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A recent article in La Prensa, Panama reviews the results of a recent economic survey of Central American business in light of global credit concerns. In general Central America is in better condition to deal with the global financial crisis than during the last business downturn in 2001. Growth rates in Central America are expected to decline and currency values will decrease versus the dollar. Panama is considered an anomaly in this study, probably because of its dollar based economy but also because of its strong banking system.

According to La Prensa global growth is expected to decrease to 4.3% for 2008 and 3.7% for 2009. In presenting these numbers the Fitch Rating notes that Panama’s situation is “anomalous.” Because of the large number of foreigners who have purchased real estate throughout Mexico and Central America there is new factor in the economic equation that was not there in the last economic downturn in 2001. To the extent that banks followed good practice and did not follow the US example of sub prime mortgages the banking system and credit availability are in good shape.

After several good years the study notes that businesses in Central America are ready to withstand a drop in business associated with the current credit crisis.

“Anomalous” Panama

With conservative banking, continuing strong foreign investment and an empowered small business community Panama seems to be weathering the storm better than its Central American neighbors not to mention the USA. There are no big layoffs on the many construction projects in Panama. Panama’s banks require a fair amount down for real estate projects and only dole out construction loans bit by bit as the construction progresses. The patriotic holidays are in full swing and folks in Panama City appear to have money to go and visit family in the interior. Real Estate Panama has been largely unnafected.

Panama calls its currency the Balboa but it is tied one to one to the dollar. Thus, as other currencies in Central America, Mexico, and South America have dropped versus the dollar Panama’s currency has risen. This is, by the way, excellent news for foreign workers in Panama such a Colombians who have seen their peso drop from 1,600 to the dollar or Balboa in May to about 2,300 in November 2008. For these folks going to Western Union to wire money home they may be still sending $100 each paycheck but the folks in Bogotá and Cartagena are getting 230,000 pesos now instead of the 160,000 they received in the spring of 2008. There are not many workers from Central America in Panama but those who are can send more money home now too.

While the rest of Central America settles in for a recession Panama investment goes on. Panama real estate on the high end has taken a pause as North Americans deal with bank loans and credit concerns at home. This makes it a great time to look at real estate in Boquete, El Valle, Coronado, Bocas del Toro or on Panama Bay. For those interested in Panama commercial real estate investment there are more and more small businesses needing rental space. You can get residency in Panama by investing $160,000 in a business in Panama and employing at least 5 full time Panama workers at minimum wage. You can also walk the white sandy beaches of the Panama Pacific while you collect your rent checks and deposit them in your Panama bank account.

Come to see us at ABPanama. We do business throughout Panama. We can help you find the retirement home of your dreams and help you find a commercial real estate investment that will pay for your real estate with the view of Volcan Barú in Chiriqui.