Thoughts on Investing in Panama

Today I’m to writing to you from the beautiful city of Panama, Republic of Panama. I’m looking out over my balcony at ocean, palm trees and skyscrapers, listening to seabirds and honking horns which stand out the regular drone of any big city. It’s one of those hot and humid days, cloudy but not quite raining. Whenever I come here, especially at this time of year, I can’t help but feel a little intrigue and mystery.

Panama is not short of intrigue and mystery (though switching on the AC kind of changes things!) Things are not always quite what they seem here. That’s why instead of quoting official statistics, I’m just going to tell you what I think and feel.

Panama, of course, is not a tailored offshore haven. It doesn’t have any specific IBC or offshore banking legislation. It’s simply a country which was founded and reached where it is now all for business reasons (international trade – the canal) and for its friendly treatment of foreign capital and income. Panama rightly refuses to be grouped together by the OECD with what its government describes as “manufactured tax havens.” Panamanians and foreigners, residents and non-residents, are treated equally. Only locally sourced income is taxable.

Over the last four or five years, what the outside world has really been watching is the real estate boom here. For at least three of those, I’ve been predicting that the bubble will burst, because much of it has been fuelled by speculators trying to flip apartments off plan before they have to put down serious money. Developers and banks are now sensibly discouraging this activity.

But there’s no reason to believe that Panama’s growth will end any time soon. One major influence here is money from wealthy Latin Americans, money that used to go to Florida. Now it comes here. Especially from Venezuela and Colombia. Another influence is retirees from North America and, increasingly, from Europe, attracted by an affordable, tax-free tropical retirement haven with a likely upside in real estate investments.

Getting to Panama is easier than ever, with dozens of direct flights from all of the Americas and now also from Europe. After all, Panama is truly the “hub of the Americas.” I can tell you, the hotels are full. Hotel rates have risen to ridiculous levels (doubled since last year)

As for investing in real estate, I think some speculators will get burned. Those are the ones who come here and don’t know what they are doing. In Panama there is a great deal of freedom, and with that comes the responsibility to watch out for yourself.

In particular, you need to look beyond the market that Panamanian realtors have created for investor-tourists who don’t know local prices. Here in the city, for example, a smart single expat friend of mine bought an apartment for $25,000 a year ago which he is just selling now for $40,000. That’s for the whole apartment, 100% paid cash. Of course it’s just a studio, and it’s not luxury, and it doesn’t have much of a view. But it’s quite liveable, in a respectable building right off Via Espana (the main drag) with a security guard at the front door.

Just down the road developers with glossy brochures are asking the same amount of money as a 10% down payment on an apartment that’s not even built yet. Yes, they are asking $40,000 down payment on a $400,000 apartment.

You won’t find deals like the above on the internet. You’ll find them perhaps in Spanish language newspapers, or better just by finding someone who knows the market to put out the word and help you scout around.

Another good investment in Panama has to be land outside the city. Panama City has a huge traffic problem, and as the city grows it will expand outwards. Only logical. But again, don’t buy it through those high priced realtors with flashy websites. And don’t buy on your first trip down.

Of course I could write a lot more, but space is limited here. Today I’ll be working on the schedule for our Recipes for Success event on the subjects of Freedom, Wealth, Wellbeing and Privacy which will take place here in Panama this November, the week after the US election. The humidity should be gone by then! Although it’s a very internationally oriented event, we’ve specifically included a “Panama day” where you will learn more about this other real estate market in Panama City. Please join us.

Further information on Recipes for Success – Panama 2008 is at http://www.qwealthevents.com.

Look forward to more blog entries about Freedom, Wealth and Privacy. I hope you enjoy them and that you can use the information here to benefit your business and your life. In turn I would much appreciate your feedback, comments and questions. I can be contacted via info@petermacfarlane.net.

Peter Macfarlane is joint editor of The Q Wealth Report an established newsletter dedicated to informing readers about creating, protecting and growing wealth in a secure offshore environment. It also covers international living, banking, retiring and investing. Visit www.QWealthReport.com to see more.