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Inflation has hit Panama. With a booming economy, steady foreign investment, and an ongoing flood of North American expatriates moving here, Panama’s cost of living is going up. The high cost of oil is translated into $4.50 a gallon gas prices and the conversion of food crops to ethanol for fuel production has raised food prices throughout the world, including Panama.

Panama

Panama is the narrowest country in the Americas and therefore was selected as the site of the Panama Canal. Located just before South America it is the southernmost country in Central America. Panama is a tropical country with a first world city, Panama City, which is on the Pacific and an hour from Caribbean coast. Panama has undisturbed tropical rain forest within easy driving distance of upscale malls in which any North American will feel at home.

The Dollar and Inflation in Panama

Panama’s currency is the Balboa which is denominated one to one with the dollar. In fact, US dollars are the currency on the street. Panama does not print Balboas. Panama mints coins with different faces than US coins but the sizes and denominations are the same. Thus, when the dollar drops in value and foreign products go up in price in the USA the same thing happens in Panama. With lower labor costs things produced or grown in Panama are cheaper than in North America but with the cost of gas and diesel fuel going up inflation has hit everything in Panama from fruits to vegetables.

Property Value Inflation in Panama

The inflation in property values in Panama is tied to a couple of things. First, Panama is a great place to vacation, live, retire to, etc. Panama has a lower cost of living than North America, Europe or the Caribbean. A steady stream of North Americans have made Panama the world’s premier retirement haven. The number of “Norte Americanos” with ready cash has driven up prices. On the other hand Panama is steadily improving its infrastructure, including roads into previously hard to reach areas. This gives rise to better deals on land values but has more and more buyers, not just retiring North Americans. Many of these buyers with Colombian Pesos, Pound Sterling, and Euros have seen the relative price of US and Panamanian property drop to very attractive levels. They buy and drive up the cost of living from property to cars to hotel rates in dollars.

Food Price Inflation in Panama

La Prensa, Panama reports on July 20, 2008 that inflation has eaten away at the buying and eating habits of the Panama working class. Sociologists worry about increasing social unrest.
“The country [Panama] is facing a level of inflation that we're not used to. It's affecting the low income classes, threatening social stability, and we should take measures to prevent the situation from spiraling out of control,” said president of the Asociación Bancaria de Panamá (ABP), Alexis Arjona.
“In real terms, inflationary pressure has reduced [Panamanian] consumers' buying power and run up the cost of a sensitive group of food items, such as chicken, for example. Because of that, eating habits are changing, according to sociologist Raúl Leis.

“The total monthly cost of the 50 essential, mostly food, items in what is known as the “canasta básica” in Panama has risen considerably in the last year, to $235. Yet Panamanians earning the minimum wage make only a little more than $300 a month in a 48-hour work week.”

Panama has previously had about a 1% inflation rate but food stuffs have gone up about 85% in the last three years. As noted above when the cost of living in Panama goes up and people on minimum wage still make only $300 a month opinions and politics may tend to change.

For more information regarding inflation and the cost of living in Panama or insights regarding Panama property please feel free to contact us at ABPanama.