Economy Of Panama

The Real Reason My Money Is On Panama

Why does Panama stand out as the safest haven in this region and one of the safest havens in the world today?

Why is it the best place on earth right now to launch and to operate an international business?

Why is a property investment in this country one of the soundest investment choices you could make?

Why have 41 major international companies (including Halliburton, Dell, Caterpillar, DHL, and Sinopec) chosen to establish headquarters here?

You could (and we often do) say that it’s the infrastructure. It’s better here in Panama than anywhere else in Central America. The transportation infrastructure, the telecommunications infrastructure, the banking infrastructure…anyway you consider it, the infrastructure in this country exists to a higher level and works on a more reliable basis than anywhere else in this part of the world.

But that’s a superficial explanation.

The real question is, why is the infrastructure better in Panama? In part it’s because of the extended American presence last century…But, looking ahead, the reason why it’s continually expanding and improving is because of current President Ricardo Martinelli’s Five-Year Plan.

In this part of the world, having a plan isn’t such a big deal. Everybody down here in the lands of bananas and mañanas has a plan.

Martinelli’s Five-Year Plan is notable because Martinelli is actually implementing it. Immediately upon taking office he published his 122-page plan (drafted with the help of McKinsey and Company) in English…and then he set about making it happen. He hasn’t stopped to take a breath in the 20 months since. Frankly, what Martinelli has accomplished already in his term as Panama’s president is nothing short of extraordinary.

Highlights of Martinelli’s Five-Year Plan include:

  • Replacing the old Diablo rojo buses that clog the Panama City roadways with new Metro Buses (this is already happening)…
  • Building a new 13.7-kilometer-long Metro across the capital (the ground-breaking ceremony took place last week)…
  • Developing a new Government City where the 200 government offices will be consolidated (saving the city millions of dollars a year in rent)…
  • The extension of the Cinta Costera; this three-phase highway expansion project is moving ahead at a great pace, with Phase One complete and Phase Two nearly accomplished…
  • The cleanup of the Bay of Panama (the French engineer father of one of our son’s friends, in Panama to manage this project, reports that it’s proceeding on schedule)…
  • The development of Panama Pacifico, a new city across the Bridge of the Americas where business development is being further incentivized by tax breaks and other perks (and where many of those 41 international companies I mentioned earlier are choosing to base themselves)…
  • The construction of additional highways to connect the key strategic points across the country (a new highway from Tocumen Airport to Colon, for example)…
  • Establishing a new international airport at Rio Hato…
  • Expanding the international airport at David…

That’s a total investment of about US$4 billion.

Where does Martinelli think he’s going to get all this capital? The Panama Canal!

In the 10 years they’ve been running this show, the Panamanians have generated for themselves more than US$4.5 billion in surplus Canal revenues.

Over the past decade, Panama has increased annual tonnage figures and prices at the same time…and it has decreased Canal transit time from 33 to 23 hours. The world’s big shipping outfits are happy to pay more to get where they’re going quicker.

Not ones to leave great enough alone, the Panamanians are in the process of expanding the Canal, pushing ahead in typically aggressive Panamanian style with a US$5.25 billion expansion of their greatest asset. This will result in even greater annual Canal revenues, both direct (more transit fees) and indirect (more maritime registrations, more maritime insurance fees, etc.).

It will also mean ever-increasing employment. Unemployment has fallen from as high as 12% about a decade ago to about 6% today.

Will all pieces of Martinelli’s Five-Year Plan happen…on schedule?

This is still a land of bananas and mañanas, and nothing is guaranteed.

I can’t predict the future any better than the next guy, but my money is on Martinelli.

Lief Simon

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