Why Own Real Estate in Panama?
Investment Real Estate Location Profile
Panama is a small tropical Latin American country bordered on The North by the Caribbean Sea and the Pacific Ocean on the South. The consistent tropical climate, pristine beaches, lush mountains, and booming economy has gotten the attention of people from around the world. In today’s article we will examine Panama’s past, present and future and why one should consider it a place to invest their resources in real estate.
HISTORY & GEOGRAPHY
Panama, a smaller Latin American country is home to a population of a bit over three (3) million people. The climate in Panama consistent and tropical, with average temperatures around eighty (80 F), Panama is well known for is lush mountain ranges, and pristine beaches. About fifty (50%) percent of the population lives in the Colon region of the country local to the famous Panama Canal. Panama's history has been shaped by its strategic location between the Pacific Ocean and the Caribbean. Early in the 16th century, native Panamanian tribes quickly disappeared after the Spanish arrived with their weapons. Panama City, on the Pacific coast, thrived as Spain conquered and plundered Peru. Caravans loaded with gold traveled from Panama City to be loaded on ships bound for Spain. However, this wealth attracted pirates and, in the early 1700s, Panama's Caribbean shore was dotted with so many pirate strongholds that shippers chose instead to sail around Cape Horn to Peru. Panama's importance rapidly declined, and Spain did not contest Panama’s inclusion as a province of Colombia when it won independence from Spain in 1821. Since that time, Panama has spent many decades suffering through various corrupt dictatorships and unscrupulous government regimes, including the most infamous General Manuel Noriega who after losing the election in 1989 attacked the winning candidate on national television and remained in power with income provided by drug trafficking. The dictator declared war on the USA in 1989 and after a short time with the help of 26,000 soldiers, the USA removed Noriega from office. He was arrested and convicted of money laundering and is currently serving a forty (40) year prison sentence.In 1994, Ernesto Perez Balldares took office and fulfilled promises to end corruption, improve the economy, and implement nationwide health services. Panama has never looked back. Since 2004, the current president is Martin Torrijos, a Texas A&M graduate with a degree in economics. He has worked diligently to continue to make strides and to grow the upstart free-enterprise democracy of Panama.
ECONOMICS
Blessed with unique circumstances due to a favorable location, Panama is more diverse than many economies. Panama is a free-enterprise democracy with significant resources and is booming. The country is making global strides in agriculture, financial services, tourism, and international transport via the Panama Canal. A combination of surging world trade volumes and a boom in port development, infrastructure and commercial and real estate is bringing Chinese-style growth to the country and inviting comparisons with international business centers such as Dubai and India.
· In 2006, the Panama economy grew about eight percent (8%).
· In 2007, the Panama economy expanded by at least nine percent (9%) and possibly over ten (10%). (Financial Times, 2007)
This is a very rapid rate of growth, among the fastest in the world, and is produced over a broad portfolio of stable businesses. The growth suggests that Panama has corrected their past inadequacies and has “arrived,” and is making a difference. Panama is taking advantage of its geographic location and benefiting heavily from the growth of trade between Asian manufacturing centers the North American and European markets. Since Panama took full control of its canal from the USA at the end of 1999, overall traffic has expanded by more than 33% and, the number of containers used to package electronics, textiles and other factory products transported across Panama has increased 300%. Due to this explosive growth and more expected in coming years, the Panama government is pushing ahead with ambitious plans to double the waterway’s capacity. The expanded Panama Canal will be big enough to accommodate the largest maritime vessels increasing growth even more.President Martín Torrijos, a graduate of Texas A&M University with an economics degree has stabilized public finances and is supporting infrastructure upgrades to ensure the country is able to accommodate the influx of people globally coming for opportunity, tourism, as well as second homes and primary real estate residences. Panama has also become the hub for banking in Latin America. USA banks such as Citigroup and HSBC among others have a significant presence in Panama City. Growth in this arena is also expected in coming years.
FUTURE OUTLOOK
Panama is a country that welcomes emigrants from The Americas and Europe. Approximately 80% of Panamanians are from at least partial European decent, and they realize their growth is global and needs influxes of financing from other places to be sustained. Panama no longer has a military. The USA ensures the national safety of Panama. With the increases in the broader economy, the Panamanian middle class is expanding and enjoying a better, more stable quality of life. Literacy is high….over 91% can read and write.The official currency of Panama is the US Dollar. This is convenient for those migrating from the US as there are no concerns about exchange rates and their effects. Also, although the USD is the main currency, Panama is constitutionally forbidden to introduce additional dollars into their financial system. This is a refreshing change from other less stable economies that literally just print money when needed causing instability and irrational swings in inflation. Federal laws are in place to protect both the buyer and seller in real estate transactions and property is owned by acquiring title on a fee simple basis much the same way as in the USA. In fact, many real estate transactions, and mortgages on property in Panama are carried forward and secured by US title companies and banks.Further, Panama has a really beneficial tax structure in place to encourage non-citizens to consider investing their resources in Panamanian real estate. For example, Panama does not charge taxes on any income gained outside of Panama. The future is bright for Panama and for those choosing to buy the “right” Panamanian real estate. Panama has a stable, free-enterprise democracy, an economy that is establishing long term growth trends, and a strengthening middle class. This is the beginning innings of a longer term growth and prosperity trend for Panama. The world is taking note and migrating in droves. Real estate prices have been on a significant rise throughout Panama over the past few years. However, real estate is starting at a very low base and still sells at a large discount to many surrounding markets.
Is Panama the Right Place for Your Second Home?
Maybe…Depending on Your Goals and Objectives
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