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The potential for new tourism ventures in Panama is strong, despite the COVID 19 pandemic. Among all Latin American countries, Panama`s economy has solid underpinnings supporting a dollarized economy within a geographically compact and strategically positioned country of about 4.2 million people. Within the past year, the Panamanian government announced incentives for new tourism enterprises, and will host a tourism investment conference in mid-March, 2021. As one example of an area where a solid tourism recovery in Panama should become reality is the Caribbean archipelago of Bocas del Toro. This positive outlook relies partly on a government-backed project that will strengthen local infrastructure on Isla Colon, the location of Bocas Town.
Panama is spreading the world of its tourism investment potential at an online forum. On January 28, 2021, the government announced the Panama Tourism Investment Forum – 2021 Virtual as an “international, virtual forum, organized by the Panama Tourism Authority together with PROPANAMA, which will take place on the 17th and 18th of March, 2021.”
The Forum´s main objective is to promote high-quality tourism investments, that reinforce environmental, social, and cultural sustainability values, as well as contribute to creating new employment opportunities and to the economic reactivation of Panama’s tourist destinations.
As Roger Kinkead, head of investment banking at Panama’s MMG Bank recently noted:
"Panama is sending a strong message to both national and international developers and investors with the announcement of new tourism incentives. These incentives, according to experts, show great potential in welcoming private investment in local tourism and infrastructure development."
New tourism industry investment will contribute to an increasingly diversified and stable economy. For example, in recently granting a large liquidity line of credit, the International Monetary Fund (IMF) 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. The IMF summarized that Panama’s 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. Likewise, FocusEconomics concluded in late 2020 that the economy should gradually recover this year from 2020’s Covid-19-induced contraction, as the easing of quarantine restrictions provides room for a rebound in domestic activity and tourism. FocusEconomics Consensus Forecast panelists foresee the Panama economy expanding 6.4% in 2021, which is up 0.6 percentage points from the previous forecast. For 2022, the economy is seen growing 5.1%.
By contrast, FocusEconomic had this to say about Panama`s neighbor Costa Rica:
"The economy is expected to slowly recover in 2021, after this year’s pandemic-induced contraction. However, the country faces many downside risks, including weakened government finances to face maturing debt, social unrest due to the proposed measures to try to secure a USD 1.75 billion IMF loan, and uncertainty over the course of the pandemic. FocusEconomics panelists see GDP expanding 3.3% in 2021, which is up 0.3 percentage points from last month’s forecast, and 3.5% in 2022."
The government of Panama has created incentives for tourism industry investors that are tax credits equivalent to 100% of the sums invested. These investments can be made through bonds, shares or other financial instruments issued by tourism companies or real estate investment companies and meet certain legal requirements. These unique tax credits are independent from the securities that originated them and may be assigned or sold to third parties.
As Kinkead of MMG bank writes:
"The first advantage is that by using or transferring the tax credits to third parties, the risk of loss of the investor's capital is significantly reduced. The potential ROI may also increase, as the investors could receive their capital sooner than expected.
Another advantage is that incentives such as these alleviate the uncertainty of investing in projects before having tourists or waiting to have tourists to build, since by reducing investment risk through the granting of tax credits, investors would have an additional window of time to see their investments stabilize without affecting their return on capital."
Part of the government`s goal with the incentives is to generate socially inclusive development and protect the environmental resources that provide the basis for these kinds of tourist attractions. And the incentives will integrate with other government initiatives in public works.
In Bocas del Toro, on Isla Colon, the government has launched an initiative to reactivate the island as a touristic center. The initial plans for this project were conceived through suggestions from the Caribbean island community in a previous hearing during the Gabinete Turistico (Tourism Cabinet) on August 30, 2019, and the original proposal was published in November 2019.
Image courtesy Bocas Breeze
The project design will be finalized in the middle of February, says Rafel Sabonge, Minister of Public Works (MOP). According to journalist Felipe Ernesto Lopez Rodriguez, Sabonge also stated there is $29 million already assigned to the Bocas project by the Ministry of Economy and Finance. The budget will be finalized after the project design is approved, which is scheduled for mid-February. Bidding on the projects should begin as of March 1st. The bidding and contracting process is expected to take up to 6 months, with construction likely to start before the end of this year.
The last phase of the urban redesign proposal is the creation of a completely new road connecting the Paunch, Bluff and Boca del Drago beach attractions, creating a beltway road circumnavigating all of Isla Colon. The proposal includes paving the road from Paunch to Bluff Beach, while redirecting the current roadway slightly inland away from the beach in Bluff and the protected area of the municipal reserve. This road will include a bridge over the Mimbitimbi River.
Another notable part of the project is urban street redesign, including the refurbishment of Bocas Town sidewalks and the addition of a bicycle lane that would circle through Bocas Town and then lead out of town, along the proposed coastal loop road. This will create a total of 37.25 kilometers of ciclovía (bike lane). Also included is the construction of new, wider pedestrian sidewalks and streetlights; not only in the town center, but also along the complete span of the new beltway road.
The example of investment in tourist-oriented infrastructure in Bocas del Toro combined with the new tax incentive and the tourism conference suggest strong interest by the current government in promoting tourism investment, and backing that up with concrete public commitments.