both construction and mining grew by 19.6 per cent apiece according to Indesa, offsetting smaller gains in the manufacturing and agricultural sectors.
In fact, it is Panama's service-based economy that has allowed it to weather rising oil prices, as well as its proximity to the US, where economic uncertainty has travelers opting for nearby leisure destinations. Panama is emerging as a significant business and tourism destination in the region for travelers from both North and South America, with the Tocumen airport acting as a regional hub between the continent's major cities.
In a report issued by the Panamanian government, authorities estimate the tertiary or service sector accounted for nearly three-quarters of the country's GDP in 2006.
"In the past three years (2004, 2005, and 2006), the tertiary sector has developed significantly, with growth rates of 6.8 per cent, 9.4 per cent, and 9.3 per cent," indicated the Panama Trade Policy Review to the World Trade Organization. "Mention should be made of the Colon Free Zone and of the hotel and restaurant subsector, which grew by more than 10 per cent. Other components of the sector also trended upwards significantly, such as financial intermediation, wholesale and retail commerce, and real estate.
"The high percentage of GDP that this sector represents and has represented in the past, shows that Panama is a service-oriented economy. In 2006 the sector accounted for 74 per cent of GDP."
The external sector has also been a strong economic driver, with the export of goods averaging five per cent annual growth between 1997 and 2006, reaching more than $1 billion USD. By 2006, the net export of goods and services represented one third of Panama GDP.
Despite the fact this year's numbers are down from 2007, which saw record growth levels of about 11 per cent, the overall positive trend is in stark contrast to regional predictions. The Economist estimates the mid-term trend for Latin America to average out at 3.9 per cent in 2012, while the IMF predicts a much better performance for Panama.
"The medium-term outlook is promising, supported by the canal expansion and other large construction projects," noted the IMF's board of directors last year in a public statement. "For 2007-10, staff projects average annual real GDP growth of about 6.5 per cent, [and] inflation of 2.25 -2.75 per cent."
IMF officials commended Panamanian authorities on governmental spending 'restraint' and improved tax collection in reducing public debt and creating a sound basis for economic growth. Declining unemployment, plummeting from 13.6 per cent in 2003 to 7.3 in 2007, was also cited, as was the positive impact of the Panama Canal expansion, expected to be completed in 2013 at a cost of some $5.5 billion.
"The project is expected to boost GDP growth and job creation, both directly and by stimulating related industries," noted IMF officials.
The Latin Business Chronicle has also placed Panama at the top of its Latin Business Index, thanks to $1.8 billion in direct foreign investment (DFI) in 2007. Panama beat out Chile, which saw more than $14 billion in DFI in 2007, taking the top spot for the higher proportion of investment to its GDP.
Inflation, which has typically been very low for Panama thanks to a currency pegged to the US dollar, has risen in step with the recent devaluation of the US dollar. While 2007 saw an increase over the previous year, going from 2.5 per cent to 4.2 cent, Panama's inflation remained well below all other Latin American countries, which averaged 7.75 per cent. However, inflation reached nearly nine per cent in May of 2008, which the IMF largely attributes to rising food and fuel costs
Prospective retirees: Panama wants you. The pitch? A plane ride just 21/2 hours from Miami enables the newly poor to swap a wretched retirement in the U.S. for one befitting a royal in the balmy Central American nation. Cash out! Emigrate! Feel rich! Panama—the new Florida.
Spin aside, Panama is increasingly popular among retirement-age types looking to hedge against—or skip out on—the recession. The Migration Policy Institute, a Washington-based think tank that studies the movement of people around the world, says the chief factors prodding professional-class Americans to flock to Panama include its First World health care available at Third World prices and the country's pensioner program, which offers some of the deepest retiree discounts in Latin America.
Seniors get up to half off on nearly everything, including movies, motels, doctors' visits, plane tickets, professional services, and electric bills. Expats also pay no tax in Panama on foreign income. Nor are they required to pay property tax for the first 20 years.
The fact that a luxe beachfront manse can be had for the same price as a dump in Daytona doesn't hurt, either. "We would have been looking at $3 million in Miami," says Jon Nickel of his 3,000-square-foot oceanfront penthouse in Panama City. Nickel and his wife, Gretchen, bought the place in late 2007 for $250,000, right after Nickel retired from his corporate law job in Portland, Ore., and sold the family's mortgage-free home for $800,000.
The skinny isthmus—nearly all coastline, with a mountain range slicing through the middle—boasts some of the best weather and lowest crime rates in Latin America. Other draws include guilt-free conspicuous consumption, with laughably low prices—by gringo standards—on splurges such as a day of beauty ($10) and a maid ($15 a day).
That's not to say life there suits everyone. Things in Panama movereallyslowly. A repairman who says he will be right over might show up days later. Water and electricity service can be spotty. In Panama City, drivers treat stop signs as a mild suggestion. "It takes a little bit of balls to retire here," says Matt Landau, a New Jersey native who is the founder of Panama City-based online portal The Panama Report. "This is not for type As. It's not your turnkey Florida retirement."
Still, boomers who have recently relocated to Panama say they feel as if they have figured out a successful geographic arbitrage. When Stephen Johnson and Linda Murdock were living in Aromas, Calif., they used to moan half-jokingly about how they'd have to retire to Barstow—the armpit of the Mojave Desert, with summers in excess of 100 degrees and winters that can dip below freezing.
Stephen, 63, retired as an executive of the Salinas Valley Solid Waste Authority in June 2008. His wife, Linda, 57, owned a dog-food business.
The pair had watched several friends retire on depleted cash cushions. Many weren't fully eligible for Medicare and wound up spending 50% of their income on health care. The couple's retirement agita was worsened by the fact that they got a late start building equity. "We bought our first house when I was 40 and Steve was 46," says Linda. "We knew we would never have our house paid for by retirement."
Over late-night pinot noir on their patio, they started talking about moving to a developing nation to stretch their money further. They had discovered Panama on a trip there in 2004 and saw it as a bargain-basement paradise. The low cost of living appealed to Steve, whose pension amounted to 40% of his pre-retirement income of $150,000. The surf-perfect weather lured Linda, who took up the sport on her 50th birthday.
Johnson and Murdock are now known as the gringos who live in the house with the red door. They bought their newly remodeled 1890 hacienda near the beach in San Carlos for $100,000 cash. They moved in last year and rented out their California ranch house. The rent covers the carrying costs on that house.
But Panama isn't only about the beach. The Boquete region in the mountains—Panama's answer to Boulder, Colo.—boasts loads of U.S.-style gated retirement compounds. The big draws of the area are tennis and golf. For those who are more interested in urban amenities, Panama City, which is by the sea, is sprouting yoga studios, bohemian boutiques, health-food stores, and artsy coffee houses.
Still, there are tradeoffs in this seemingly easy life. "Paradise is just a place you visit," says Johnson. "If you live here, you begin to see the cracks." Those include the three months it took them to get their driver's licenses—a process that involved blood tests, a hearing exam, and lines that make a U.S. Motor Vehicles Dept. seem like a fast-food joint.
But Johnson and Murdock have no major complaints, and Panama is certainly better than the Mojave. Murdock surfs—every single day—and says Johnson looks 20 years younger since retiring. They both love the way their dog can run on the beach without a leash and the fact that their doctors, many of them schooled in the U.S., happily give out their cell-phone numbers and actually answer when called. And their social life is far more active than it was in Aromas. They go out with new friends, a blend of expats and natives, almost daily, often for evenings of fish tacos and endless margaritas—for $20. "We have more time," says Johnson. "And apparently we have more money."
For Latin Americans, Miami has been a lot of things– the major financial center, the cultural Mecca, prime tourist destination, the business capital, and a symbol of international success.
The city made its riches and opportunities available to all nationalities, reaching the point during the most recent real estate boom where one could become financially successful and never speak a word of English.
Truly, Miami was a frontier island between North and South, sort of a Hong Kong of the Americas, infusing business savvy and capital with cheap labor and an extraordinarily large market.
The fact that Miami is so close to the United States and participated in the US banking system (the world’s #1 tax haven for non-US citizens) was a major benefit to individuals and businesses.
Naturally this is all changing now.
I have friends and family in Miami and come through the city from time to time in transit… and I believe that the city represents the absolute worst of the economic bust– entire blocks of condo buildings sitting empty, former high-powered real estate agents working as pool boys, and the car repo lots filled with exotic sports cars.
(not to mention Miami has absolutely, unequivocally the WORST airport in the developed world)
This is the effect of the residential real estate bubble bursting, as well as the drying up of domestic and foreign tourist dollars that used to be a steady source of tax revenue.
An imminent drop in commercial real estate, the next bubble desperately seeking a pin, is likely to further damage the city’s medium-term prospects. Excess inventory of warehouses and office space will likely lose significant value, creating negative equity scenarios for banks and investors.
Even the drug trade, once the city’s key economic growth engine, has slowed down.
While it is not my intention to prognosticate a death sentence for the city of Miami, I do feel obliged to point out that the wealth and wealthy have not simply vanished from the face of the earth or passed on to money heaven.
Nay. They are simply regrouping in other locations. But where?
Sao Paolo would be the most logical choice given the size and scope of Brazil’s economy… but there are too many problems– notably the language, crime, utter lack of transparency, and capital controls. Plus it is just a crappy city.
Mexico City? ha. next.
Buenos Aires makes more sense with an established financial infrastructure, but the government is too unstable to take seriously.
Santiago is a major success story, but its paper thin financial industry will not be able to support regional capital flows for quite some time.
Bogota also makes sense given the size and potential of Colombia’s economy and its significant economic success; but the country still suffers from security stigma and paranoia, and problems with Venezuela do not do it any favors as a financial center.
That leaves Panama… an open, bilingual, vibrant capital city with a well-established international banking center, free flow of capital, stable government and economy, and an ace-in-the-hole to guarantee sovereign independence.
Best of all, it’s dead square between North and South America, and just 2.5 hours flight to Miami.
Not a bad compromise… and this is one of the key reasons that I am bullish on Panama.
Yes it has its share of problems– no place is perfect. But Latin America has woken up to the economic reality of Miami.
Capital is going to look for its most conducive home, and Panama represents a safe, cultural fit. And for individuals and business, the transition to Panama is easy. Besides, Panamanian immigration officials welcome visitors with open arms, in stark contrast to the immigration thugs in Miami.
While I do not believe there is going to be a huge sucking sound coming out of Miami, it is clear that Latin America is certainly looking to crown a new capital city.
The truth is, speaking Spanish isn’t completely essential in Panama. Unless you choose to live in a remote, rural area of the country, chances are you won’t have any trouble finding English speakers. But knowing the language does make adapting to life in Latin America a little easier, and Panamanians will definitely appreciate it if you take some time to learn their language. By speaking only English, you’ll likely confine yourself to expat circles, and won’t have the opportunity to fully immerse yourself in Panamanian culture.
If you live in Panama – or you’re going to be around for a while – I’d recommend signing up for at least a basic Spanish course. And don’t be shy about using your newly acquired Spanish skills. Panamanians are friendly people and even if they laugh at your attempts, a gringo who wants to take part in the culture is much better regarded than one who can’t be bothered to learn the language.
Most programs begin on Mondays as long as there are enough students enrolled. You may want to keep in mind that even if you sign up for cheaper group lessons, there may only be one or two other students in your class. Also, programs in Bocas del Toro seem to attract a younger crowed, so if your idea of a good time doesn’t include surfing or barhopping, you may want to call ahead and inquire about adult classes.
Languages in Action offers language schools in Panama City and Boquete for beginner through advanced students. Four week courses in Panama City cost $875 ($1575 with home stay) and four week courses in Boquete start at $975. Class size is limited to four students. One-on-one sessions are also available.
El Paraiso Language School takes a more adventurous approach to learning Spanish, offering courses such as “Spanish and Adventure,” “Spanish and Surf,” “Spanish and Scuba Dive” and “Spanish and Volunteer. If you just want to learn Spanish with no adventure of the side, small group classes cost $205 without lodging and $315 with lodging per week. Private classes start at $235 per week without lodging.
EPA! Español en Panamá is located in the heart of Panama City’s financial district and offers semi-intensive to super-intensive programs, as well as a “general Spanish and Panamanian course” aimed at expat residents. Prices start at $600 for four weeks and go up depending on the number of sessions per week you sign up for. Accommodations with two meals a day cost $500 for a four week period.
Habla Ya Spanish Language School is probably the best known Spanish school in Panama and offers group and one-one-one courses, as well as a “Part Time Spanish Crash Course” for those already living in Panama and looking to pick up some Spanish. Located in Boquete, Habla Ya can help you find accommodations (private apartment or home stay) and they offer excursions in and around Boquete. Four week group programs start at $750 (80 hours) and the part time resident programs costs $500. Private lessons start at $295 for 20 hours.
El Instituto Latinoamerica de Idiomas (ILISA)Long established in Costa Rica, ILISA opened a Panama campus by the Miraflores Locks at the Panama Canal in 2005. Group lessons (max four people) cost $1,820 for a four week session and one-one-one lessons start at $2,720 per month. They also offer a less-intensive 60 hour, 10-week program for foreign residents for $695 for group lessons or $1,465 for one-on-one sessions. They offer home stays for $175 a week and furnished apartments and hotels from $30 per day.
Spanish by the Sea and Spanish by the River is another well-regarded Spanish language school with campuses in Bocas del Toro and Boquete. They offer a number of Spanish courses, including standard, business and medical Spanish. Group lessons cost $80-$220 per week, depending on how many hours you sign up for and private lessons $150-$430 a week. They offer school stays, home stays and apartment stays for an additional fee if you don’t have your own accommodations. There are also weekly group activities.
