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Panama has established itself as an ideal country for business and investment of all scales for numerous reasons. It has maintained its status as one of the economically stronger Central American countries during the COVID-19 pandemic, and a variety of options exist for those looking for investment targets or acquiring a lifestyle business, such as a boutique hotel or tourist rental business.
Charles Leary, PhD, MBA, with RE/MAX Freedom in Panama, says investing in business opportunities in Panama makes sense, whether as a passive investor or a business owner. He pointed to several third-party sources expressing confidence in Panama. For instance, Leary said a recent report by Bank of America Global Research concluded the current government is “doing a good job at covering funding needs and preventing the fiscal deficit from ballooning” during the pandemic, and the outlook is “constructive for 2021.” Growth prospects remain favorable and the sovereign will likely retain its investment grade credit rating.
Indeed, in October, 2020, Moody’s maintained Panama’s investment grade status. The Baa1 rating incorporates the sovereign's still-present underlying credit strengths, including trend growth in excess of 4%, which has been above that reported by most Baa-rated peers. Additionally, Panama's ability to access market funding at relatively low borrowing costs keeps government liquidity and refinancing risks contained. Panama's long-term foreign-currency bond and deposit ceilings remain unchanged at A2.
Recently, the International Monetary Fund noted that the government has taken measures including reinforcing expenditure controls, strengthening revenue collection, privatizing enterprises, improving financial supervision, combating money laundering, and establishing targeted transfer programs to reduce poverty. As a result of these IMF-supported reforms, the economy grew at an average rate of 6 percent between 1992 and 2019—the fastest in region— and achieved the highest per capita income in Latin America. In January, 2021, the IMF granted a 2-year Precautionary Liquidity Line of $2.7 billion to Panama as an insurance policy against shocks.
Private industry, too, remains optimistic about Panama in 2021. For example, First Quantum Minerals expects a strong rebound at its US$6.5bn Cobre Panamá copper mine in 2021 after COVID-19 disruptions last year. The company produced 206,000t copper and 85,000oz gold at the Panama operation in 2020, ahead of revised guidance of 180,000-200,000t copper and 70,000-80,000oz gold. The figures include 66,000t copper and 25,000oz gold produced in Q4. After the advent of the pandemic, Forbes rated Panama as number one amongst places worldwide to invest in real estate for future resale.
In another article, Forbes author Kathleen Peddicord stated:
"The best example of a city with brand-name resiliency in the Americas is Panama City. It’s the regional headquarters to hundreds of multinationals and a genuine business and financial hub with deep and diversified pools of both buyers and renters from around the world. In addition, Panama’s economy is backstopped by the Panama Canal, which accounts for about 40% of Panama’s GDP. If you’re in the market for an investment with a short-term horizon, start here." (https://www.forbes.com/sites/kathleenpeddicord/2020/05/07/global-property-markets-post-pandemic-how-and-where-covid-19-is-creating-opportunity/?sh=313cce5987c1)
Those interested in investing in Panama today should know that the climate for investment is stable in social, political, and economic terms. On the legal side, Panama presents a transparent and robust environment, which improves the desirability of investing here. Additional value comes from the use of the U.S. dollar as a currency and strong banks. This makes investment options attractive because investors prefer to put money into a currency that does not have mini devaluations, thus protecting capital and assets. The recent climb in the value of the Euro over the dollar makes investments in Panama even more attractive for Europeans.
Investing in Panama today offers great options to generate large gains thanks to a strategic geographical location, enormous productive potential, and natural resources combined with a strong economy. Explains Leary, “The expansion of the Panama Canal is another great advantage of this country that, moreover, is free of hurricanes and earthquakes. Tocumen International Airport is a true hub, connected with the world’s major cities, and Panama has five seaports with the most modern facilities, the largest merchant fleet in the world and the second largest Free Zone on the planet (second only to Hong Kong), in Colon.”
For the European investor this is the best time to invest in Panama, as it helps it to dodge the current housing bubble, taking advantage of a Euro stronger than the dollar to invest in dollarized markets. In addition, Panama is becoming the second place of residence for many retirees around the world, mainly Americans, under the large tax incentives offered by Panamanian laws. Leary himself recently established legal residency in Panama under the Friendly Nations visa program, having previously worked with RE/MAX in Spain. This is a visa distinct from the retiree visa.
In Panama, retirees and those seeking alternative residences can find value properties, with the added advantage that local banks grant mortgages for non-residents for 70% of their appraisal value; therefore, only 30% of the capital is required. Investing in Panama today is the safest and most cost-effective option for small and large investors and developers who decide to place larger sums, from the purchase of more than one new construction apartment to the construction of all kinds of housing and tourism projects, whether in Panama City and on beaches, the interior of the Republic, or on islands. RE/MAX Panama has numerous investment options, from stable alternative agriculture investments to commercial real estate to city center apartments.
Panamanian coffee is one example of opportunity. “Panama has quietly staked its claim as a force to be reckoned with thanks to growing the renowned Geisha coffee bean, which can sell for over $1,000 per pound,” notes author Ali Wunderman. Such specialty coffee grows in regions like Boquete and Volcan. Leary knows of investment opportunities involving ownership of Boquete coffee lands. “This sort of income producing opportunity is one of my specialties in my work with RE/MAX,” Leary reported. I first visited Boquete in 1997, at a time when no one could imagine its emergence as the world leader in specialty coffee production.
As Wunderman wrote:
"To put it in perspective, Panama’s Geisha coffee continues to set records year after year. First in 2004, when a washed Geisha from Hacienda La Esmeralda sold at auction for $21 per pound, blowing past the existing record of $4.80 per pound. By 2017, these beans were selling for $661 per pound, finally surpassing four figures in 2019 at $1,029 per pound. In only 15 years, Geisha from Panama redefined the entire concept of luxury coffee."
And coffee is not the only thing brewing in Boquete. Leary says recently a specialty chocolate production facility has opened there, which also has opportunities for investors, as such chocolate heads for international markets. Adds Leary, “This country literally at the hub of the Americas is ideally located for a business doing business across the Americas. Thanks to the investment made over decades by the U.S. military, the infrastructure in Panama City is in a league of its own for the region, and much of the population, thanks again to the extended American presence, is English-speaking.”
Panama has successfully attracted companies like Dell, Procter & Gamble, Adidas, Caterpillar, Nike, Estée Lauder, and others seeking out the best place to locate their regional headquarters. Around 150 multinational corporations have Panama City as their base, employing, among them, thousands, including hundreds of foreign management staff. Says Leary, “All of these people need places to live, and the imported foreign executives have helped fill apartment buildings that in other circumstances might have remained empty.”
Panama has another huge economic advantage in its canal, which was expanded in 2016 and generates more than $2.6 billion of revenue each year, a huge income source for a country of 4.2 million people. Also, in 2017, former President Juan Carlos Varela established diplomatic relations with Beijing, leading to huge increase in Chinese investment, much of it related to the canal.
Investing in Panama has never been simpler for foreigners. Real estate and other investments are easily transacted and transparent, with almost no restrictions on foreign ownership. Also, company formation is easily accomplished.
As part of the Panamanian Government’s strategy of attracting foreign direct investment, the Panama Agency for the Attraction of Investment and Export Promotion (PROINVEX) has been established. An autonomous government agency attached to the Ministry of Trade and Industries of Panama whose express objective is to explain to foreign investors how to invest in Panama.
“The intention of the creation of PROINVEX is that the government of Panama can provide as much assistance as possible regarding the legal and bureaucratic processes that foreign investors have to comply with if they wish to invest in Panama,” explains Leary.
Since it is a government agency, but autonomous, PROINVEX positions itself as the best option when advising foreign investors in Panama. This agency’s extensive network of contacts can provide investors with the necessary synergy between the public and private sectors. This has the aim of facilitating direct investment processes in the country.