Panama has enjoyed two golden eras of economic expansion in the past 500 years. Investors who got in early then were rewarded with wealth beyond imagining. Today, Panama’s third golden age is just beginning. Those who prepare for this new commercial dawn can expect to realize riches comparable to the conquistadors of old. The tourism in Panama is the key to this third golden economic age.
Panama’s First Economic Golden Age
The time of the conquistadors was a brutal chapter in the history of Panama. Native populations died from war and disease while the colonists extracted unimaginable riches.
Over 30 sunken Spanish treasure ships have been identified in the area around Panama’s coastal waters. Many more wrecks undoubtably remain undiscovered. Those that sank in Panama’s waters represent only a small fraction of the total treasure taken from the region.
To give you an idea of the value of this treasure, just two such wrecks in the region were excavated by Mel Fisher in the 1980s and yielded treasure worth over a billion dollars in today’s terms.
So much potential wealth was evident in the area, that Spanish explorer Vasco Nuñez de Balboa was sent to chart the area in 1501. He discovered that the Isthmus of Panama was a narrow land bridge separating the vast Atlantic and Pacific oceans.
Balboa knew that finding a navigable channel between both oceans would revolutionize global shipping.
It was then, over 500 years ago, that the first idea for a canal to connect the two oceans was formed.
In order to tap the unimaginable wealth harvestable from a fast route from the Atlantic to the Pacific, Pope Charles V ordered a canal built. This was a time when the local populations suffered immeasurably, and the colonialists took everything they could.
Second Economic Golden Age: The Canal And Financial Services
Despite the orders of Pope Charles V, the canal took over 350 years to be completed.
In 1881, a French company began an ill-fated plan to build a canal across the Isthmus of Panama. This monumental task failed, and it fell upon later investment companies to finish the canal.
However, when the canal was finished it opened the economic floodgates for Panama.
Suddenly, Panama controlled the choke point of global trade. This inevitably brought a second round of colonial occupation, this time from the United States.
Once again, this new economic opportunity was detrimental to the local populace. During the canal’s construction over 25,000 workers perished.
While banking and trade financing had long been at home in Panama, the dawn of the era of Panama as an offshore tax haven began over a century ago.
In 1904, Theodore Roosevelt appointed J.P. Morgan & Co. as the fiscal agent for Panama, in an attempt to get control of the canal. Panama became a tax haven in 1919 when it started registering ships belonging to Standard Oil for lower fees than the United States. With the revenues from the canal, and its own status as a banking and tax haven, Panama made locals and international investors rich through international trade and finance.
Panama has been a safe and private place to incorporate offshore companies for decades, and its tax system is very sympathetic to foreign businesses.
While a lot of the wealth created stayed in the hands of foreign investors, a lot of it was invested in Panama and made its way to the Panamanian people. This is especially true since Panama took back control of the canal from the United States in 1999.
Since then, Panama has enjoyed the economic boom that Kathleen Peddicord and Lief Simon have been writing about for over 20 years.
While the rules of the offshore financial services world are tightening, and Panama is no longer the absolute tax haven that it once was, Panama continues to create huge wealth from shipping and offshore services.
Now that these industries have matured, Panama is turning to cleaner, more inclusive new industries to shepherd it through the new millennium.
With her shipping infrastructure, Caribbean and Pacific beaches, and lush jungles, Panama is creating a new cash cow industry to diversify its economy from the financial services and the canal.
Panama’s Third Economic Golden Age: Tourism
Tourism in Panama is an untapped market. Tourism currently only generates 2.9% of Panama’s GDP. However, Panama has just announced a massive investment in its tourism industry.
This time Panamanians will fully benefit from the economic boom.
This industry won’t be destructive of the local population or extractive of the resources of the country.
President Laurentino “Nito” Cortizo is taking tourism seriously. He even upskilled the workforce during the pandemic lockdowns by providing free tourism training courses.
He appointed Panama’s first full Minister of Tourism and created a tourism marketing entity called PROMTUR to promote and expand the industry. More importantly, Cortizo funded it with a five-year budget of over US$300 million.
Part of the plan includes a new dual cruise ship pier and new convention center in Panama City. Previously, the only cruise ship port in Panama was two hours away from Panama City in the Colón province.
This new cruise ship facility will encourage Holland America, Norwegian, Princess, and Carnival Cruise lines to expand their offerings in Panama. The new terminal will allow Panama to become the home port for cruises. This means tourists will fly to Panama to get on their cruises, and will finish their cruises back in Panama.
This will encourage tourists to spend additional days in Panama before and after their cruises, greatly increasing the economic impact of the cruise industry in the greater Panamanian economy.
On my February 2022 scouting trip to Panama City, Lief Simon took me on a tour of the area that included the Amador Causeway. Lief has lived in Panama City for well over a decade and has studied its development closely. One of the most interesting projects he showed me was the giant convention center that is situated on the Causeway.
This new center is set to make Panama the convention capital of Central America, offering 190,000 square feet of convention space, with an additional almost 7,000 square feet of smaller rooms and banqueting halls. This facility will allow for 20,000 people per day to attend conferences, and will offer stunning views of the ocean from high-class restaurants serving lobster freshly caught in the Bocas del Toro area of Panama.
The Azuero Peninsula on the southern coast of Panama offers some of the best fishing in the world. It’s a bit of a secret at the moment, but with Panama’s international tourism marketing plan, soon everyone will know about it.
If you want the best surfing in the region, go to the Bocas Del Toro archipelago. You might be able to scoop some lobsters off the ocean floor while you are at it.
Volcano hiking and jungle tours are also exciting tourism opportunities inland in Panama. Plus, you get the opportunity to view more bird species in one small location than in all of North America.
Another reason Panama continues to show bumper growth in a time when other Central American countries are stagnating is that the government continues to pump money into major high-impact infrastructure projects.
The canal doubled in capacity when its major expansion was opened in 2016.
The government has financed the construction of a fourth bridge across the Panama Canal at a cost of US$1.5 billion, which will relieve traffic congestion and provide easier accessibility to the interior of the country. This will further enhance the additional access offered by their new US$2.5 billion investment in a metro line running under the canal.
Just as a rising tide raises all ships, anyone who makes an investment in Panamanian tourism now will benefit from these huge government investments, too.
How To Invest In The New Panamanian Tourism Boom
Panama has 68 direct flights from 31 countries, offering easy access for tourists from almost anywhere on the globe.
-Invest in short-term rentals around Panama City for convention center clients and medical tourists
While short-term tourism rentals aren’t allowed in most of Panama City to avoid tourism displacing local renters, certain developments are allowed to rent to tourists in the short term. (In Panama, a short-term rental means less than 45 days.)
By investing in a property with a short-term rental license, you can expect rental returns from the 6% to 10% mark after all expenses.
If you want to discuss your short-term rental investment options around Panama City, contact our most-trusted Panamanian property agent here.
-Invest in short-term rentals outside Panama City
With their huge investment in advertising Panama as a premium tourism destination, tourism in all areas is expected to flourish. As this happens, all short- and long-term rental opportunities will improve for all property owners.
A savvy investment now in a rental property in a popular or up-and-coming tourist area will increase cash flow and appreciation rates in-step with these major government investments.
-Invest in tourism properties
Right now, deals can still be found on guesthouses, bed-and-breakfasts, small hotels, and tourism service businesses.
-Invest in agricultural investments
With this impending tourism boom across Panama, a corresponding increase in the production of high-value food to supply resorts and restaurants needs to happen.
Given these major investments in the economy and infrastructure, it’s predicted that by 2030 Panama will have lost its designation as a developing country and will have joined the ranks of First World nations.
Con Murphy
Editor, Overseas Property Alert
