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ECONOMIC GROWTH IN PANAMA – OCTOBER, 2012

Panama is home to the fastest-growing economy in the Americas. Almost overnight Panama City has changed from a Casablanca-on-the-Pacific to a slice of Manhattan transplanted to the tropics.

Today Panama, one of the major shipping ports in the world, has a population of over 3 million people, of which half live in the thriving metropolis of Panama City. Due to its importance to global commerce, it is a shoppers’ paradise. World-class medical care is readily available here at greatly reduced prices and an abundance of restaurants represent almost every country and ethnicity in the world.

The country’s most important man-made attraction is without a doubt the world-famous Panama Canal, which is considered one of the architectural marvels of the 20th century. The Canal’s spectacular construction goes through the interior of the rainforest, joining the Atlantic with the Pacific Ocean through the artificial Gatún Lake. The fascinating crossing of huge container vessels and cruise liners, and their elevation and descent in the locks, transform the Canal into a highly interesting attraction for nationals and visitors alike. At this present time the canal is being doubled in width to accommodate super tankers.

As in the past, fueled by transportation, storage and communications, construction, trade and tourism, the country is projected to reach economic growth of 11%.

In a statement from the Presidency of Panama the nation will grow by double digits at the end of 2012 and continues to reduce its poverty and unemployment rate.

• The Government continues to prioritize projects that improve quality of life for Panamanians
• Investments are made without resorting to new borrowing
• Continuity and the creation of social programs promoted in this administration has resulted in over 100 thousand Panamanians escaping poverty

Frank De Lima, Minister of Economy and Finances presented a report with figures showing a decline in unemployment and poverty, increased economic growth and good fiscal performance, which allows the government to implement more investments without resorting to new financing.

The minister, who was accompanied by his two deputy ministers and directors of the entity explained the responsible management that they have given to public funds and explained the financial performance in the fiscal period from January to August 2012.

With an economic growth of 10.6% in the first half of 2012, driven by transport, storage and communications, construction, trade and tourism, which in two years has increased its capacity by 30% – Panama is on the right track to finish the year with double-digit growth rate, as it did in 2011.

The boom is partly thanks to the canal, which Panama took control of in 1999. More than 4 per cent of world trade passes through its locks, with twice that expected when a $5.3 billion expansion, begun by the former president, is completed in 2014.

“It will be a game changer,” says Alberto Alemán, chief executive of Panama’s well-respected Canal Authority.

President Martinelli, a supermarket tycoon elected in 2009, has gone even further, supercharging economic growth with a $13 billion investment program – equivalent to half the country’s gross domestic product.

“Businessmen get things done,” boasts Mr Martinelli, who takes Singapore, another high-rise tropical success story, as his model.  All this is a welcome rarity in Central America, which is more often associated with drug violence and economic despair. Panama was voted by The New York Times “best place to visit in 2012”.

Panama meets the golden rule of any successful hub: location, location, location. Shipping remains a crucial industry and multinationals, such as Procter & Gamble, SAB Miller, and the UN have made Panama their regional base.

There are no tedious visa restrictions, as in Miami. Five submarine-optic cables also pass through the country. Copa, the well-managed local airline, is meanwhile so busy it alone accounts for 4 per cent of Gross Domestic Product.

Uniquely in Latin America, the British, another trading nation, are Panama’s biggest foreign investors, with £8 billion committed so far. “We can’t build warehouses fast enough,” says Henry Onionskin, general manager of Panama-Pacifico, a $600 million investment by the property company London & Regional that will turn a former US air base into an industrial park replete with logistics and data plants, and a golf course.

Admiring officials from Colombia have visited to see how such “clustering” works.

Panama’s sophisticated banks are part of the answer, with diplomats suggesting the money-laundering business of old has moved on to Ecuador, another dollarized economy.

All this has turned Panama City into a building site. A 70-storey Trump Ocean Club and a Hard Rock “megapolis” with 1,500 rooms opened last year is due in April.

PANAMA HIGHLIGHTS

    • A notable and appealing factor to most investors is the US Dollar based economy growing at a rate of over 10%.
    • Panama is politically sound with a stable government
    • Panama is economically sound and this makes Panama a good place to invest. Panama’s economic performance is, almost every year, better than just about every other country in Latin America. In fact, over the past 40 years, the country’s inflation rate has averaged less than 2% per year…that’s simply unheard of south of the United States. The Tripartite Committee has ranked Panama #1 in the region for low cost of living.
    • Panama is considered one of the safest countries in Central and South America. Panama has the highest rating for tourist safety from the prestigious Pinkerton Intelligence Agency.
    • Foreigners can buy and own property in Panama with the same rights and protections as Panamanians citizens.
    • Residents pay no tax on foreign earned income
    • Tourism investments have exemptions from import duties, construction materials and equipment, income, real estate taxes, etc.
    • Property tax exemptions apply to all new construction
    • English is widely spoken
    • Panama has a reliable communications system with fiber optic telephone lines and much of the country has ADSL internet
    • Panama is a good place to invest. Favorable offshore banking laws and the government investment incentives that slash tax rates and fees for entrepreneurs encourages foreigners to invest and live in Panama.  The government provides one of the most generous retirement programs world-wide. Retirees to Panama can obtain a Retiree Visa, locally known as a “Jubilado” or “Pensionado” Visa, which entitles holders to discounts of 30-50% on hotels, 25% on travel both domestic and international, 15% on health care and prescriptions, 15-25% on restaurants and utility bills, 50% on movies and theater productions and more.  There are numerous expat social groups.
    • Political Risk Services named Panama one of the top three countries in the hemisphere for best-risk investments. According to Canada’s Fraser Institute, Panama is at the top of the list of the world’s freest economies, ranked eighth with Australia, Ireland, the Netherlands, and Luxembourg.
    • Panama occupies a foremost place as an international banking centre and is one of the Latin American nations rising strongly. More than 85 banks including many international make Panama Latin Americas leading Financial Centre. Panamanian banks remain highly liquid (up to 60% liquidity).  With more than 120 banks from 35 countries, including Citibank, HSBC, Dresdner, Bank of Tokyo, Bank of Boston, and International Commercial Bank of China.
    • The US presence in the country for many years has led to US style infrastructure with a number of household names and businesses
    • Panama continues to enjoy a unique relationship with the U.S. characterized by a deep commitment to the preservation of its security situation and the rule of law, resulting from the Canal’s strategic importance and the scale and international significance of its banking system.
    • Panama has a number of US standard health care facilities and services – including a brand new Johns Hopkins University Hospital – with many US trained English speaking doctors available yet the cost of health care services is a fraction of comparable services in the U.S.
    • International tourism has more than doubled in the last ten years to over two million visits per year. Panama was voted The New York Times’ “best place to visit in 2012”
    • Panama provides huge appeal to the younger market with world-class eco-adventure, cloud forest treks, surfing, sailing and deep-sea fishing to name but a few of the possible activities. International experts rave about river running in Panama which includes rafting, kayaking and motorized river boats. There are rivers in Panama where you can ride 20 sets of rapids in one afternoon. Canyoning, trekking, rappelling and surfing offer similar world-class experiences for the hard and soft adventure seeker.
    • Panama is the best place for ecotourism today.  Panama’s position as a narrow land bridge connecting two continents has endowed it with some of the worlds’ most pristine and bio-diverse rainforests in national parks covering 5 million acres. A key indicator of its bio-diversity: Panama has 944 recorded bird species, more than the U.S. and Canada combined. Furthermore, all that great nature is very accessible, with some of the best locations less than an hour from Panama City. There is a local saying that while in other countries you have 20 tourists looking at one bird, in Panama you have one tourist looking at 20 birds
    • Commercial and economic relocations, banking, asset protection and offshore residency add to the appeal of places like Panama.
    • Investors and entrepreneurs are looking for viable alternatives to the traditional ‘safe-haven’ real estate plays such as North America and Europe. Panama is beginning to provide a growing and viable alternative.