COMMENTARY - April 2017 (2)

While waiting for the election results to come in yesterday from France, I spent my free time developing a real estate marketing campaign for the French market on behalf of Panama. I thought I might as well do something useful while waiting. I was pleased when I came up with a campaign theme based on a “play on words” in the French language that expressed the theme perfectly. That does not happen often! It is not a typical approach in Panama's marketing as it is "personalized" for the French market. I was lucky to have something constructive to do while waiting, even luckier when it turned out to be potentially useful in the future. My thanks to the French electorate for making it possible!

I mention this because most of the marketing campaigns I see in Panama are based on old formulas and do not take into account changes in the market of buyers. There is an “old way” that never seems to change and a “new way” that is flexible and able to adapt quickly to changes in markets.

Unfortunately, the old way is still standard in Panama for real estate firms, law firms, and others who appeal to expats for business.  The new way is found here too, but in a different business community in Panama.  I will use two web sites as examples.

I will not link to or otherwise identify the first one as I have no interest in offending anybody.  In this case, I am familiar with the business organization and know that it has more than enough in financial resources to do a great job of marketing.  But their site is a sad example.

It is dark and unattractive.  The initial text emphasizes the future, especially the future of technology.  Despite this, the design is one that would have been considered out of date a decade ago.  It looks like someone’s cousin did it with free software.  The imagery and text is almost entirely focused on the past, not the future.  Finally, the home page includes an “English translation” near the top where it cannot be missed.  Too bad!

The English translation is amateur, and that is being kind.  Some of it is simply clumsy English, understandable but not the way a native English-speaker would write.  The worst examples are two verbs.  One is singular (has) when it should be plural (have).  The other is in the present tense (focus) when it should be in the past tense (focused in American English or focussed in British English, both acceptable).

Here is the amusing part of the story.  I was thinking that, since most browsers now can easily translate pages from Spanish to English using Google Translate, that it would have been better they had left it all in Spanish as English-speakers, like me, will automatically use Google if it is necessary.  Just out of interest, I had Google translate this site’s home page.  It not only translated the Spanish, Google re-translated the English, correcting both errors in the process!

Now, let’s take a look at another site.  It also promotes sales.  It is bright and visually attractive.  It provides specific information on what it offers today, not wasting time on what it may have done in the past.  It is entirely in Spanish, but Google’s translation is excellent, so it does not waste time providing its own translation.  It also discusses a service that is slowly growing here in Panama, but is still quite new and thus more future-oriented.  That service is called “coworking” and the web site is provided by the Ciudad del Saber’s Center for Innovation.  Take a look for yourself.  I don't mind sharing that one publicly!

Recently, I have been in communication with the President and CEO of a major Silicon Valley corporation that specializes in artificial intelligence (AI) for businesses.  He also writes a newsletter on AI that is widely read.  I wanted to share some web sites of activities here in Panama that are tech-oriented and that might interest him as I hope that he will eventually visit us.  Both our business community and our growing tech community could benefit from hearing him.

In looking for websites to share, I found the first one above.  I did not send that one.  It would have been embarrassing.  I sent the second one, along with a few others.  I am sincerely thankful for the Ciudad!  They provide the finest examples and Panama should be very proud of them.

At Panama Wave, we focus on the future, not the past.  We recognize that the world is going through major changes that affect everything, but especially in the former “First World” nations of North America and Europe.  Since I often write here about the Third Wave of relocators arriving now and likely to continue (Europeans) and also about the Fourth Wave which is beginning to show up and with more to come (Asians), we spend time considering things like a marketing campaign directed to the French, as only one example.

We practice what we preach too, when the opportunity arises.  For example our Bayano site had drawn some interest from places like Singapore, Hong Kong, and Malaysia.  The first two are majority Chinese, ethnically.  The third, Malaysia, has a very large and successful Chinese investment community.

We know that the people coming from all three locations are very likely to be fluent in English, but we also know that not everyone finds English easy to read (written English is much more challenging to many people than spoken English).  We could have left them to use Google, but translating from a character-based language to an alphabet-based language is especially difficult.  So when we decided we wanted to put up a page in Mandarin Chinese with a summary of the site as a courtesy to visitors, we had it professionally translated in Hong Kong.  We are perhaps the first firm in Panama to include a page in Mandarin Chinese.

It didn’t seem to make any difference until this weekend when I received a message from a lady in Hong Kong who thanked me for that page.  A relative of hers is the investor, but he has no Spanish and has difficulty reading English.  Having a summary in Mandarin was much appreciated.  I don’t know if we will ever see the gentleman, but, although we don’t need it, it further confirmed that the concept is valid.

I see too many websites like the first one I described, especially real estate developments, even the high-end developments.   On two occasions in the past, I have seen sites that I wanted to share with other people at my websites and in my newsletters.  I wrote both groups and politely pointed out that there were some errors in the English version.  I even offered to help them improve it at no cost to them since I wanted to share their sites with English-speakers.  In both instances, I was firmly rejected and told, "We are fluent in English. We don't need anyone's help."  Oh, they did, they really did, but there is no use in arguing when all you want to do is help!  I still see similar sites today, but I no longer waste my time doing that.

My point today is simple. If you are going to use someone else's language at your site, use it correctly. That includes English. Have it checked by someone who is not just fluent in spoken English, but in written English. If it is another language you are not familiar with so you can't even be sure that the Google translation is correct, have it translated professionally as we did.

We stand ready to help Panamanian businesses improve their marketing to foreigners.  At the same time, we are also ready to consult with expatriate investors to help them adjust to the Panamanian market, but with sensitivity to their special needs in marketing in their home nations.  In all cases, language is important.  Do it poorly and you will lose sales.  Worse yet, the people you lose will not bother to write you and let you know, so you will never know.  What a waste of time, money, and effort.

If you are not fluent in written English with an English section at your site and you want me to take a look and provide an honest (and gentle) reaction, just let me know.  No charge!


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COMMENTARY - April 2017

With more than 11,000 employees in 110 offices world-wise, McKinsey & Company is a truly global management consulting firm.  Widely considered the most prestigious management consultancy, McKinsey's clientele includes 80% of the world's largest corporations, and an extensive list of governments and non-profit organizations.  More current and former Fortune 500 CEOs are alumni of McKinsey than of any other company.  They publish extensively on a very wide number of topics.  

Since I accepted an invitation to join their global Executive Panel some years ago, they have kept me very well-informed of their work and that has certainly been a benefit to my analysis.  However, most of their reports are global in nature and Panama is rarely ever mentioned.  We are too small.  So Panama is simply included in the Latin America and Caribbean region (LAC).  Nations like Brazil and Mexico receive the majority of the nation-specific commentary.

Recently, they sent me a copy of the results of a study focused on LAC, but also comparing it to other regions.  I will share two charts based on their research here and later I will provide a link to anyone wishing to download a copy of their 26-page discussion paper.  

They are focused on how nations increase their national wealth (GDP).  There are two ways and only two ways to do that.

The number of workers employed can increase (Labor) or the amount each worker produces can increase (Productivity).  Of course, both can be factors and each can go down as well as up.

The best news is when the majority of the growth is from Productivity.  For thousands of years, Labor was the primary factor, so empires and slaves were critical to a nation's wealth.  No more.  The old colonial empires and slavery are gone.  If you can find any remaining examples of slavery somewhere on this planet, you are visiting an extremely poor community.

The first chart compares LAC with the other global regions as defined by McKinsey from 2000 through the end of 2015.  I appreciate this.  Most studies tend to just consider the last five or ten years.  Including all those available for this century is a nice addition.  After all, the first five years were not that exciting for Panama, so this helps reduce the impact of its more rapid later growth.  I am not looking for statistics that make Panama "look good", but those that help us accurately understand its position compared to other nations in this century.  

I will not go into all the detail here as found in the paper, but the first column demonstrates the growth rate of Productivity in each of the regions.  The last column shows the growth of GDP, national wealth.  The two columns in the middle indicate how much of that growth was due to increases in Labor and how much due to increases in Productivity.

What you want to see is at the bottom of that chart, labeled "Asia".  Very strong growth in Productivity and very strong growth in GDP, which is primarily driven by that increase in Productivity, not just Labor.

Latin America looks very weak in comparison to the other regions.  It gives us an idea as to why the LAC region is sometimes ignored in global economics, or mentioned only briefly.  Despite this period being one of the quietest periods in LAC history in terms of conflict and social disruption (Venezuela is the exception now, not the rule), especially compared to some of the other regions, it is far behind most and it is not catching up.

If I was using this chart to find a region for investing my money, Latin America would not be chosen.  Looking toward the future as all investors should, even Africa would be more interesting.

Panama is often ignored for no other reason that it is very small.  But beyond that, it has another problem.  It is buried in that statistic for Latin America.

So let us take a look at another chart, also from the McKinsey research, but this time, we see GDP growth broken down by individual LAC nation, nearly all of them, not just the big ones.  And this time, Panama is included.

For investors already active in the region, this may not be a surprise (although many are surprised who have no experience with Panama), but for investors who are not involved significantly in the LAC region, this is generally unknown.  When they turn to look at the region, they automatically look at Brazil, Mexico and the other large nations.  

When they cannot compare Panama with the others, they not only overlook Panama, they also fail to learn the other factors (US$, stability, democracy, growth consistency, logistics, and many more) that, when taken together, make Panama stand out from every other nation in Latin America and the Caribbean.  But if you don't see the comparison, you can easily miss the story.

When I wrote subscribers that this commentary would help explain “why Panama is being held back by Latin America”, this is what I meant.  That is a little extreme and could be considered insulting by others, but I wanted to get the message across in a few words.  We have to be aware of it and be ready to explain it.  It really is not that hard, if you have the facts available.

If you want to read the McKinsey Discussion Paper, you can download it here.

I will finish with a very short note.

Italy – I have no space for detail here, but two Italian banks, Popolare di Vicenza and Veneto Banca, have both recently reported their 2016 figures. The figures show losses of 1.9 billion euros ($2 billion) and 1.5 billion euros ($1.6 billion), respectively. Both banks are requesting state bailouts to replenish their capital reserves, since they currently do not meet European requirements.

This is not the first time this has happened and the total of their losses is only a tiny portion of the estimated 360 billion euros ($380 billion) in non-performing loans in the Italian banking system.  The system is very fragile.  We watch it carefully because it may lead to a major crisis if it is not handled very carefully.  There is more to watch in Europe than simply the next election in one of the EU member nations.  Governments can change hands, but change can be slow (as in Greece).  But when banking systems fail, the results are dramatic and immediate.

Why should we care?  As more and more Italians arrive in Panama seeking a safe haven, they are becoming quite noticeable and welcome, as Europeans typically are.  Their numbers could increase dramatically.  And they are not alone as formal and informal evidence of increases in other European nationalities coming to Panama grows.   Fine, but we need to do a better job of finding out what they want when they come and making sure we have it.  

But there is an excellent source of “research” on this topic – Europeans themselves.  To Germans, Italians, French, Britons, Dutch and more, I have one simple message.

Do not just come to Panama to buy something.  Come to build something.  Now is the time to get started.


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COMMENTARY - March 2017

There is an old market saying that is worth remembering today.  When trading in traditional free markets that are commonly traded (stocks, bonds, real estate, commodities, and currencies are good examples) and which have been rising (a bull market), the probability that the market you are in will fall increases every day that market continues to rise.  Exactly the same can be said of the same markets when they are falling (a bear market).  

This is not profound.  It is a simple reminder that free markets do not go up or down forever.  This is especially important to remember with bull markets as history has taught us that it can take a long time for people to trust a bear market that has turned up, but very little time for them to leave a bull market that turns down.

It is obvious.  It is common sense.  And yet, investors frequently forget it.  I find that they replace it with another approach that I call the "track record" approach.  This is a huge mistake.  Let me explain.

We have all watched this happen on at least two very famous occasions.  The first was the "high tech" stock markets of the late 90s and the very early years of the 21st century in the US and many other nations.  It happened again soon after the collapse of the stock markets, but in the US housing market that seemed to have nowhere to go but up until it crashed in 2008 and 09, followed by similar drops in some European markets..  Both "crashes" hurt tens of millions of people, the housing crash leaving behind a mountain of unpaid mortgage debt.

The potential for both disasters was clearly and analytically outlined by one man known for his work on markets and their extremes - Dr. Robert Shiller of Yale University.  The first edition of his book in 2000, Irrational Exuberance, warned that the stock market was a bubble waiting to collapse, as it did in the following two years.  His second edition of Irrational Exuberance published in 2005 warned of a bubble beginning to form in the US real estate market.  This time he gave us plenty of warning, and he was right again.   Both versions were widely-read, widely-reviewed, widely-praised, and just as widely ignored.

I spoke to dozens of investors in both markets during both periods.  Although quite a few had read Shiller, they had a different view.  They would tell me that the market (either one) had been going up for a few years.  It had a “track record”.  They could not see either market crashing when each had such a great track record!

In their minds, every day their market went up or stayed up in value, it was proof that they were in the right market.  They kept reminding me of their market’s “track record”.  The longer it went up and stayed up, the safer it was for their money. Their argument was precisely the opposite of that old market saying based on centuries of experience.  I have to say that I am not always impressed with the people who win Nobel Prizes, but when Bob Shiller received his in 2013 for his work on markets, it was richly deserved.  Unfortunately and with sympathy, I have to say that many of the losses experienced in those markers were also deserved.  Free markets do not offer guarantees, but they do offer opportunities.

Now, what does this have to do with investing in Panama?  Time for a map.

Here we see the ten provinces of Panama, the three provincial-level Comarcas (areas set aside for the indigenous people where land is not for sale), and the two district-level Comarcas (in stripes and also not for sale).  Forgive my amateur art work, but the section outlined in red is what I call The Box of Panama.  It runs from Panama City in the east and along the Pacific Coast to the west.  Within that box lives the majority of Panama's population, it represents about 80% of retail sales in the nation, and offers the great majority of upper-middle-income and upper-income housing.  Most of it outside the city lies along the coast, but some is found in or near mountain communities like those near Sora or El Valle de Anton.

Everyone in Panama knows The Box, even if they do not call it that.  They know it has grown exponentially in the last 15 years.  When I first arrived 13 years ago in 2004, there were a few developments along the coast and in the mountains, now there are more than I can count.  At one location, where there once was one shopping mall, today there are four! A decade ago, people who lived there had to come into the city for the best supermarkets, restaurants, and hotels.  Today, many have opened branches along The Box.  The traffic can be truly terrible, especially on weekends and any holiday or vacation time.   As a result, the beaches are crowded.    Everything is crowded.

The city has come to The Box.  Urbanization is as much a problem in The Box as it is in the city.  Much of the natural environment has been replaced with asphalt, concrete, and second-hand copies of southern Florida.  "Panama" is still there, but it gets harder to find each year.

I have friends who live in The Box and I have had many pleasant visits in the past to that area, but I would not invest there now.  I certainly do not want to hurt the feelings of my friends in any way, but although no one is eager to present real statistics, prices of real estate that were booming seven or eight years ago are not booming today.  Homes and condos are not selling well and more and more resales have to reduce their asking prices, or settle for a price that barely covers inflation.  Undeveloped land on the beach can easily cost US$300 to US$500 a square meter (US$1,200,000 to US$2,000,000 per acre), even $800 or a $1000 a square meter (more than US$3-4 million an acre).  We are happy to send you a link to an example, if you ask.

The Box is becoming more dependent on seasonal visitors and less on people coming to live, as was true of North American retirees in years past.  Most retirees cannot afford The Box any more, or if they can, they prefer to go further west to an area that hasn't been over-developed.  But the majority of residents, Panamanian and expatriate, cannot go too far from the city.  They are not retirees.  They have jobs and families with kids in school, and the best of both are found in the Panama City metro area, not in The Box and definitely not further west of The Box.   

If there is one area of Panama that offers the least likelihood of an impressive return on real estate investment, it is The Box.  Further development only increases competition and there is too much of that already.  Further road improvements do not decrease congestion, they just bring more drivers and more congestion, but not more buyers.

Yet developers continue to focus on The Box.  Why?  If you are familiar with game theory, this is effectively a "Nash equilibrium".  If game theory is not familiar, it is an example of everyone playing the same game over and over, regardless of the falling investment returns, out of habit and because they fear being the first to leave the game.  This is a recipe for failure from the investment viewpoint.  The Box may continue to grow, but I would not put a penny of investment money in The Box.

At Panama Wave, we believe an investor with substantial resources who wants a decent, even spectacular, return on investment must think outside The Box.  

When an investor comes to us, interested in putting his or her money into The Box, we send them to one of the many firms happy to help them spend their money.

We do not advise investing in Panama's past, but in its future.  We look east, not west.  We prefer the cheap land, beautiful landscape, and tranquil waters of Lake Bayano to the grossly over-priced land, crowded beaches, and congested highways west of Panama City.  I have written about this before and I will continue to do it.  Yes, we do represent a property on the Lake, the only one for sale with paved road access and other amenities, but that is a very special case and a unique opportunity.  Beyond that special case, we will continue to help investors find what they need to find, profitable investments, east of Panama City.  The Lake is the "pearl", but there is more to the east than that.

Panama has a very, very bright future.  It is genuinely unique.  We know that expats just looking at Latin America for the first time think we must be very similar to Costa Rica, for example.  They are completely mistaken.  No, Panama is unique in all of Latin America and that is easier to demonstrate than outsiders might think, but they must get beyond Google to really understand it.   That is part of our service.  But this does not mean that every area in Panama is equal to every other area.  Quite the contrary.

At Panama Wave, we plan for the Panama of 2020 and beyond, not the Panama of the recent past.  If you have substantial investment resources, Panamanian or expatriate, and if you are able to think outside The Box, let us know.


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COMMENTARY - February 2017

In my last post, I provided two maps concerning Panama's connectivity with the rest of the world. Both maps showed the internet cables that run through the country via the Canal.  I think that is very impressive, but it leaves simple questions.  So what? What difference does it make how many cables there are? If those cables aren't used for something constructive, they really don't mean anything, do they?

Yes, they do, precisely because they are being used for something constructive.   I am not going to waste a lot of words on this topic.  I will let three websites do the talking for me.  They are just three of the Internet tech conferences being held in Panama in the next five weeks.  A few minutes looking at each will provide enough to get the idea.

Pandemonio is international in scope, drawing participation from other nations, but at $1495 a ticker, it is not cheap!  But it does what a conference is intended to do.  It brings people and projects and ideas together that would otherwise never meet.  Networking is not just a “fad”.  It is a very powerful means of communication.

CyberTech-Latin America is more reasonably priced from $200 to $300 a ticket, depending on when someone registers, and that improves coverage which broadens communication to a larger community. It will be held in conjunction with our friends at the Ciudad del Saber (more on that in a moment) where its Innovation Center has become a focus for the growing tech community here in Panama. 

There are others that focus on specific technologies, like the TIC Forum this month sponsored by the Telefónica Business Forum on "cybersecurity", but the first two above are very good general examples of what I am talking about today.  Each year, the number of these conferences held in Panama and their level of sophistication increases.

But conferences are not enough.  You must have a permanent facility that not only sponsors conferences like these on technology, but also provides resources for continuous research and development of new tech, but above all, their use in the real world.  In other words, Panama needs its own version of Silicon Valley.  It has one.

.The Ciudad del Saber (City of Knowledge) is a non-profit foundation created in 1995 to encourage Panamanian research and development.  In November of 1999, as part of the Panama Canal's transition from US to Panamanian control, the Ciudad was "given the keys" to Fort Clayton, a former US Army base, for development.  It was a great gift, but also a great burden.  Just the maintenance of the remaining structures was a financial and administrative challenge in a time when the Panamanian economy had not yet begun its spectacular growth.

Today, as their website clearly demonstrates (in English and en Español), the Foundation has been a great success.  Every day, some 5,000 people visit the city to work in one of the nearly 200 businesses, research centers, inter-governmental agencies, and non-profits that have operations there (see a Directory here), attend conferences, workshops and seminars, or take part in a wide variety of activities in every sector.  The Ciudad is not small.  It includes more than 200 buildings on 120 hectares (about 300 acres).  The Ciudad is truly a "ciudad", itself.

The Ciudad is about more than just technology and entrepreneurship.  They also have selected other agencies and businesses as residents to increase the intellectual interchange.  If you have a moment, take a look at their Annual Report.  Expand it to full size and just flip through the "pages".  You don't have to read the text, the dozens and dozens of photos tell the story better than words alone.

A final point that impresses me.  The Ciudad del Saber does not receive a single penny of taxpayer money.  They are solely responsible for earning their $20 million (and growing) budget.  How appropriate!  They train entrepreneurs and they are successful entrepreneurs themselves.

The real answer to the questions at the beginning is simple.  The Ciudad del Saber is one impressive example of how Panama uses the oceanic cables that pass within sight of the Ciudad for productive use. The conferences further underline this. Those cables provide Panama with more than just a pretty map.  They provide it with above-average connectivity and relevancy in the 21st century.

At Panama Wave, we know that the last 15 years of economic growth have changed the nation in more ways than increases in GDP, the expansion of the Canal, or even the Ciudad.  Successful investment requires deep, not shallow, analysis that requires a much broader view of the reality of today's Panama. That is precisely what Panama Wave brings to the marketplace.


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COMMENTARY - January 2017 (2)

First, we have updated our Seasteading page to announce that the project has been approved by the French Polynesian government for initial work to test the economic feasibility of the concept, including the construction of the first "floating islands".  The nearly nine years of preparation for this project by the Seasteading Institute is the foundation for all of this.  The work they will do can have real benefits to a double-coastal nation like Panama, especially for those islands in the Caribbean side that will be in real danger and soon, if ocean levels continue to rise.  And just from an "ocean real estate" perspective, this could be useful to many others in the business community as well. We are not interested in the politics of "why" ocean levels rise.  We are focused on their rise, whatever the reason.  We are part of the consortium supporting this project and we are considering bringing its primary spokesperson to Panama to share their plans.   He has said he would be delighted to do that.  Let us not look at the ocean as a threat, but as a "neighbor" and an opportunity for everyone.  Supporting constructive ocean research is one way to demonstrate that Panama is not an "average" nation, but way above-average!

It is early and I cannot make an announcement, but if you or your firm would be interested in being a sponsor or contributor to this important public presentation, please let me know and I will keep you posted as this develops.

I have been working for some time on a major publication.  It is a lot of work and I hope to get it done before I die!  In any case, it involves the creation of maps, among many other things, using databases from industries, Harvard University, and other excellent sources.  I want to share a couple with you today that include Panama.  I do not think you will have ever seen two maps like these.  Both focus on "connectivity", the extent to which a nation is connected to others.  It is one of the primary factors in economic development.

The first map is dramatically different.  There is no traditional "geography", no borders, no mountains, no roads, nothing but the oceanic cables that carry the Internet to this part of the world.  As your eyes adjust, you will probably guess that the northern section of South America is the big black space at the bottom and a portion of Central America is a smaller black space toward the upper-left of the arrow.  The arrow points to Panama and its Canal.  These major sub-marine cables are the "backbone" of the Internet.  Having so many pass through Panama is a huge benefit that separates us from most other nations, but which we normally never see. Click on it to see an expanded version.

Now I want to share another map of the same general area, but this one is more traditional and includes the standard geography.  The blue lines are the primary sub-marine Internet cables again, but you will see plenty of pink lines too.  They represent airline "flight paths".  Take a look at Panama City.  Then take a look at Bogota.  Even using the highest estimate of Panama City's metro population, Bogota's metro population is six times larger, and Colombia's population is 12 times larger than Panama's.  Would you guess that looking at this map?  I don't think so.  You can click on it for a larger version too.

Both maps deliver a message.  Panama is small in size, but big in other ways that are very important and are critical to understanding the nation's potential.  Once the new terminal at Tocumen International is completed and, as expected, there are direct flights to Asia, that map is going to get even more colorful and even more meaningful.  Traditional maps and geography do not provide the information an investor needs.  As I continue my research, I will occasionally share other factual insights with you here that are rarely noted, if they are noted at all, in visual form.  As I reminded us in my last post, a picture can indeed be worth a thousand words.

These maps are just tiny pieces of the work we do at Panama Wave S.A. to promote Panama and its development, with respect for both its people and its environment.  As I have said before, we are not a real estate agency, despite our one time agreement to represent a special property because we think it is a key property in an area that will see major changes in the next few years.  We are not money managers.  We are not an investment firm or fund.  We are analysts and consultants who recognize that every good decision is based on objective analysis, not emotion.  This is my 50th year of professional analytical work all over the world and I chose Panama as my home for a good reason.  It is not simply what Panama has accomplished, but what it can accomplish in the next few years and beyond.

But if Panama is to be a leader in the future, we must not just repeat what worked in past years again and again.  We must get outside that "box" and open our minds to a different view of the nation and its potential.  Panama Wave is here to help with that.  It is our primary purpose.


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COMMENTARY - January 2017

 The last 30 days have been very intense as we worked on behalf of clients.  It was not a "vacation", but we have no complaints!

Talking about Panama, we often get too involved with the individual “trees” and forget to take a good look at the “forest” of trees.

I find some people are still worried about the impact of the so-called Panama Papers.  That is already old news and there has been no impact that anyone can find up to now, so it is history.  There are always challenges and things like the “Papers” can leave a bad taste in some peoples’ mouths when they don’t have all the facts they need.  This is why I wrote my article at Barron’s.  The Papers are a good example of a tree in a very large forest.

Panama is a small nation.  Ignoring the islands for the moment, in terms of area, Panama is only the 19th largest of 23 mainland nations (75,000 square kilometers or 29,000 square miles).  That is half the size of Florida and a little smaller than Scotland.  17 states of the US are larger than the Republic.

In terms of population, Panama is #17 of 23 (4 million currently).  New York City and Sao Paulo each have more than five times the population of the Republic of Panama.

So many outside Panama see how small we are and automatically assume that our economy is small too.  They also assume that Panama is nowhere near as well off as Brazil, Mexico, Colombia, and other much larger Latin American nations.  They forget an important fact.  It is not only how much money you make, it is how many mouths you have to feed.  To compare Panama with other nations in our region, you need to look at our economy in per-capita (per-person) terms.

They say a picture is worth a thousand words.  Okay, here are 2,000 words as two charts.

First, we compare Panama with all of Latin America and with the world as a whole.

Now, let’s compare Panama to several individual Latin American nations.


You can see where we all started in 1990.  You can see how well we passed through the 2008-9 global financial crisis and how we have performed since then.

There are a dozen charts I could use on everything from our exceptionally high level of FDI (Foreign Direct Investment) per-capita to the sharp reduction of unemployment to the ever-increasing numbers of people visiting, some of them staying and so much more that it would take pages to describe it all.

But those are all trees.  Those two charts above are pictures of the forest from two perspectives.  They tell Panama’s story in the 21st century and they give us an idea of its future.

When I first came to Panama in 2004, one of the least pleasant aspects of the city was the smell.  That came from the bay where raw sewage was dumped every day.  When the winds blew in from the bay, it was disgusting!  I rented an apartment overlooking the bay and I can assure you it was nothing you wanted to smell.  That was a "tree" in the "forest" of Panama.

Today, I cannot tell you the last time I smelled that odor, but it has been a long time.  The modern sewage disposal plant has removed that tree.  It is gone now and no one visiting Panama has to suffer that smell.  But I remember visitors who thought that smell was somehow permanent.  They acted as if this was not going to change and it was one important reason not to live in Panama City.  They were wrong.  It was just a tree.  It is part of the city's history, but not of the city today.

Panama is truly a work in progress.  Every year, another bad tree disappears and a good tree is planted.  Panama is a healthy forest.

You cannot judge any forest by a single tree or even a hundred trees.  You have to look at the entire forest.  Every nation is a forest and every nation has its bad trees, its ugly trees, its sad trees.  No nation is immune.  But we still have to judge whether a nation is a place where we want to work and live, or not.  Some people will decide based on a tree they don't like, but the wise will decide based on the forest where it is found.

That brings me to my simple point.  When you talk about investing in a nation (Panama, Ecuador, Chile, the US, Mexico, Brazil, Canada and so forth), the smart decision is based on the forest, not on a single tree or two or three.  Those charts above are only two of those that demonstrate Panama's reality relative to other nations in Latin America and the world is above-average, sometimes very far above average.  This has been going on for years now and there is no indication that it is reversing or even stagnant.  

Yes, our GDP grew less than we hoped for last year.  The final statistic is expected to show around 5% growth, compared to the 6% estimated when 2016 began.  But everyone slowed down, so the result is that we are still going to be one of the top two or three nations in the Western Hemisphere.  Just as we did better than others during the global financial crisis, we continue to do better today.  More importantly, whether we are #1 or #3, we are consistently near or at the top of the list.  Consistency counts.  Another nation may have had a good year, but we have had a good decade.

As everyone living in Panama knows, we are a “safe haven” for many, many people and I am not talking about illicit tax avoidance.  I am talking about getting away from the anger and distress that so many nations face today.  They have come from all over Latin America by the tens of thousands.  They have come from North America by the tens of thousands.  They are now coming in growing numbers from Europe, already in the thousands with more headed our way.

They do not see the charts above, but they do see the forest.  We have a reputation and it is the reputation of a safe haven, as much as North America or Europe in the past, and often more so today.  Their people seek a warmer, friendlier, more positive environment.  They seek it as individuals, as families, as corporations, as non-profit agencies, and every other category.

Much of the world's "advanced" nations are under great stress due to failure to deal with the problems they have made for themselves.  Panama deals with another kind of “stress”, the stress of success due to a rapidly growing, dynamic economy and the challenges such growth brings.  That growth owes a great deal to others who have relocated here.  

Sometimes, I talk to some Panamanians who feel overwhelmed by the number of foreigners arriving, but they deal with it very differently than is currently the case in much of the world.  Despite their concerns, the great majority understand that people from other nations have played an important role in Panama’s success.  And never forget, Panama has plenty of experience living and working with foreigners due to the road, then the railroad, then the Canal, now the expanded Canal. When all is said and done, they understand that the "stress of success" is part of the price that is paid for that success.

I have said enough for today.  I will share more in weeks to come to explain why we see the next three years as three of the best years of Panama’s history opening before us.

I will finish with this.  If you have an interest in doing business or investing in Panama, 2017 is an especially good year for that.  You should take advantage of it.  If you are interested and we can help, let us know.  We are here for you.  And if you have come to this page from a search engine or a friend's recommendation, use the same link to send us your email address and we will include you when we announce new commentaries or changes at our website.  There is no cost involved and we do not share our mailing list with anyone else.

COMMENTARY  - December 2016

In the newsletter, I promised two very quick references to the Third (European) and Fourth (Asian) Waves.

At Panama Wave, we follow events in Europe very carefully. Yesterday's Italian referendum on constitutional changes failed badly. That was no surprise. We do not see this as either "good" or "bad", we only take note of it in regards to Panama. It appears that the rapidly-increasing number of Italians seeking Panamanian residency visas is not likely to slow down.

Our current small, but growing, Italian community is a critical factor too. They are our best advertisements. So you might consider that we now have two forces encouraging the Third Wave, "push" factors of which the referendum is only one, and "pull" factors like our growing European resident community of which Italians are only one part. We expect the Third Wave to increase in strength in coming months.

As for the Fourth Wave, we also follow events in Asia, especially East Asia, very carefully. One of these "events" just occurred here in Panama, but it is the result of others underway in Asia. I am referring to the group of Chinese business people who arrived in Panama last week.  You can read about it in English here or in Spanish here

This is one more in a series of activities over the last year or two that clearly indicate China's interest in Panama, despite the fact that we continue to recognize the Republic of China in Taiwan diplomatically. It is not about diplomacy, at least not today. It is all about business. Events like this one are the first ripples (rizos) of the Fourth Wave and we will see more of them.

Years ago, I commented to a friend that it seemed to me that the Panamanian real estate sector designed projects for themselves, not for the buying public. This was very much true for the area where new developments sprung up. While expats were opening Bocas del Toro, Boquete, and finally Pedasi to development, Panamanian developers were focused almost exclusively on two areas. First, the coast from the city west to Coronado and beyond, and, second, in the mountain areas of El Valle de Anton and the Altos del Maria project near Sora, both in the mountains above the Pacific coast developments.

Why did they ignore other buyers, especially North Americans - a major source of buyers at that time, who were looking for something (or somewhere) else? The answer seemed simple. They were building for themselves, not the market. Since they had to work in the city and wanted their country homes to be in nearby areas they liked, they assumed expat buyers would feel the same.

My American firm ran a series of nationwide opinion surveys of the American people between 2005 through 2011 to get a sense of what people considering relocation to another nation, not just Panama, were looking for and where they were looking for it, among other things. Two articles at Barron's and an interview at CNBC resulted.

At the same time, I shared much of the results with developers here. The results indicated that the Panamanian market was failing to take advantage of some of the real interests of people interested in buying, at least in the US which was Panama's major foreign market at that time. But it made no real impression. Developers could not "see" Panama as an outside buyer saw it, but they thought they could. 

Nothing much has changed. Those two areas on the coast and in the highlands directly west of Panama City have gotten crowded with multiple projects, many of which look exactly like other ones two or five or ten kilometers away. The over-development of this area is so obvious that it is hard to know how people can miss it. Well, that is not a "Panamanian problem".  I have seen it in every nation where I have worked.  It is human and has no nationality. But for our purposes, if this was true with Americans with whom Panamanians have considerable experience, we can expect greater challenges with the Europeans coming now and the Asians who will follow. 

At Panama Wave, we do our best to act as the "professional outsiders", a term you will hear in the video below. We look at the entire market, everywhere that is available for development. We look for areas that have great potential, but are not where local people have traditionally looked for properties. An "outsider" perspective, especially from those who have lived here for years and love Panama, can be useful. It is a challenge to share this outlook because some people may things we are insulting Panama!  But that is completely wrong. Done professionally, it is a compliment. There is so much more that can be done. Panama's future is just beginning.

Jakob Nielsen is a Danish expert in human-computer interaction. He has been one of the most important voices in web design since 1994 and is owner of his own design consulting firm. Jacob is best-known for his widely-read newsletter and his conferences held all over the world. Just today, I came across a simple two-minute video where Jacob makes the point I made above. He is talking about website design, not real estate development design, but the message is the same.  

COMMENTARY - November 2016 (2)

Join me on a trip to three different Panamas, all three found in only part of one Panamanian province.

Last week, my business partner and I drove to Tortí. Tortí is a town of roughly 10,000. It is near Darién province, but still on the Panama province side. We visit every once in awhile as we see this as the logical place for a growing city, probably in the next decade.

We were especially interested in seeing what progress was being made on building the first road from the Inter-American highway to the Pacific Ocean east of Panama City. It is in its early stages, grading and widening the very poor road that it is replacing. Although still early, as we drove on it, we could see that it is having a real impact on local people who are already using it, although it will be months before there is any asphalt. In the decades of my work all over the world, there are few things as dramatic as watching the economic impact of a paved road in a rural area. Everything changes and we can see that this is already beginning.

This eastern end of Panama province has a future. It may take a few years, but that future is coming. Today, the primary investment in that area and beyond into Darién province is foreign, typically the purchase of large land parcels for teak forestry projects.

So Tortí's story is one of being poor, neglected, and without sufficient infrastructure to support most economic development. It represents a 20th century Panama, but finally the foundation is being established for something better in the next decade. We will follow it closely because, to be honest, no one else in Panama will bother! When it is ready, Panama Wave will be ready on behalf of our clients.

By the way, if you ever visit that area, Tortí is home to a great little hotel that makes an excellent base. It is the Hotel Avicar with its inexpensive rooms, cable television, swimming pool, and a restaurant that serves good country food for good country prices! Best of all, your host will be Andrés Aquiles Dominguez, a gentleman, intelligent, bi-lingual, and always helpful.

Back to the highway, we move toward Panama City. Nearly half-way there, we cross Lake Bayano. The bridge we take allows us only a brief view of the lake and it does very little to demonstrate either its size or its beauty. It is there that Panama Wave represents a major property, the only one of its kind for sale at the Lake.

As you know, Panama Wave is not a real estate agency and has no plans to become one. We represent that fully titled property because we know the Lake well and we are aware that this is the one opportunity to take advantage of all the Lake offers, plus a paved road, access to utilities, and so forth.

If the buyer is a good one with the intention of doing the best possible job of developing the land, we are very willing to help them market it and we have a plan prepared. In any case, we will be promoting eastern Panama province because that is where development promises the best return on investment, both for the developer, individual or corporate, and for the people who live there. The local people get a “return” on investments from outside too. Everyone benefits.

This is a second Panama and it is dramatically different than its cousin on the western side of Panama City. I will be completely frank and open with you. We have turned the Pacific coast west of Panama City into a poor copy of the Florida coast. It is becoming one long strip of malls along roads filled with traffic. It is the urbanization of the coast and it stretches further and further west of the city each year. It is “more of the same” and it is ordinary, not special anymore.  At this rate, soon it will simply be sad.

When people outside Panama dream of a tropical “paradise”, they are not dreaming of what has been built to the west. What you see at the Lake is what they are dreaming of. They cannot find anything like it to the west, certainly nothing they can visit in an hour or two from the city.

Lake Bayano is another Panama, one suited for this period of the 21st century. From our research, we believe this area would be of particular interest to the Third Wave of relocators, those coming from Europe. They have shown us a real interest in experiencing the “natural beauty of Panama” without losing touch with the city and the airport, and that is what the Lake is all about. Obviously it would attract North Americans and others as well.

Now, we return to the road and continue to the other end of eastern Panama province, next door to Tocumen airport where nearly all our visitors arrive. I have mentioned the obvious growth in upper-middle and upper income households to the east of the city in past commentaries. In the first October Commentary, I mentioned the very ambitious Panama Global City project  described here in English and also here in Spanish

I knew very little about this project when I wrote in October. Were the sponsors capable of implementing such a huge project?

I have spent the last couple days working my way through an 85-page document describing the project in detail. It is part of the developer’s Environmental Impact Study. The lead developer is URS Holdings, Inc., a Panamanian corporation listed as a subsidiary of the URS Corporation in the US which has now merged with AECOM, one of the world’s largest engineering firms providing design, consulting, construction, and management services globally with 95,000 employees and revenues approaching $20 billion ($20,000 million).

I am still absorbing what I have read, but I do have two conclusions to share now.

First, I have no doubt that AECOM is a firm very capable of implementing this project. And I am pleased to see that they have been praised for their attention to the environment. This is not an endorsement of the project, I don’t know enough about it yet, but it does mean that the chief firm is fully professional, very experienced, and I will expect it to meet the highest standards.  I also feel it is safe to assume that they can find the investment money needed for the project's completion.

Second, I had to smile. Here is another firm that has the same outlook on the future that we have at Panama Wave. This project will be useful to everyone, but it is specifically designed to support increased trade and investment from Asia, what we call the Fourth Wave at Panama Wave. Regardless of anything else, it is a real pleasure to read a professional opinion that so closely agrees with our own, but was created completely separately. As we all know, this will take years, not months, and the project should unfold over a 15-year period. But the impact will start to be felt in the next few years, if it satisfies all requirements and receives approval.

So there you have it – three Panamas in one part of one province.  In travel time, it took only two hours to drive from the first to the last, but we covered much of Panama's past and future in that short time.  Tortí represents the Panama of the late 20th century where the foundation is being prepared for its entry into the 21st century in years to come. Lake Bayano represents the Panama of today and the immediate future. The Panama Global City potentially represents the Panama of tomorrow and years to come.

All this on one side of one province that normally goes ignored. Ignore it if you like, but be prepared to regret that in the future. We all have a choice in a rapidly changing world and a rapidly changing Panama. We can choose to get “outside the box” where the future lies, or stay inside the box and slowly, but surely, suffocate.

COMMENTARY – November 2016

Although Panama Wave S.A. is not a real estate agency, we do deal with foreign investors who are interested in real estate investments. Unfortunately, those investments that are available rarely meet the current interests of our clients which makes our life difficult and denies Panama access to substantial investment funds. There are two gaps (brechas) in the market.

One gap is the lack of apartment houses as known in North America and Europe. Sometimes, I find there is confusion as to what I mean by "apartment house". Here is a real example. I was talking with a married couple who had met when they were university students in Florida. They returned to Panama and were deeply involved in real estate development here. This was the part of the conversation between me and them that I cannot forget.

ME: You talk about the condominiums you are building. Why don't you build an apartment house?

THEM: We do. We have condominiums.

ME: That is not what I mean. Let me ask you this. When you were students in Florida, did you live in apartments?

THEM: Yes.

ME: Were they apartments in buildings that only had apartments for rent, no condo units for sale, and where all the apartments were managed by one agency?

THEM: Yes.

ME: That is what I mean.


ME: So why not build apartment houses in Panama City?

THEM: We like to build condos and sell them as soon as possible. We want the money now!

Okay, I get it. A short-term profit is preferred to a long-term income stream that is also profitable, frequently more so over time than selling condos, more flexible, and less risky., but there are investors who prefer that and I have nothing to offer them in Panama City at the moment.

When I discuss this in Panama, some people say that maybe there are old laws from the 20th century that make apartment houses less interesting. Perhaps, although I have met no one who has actually researched the topic, but old laws can change in the light of new markets.  If a reader has researched this and has something to share with the rest of us, please feel free to write me and I will include it in a future commentary.

Some tell me that the "Latin culture" is to buy, not rent. Perhaps, but cultures adapt to changing circumstances. This gap could be found in past decades in North America and Europe, but no more. It is less a question of culture and more a question of changing circumstances. And I add that expatriates, alone, could fill several apartment houses here without difficulty, assuming they are well-managed and reasonably priced.

Some say that our "apart-hotels" are the same thing. No, they are not, especially for people looking for a one-year lease. Too many expats end up on Craig's List-Panama instead where prices are more reasonable, especially if you do not have to live in the center of the city.

Some say that banks may not be as interested in loaning money for apartment houses as there is no long-term "track record" for that kind of investment. Well, there are expat investors who are willing to loan the money at reasonable interest rates because they prefer a steady long-term income than the risk of selling condos. We must remember that many investors in North America and Europe have experience with sales markets that failed, while rental markets rose, as has happened in recent years in the US.

Finally, many people locally do not feel comfortable trying something "new" without an example of it working in their kind of circumstances. Do I have an example?

Yes, I do, in Mexico City. For those with a paid subscription to the Wall Street Journal, you can read the article here. For those who do not, I have made a PDF of the article and you can download it here.

Enough. Regardless of how we see the situation, this is definitely one big gap in Panama real estate and it deserves some serious attention. Until then, I will have to recommend that our clients looking for this kind of investment consider Mexico City.

The second major gap I want to discuss is one I have mentioned before, but let me put it into perspective.

Since I first arrived in Panama in February of 2004, I have seen foreign investors, sometimes small ones, succeed in areas that were ignored by Panamanian investors at the time. The islands off the coast of Bocas del Toro, the Chiriqui highlands around Boquete and Volcán, and the area around Pedasí and Playa Venao are three areas that were "pioneered" by expats, not Panamanians. The expats took advantage of the cheap land prices of the early years, leaving Panamanians paying higher prices when they finally realized that each of these areas attracted a serious market. The one comment I heard over and over again in the early years is that each of these areas was "too far from Panama City".

How embarrassing it would be if this was to happen again in an area very close to Panama City!

Take a look at the map below. It shows the four districts of the "new" Panama Province - San Miguelito, Panamá (home to Panama City), Chepo, and Chimán. Chepo includes the district-level comarca of Madugandí.

Here are two facts. Chepo and Chimán represent 74% of the total land area of Panama Province. But as of the 2010 census, Chepo and Chimán represent only 4% of the population of the province! Meanwhile, the nation's developers are busy covering the Pacific coast west of the city with concrete and asphalt, changing what used to be a rural area into part of the city's urban sprawl. We are strangling the western coast with too much development and that leads to poor returns on investment, as well as making that area less and less attractive.

Why? You can find plenty of reasons for this severe imbalance, beginning with the Spanish decision to establish the second city of Panama (after Panama City) at Nata to the west and continuing right through to the 20th century for a variety of reasons too detailed to discuss here.

But people ask me, why would anyone want to live or vacation there?

There are mountain areas every bit as beautiful and unspoiled as anything you will find in the area around Sorá or El Valle de Antón to the west. There is plenty of oceanfront in Chimán, but that area is very isolated and extremely difficult to visit without going by water. We do follow it carefully and we know that this is definitely going to change, but it will be a few years. When it does, it will be very interesting indeed.

But right now, today, there is Lake Bayano where we represent the only property for sale on the Lake with access to a paved road and other amenities. Given the obsession with the western coast, most Panamanian developers simply ignore the east. It is a repeat of what I experienced a decade ago with the other areas that were being opened by foreigners, but this time it really is embarrassing.

So be it. It means more expense and time for us, but we will continue our discussions with foreign investors. One visit to the lake and they have absolutely no problem understanding the opportunity. However, it is a second gap and deserves attention too.

COMMENTARY - October 2016 (2)

[Much of this commentary is related to the one before it. If you have not read the first one and would like to, you can find it directly below this one.]

First, my thanks to those who wrote me following the first commentary. Two of them were especially interesting.

Jean-François wrote to remind me that Monaco is very similar to Dubai. He is right! 78% of their population is made up of permanent residents, nearly as dramatic a difference as I noted in Dubai in the last commentary.

Marian wrote to suggest I take a look at Singapore. Singapore's situation is a little more complex. Instead of just citizens and permanent residents, they have citizens, permanent residents, and "non-residents". The non-residents actually live there, but they are not "permanent" as they are given renewable, but temporary, visas even if they are there for a long time. They include foreign workers and their dependents, for example. The latest stats show 61% are citizens, 9.5% are permanent residents, and 29.5% are "non-residents", so 39% would fall into the resident category in Panama. That may not be a majority as in Dubai and Monaco, but it is a very, very high figure.

Dubai, Monaco, and Singapore all have certain things in common. They all began as "port nations" (not unlike Panama and its Canal and ports). They all had periods in their histories when their very existence was in question (yes, Singapore too when it first gained independence in 1965). They all had small populations that made growth difficult. They all found a path to success by combining large non-citizen resident populations with their citizens. And has each really been a success? I think so. Don't you?

They do have different policies on residents becoming citizens, ranging from the "nearly impossible" in Dubai to the "relatively easy" in Singapore (10% of their citizens are foreign-born), but that is a completely separate issue. Each nation can do as it likes, but still depend on foreigners relocating and working in their nations.

Enough on this topic. My point is simply that we in Panama should see foreign residents as valuable partners, not threats to independence. As I said in the last commentary, "In human behavior, perspective has a great impact on performance. We need to have a positive perspective" on this issue.

Carlos wrote and asked about the Fourth Wave I introduced last time, Asians. He said that he had read that Emirates Airlines in the UAE, Dubai's home nation, that the direct flights to Panama had been delayed because of a "lack of interest" in Panama among Asians and others. I remember reading the same comment in a local paper some months ago and being surprised as our research indicated the opposite.

Well, it appears that this was not a lack of interest among potential travelers, but a bureaucratic problem. This Bloomberg report published at the UAE's English-language newspaper provides a different perspective. This will get straightened out and, with direct flights expected, most likely from Singapore, in 2018, it is nothing to worry about. The Asians are ready to come. We just have to get the bureaucrats off their rear-ends.

Carlos also asked what evidence we had found of increased Asian interest.  We cooperate with a real estate investment group in Hong Kong and they assure us of Asian interest, but there is another piece of evidence.  Although Asians make up a very small number of "tourists" to Panama, one nation's visitors have grown.  They are sending 50-60% more visitors every month in 2016 than they did in 2015.  They are from China.  They are not really tourists, the trip is too expensive and especially too exhausting to come to visit Casco Viejo.  Who are they?

Our friends in Hong Kong say they are from China's private sector, they have money, they want to diversify outside the US and Europe where the situation is less stable, and they are seeking a better ROI than they can get in the so-called "advanced" markets.  Although they are from the same group that purchases homes in Canada and the US to get their families out of China and into the best schools, these family folks are not yet significant here in Panama, so most of them are strictly investment-oriented.  And we are told that they are not fans of the Chinese Communist Party!  

I have some experience with this type of investor.  A few years ago, I interviewed Haozhi Chen, the co-founder and CEO of Chukong Technologies and a young (23 when he launched his first start-up, 36 when I interviewed him) and very successful entrepreneur.  I was especially surprised by his very open criticism of the Chinese government and its treatment of the private sector.  I actually "toned down" his comments a little for publication as I did not want to cause him a problem accidentally.  He is the kind of person we are talking about.

Finally, as probably all of you know, Panama has diplomatic relations with the Republic of China in Taiwan, not the People's Republic of China in Beijing.  It really is of no commercial importance.  Both "Chinas" use the Canal regularly and both pay their bills.  This is simply not an issue.  But it does mean that Chinese government investment in Panama is very unlikely as they do not appreciate Panama's position on this.  

Once in awhile, someone says that maybe we would get a lot more investment if we made a deal with Beijing and changed diplomatic relations.  I would not suggest it.  Our neighbors in Costa Rica have experience with this when they switched to Beijing in return for promises to finance major projects and to buy up to $1 billion of Costa Rican bonds to help Ticos when they had financial problems.  The results?   This editorial at Central America Data is definitely worth reading.  Not a good idea.

We continue to do our research of the Asian market and we also recognize its growth.  Recently, when we discovered that we had several visitors from China to our Lake Bayano website who were not from Hong Kong, we added a brief Mandarin language summary of the English text, simply as a courtesy.  I have no idea, but we may be the first to do something like this in Panama.

I will finish with a comment on the upcoming US elections. At Panama Wave S.A., there are two subjects we avoid completely - politics and religion - whether that is in Panama, the US, Germany, Italy or any other nation. Everyone is welcome to their personal opinions, but as professionals, we work with clients, not voters.

This will be the same with regards to Italy's Constitutional referendum and Austria's re-run of their Presidential election in December. And it will be the same next year during the Dutch general election in March, the French Presidential election, likely to be a two-stage affair, in April and May, as well as the German general elections scheduled for next September. There are no “simple” elections on either side of the North Atlantic these days.

However, it is impossible to ignore the extreme anger that all of us see every day in the current US election campaign, especially as we finally approach its end. Whatever the results may be, it is important for us to be gentle, kind, and understanding, but also to stand clear of the debate. I especially recommend that my Panamanian associates who deal with Americans and understand this to be sure that less-experienced staff understand it too.

My favorite response is to say something like this, "We do not discuss the politics of other nations. We have the same policy for everyone. We are here to help you build a new and happier life in Panama. Let me help you do that!" In other words, do your best to change the subject without insulting anyone's politics. It will not always work, but we have to try.

You know what I mean. We have been through this with the Venezuelans and people from other distressed nations in South America. A few of us are already experiencing it with some Europeans. We might as well get used to it and deal with it intelligently. We cannot help them in their nations, but we can help them start over in Panama and find peace and happiness here.

And I will end with something very difficult to say for fear of being misunderstood. Like you, I want the US and Europe to solve their problems successfully and come out of their disputes with a new spirit of cooperation. However, I see no reason to expect that yet.

With every challenge comes an opportunity. We may see a "mini-boom" in people looking for a new home in Panama, one that lasts for longer than a month or two. Given all the troubled nations involved on both sides of the North Atlantic, this could be the beginning of something bigger than we expect now.

My advice to investors who agree is to move forward now, don't wait. If you are not already in Panama, come down, the sooner, the better.  If there is a surge following the election, do yourselves a favor.  Be prepared.

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COMMENTARY - October 2016

Foreign Residents – Curse or Blessing?

It is a delicate topic, but one that is well-known in Panama. I am referring to the concern about the number of foreigners coming to Panama to become residents. I am sure I do not need to tell you that the wave of Venezuelans fleeing their nation as it descends into a frightening socio-economic nightmare are the source of much of this concern. 

Panamanians opened their arms and welcomed these “refugees” to Panama. Their integration into Panamanian society has not been easy, but that is always the case when foreigners arrive in a new nation. The difference this time is the large numbers involved, arriving over a period of just a few years.

However, they are not the first "wave" to arrive in Panama and they will not be the last.

The Three Waves

In 2005, Migración individually listed all residency visa recipients at its website, information that was available to anyone with an Internet connection. For each recipient, they provided the nation of origin. At the time, many people were insisting that the great majority of new foreign residents were coming from the US. I did not think that was correct. So I went to the Migración website and counted more than 12,000 visa recipients by nation of origin. It was easy, just time-consuming.

When I went back to that website a few years later to check again, the list was gone and no statistics have been reported until last year in the local press for a little over 10,000 visa recipients for the first half of 2015.

Because I had the statistics from 2005, I could compare them to those reported in 2015. Here are the results, expressed as a percentage of total number of visa recipients in each case.

To find large numbers from Colombia is no surprise. The two nations share a common past history and Colombians, in general, seem to integrate well into Panamanian society. But they are not “foreigners” in the sense of other nationalities.

In 2005, the percentage of recipients who were Americans, many of them retirees, was high and we can say that they represented the First Wave of foreign residents. We all can remember the dramatic impact they had on real estate for several years in the first decade of this century. And the money they brought with them had a dramatic impact on the real estate market.

But as I often point out to friends, it was more than real estate. Traditional retirees are people who no longer work for a living. They live on their savings and whatever social security benefits are paid by their home nation. As a result, they can live anywhere in Panama and, wherever they live, they provide a steady source of income to local businesses. Since many of them chose to live far outside Panama City, those benefits were shared in places like Bocas del Toro and Chiriqui, as well as the city's metropolitan area. That has had a dramatic and positive financial benefit to those areas, now including the Azuero peninsula from Chitré to Pedasí. In short, they spread their wealth to areas typically ignored and that was and is a very positive benefit to many Panamanians who did not benefit from Panama City's dramatic growth.

In 2006, the first signs of weakness in the US real estate market appeared, but gained little attention. In 2007, we were introduced to "sub-prime" mortgages which turned out to be another way of saying "high-risk", but still there was very little concern. In 2008, the decline continued and deepened and US home-owners became seriously concerned. By 2009, the bottom had dropped out of that market and prices crashed, taking the NY stock markets with them. By March, the Dow Jones Industrial Average had fallen below 6,700. For comparison, as I write today, the DJI is a little over 18,000.

It was a dark time as we sat and watched the global financial crisis travel cross the Atlantic and hit Europe, then other nations. I remember that many people, both Panamanian and expatriate, were convinced that the Panamanian real estate market and economy were going to crash too. But that did not happen. Why?

Looking back after the worst was over, people were quick to point out that Panamanian banks had not offered the crazy "low cost" mortgages of their North American and European counterparts. I agree. But there was a second factor - the arrival of more and more Venezuelans (and please, let's be fair, other Latin Americans too). In addition, the Venezuelans were facing a serious on-going crisis in their home nation. They came to us burdened with great anger and fear, not just suitcases, and many sold everything they could to finance their move. They helped keep both the real estate market and the Panamanian economy growing. That increase is clear in the 2015 statistics above. Even though the pace of growth slowed, Panama's GDP continued to show solid positive growth while the rest of the Western Hemisphere, Europe, and other nations drowned in red ink.  The Venezuelans and other Latin Americans were the Second Wave.

Because the government did not regularly share the statistics of the number of foreigners getting permanent residency visas in Panama (and I have to believe that both Migración and the Tribunal Electoral have those numbers available to them), we could not "see" this happening at first. As time went by, the Venezuelans became too visually obvious to ignore, partly because they stuck together as a group more than most nationalities. Estimates of how many Venezuelans live in Panama had to be guess work because there were no stats to point to, and that introduced another problem in perception.

Consider a Venezuelan head of household who sells everything he can and moves his family to Panama. Let's say he has $300,000 available to him He buys a home, puts his kids in private schools, and opens a business as he now needs income. Contrast that to a Nicaraguan laborer who arrives perhaps with $300 in his pocket looking for a job on a construction site, leaves his family at home, and cannot buy a house or set up a business. Who do you think is more obvious?  I think a hundred Nicaraguan laborers or more will go almost completely unnoticed, while one Venezuelan with financial resources is very much noticed.

I am aware that some people, denied any actual statistics, have estimated that hundreds of thousands of Venezuelans live here as residents, even as many as one million! I serious doubt that. Venezuelans have a long history with the US. For generations, they have gone to university there, taken jobs there, have family and friends there, and invested there. Many are now American citizens. In 2014, the US Census Bureau counted only 288,975 Venezuelans living in the US.  We have four times as many in Panama? I sincerely doubt that.  There are many here, but no one knows how many, so we have to be careful when we guess.

But you said Three Waves!  Where is the Third?

Let us take a look once again at the residency visa statistics I showed above. Do you see what I see?  I think it is obvious.

Say “¡Hola!” to the Third Wave, the Europeans. No European nation made it into the “top 12” in 2005. I only have numbers by nation for the top 12 in 2015, but I have them for all nations in 2005. The Spanish have risen from #14 to #3. The Italians have risen from #18 to #4, despite not having a direct air flight from Rome.   Both greatly outnumber Americans. And the Portuguese? They have risen from #43 (less than one-tenth of one percent) to #8, pretty impressive.

Combined, these three nations represent 17.3% of the total in 2015, more than the Colombians. I feel confident that if Migración had provided the rest of the European nations (France, Britain, Germany, the Netherlands, etc.) who are also arriving in Panama in smaller numbers, the Europeans would likely reach 20% or more.

As I am sure you agree, watching Europe and its European Union go through their current and very serious crisis is painful and I sincerely hope that they will eventually work out their problems, but I do not expect it to end any time soon. In truth, I suspect it will first get worse.  I believe this Third Wave will continue to grow. Who knows? At some point in the future, perhaps not so long from now, Europeans may outnumber Venezuelans.

So here we are at a time when immigration is a very controversial issue in North America and Europe that is causing everyone a great deal of pain and we are receiving our own waves of “immigrants”. Should we be worried?

A Message from Dubai

Parag Khanna is a Senior Research Fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is also the Managing Partner of a geo-strategic advisory firm and co-founder & CEO of a boutique content strategy agency. He is the author of four best-selling books on international affairs. His most recent is Connectography: Mapping the Future of Global Civilization which I am currently reading. The reviews of the book are excellent and for good reason.  He has done a truly impressive amount of research on which he bases his analysis.

However, it is not Dr. Khanna or his book that concerns me at the moment.  It is one small section that immediately grabbed my attention when I read it.

That section concerns Dubai.  We all know Dubai as a tiny city-state, part of the United Arab Emirates, famous for its very high buildings and its artificial islands. You may also remember that it faced financial collapse some years ago and people thought their story was finished, but they came roaring back and Dubai is now the fastest-growing city in the world and a major center of financial and business activity. Minus the "collapse" that Panama did not experience, you might say that Dubai is "Panama on steroids".

Consider this.  Only 15% of Dubai's populations are citizens. The other 85% are residents from everywhere in the world, many from other Arab states. 

Khanna tells us that some of their foreign residents dismiss Dubai as a simple fishing port that got lucky. For example, their Arab critics come from ancient cities that were major centers of education and culture for centuries, while in comparison, Dubai was “nothing”. However, Khanna adds this...

"But this is precisely why Dubai should not be compared to the others. It does not seek to replace them. It is a platform for their survivors."

It is a platform for their survivors.  Exactly.  So is Panama. What a wonderful thing to be, when you stop and think about it.

And how does Dubai justify the "imbalance" between citizens and residents? I do not know, but I suspect it runs along these lines.  "We benefit from the money, the skills, the education, and the business brought to us by these foreign residents. Some of them may be impolite and insult us from time to time, but so what?  They cannot force us to do anything and they can always go home if they want to. Dubai is our nation and we are in charge."  

An excellent summary of reality.

Are we ready for the Third Wave?

No, not yet, but we should be thankful. Despite the government's decision not to share resident statistics by nation of origin, they at least did it once last year.  Their purpose was to show that the number of new Venezuelan residents was not as large as some people thought. After all, that 37.3% in the table above represented only 3,958 people. But in the process, they inadvertently introduced us to the Third Wave, although nothing was said about it at the time or since then in public.

At Panama Wave S.A., we are following this new "wave" with great interest, as well as other trends that are typically ignored locally.  One of those is the opening of new developments to the east of Panama City, not the west.  It began with Costa del Este, it continued with the Santa Maria development and its Jack Nicklaus golf course, and now a huge new Global City has been proposed for an area near Tocumen International Airport.  That project to create a new city and business center is budgeted for $4.2 billion, six times the cost of developing Panama Pacifico and 80% of the cost of expanding the Panama Canal!  We do not support or oppose this new project which is controversial in some quarters.  But we cannot ignore the obvious direction of new development in the city's metro area.

In years past, I was CEO of a US corporation that wanted to know more about Americans interested in overseas relocation.  We contracted the implementation of nine surveys of a total of more than 150,000 Americans on this subject from 2005 through 2011 by a recognized, established opinion survey firm of a statistically-valid sample of the US population.  One of those surveys included more than 20,000 adults and another of nearly 25,000 adults.  Those two surveys were ten to twenty times larger than typical opinion surveys done in the US and with which most of you are familiar.  They were that large (and expensive!) so that we could have a large enough sub-sample of adults seriously considering or actually planning overseas relocation.

In addition, we conducted (and Panama Wave continues to conduct) thousands of email "conversations" and hundreds of direct, face-to-face interviews with people specifically interested in Panama.

The results surprised us and many others in the US and elsewhere.  I wrote two articles on the results for Barron's, one of America's leading financial and business publications where my "Letter from Panama" was recently published,  was interviewed on CNBC, and was further interviewed by a host of publications ranging from USA Today to Singapore's Straits Times, among others.

When I discussed our US research with Panamanian professionals in past years, especially the real estate sector, I found mild interest, but serious resistance. "Where are these people? We don't see them in our offices. They don't contact us."  The answer is simple. If you do not advertise it, they will not come. Market research is not just talking to people who already buy your product or service, but to those who could buy them, but do not.

Over the last two years, we have also conducted dozens of interviews with Europeans interested in relocation to a tropical climate and, despite some differences from Americans and Canadians (they typically have more money than North Americans, certainly more than North American retirees, as one example), they have similar attitudes, especially in their desire to find a truly "natural" setting for a relocation home or vacation home, either with above-average investment potential, but with easy access to the amenities of Panama City and (an important point) Tocumen International Airport.  They are not interested in Boquete, Bocas del Toro, and Pedasí that are much too far from the city or, surprising though it may be to some, the congested, rapidly urbanizing area along the Pacific coast to the west of the city. 

Pulled together, what were the results of all this research? Above all and most surprising to many, retirees are a tiny "slice" of this pie. They are greatly out-numbered by young and middle-aged adults. They are from every income level, but above-average as a group. It's no surprise, but people want to live in a nation that is socially, politically, and economically stable. This is even more true of both Americans and the "Third Wave" from Europe today. They are not looking for another Florida. They want to experience nature as it really is in a tropical nation. They want a sense of adventure, although not too extreme. They want the pleasure of being in a rural environment, but near a modern city and its amenities. Many have studied, worked, and/or lived in another nation already, so they do more international travel than the average citizen of their nation and easy access to an international airport is a real value as mentioned above.  

For activity, a comparatively small minority are interested in golf. By a great margin, they are much more interested in outdoor activities like hiking and boating. Although it is not critical to many, they like the idea of waterfront, but they are as interested in lakefront as they are in oceanfront. This should not be a surprise to Panamanians who have spent time living in North America and Europe.  On both those continents, "waterfont" means a lake in their minds as tens of millions of North Americans and Europeans have very fond memories of spending their summers at their family's vacation home or cottage on a lake. These are just a few of the more interesting results.

As a result, we looked for an area in Panama that offered the potential for a substantial ROI that met the interests of those we had surveyed and interviewed. We found it at eastern Panama Province's Lake Bayano, just an hour from Tocumen and an hour and a half from downtown Panama City.  We have spent ten years (yes, a decade) researching this area and we truly believe it will not be a "new Boquete", but far more successful due to its easy access to Panama City and the great majority of its wealth and amenities.  And from the perspective of ROI, what is cheap today will not be so cheap in years to come.

There is an "empty hole" in what Panama offers foreigners and Panamanians alike and Lake Bayano fills that hole better than any other area in Panama.

If you have read this far, do not leave without taking a minute to see what I am talking about here.

In Conclusion

We are not the United States.  We are not the European Union.  We must not follow their path down a road that leads to anger, hatred, and even violence. That is totally inappropriate for Panama. I have heard Panamanians call those who are upset with foreign residents, xenophobic. I understand what they mean and even sympathize in part, but I think it is seriously over-stated. I have worked professionally in economic development in more than 40 nations around the world and I can sincerely say that Panamanians are the least xenophobic people I have ever met.

Yet, they are worried that they are "losing control" of their nation. We are also not Dubai. We do not need "steroids". But we can learn a lesson from them. Perhaps Panamanians need to tell their fellow citizens, "We benefit from the money, the skills, the education, and the business brought to us by these foreign residents. Some of them may be impolite and insult us from time to time, but so what? They cannot force us to do anything and they can always go home if they want to. Panama is our nation and we are in charge."  This is a matter of growing a nation, not losing control of it.

In human behavior, perspective has a great impact on performance. We need to have a positive perspective.