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It turns out that the global financial crisis may have a positive effect on Panama’s construction, real estate, and investment. Panama’s Balboa is tied one to one to the US dollar. Now that other currencies are weakening against the dollar Panama is paying less for imports including structural steel and the ingredients for cement. Lower construction costs will translate into lower real estate prices and more real estate investment opportunities in Panama.

The Global Credit Crisis and a Strong Dollar

For many years the United States has been the world’s best customer. Now that the US is dealing with its credit crisis and the makings of a long recession factories are laying off all over the world. Thus the financial crisis is spreading world wide. As always with periods of financial crisis there tends to be a flight of capital to the US dollar. The dollar has appreciated by about twenty percent versus the Euro and Pound Sterling from July to November 2008. The press is full of reports of shipyards not starting new ships, factories closing in China, and the price of gasoline plummeting. For Panama all of this is not necessarily a bad thing.

The “bad” thing is the pause in Panama’s high end real estate market as North American’s feel the credit crunch at home and need to think twice before buying in Panama. Another “bad” thing may be a flattening of the yearly increase in traffic through the Panama Canal.

The “good” thing is that the cost of living is going down in Panama making it a more attractive place to live, invest, vacation, and build. The cost of the Panama Canal Expansion will likely be less than expected. According to Moody’s when they gave the Panama Canal Authority a favorable rating for its loans for the Panama Canal expansion, 30% of budgeted expenditure is for possible cost overruns and inflation beyond current expectations. A strong US dollar and therefore a strong Balboa for a few years will save a lot on cement and structural steel. Maybe the Panama Canal Authority will be able to save that 30% after all.

Panama and Organic Growth

Investment in Panama’s tourism industry, buying condos at pre construction, and finding underpriced real estate before the crowd shows up have all done well in Panama for a decade. However, Panama recently improved its credit laws. The changes have opened credit access to as many 300,000 small businesses which employ the bulk of Panama’s work force. In a country where traditional lending on a small scale has often been from pawn shops and street lenders charging 10% every two weeks this is a dramatic change. The growth of Panama’s small business community is a place to look for another real estate investment opportunity.

Investment in commercial real estate in Panama bypasses the rent controls on low rent housing. Investment in commercial real estate for lease avoids the pitfalls of doing business in a foreign country. Investment in commercial real estate in Panama ties you into the advantages of a strong dollar, Panama’s conservative and solvent banks, and the energy of a growing small business community.

Come to see us at ABPanama. We have over 23 years experience managing real estate portfolios. We know when to buy, when to sell, and when to sit back and collect your lease payments as Panama’s economy prospers.