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Home Countries Panama

Flight Of Capital

Kathleen Peddicord by Kathleen Peddicord
Mar 18, 2009
in Panama
0
A skyline view of Panama City with a red sign saying, "Panama. We're Open For Investment."
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“How can there be such a hotel shortage in a city with so much new construction?”

“All the buildings you see going up everywhere are condo towers,” I explained. “Many of them are coming online right now, but they’re residential units.”

“Can there be buyers for all these units?” asked the reader we met for drinks here in Panama City last evening.

“Most have already been bought. They were purchased pre-construction a year or two ago. Finally, they’re being delivered.”

“Won’t this glut of supply sour the market?”

“Well, the Panama City sales market has already softened considerably. Prices have leveled, and apartments aren’t selling in a matter of a few weeks or months, as they were a year ago. Prices will fall. Meantime, sellers are more negotiable than they’ve been in years.

“But this market won’t collapse, as others around the world are.”

“Right,” Lief interjected. “People think that, because the bottom has fallen out of the U.S. market, all markets in this part of the world are done for. Yes, of course, what’s going on in the States has an effect throughout this region. But a varying effect. And Panama will be perhaps least fazed by the U.S. troubles and the global meltdown. Because, like the tourism market in Panama, the real estate market in this country is only partly made by Americans.

“Plus, frankly, people need someplace to put their money,” Lief continued. “An enormous amount of wealth has disappeared over the past 12 months…but that is not to say that nobody anywhere has any money, period.

“In this part of the world, if you’ve got money, Panama is one place you park it. The flight of capital right now from Venezuela and Colombia, for example, into Panama, is a big and growing market force. A friend in the real estate business told me about a call he received from a Venezuelan business owner.

“‘I need 50 apartments,’ the guy said. ‘And I need them now. I don’t want pre-construction. I want to move my 50 top executives from Venezuela to Panama, and I need places for their families to live.'”

“You know, in fact, I can attest to the Venezuelan interest in this market from personal experience,” said our reader-friend. “I had an apartment on avenida Balboa that I sold last year. The buyer was a Venezuelan woman. She bought sight-unseen. And she didn’t put the place into the rental pool after she bought it. As far as I know, it’s sitting empty. She so much didn’t care about hassling with renting out or managing the place. She just wanted to put her capital into something in Panama City.”

Venezuelans, Colombians, Argentines…and Europeans, too. For centuries, people have sought out this strip of land connecting North to South America. It’s been a trading hub of international significance since its earliest days, in the early 1500s.

Panama is and always has been a melting pot. Our little Panama City office team includes a Colombian, a Canadian, a Russian, a German, and we three Americans…

Today, it’s not only trade that’s bringing people from all over the world to these shores. As Lief suggested in our conversation with our reader-friend last night, it’s also a flight to safety. This country has real advantages. It offers hard assets at a time when people are, rightly, suspicious of paper assets.

And at a time when other countries around the world are in turmoil.

Here in Panama, it’s business as usual. And the business of Panama is growth.

Kathleen Peddicord

MAILBAG:

“Kathleen, I just left a real estate office where I was talking about banking in South America and how you talk it up as being so safe. The agent I was visiting with said that she was raised in Brazil and that you never kept your money in a local bank, because the government could take whatever money was in in-country bank accounts whenever they wanted.

“So I am curious now. If I decided to settle in, say, Belize, would I be safe to have my civil service retirement sent straight to a bank there or should I keep it in a Stateside bank and only transfer what is needed at the time? This would also apply if I decided to live in Panama or Costa Rica. I am doing a lot of reading about South America, but when a local who has lived down there tells you something like this, you begin to wonder.”

— Dennis C., United States

Your Brazilian real estate agent is right. Wealthy Brazilians don’t keep much money in local banks. Neither do wealthy Colombians, Argentineans, Nicaraguans, or Venezuelans. They keep most of their wealth outside their home countries.

One of the places they put it is Panama. Panama is one of the world’s top banking havens.

Belize, too, can make sense as a place to park deposits. Belize, like Panama, has a stable government and strict banking laws that protect the depositors and the banks.

To answer your question directly, I think you’d be fine to have your retirement pension deposited into a bank in Belize…or Panama. Beyond these two countries, which, again, have strong banking industries and solid banking laws, you might keep on deposit in a local bank only as much money as you need to live on.

***

“Kathleen, as someone who frequently travels to Ecuador and who has family there, I think you made some good points about the upsides and the downsides to placing that country on a ‘Top 10 list.’ However, in using Quito as an example, in my opinion, you overlooked a part of the country that has far more pros than cons.

“I recommend the Salinas area, where one doesn’t sacrifice infrastructure for low prices.  Getting there is easy. It’s about an hour-and-a-half drive from the international airport in Guayaquil on the best road in the country–a perfectly paved, new highway.

“The greater Salinas area is home to several hundred thousand people. All the main roads are paved. It is not polluted, has a brand new hospital, a mall, many restaurants, several grocery stores, and reliable municipal utilities, including cable TV and broadband Internet.

“Real estate prices remain low. It is possible to get a condo in a beachfront development for around US$50,000.

“As you pointed out, the best option is to visit for oneself. I believe readers looking for affordable beachfront property, low cost of living, and good infrastructure will be pleasantly surprised by Salinas.” — Amy P., United States

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Kathleen Peddicord

Kathleen Peddicord

Kathleen Peddicord has covered the live, retire, and do business overseas beat for more than 30 years and is considered the world's foremost authority on these subjects. She has traveled to more than 75 countries, invested in real estate in 21, established businesses in 7, renovated historic properties in 6, and educated her children in 4.

Kathleen has moved children, staff, enterprises, household goods, and pets across three continents, from the East Coast of the United States to Waterford, Ireland... then to Paris, France... next to Panama City, where she has based her Live and Invest Overseas business. Most recently, Kathleen and her husband Lief Simon are dividing their time between Panama and Paris.

Kathleen was a partner with Agora Publishing’s International Living group for 23 years. In that capacity, she opened her first office overseas, in Waterford, Ireland, where she managed a staff of up to 30 employees for more than 10 years. Kathleen also opened, staffed, and operated International Living publishing and real estate marketing offices in Panama City, Panama; Granada, Nicaragua; Roatan, Honduras; San Miguel de Allende, Mexico; Quito, Ecuador; and Paris, France.

Kathleen moved on from her role with Agora in 2007 and launched her Live and Invest Overseas group in 2008. In the years since, she has built Live and Invest Overseas into a successful, recognized, and respected multi-million-dollar business that employs a staff of 35 in Panama City and dozens of writers and other resources around the world.

Kathleen has been quoted by The New York Times, Money magazine, MSNBC, Yahoo Finance, the AARP, and beyond. She has appeared often on radio and television (including Bloomberg and CNBC) and speaks regularly on topics to do with living, retiring, investing, and doing business around the world.

In addition to her own daily e-letter, the Overseas Opportunity Letter, with a circulation of more than 300,000 readers, Kathleen writes regularly for U.S. News & World Report and Forbes.

Her newest book, "How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad," published by Penguin Random House, is the culmination of decades of personal experience living and investing around the world.

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