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The Economy In Panama Looks Strong For 2016

19 Jan
panama canal

Panama Is The Place To Be In 2016

We’re barely out of the gate for 2016, and already it is shaping up to be a phenomenal year here in Panama.

Panama enjoyed a flurry of attention this month as the country popped up again on annual lists of the best places in the world to live or retire, as well as on hot-destination roundups in the travel press. Travel & Leisure called Bocas del Toro the place to be in 2016, and a contributor to Forbes said our little corner of the Caribbean is fast becoming a hotspot for luxury travel.

The latter also noted that not one but two Ritz-Carlton hotels are due to open in Panama this year, one in the capital and another under the company’s boutique Reserve brand in the Pearl Islands south of Panama City. The city Ritz is being joined by high-end brands such as Chanel, Versace, and Burberry in the new Soho Panama mall. Money is pouring into Panama’s capital, and it’s not hard to understand why.

Much of the hoo-ha about Panama’s economic prospects hinges on the Canal. It’s been a long time coming and the road has not been a smooth one, but President Juan Carlos Varela swore earlier this month that the planned expansion would be complete late this spring.

Excitement about the expansion is rippling across the hemisphere. Ports on the United States’ East Coast and Gulf of Mexico are racing to expand and make room for larger vessels and more cargo going to and from the Far East, cargo that previously had to dock on the West Coast because of the canal’s current limitations. American coal and grain exporters are also salivating about easier and cheaper access to markets in China and elsewhere in Asia.

The Main Player: The Expanded Canal

Work on expanding the canal began in 2007 and was initially scheduled to be completed in October 2014. Billions (the final price tag for the project has been put at about US$5.5 billion) in cost overruns and delays pushed that back to April 2016. Then Varela said May. Whether that deadline is met or not is anyone’s guess, but the project, now said to be 96% complete, will get done at some point this year one way or another, barring unforeseen catastrophe.

Which is the main reason economic prognosticators see a good year ahead for Panama. The canal currently accounts for 15% of the country’s GDP. If the capacity of the canal is doubled by the expansion as promised, the math is compelling enough to conclude that the country’s prospects are brighter for the foreseeable future.

It’s not only the government that stands to benefit from the canal expansion. The private sector is stepping up in a big way, as well, and much of the activity centers around the Pacific entrance to the canal just outside Panama City. A new container terminal at Corozal is planned within two years and has generated interest from 13 of the world’s largest port operators.

Meantime, the Panama Pacifico Special Economic Area is shaping up to be something special.

Home To The Future: Panama Pacifico

I took a tour of Panama Pacifico recently and was bowled over by this massive mixed-use project just 15 minutes from the center of Panama City (barring traffic, of course) on the canal’s west bank. The former Howard Air Force base is slowly but surely being converted into a hub of activity that will no doubt draw corporate partners interested in the Latin American market from across the world.

Former military barracks on the 3,450-acre site are being dismantled and replaced by beautiful new townhomes, apartment complexes, single-family houses, offices, and warehouses. It was all part of the old Panama Canal Zone before the land was returned to the Panamanian government by treaty on Dec. 31, 1999. The airstrip there now serves as the hub for VivaColombia, low-cost European carrier Ryanair’s second foray into the Americas, which operates a couple of daily flights to and from Medellín and Bogotá.

The master-planned community is a joint project between the government and UK developer London & Regional Panama. The idea is to create an economic zone concentrating on 12 industries in which Panama could reasonably expect to be competitive, including high-tech manufacturing, logistics, back-office operations, call and data center operations, business processing, maritime services, and airline services.

The government stepped up with special laws and incentives that make the place exceptionally enticing to foreign investors. Panama Pacifico has a special office that helps foreigners cut through the ubiquitous government red tape in areas such as immigration and permitting, and the zone is exempt from Panamanian labor laws that preclude a company from running 24-hour operations. Companies are even allowed to employ more than the usual number of foreign workers.

Since the project started in 2007, some 1,200 homes have been built and more than 230 companies—among them 3M, Caterpillar, Dell, Grainger, Cable & Wireless, Avon, and BASF—are now operating in the zone. More than 1.5 million square feet of warehousing has been built.

For residents of the sometimes-claustrophobic city of Panama, what is perhaps most enticing about Panama Pacifico is the fresh air and open space. The developers have taken great pains to prevent overcrowding and develop a style of life and work that acknowledges the need for elbow room. Half the site has been set aside for parks, nature preserves, and green space, and the surrounding hillsides are covered with rain forests, rivers, and lush greenery.

Mailbag

“Lief, when we were in the Panama conference back in 2014, the mango deal was on the table and included residency. Am I crazy or is that correct?”

H.G.

If you’re asking if the cost of residency is included in the cost of the mango purchase, the answer is no, it isn’t.

However, the mango investment I’ve been reporting on does qualify you for residency in Panama under the Friendly Nations program if you are from one of the 48 countries on the list. In fact, any land purchase in Panama where you hold the property in your name qualifies you for a Friendly Nations visa, including this currently available teak investment.

Note that the teak investment price does include the residency processing… or you can skip the residency and they’ll take that cost off the investment price.