Have you ever wondered why people choose to invest in Panama – people like Donald Trump with his Trump Ocean Club International Hotel & Tower, or Carlos Slim Helú – Latin America’s richest man according to Forbes’ most recent rankings?

And still no-one has asked why just two years ago Panama began to experience an explosion in immigration. The result has been that this magnificent country has become the focus of attention for many who were asking whether Panama really was the ideal place to live, to retire or simply to escape the cold of northern winters in Canada, United States and Europe or whether this was just another cruel rumor put about to satisfy man’s desperate search for a panacea for his troubles.

This wave of migration to Panama began with a few newcomers who settled in this small Central American country, and who encouraged more to come over the ensuing months. Now this phenomenon has awakened the curiosity of many more people who are following the example of those smart enough to know where to invest for high yield with minimum risk and maximum growth. These people are asking themselves “What guarantees does Panama offer to these magnates to encourage them to invest sums like the 220 million dollars that the Trump Ocean Club International Hotel & Tower to be built in Panama City will cost?”

Careful analysis indicates some of the reasons why such investors are attracted to Panama. Since General Noriega was expelled from Panama, the country has taken giant strides forward and now enjoys a reputation for safety which has only increased as democracy has taken root. This choice of Government provides a stable and safe political environment, very different from some of its neighbors to the south. Added to this is the open door to foreign investment, backed by tax advantages, the use of the US dollar, and a sound banking system with an established track record, all of which combine to make the country attractive to investors from many points of view.

As for the economy, its growth was 8.1%, measured by the Gross Domestic Product (GDP), at 2006 prices. The real GDP registered an amount of B/. 15,141.9 millions, which represents a growth of B/. 1,137.1 millions over the 2005 GDP. 76% of the GDP is represented by the Colon Free Zone and the maritime services offered by the Panama Canal, which annually generate
approximately USD 1 billion. This figure seems small, if we compare it to the 2,000 companies established in the Colon Free Zone – the second largest in the world – who generate movements that exceed USD 11 billions per year.

The most relevant economic activities were:

Construction, with a growth of 17.4%, as a result of the 17.4% increase in the building industry and 16.5% in independent constructions. On the other hand, the exploitation of mines and quarries, supported by the dynamic performance of the building industry, grew by 16.2%. Transportation, storage and communications, which had a growth of 13.0%, impelled by the regular air transportation with 21.3%, telecommunications with 16.0%, the railroad with a growth of 11.6%, the canal activities with 10.9% and the ports with 8.5%. Financial intermediation has increased by 12.8%, influenced by banking and cooperative’s activities, which grew by 13.2%. On its account, the insurance activity grew by 6.3%. The hotel and restaurant sector grew by 12.5%, influenced by the growth in the hotel industry of 14.8% and the restaurant industry growth of 11.0%, due to the increase in the number of tourists and the expenses incurred by these.

Activity in the Colon Free Zone increased by 11.6%. Other activities which also showed an important growth were: agriculture, cattle ranching, hunting and forestry with 7.4%; private education with 6.3%; communal activities, social activities and personal services with 6.2% and real estate, enterprises and rental activities with 5.3%. *(1)

Activity in the Colon Free Zone increased by 11.6%. Other activities which also showed an important growth were: agriculture, cattle ranching, hunting and forestry with 7.4%; private education with 6.3%; communal activities, social activities and personal services with 6.2% and real estate, enterprises and rental activities with 5.3%. *(1)

The total unemployment rate in 2006 was 8.6%, which registered a decrease of 1.2 percentage points when compared to the 2005 rate of 9.8%. This decrease happened in the urban area as well as in the rural area.

All of this goes to prove that it is not for nothing that Panama is spoken of as the Switzerland of South America because it offers long term guarantees to investors and facilitates the movement of considerable sums of money as a result.

Settling in Panama gives you the benefit of a range of different climatic conditions. For those seeking a gentle climate (50-60º Fahrenheit), you would be well advised to look for a place to live in the mountains of Cerro Campana, Altos de Sorá or El Valle de Antón, Boquete, Volcán or Cerro Punta for example. If on the other hand you love the heat and the sun, the country offers you many alternatives in addition to Panama City where you can enjoy luxuriant scenery, whether on the Pacific or Caribbean coasts. Any place that you settle, the cost of living will be lower than what foreigners are used to, and you will find residences and recreational facilities either close to or with views of the beach, or on one of its heavenly islands. In the end, what is most important for each new arrival is that the country will not drown under the weight of inflation. Failure to observe locally established customs and prices because they are considered to be excessively cheap will result in inflation breaking out of a type that is already becoming visible in some parts of the local economy.

Those who are not so happy are the population who labor under the burden of public debt, which at 31.12.2006 totals more than 10.485.50 million dollars reflecting an increase against the 2005 of 217.30 million dollars. If the recommendations of the executive director of Fitch Ratings– who last year asked the Government to slow down the growth in public debt and who therfefore gave a BB Outlook Stable rating – are ignored, the consequences for Panama will quickly be felt, considering that Fitch considers an acceptable limit to be 45%.

Will the current collection of mega projects improve the country’s economy? The Panama Canal expansion will involve investment estimated to be more than 5 billion dollars over the next eight years. Real estate investment is running into millions of dollars, the economy is diversifying and the country is experiencing growth in residential tourism. Can these initiatives, in the context of healthy financial management by the Government, reduce the fiscal deficit? This question will only be answered in the years to come, but for now our priority must be to find ways of reducing the high levels of poverty, which affects 6,5 % of the population. This worrying level, which could be even higher than publicly acknowledged, appears to be a secret for which hardly anybody seems to want to take responsibility. The consequences of this “collective blindness” could be to visibly reduce the level of growth over the years to come.

Panama has historically been a destination that has given a warm and friendly welcome to foreigners who want to come and make a success of their lives here. Living examples of this are the large communities of Jews, Indians, Arabs, North Americans, Greeks, Spaniards, Colombians etc. who have come to settle in this country in search of a dream that they have managed to realize through establishing successful businesses and created employment opportunities. However we must not forget that every dream comes at a price and even though Panama is a much more attractive destination than many of its Latin American neighbors, you have to remember that everything is new and different when you move to another country to settle. Remember that in Panama, the people have their own ways of doing things, according to an easy going rhythm when compared with the frenetic pace that foreigners are sometimes used to.
Do not try and impose or establish routines that will end up being too restrictive and onerous for Panamanians. Never forget that as a foreigner you are an invited guest in your neighbor’s house and that placing a priority on refinement and education demonstrates respect for the place you have chosen to make your home. As the proverb says “when in Rome do as the Romans do” and
following this principle will make it much easier for you to adapt to the multitude of cultural differences and will help you to avoid unnecessary friction and unpleasantness both for you and your new neighbors.

So what can you expect from the country if you do decide to invest or settle here? The reply is closely related to your assertiveness, your tenacity, your patience, your capacity to adapt and your knowledge. Panama is a country where there are still many opportunities and where if you want to, you can thrive in this Promised Land, where life can bring serenity and opportunities belong to those who know how to see and exploit them.