Shopping And Trade In Panama City

Hermes, Tiffany, Gap, Banana Republic, and Bruno—Profiting From The Current Trend In Panama

Dec. 11, 2011, Panama City, Panama: Panama is one of the world’s biggest and longest-standing trade hubs and an increasingly important shopping destination for Latin America.

Also This Week: What The Well Diversified Global Property Investor Should Own Now...Chasing A Reliable Yield--How To Net 5% To 8% A Year In A 0% World...The Advantages Of Raising Kids Overseas...Of Costs, Currencies, And Quality Of Life...

Dear Overseas Opportunity Letter Reader,

"I didn't just wake up one day and think, 'Well, wouldn't it be nice to build a hotel in Panama City?'

"There's more to it. There are bigger-picture reasons I'm here in Panama right now."

Our friend Bruno, originally from Milan, Italy, was speaking over lunch on Friday. Bruno has enjoyed a hugely successful four-decade-long career as a global property developer, developing hotels, condominiums, and commercial space in Europe, the United States, and Latin America. We met Bruno three years ago, when he'd recently turned his attention to Panama.

You might say that Bruno's timing wasn't ideal. Three years ago, in 2008, Panama City's property market was beginning what would amount to about a 25% decline over the coming three years. Bruno was aware of the shifting market at the time. He knew, like everybody, that not only the property market in Panama City, but many worldwide were set for falls.

But Bruno, as he explains, takes a big-picture view. Over his 40+ years as a global developer, he's seen property markets cycle before. Looking around the globe last decade, Bruno noticed Panama. It stood out for him because, as he reminded us on Friday, it has something the whole world needs and is going to continue to need looking as far ahead as anybody can look--the Panama Canal.

Bruno's not the first one to make this observation, of course. This isthmus has been a trade hub as long as folks have been trading. Since before it was Panama. Since before it was part of Colombia (as it was from 1821 until 1903). Since before, even, it was part of Spain (1538--1821). The difference today is that it's easier than at any time in this little strip of land's history for a trader to come and go with his goods. And it's going to get easier still when the Canal expansion project is completed and even bigger ships will be able to pass through to get from one coast of the Americas to the other.

As a result of its geography and its tradition of trade, everybody comes to Panama. North Americans, Europeans, Asians, and Latinos. The big guys take their container loads through. We little guys shop for electronics, clothing, and luxury items that, notably, are much harder or even impossible to find in most of the rest of Latin America.

This was the real point of Bruno's insight last decade. Being from Italy, Bruno has connections there, including in the fashion world. He knew that those in the fashion world, including one Italian designer in particular that he knows well, are interested in doing more business in Latin America. They see this is as an important growth market.

Bruno thought of Fashion Week in Paris. And he conjectured that a Fashion Week would work in Latin America, too. But what would be the regional equivalent of Paris?

Now, Panama City isn't Paris. I know. I've lived in Paris. But in the context of Bruno's conjecturing, I understand the thinking. Everyone in the fashion biz in Europe, indeed everyone in fashion worldwide, is happy to come to Paris for the annual weeklong trade show. Those in fashion in the Americas, Bruno thought last decade, would be happy to come to Panama City to do business in the same way.

Because it's a hub. A trade hub and a travel hub. Because it's increasingly the place all Latin America comes to shop anyway. As it becomes more and more difficult for Latinos to get visas to travel to the States, fewer and fewer of them make their traditional annual shopping expeditions to Miami and New York. Instead, they come to Panama City.

Panama City now boasts four big U.S.-style shopping malls. The highest end of these, MultiPlaza, features a wing dedicated to all things luxe, from Hermes to Tiffany, from Cartier to Jimmy Choo, from Ferragamo to Ralph Lauren. And it's not only luxury-level shoppers from around Central and South America who seek out Panama City in ever-greater numbers. It's more typical shoppers, too. Gap and Banana Republic have noticed this, evidently, for they are opening new stores here in February 2012.

Hermes, Tiffany, Gap, Banana Republic, and Bruno. They all see the trend.

Bruno doesn't do retail. He does hotels. And he has connections in the fashion world.

What if I built a five-star, luxury-level hotel, unlike anything Panama has seen to this point, in the heart of the city...and then worked with my fashion world connections to develop Latin America's answer to Fashion Week in Paris? That's what Bruno thought to himself a few years ago.

If he could do this, Bruno thought, not only would his hotel tap into the growing high-end executive traveler market emerging in this city, but it would enjoy the added occupancy from the fashion muckety mucks who'd stop by for the trade event each year.

That's what Bruno is doing. Speaking as a woman who likes to shop, I look forward to the end result.

Kathleen Peddicord

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P.S. What else this week?

• "The perfectly diversified international real estate investment portfolio might look something like this," writes Global Property Investing Expert Lief Simon...

• "'I haven't paid much attention to rental investments throughout my real estate investing career," explained a reader who contacted me recently for advice.

"'But I'm interested in understanding current opportunities worldwide right now, because, in the current climate, a reliable net annual yield from a rental property, even of, say, 5% a year, sounds pretty good.'

"I agree," says Global Property Investing Expert Lief Simon.

"So how do you choose a rental investment buy?"...

• "It is that awful time of year that every parent of a high school senior dreads," writes Correspondent Anna Hosbein, "the college application deadline, when kids fill out college applications that sum up the total of what they have done for their first 18 years of life. And parents generally feel anxious.

"This is the second time that we are doing going through this process. In our case, there is a twist. We are helping our second son prepare his college applications from Cochabamba, Bolivia. Does that make the process more or less stressful, you might wonder. In fact, we're feeling pretty good..."

• "It was lunchtime in Mendoza, Argentina," writes Correspondent Susan Rensberger, "but I still had errands to complete before I stopped to eat.

"One thing I love about my new neighborhood in Mendoza city center is that I can walk to everything, including excellent restaurants that serve more Mendocinos and expat residents than tourists. I stopped at one specializing in seafood to ask about their daily menu ejecutivo. This is a fixed-price lunch available at most restaurants in town that represents a good value. The waiter said they were offering a choice of beef or fish, with a glass of wine and dessert, for 45 Argentine pesos. That's about US$10.50.

"By the time I completed my errands and returned to the restaurant for lunch, they had closed the door for the afternoon. I knocked anyway. When he opened the door, the waiter told me not to worry about the time and invited me in to eat.

"I walked through the empty dining room to a patio with a grape arbor on one side where the only diners were the two waiters and some friends. I chose a table under an ancient bougainvillea with pink blossoms facing an ivy-covered brick wall. The table was dark wood made in the rustic local style, the napkin white linen. The waiter brought fresh rolls with two dipping sauces and a glass of an excellent dry rosé. A fish fillet arrived perfectly grilled on a bed of smoky-tasting grilled vegetables.

"When my waiter brought out a bottle of malbec for his friends, he poured a glass for me, too. Before they drank, they raised their glasses to include me, and we all toasted each other, the food, the sunny day, the cooling shade, and life in general. Dessert or coffee to finish the meal? I chose dessert--ice cream with strawberries and raspberries--so that I could take a nap afterward.

"When the waiter unlocked the front door to let me out, I told him I had just moved in nearby and would be back. 'So we're neighbors,' he replied. 'Sin horario.' In other words, our doors are always open to you.

"Compare that experience to the fast food hamburger and soda I bought in Atlanta a few weeks ago for US$6.50. With a choice between eating in a plastic-furnished dining room or in my car. For just US$4 more, I not only got a full meal of higher quality with wine, but also gracious, personal service and a lovely setting.

"It's true, of course, that prices have risen noticeably in Mendoza since I was last here, last April. Then, a fixed-price lunch, the menu ejecutivo, cost between 28 and 40 pesos (US$6.60 to US$9.40 at today's rates).

"So, yes, the cost of living in Mendoza has increased noticeably since I've been away, but what strikes me more upon my return is not the cost of living here...but the quality of the experience of being here..."

Also This Week...from Resident Global Real Estate Investing Expert Lief Simon:

Uruguay, home to about 3.5 million people, is a generally sleepy place. The country boasts a stable economy based mostly on agriculture (along with a growing banking industry) and politics that could be described as boring (especially compared with the country's next-door neighbor, Argentina).

Those things, among others, make Uruguay a great retirement destination. But investment haven? Not necessarily. As in all markets, though, there are important exceptions.

One is the tourist accommodation market--that is, hotels and short-term rentals--on stretches of this country's coast. Uruguay is "the" beach vacation destination for Argentines and Brazilians during their summer months (Christmas through February with shoulder seasons from the beginning of December and much of March). During this time, rental rates in the hottest beach spot in Uruguay, Punta del Este, are exponentially higher than during the rest of the year. You can pay US$10,000 for a month to rent an apartment on the water in Punta del Este in January that you could rent for US$1,000 a month or less in April. It's a simple case of supply and demand...and the tourism demand for beach rentals in season is growing.

Tourism for Punta del Este increased 10.4% from 2006 to 2010 (about 2% a year compounded). That's not a huge figure, but you have to remember the high tourism rate for that area already in 2006, as well as the global economic issues (and those of Argentina, Uruguay's biggest source of tourists). In that context, it's decent growth.

However, just down the beach, about 30 minutes closer to Montevideo, lies Piriapolis. Piriapolis is relatively small compared with Punta del Este, but it has many of the same amenities, including nice beaches and a marina. During that 2006 to 2010 period, tourism in this localized region increased 78.6%. Even given a much lower starting figure, that increase is huge. And it indicates that, increasingly, people are looking for less expensive options to Punta del Este.

That's the market that a developer friend and colleague, David James, is looking to tap with his recently launched "Ultimate Bungalows." David has put together a rental product to allow investors to get in at a low capital investment while creating supply to feed into the growing tourism trend in this part of this country. And he's doing it all within his high-end gated community, Sugar Loaf Ocean Club & Spa.

Sugar Loaf has seven completed houses with others under construction, but these houses are bigger than many short-term renters are looking for. The bungalows are designed to be modular, meaning they can be rented out individually or as a group if a family needs several rooms together. And, thanks to the modular design, investors have a chance to buy a rental unit for as little as US$99,000.

In spite of the increased tourism figures, David has worked with relatively conservative numbers to project the net yields for his new bungalows. His projections are for 12.4% per year (after Uruguayan taxes) on the purchase price and 11.15% per year once you factor in an US$8,000 furniture package and the US$3,300 closing costs. That's a strong number considering, first, that the nightly rates being used for the projections are 10% to 20% lower than rates currently charged by local hotels and, second, that the projection for annual occupancy rates is only 50% (this takes into account the super low season along with the close to 100% occupancy that is reasonable to expect in the high season).

The structure and management of the rental units works like a condo-hotel unit. Your unit will be rented out with everyone else's. Direct costs are deducted, the management company takes a fee, and you get paid the balance once Uruguayan taxes have been paid. The split of the gross profit (before taxes) is 75/25, with you as the owner getting 75%. That split is the most generous you're likely to find in the condo-hotel industry.

David launched the new bungalows to his house list a few weeks ago and so far has sold 10 out of the 32 initial units he plans. The launch has worked so well that he's already planning a price increase Jan. 1, 2012. This doesn't give the would-be investor much time to make a decision, so David has offered to take a refundable deposit to lock in the current price while giving you 30 days to complete your due diligence.

Earlier this week, I detailed for you an ideally diversified global property investment portfolio. On that list of What The Well Diversified Global Property Investor Should Own Now, I included a rental in a resort location.

This new offering on Uruguay's coast would qualify nicely.

For more information, get in touch here.

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Editor's Note: Lief Simon left the States at the early age of 24 and headed, first, to Chad (with the oil drilling company he was working for at the time). In the near two decades since, Lief has lived and worked in 7 countries and traveled to 65.

All along the way, Lief has been actively investing and doing business. He has launched and managed business ventures in 10 countries, including local businesses, web-based businesses, and international franchises.

Real estate, though, has been Lief's primary focus. He has managed multi-million-dollar developments, multi-million-dollar property portfolios, and more than two dozen rental properties and has bought and sold real estate in 18 countries.

As Lief explains:

"I've made a considerable amount of money. And I've lost money, too. But I've learned from every experience, and, at this point, nearly two decades into my global investing career, I have more of a track record at this than any other private investor you're likely to meet.

"Real estate and business have been my focus, because these are assets you can control yourself. And, as important to me, if managed successfully, these are assets that can produce cash...ongoing yields in addition to any appreciation over time..."

Lief currently calls Panama City home but is on the road at least 50% of the time exploring new opportunities and new options.

Over the past three-and-a-half years, we've shared some of Lief's discoveries and recommendations in these daily dispatches. Now, though, we recognize that what Lief has been doing all these years is special and valuable. Something that only a handful of others have had the opportunity to figure out. Given the direction the world continues to head, the need for this kind of information, guidance, and expertise is much greater than it's ever been before.

That's why we're launching the Simon Letter.

The global investing, asset-protection, and tax-planning information in Lief's Simon Letter will be straight-up. Those who know Lief know that he doesn't mince words or waste time. He likes to take a position, take his profits, and move on.

In his new Simon Letter, Lief will give readers the intelligence and the judgment you need to make your own determinations. His aim is to help you take control of your life and your future, current global uncertainties notwithstanding.

"You're a grown-up," Lief says. "You'll decide what's right for you. My objective is to do everything I can to make sure you have the real-time, real-world information and intelligence you need to make the best decisions possible for yourself, your assets, and your family."

More soon.

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This Is Your Final Call

Uncle Sam is working quietly, behind the scenes, to put obstacles in place that will make it more difficult for you to broaden your horizons overseas. And much more difficult for you to be in the driver's seat of your own future.

It's not just the banking arena that's under threat.

In 2008, changes to the Veterans Act allowed for an "exit tax" on U.S. citizens who choose to leave the country and end their citizenship.

What other countries have done this in the past? Nazi Germany. Communist Russia. Apartheid South Africa...

This is your civil liberty at stake. How long before you just won't be able to get your assets out of the States?

I'm not an alarmist. I'm a pragmatist. And, as a pragmatic investor, I've seen the writing on the wall for some time. I've worked all these years and with an added sense of urgency more recently to take control of my own life, my own financial future, and, most important to me now, the future of my family.

Now I'd like to offer you a chance to do the same.

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