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According to La Prensa, Panama, as of October 23, 2008, the government’s cap on prices will drop. Prices per gallon will drop to $2.94 for 95 octane and $2.77 for 91 octane. Diesel fuel will drop to $2.85 a gallon. This is the first time that gas prices have been below three dollars a gallon since early in 2008 when prices went above $4 a gallon. Panama business and real estate investment will likely benefit from a little cooling down of inflation.

La Prensa quotes the Panama Consumer Protection Authority as saying that unless the government caps prices savings for gasoline do not routinely get passed on to the consumer.

According to La Prensa there were some stations out of gas preceding the price reduction as they had not purchased fuel but rather waited for lower wholesale costs. Obviously these folks did not want to buy expensive gas whole sale and have to sell retail at a reduced price.

It is also of note that some grocery items appear to be lower priced such as eggs which have come down ten percent and more in the last weeks. One assumes that lower transportation cost has allowed this price reduction.

Panama Investment, Inflation, and Wages

Part of why Panama attracts the highest per capital rate for foreign investment is that its wages are low. A recent study by the United Nations Economic Commission for Latin America and the Caribbean shows that poverty in Panama has been reduced substantially over the last couple of decades. However, most of this reduction has been due to more jobs and hours worked. With a hardworking workforce, low wages, and a pro business administration Panama remains a good place for investment.

A difficult social issue currently is the increasing cost of living in a society where wage earners are already working six day weeks, often 60 hours a week. There is a physiological cap on how much a person can work. The same study noted above says that as poor families with lots of kids grow up the kids go to work and add to family income. This is a demographic factor in Panama as well as throughout Latin America. However, the same fact applies, folks can only work so much and prices have been going up.

Thus the drop in gasoline prices is welcome. First we expect that car owners are very happy. Next we hope that folks will see a reduction in costs at the grocery store, department store, etc. Investment in construction will probably benefit too from a lower cost of transportation.

Panama has two tiers of investment for foreigners. First, there is dealing with tourists and foreign buyers. This market has been hot with lots of North American retirees, second home buyers, new residents, and tourists. Marinas are going up with hotels and restaurants and tour agencies are doing well. And what happens if the global financial crisis keeps the wealthy North Americans and Europeans away?

The other tier is the basic Panama economy and its integration with world trade and trade throughout Latin America.

No matter what is happening in New York or Paris folks here need to eat, buy clothes,  pay rent, and the rest of things one needs.

Commercial real estate investment closer to the heart of Panama’s local economy whether renting to a bakery, the corner store or a realtor catering to Venezuelans fleeing Chavez’ nationalizations will likely continue to provide nice return on leases for years to come.

If you are interested in looking into targeted commercial real estate investments in Panama come see us at ABPanama. We have over 23 years experience managing real estate investment portfolios and do business throughout Panama.