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How Panama Became A Great Economic Success Story

Why We Chose Panama (When We Could Be Anywhere)

Kathleen Peddicord by Kathleen Peddicord
Jan 19, 2021
in Investing, Lifestyle, Panama
0
Panama City Skyline from Cinta Costera Park, Panama City, Panama.

Alamy/Ambling Images

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Last week we held the biggest Live and Invest in Panama Conference in our history, with more attendees and more presenters than ever before.

It was a lively, high-energy, jam-packed affair…

And, for the first time ever, it was virtual.

As we worked last week to introduce the hundreds online with us to this beautiful little country at the hub of the Americas, I couldn’t help reflecting on our own connections here.

Why were Lief and I drawn to Panama in the first place… some 23 years ago… and how have we come to be more invested, personally and professionally, in this isthmus than we are anywhere else in the world?

All Panama but especially Panama City has been one of the greatest economic success stories of the past two decades.

The Massive Growth Has Been Due Largely To Foreign Investment

When the United States handed over ownership of the Panama Canal to Panama in 1999, the country fell immediately into recession. It needed to find a way to replace the disposable income that all those U.S. GIs had been spreading around and quick.

Investment From Tourists And Retirees

Panama looked next-door to Costa Rica, whose economy is based almost entirely on income from foreign tourists and resident retirees. We could do that, too, Panamanians figured, and began working in earnest to attract the attention of North Americans.

Tourists hiking in the rainforest at the El Chorro Macho Trails in El Valle de Anton, Panama.
Alamy/Wolfgang Kaehler

Panama targeted eco-tourists and budget-conscious Baby Boomers looking for places where they could stretch their retirement nest eggs. It introduced a pensionado residency program, improving on the model Costa Rica had by now made famous, offering resident retirees discounts on everything from restaurant tabs and movie tickets to plane fares and prescription medications.

Retirees, Panama figured, like the American GIs, living in the country, would be spending on a monthly basis. Tourists, while helpful for an economy, come and go.

Investment From International Companies

Next, Panama targeted international companies, playing up the incomparable advantage of its geographic position. This country literally at the hub of the Americas is ideally located for a business doing business across the Americas. Plus, thanks to the investment made over decades by the U.S. military, the infrastructure in Panama City is in a league of its own for the region, and much of the population, thanks again to the extended American presence, is English-speaking.

Panama wooed companies like Dell, Procter & Gamble, Adidas, Caterpillar, Nike, Estée Lauder, and others shopping for the best place to locate their regional headquarters. Today, more than 150 multinational corporations have this country’s capital as their base, employing, among them, thousands, including hundreds of foreign management staff. All of these people need places to live, and the imported foreign executives have helped fill buildings that many predicted would sit empty long after completion.

The Influence Of The Panama Canal In The Economy

Panama Canal, Panama.
iStock/Marina113

Panama has a second incomparable advantage in its canal, which it expanded in 2016 and which generates more than US$2.6 billion of annual revenue. That’s a lot of cash flow for a country of 4.2 million people, and the amount increases every year. Panama wisely continues to invest much of this canal income into infrastructure projects, expanding its highway systems, building new hospitals, and generally making the country ever more appealing for the foreign investor.

Coupled with its developed international banking and financial services industries, the canal economy has helped to position Panama as a regional safe haven. Colombians, Venezuelans, and Argentines like to park their capital in Panama City’s dollar-denominated condos, fueling the city’s property markets.

New Investments In Panama

Now Panama has attracted another pool of foreign investors—the Chinese.

In June 2017, former President Juan Carlos Varela ended diplomatic relations with Taiwan and established formal ties with Beijing, leading to a tidal wave of Chinese investment.

China is positioned to become Panama’s most important commercial partner. Mega-infrastructure projects under discussion include a new rail system to make the transport of goods from the west of the country to the canal more efficient.

Why We Chose Panama

Over the two-plus decades since the Americans pulled out, Panamanian markets have cycled, including a drop in property prices after the 2008 global crisis, but the overall trajectory has been and continues up. We first recommended Panama as a buy in 1998, and we are more bullish on this country’s prospects today than ever… the current pandemic marketplace notwithstanding.

Its undervalued property markets put Panama on our radar back in 1998, and, in the more than 20 years since, we have made a series of real estate investments here, from a pre-construction rental and a commercial building (that houses our Panama-based staff) in the capital city to teak, timber, and fruit plantations in the interior and Los Islotes, the biggest and longest-term property undertaking of our careers.

In 2008, we doubled down, choosing Panama as the place to base our Live and Invest Overseas business.

That meant moving to the country full time… which meant enrolling our son in school and committing in the most personal ways.

Our reasons for picking Panama were all financial, but that’s just one face of this little country.

Panama is also home to more than 940 species of birds, 250 kinds of mammals, and 354 reptiles and amphibians from howler monkeys to caimans, from coati mundi to turtles, from ocelots to crocodiles, and from pelicans and toucans to king crabs and iguanas… plus the Central American tapir, the American crocodile, the scarlet macaw, many species of eagle, humpback whales, dolphins, and hammerhead sharks…

Beautiful coati walking on rainforest
iStock/Bob Hilscher
A Coati mundi

In fact, thanks to its unique geographical position, Panama harbors a greater diversity of wildlife than any other country in Central America. A natural land bridge connecting the two continents, Panama is home to both North and South American species of wildlife. About 34% of the country’s land area is protected in 14 national parks, more than a dozen forest reserves, and 10 wildlife refuges.

The country is blessed with two long coasts and myriad sand-fringed islands, plus some of the best deep-sea fishing, surfing, snorkeling, and scuba diving anywhere. Around its Coiba island lies the largest coral reef on the Pacific side of the Americas.

This is a U.S.-dollar jurisdiction—that is to say, Panama has been using the U.S. dollar as its currency for about 100 years, meaning an American living or retired here has no currency-exchange risk to worry about.

Panama is an established medical tourism destination and home to the Johns Hopkins-affiliated Punta Pacífica Hospital in Panama City.

It’s home to many World Heritage Sites, from Casco Viejo, Panama Viejo, and the forts of San Lorenzo and Portobelo to Coiba National Park and La Amistad Reserve.

It’s the biggest international banking center in the region and one of the few Latin markets where it’s possible for you, as a foreigner, to borrow locally to buy real estate. Panama is also a true tax haven, a place where you can live and do business tax-free.

Sincerely,
Kathleen Peddicord
Kathleen Peddicord
Founding Publisher, Overseas Opportunity Letter

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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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