COMMENTARY - February 2018

Panama is a city-state.

How many times have you heard that?  Probably never, but there is real truth to it.  Allow me to explain.

In recent years, there have been several articles and at least one book about modern “city-states”.  They all make one error.  They misunderstand what “city-state” meant in the past and what it means today.  Typical examples of other city-states today focus on Singapore, Monaco, and the Vatican.  Singapore is the most appropriate for comparison to Panama.  However, Singapore is literally a city and a nation at the same time.  It is just a few islands off the coast of Malaysia in eastern Asia.  Dubai is sometimes mentioned, but Dubai is not the same as the others.  It is only one of seven emirates in its nation, the United Arab Emirates (UAE).  If it claimed that it was the city-state for the UAE, you can be sure that the people of Abu Dhabi, a city almost as large as Dubai whose emirate provides more than 60% of the UAE’s GDP (economic activity), would complain.

This is not much for comparison, so writers often go back to a favorite example of a city-state, Venice (actually the Republic of Venice), a famous city-state that lasted a thousand years.  If you are like me, you probably think of a city of canals with graceful boats and perhaps the city’s main plaza, the Piazza San Marco.  But is that the city-state of Venice?

Let’s look at a map of this city-state from the 15th and 16th centuries.


 If you have very good eyesight, you can find the city of Venice in the upper-left corner in the darkest shade of red.  Then you can see the rest of this “city-state” in red and sometimes pink, plus the important trading routes that they controlled.  There is your traditional (and famous) example of a “city-state”, far more than what we would call a “city”.

What about Panama?  What follows is a small part of a commentary I am currently preparing for publication elsewhere, but it deals with this question too.

First, if Panama is a city-state like Venice, it would be good to see how big the city was in comparison to the nation.  Below is taken from the 2010 Panama census and compares the Province of Panama with all the other provinces and comarcas.


 I would add that the population of Panama Province (now two provinces, Panama and Panama West) has grown as a percentage of Panama’s total population in every census since the first in 1911 and the others from 1920 through 2010.  In other words, the province has always grown faster than the nation from the very beginning of the Republic.  In 2010, it passed 50% of the national population.  No wonder we have two provinces now instead of one.  In 2020, it is expected that the two provinces combined will increase that percentage.

Fine, but what about the Panama City metropolitan area?  I say the “metropolitan area” instead of the “city” because the city’s boundaries reflect a reality of long ago.  At the very least, we should use the population of the District of Panama which includes the city.  Then we can compare it to other “cities” in Panama.  Here are the results for 2010.  I prepared this image in 2012 for another report I was doing.  You will notice that the photo I used of the city skyline is a good example of how much the city has changed in just those few years.


But this is not a good representation of the metro area either.  After all, San Miguelito certainly deserves to be part of the metro area.  Arraijan and La Chorrera would be considered part of the city’s metro area by any definition of “metropolitan area” with which I am familiar.  So, in the image below, the red column is a combination of all of the above.


 In that report, I noted that 92% of the province’s population was clearly in the metro area as shown above, but the truth is that much of the remaining 8% are part of the metro area as well.  And yes, should someone wonder, most metro area definitions based on economics would also include Colon, but we don’t need to add Colon to get the point.

That point is simple.  In today’s world, nations that are so clearly dominated by a single urban area might as well be considered “city-states”, as was the case with Venice centuries ago.  Think of a city-state as a tree.  A big part of it is above-ground and visible, but there is a root system too.  Venice's "tree" was small in size, but big in economic and political power.  Panama's "tree" is clearly big in all three.

Does calling Panama a city-state reduce the importance of the “roots” found in the other provinces and comarcas?  No, not at all.  I ask you, without healthy roots, how long will a tree survive?  Not long.  The people of the Republic of Venice learned that the hard way a long time ago.  We need to remind ourselves of that every once in a while.

That is all for this commentary.  Just “food for thought”.  Thank you for visiting.

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COMMENTARY - January 2018 (#2)

Briefly, for those interested in the Bayano property, I have put up a very simple video describing a special offer.  It is a private video, very informal, and not shared on YouTube generally or at the property's website.  However, as Commentary readers,  If you are interested, you can see it here.

There are three items I want to share with you today.  They are all exceptionally good news for Panama, but many people have not yet heard them all.  This commentary will seem "long", but it is primarily lists and those take up space.

The World Economic Forum at Davos is underway and a mass of reports, essays, and so forth are coming out, as is normal.  One of those is an attempt by the WEF to develop another measure that goes beyond GDP (Producto Interno Bruto in Spanish) to more accurately demonstrate economic strength.  The emphasis is on "inclusiveness", the idea that wealth needs to be shared as well as earned.

The WEF has attempted to create a more balanced approach that includes GDP, but also a variety of other data.  I think they have done their best and the results will take closer study, but are useful by forcing us to look at our economy, its growth, and its results from a new perspective.  The call it "The Inclusive
Development Index 2018" (El índice de desarrollo inclusivo 2018)

Not all nations are covered for lack of data generally.  Four nations that were to be included (Cambodia, Kenya, Morocco, and Singapore) did not have complete data in one category or another, so they cannot be added until later.

29 nations are included in the category of "Advanced", while 74 are "Emerging" from China to Albania.  They are divided into these two lists because of different definitions of poverty.

Here are the two "Top 10s", followed by a summary of Latin American nations, and a link to the full report if anyone is interested.

Top Ten "Advanced"

1 Norway
2 Iceland
3 Luxembourg
4 Switzerland
5 Denmark
6 Sweden
7 Netherlands
8 Ireland
9 Australia
10 Austria

Top Ten "Emerging"

1 Lithuania
2 Hungary
3 Azerbaijan
4 Latvia
5 Poland
6 Panama
7 Croatia
8 Uruguay
9 Chile
10 Romania

All Latin American nations (with sufficient data)
and their ranking among all Emerging nations

6 Panama
8 Uruguay
9 Chile
12 Costa Rica
14 Peru
20 Paraguay
21 Dominican Republic
23 Argentina
24 Mexico
29 Nicaragua
30 Colombia
35 El Salvador
37 Brazil
41 Bolivia
44 Guatemala
46 Honduras

You can download the full report at the World Economic Forum's website, if it interests you.  In English, a Spanish version is not yet available.

Who predicted that 15 years ago?  No one.  And we probably would not have predicted it last year!  We are our own worst critics.  That is good.  Better us than someone else!

Another interesting fact was shared by Bloomberg, A New Contender Has Emerged for the Best Credit in Latin America.  As they report, Panama is passing Chile as the best "credit risk" in Latin America indicating that the global financial system sees Panama as being far better than the home of some "Papers".  Panama's stability, growth, and planning for the future assure lenders that they will be paid and that is what lending money is all about.  But to be a better bet than Chile or any other Latin American nation?

Who predicted that 15 years ago?  No one.  Panama's bonds were still classified as "junk" back then.  That is history.

Finally, I note the government's announcement that Panama will create a Global Center for Excellence in partnership with DHL International.  There are several global centers and this one will be based on a model created in Singapore, also a partnership with DHL.  The centers are meant to be exactly what they are called, centers of excellence.  They typically are tightly focused on a single topic.  Panama's Center will focus on logistics, specifically its plan to be  logistics "hub" for Latin America, in line with s the National Logistics Strategy of Panama for 2030.  I especially am impressed with DHL's involvement.  Not only are they one of the most competent global logistics firms, they have the experience of doing this in Singapore already.  There is no better partner.

Who predicted that 15 years ago?  No one I know.

If you want to read the announcement, you can read it here in English or here in Spanish.

That is all for today.  In the last commentary, I mentioned a  new way of looking at Panama (and other similar nations).  I am still working on it for publication.  When that is done, I will be happy to share it with you!  And for those interested, don't forget the Bayano update video.

Thanks for visiting again.

A PDF of this commentary can be downloaded here.


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COMMENTARY - January 2018

First, I would like to mention that the non-commercial website I operate at RetirementWave.com has been completely redesigned.  The old site was simply too old!  It would not even show up on a smartphone properly and it was full of out-of-date information.  We are now entering the 14th year that this website has been introducing thousands of people from nations all over the earth to the possibility of relocating to or investing in Panama.  After that many years, the site needed to be cleaned up.  Once more we are hearing from people who are interested in Panama, but prefer at least one site where there is no advertising or sales.

Over the years, Retirement Wave (RW) has introduced at least 25,000 people to the potential of living and/or investing in Panama.  The site is not advertised.  It depends of members sharing it with others, what I call “word of mouse”.  When I started, I predicted 200 members.  As time went by, we hit 1,000, then 2,000, eventually 3, 000 and, despite our old site not being very attractive, we leveled off around 6,000.  I never dreamed that would be possible.  Actually, it would have upset me!  The idea of handling all the correspondence required from a group that size would not have appealed to me, but I have gotten used to it and I feel a real partnership with my members.

Despite being non-commercial, I have always told members that if I found an outstanding development, not just another “big box” on the coast or in the city, that provided a real “Panama experience” and affordable housing, I would be happy to partner with the developer.  Over these 14 years, I have seen a couple, but very small and not useful for a large group.  As a result, that has never happened, and I have pretty much given up hope.  I am fussy.  I want a really good product to offer at a good price for all concerned, but that just has not happened.

It is not secret if you know me, but we can finally get the Lake Bayano property sold to someone who is going to do a really good job of being sensitive to the Lake’s environment and provide reasonably-priced housing, we could reach an agreement where I would help them market it, but that is not going to happen until the opportunity arises.  Such is life.  I am just happy to be able to offer the site.


Another item I want to mention is Uber.  I do not know if people in Panama appreciate what a positive impact Uber has had on expats considering Panama City as a new home.  90%+ of RW members would simply reject the city entirely, saying “I will not drive in this traffic!”  That was almost always their first and loudest complaint.  Now, when I tell them about ride-sharing services like Uber, many have a very positive reaction.  It is not enough by itself, but it opens the real possibility that they could be happy living in the city. This is the foundation for our “Metro Match” program at the RW site.

Let me be blunt.  If you are in real estate in Panama City (or up the Pacific coast), you need to stand up and support Uber openly.  It is bad enough that few real estate agencies bother to mention these services in their advertising, but if we lose Uber and other ride-sharing services, we are back at “square one” again.  If you need to move unsold inventory in the metropolitan area, be smart and support these services.  They are important “partners”, more important than you may think now.  You do not want to lose them.  Do not make the mistake of thinking this issue is settled, especially with a new administration taking office in a year and a half.

I remind my friends everywhere that the 21st century waits for no one!  ¡El siglo XXI espera a nadie!  What was “new” yesterday becomes “standard” quickly.  We must run to keep up.  Yesterday, I was talking with my colleague, Jeffrey Lane, about ride-sharing services.  Later, Jeff sent me three websites in the US that provide transportation services in different styles.  These are examples of what I am talking about.  Each link will open a new page, separate from this one.  When you have a moment, see for yourself.





This subject is much greater than transportation.  Learning how to work successfully in the 21st century is every nation’s concern, but they are not all doing that well at the moment.  Too many nations and too many people are trying to live in the 20th century and failing.  As the American philosopher of decades past, Marshall McLuhan, put it, “We are marching backwards into the future”.

One thing I am writing on for publication elsewhere in weeks to come is the need for each nation to look at itself today differently than it did in the last century.  That is easy to say, but difficult to do.  In my next commentary, I will introduce a new way for all of us in Panama, citizens and foreign residents alike, to look at ourselves and this wonderful nation in this very challenging and exciting century!.

Until then, thank you for visiting.

A PDF of this commentary can be downloaded here.


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COMMENTARY - November 2017

I will briefly mention the “Chepo project”.  I have no more information on that, but it may (or may not) relate to this post and I should mention it. It is a “mystery”, but potentially a very important one with a budget of $500,000,000 over 15 years.  If you do not know what I am talking about, the last couple posts will explain.

I want to talk about another “mystery” today.  There have been rumors, pranks, and false stories about this for more than a decade, so many people ignore it.  I am referring to the possibility of the Disney corporation coming to Panama to create a park or a resort.  I ignore all the rumors and only consider facts.  A professional outfit like Disney will not talk about plans until they are ready to talk about them and that happens only when everything is final and ready.  So, you have to look carefully to get any real information.  What follows is just part of the information we have found, all of it is public.

Immediately following the inauguration of President Varela in 2014, ANPanama (Agencia de Noticias Panamá – Panama News Agency) interviewed the new Director of Panama’s Tourism Authority at that time, Mr. Jesus Sierra.  This is what Mr. Sierra had to say.


Very briefly in English, Mr. Sierra explained that an important part of the new administration’s tourism program would be the creation of a theme park in Panama designed and operated by one of the biggest theme park operators in the United States.  He could not share their name or the location because it was still under discussion, but there definitely was going to be a theme park and an announcement would come soon.

This was the reaction of one website in Panama.  Their headline expresses their idea of who was coming, “They will open Disney World in Panama!”

That was nice to hear, but there was no further announcement.  The subject was not brought up again.  I have to believe that Mr. Sierra was being honest based on what he had been told, but obviously it was not yet ready to be made public.  However, ANPanama has not taken down that video for a good reason.  The interview was real.  It is part of history.

There are also many little things that tell us that the entertainment industry in the US is aware of Panama.  Some of you probably remember the attempt to set up a Sea World, another Orlando park, in Panama.  It failed as described here at the Los Angeles Times due to opposition from animal rights and environmental organizations, but it clearly indicated Orlando interest in Panama back in 2007.  And of course, there was the Disney Parade during the Christmas season in 2015 and the passage of the Disney Wonder, the first cruise ship to pass through the new Canal locks, so Disney is certainly aware of Panama too.

But so what?  Is there any clear, specific evidence that Disney is interested in something more in Panama?  Yes, there is, and it has been there for two decades, if you know where to look and what to look for.  

In this case, I am referring to Internet domain names, like PanamaWave.com.  As long as we pay our fees, we have complete use of that domain name and no one else can use it.  In the 1990s, there was controversy because major corporations were having to buy their corporate domain names from someone who had paid for them earlier for a few dollars, but the companies were having to pay tens of thousands of dollars, even more!

That is a legal question involving trade names, trademarks, and intellectual property.  Today, if you try to do that with a major corporation like Disney that is legally registered in every nation on the planet, you are going to fail.  But if you are seriously considering a specialized name in the 90s, even if it included your corporate name, the smart thing was to buy it immediately and never have to worry about it.

The Disney corporation bought two specific domain names for Latin America on 1 December 1997.  

The two names were chosen for obvious reasons.  The first was for Disney in Brazil (Brasil in Portuguese, as well as Spanish).  With 208 million people (52 times Panama’s 4 million), Brazil is quite capable of supporting a park domestically, plus they are Portuguese-speaking, not Spanish-speaking, and should have their own park.  

The second name was clearly intended for the Spanish-speaking people of Latin America and it was for Panama.  

The records of the two domain names are exactly the same, except for the domain names.

But do we know if Disney is the real owner?  Yes, and here are two ways to check it.

When you click on a link, you are taken to the website of that domain name.  If you have no plan to use that domain name for a website in the near future, then the visitor goes nowhere.

Click on http://DisneyBrasil.com and see what happens.  The domain name is owned by Disney, but it is not being used.  They simply own it.

Okay, now click on http://DisneyPanama.com and meet the “owner” of that domain name face-to-face.

The only reason that you can see our little friend Mickey is that this domain name is owned by the Disney Corporation.  There is no other explanation.

The second way is simple too, but totally authoritative. For those with tech backgrounds who understand who and what ICANN is, you can go to their site in English or their site in Spanish and enter both domain names.  The owner is right there to be seen and is as “public” as you can get.  When it comes to Internet domain names, ICANN rules, literally.  When they say Disney is the owner, Disney is the owner.

Some readers will notice that when they click on the Panama link, it does not send them to DisneyPanama.com.  It “redirects” them to another address at Disney.  Then it says, "UH OH!  Couldn’t find that. Try something else?"  Why? 

Typically, that is because a real website is under construction to use the DisneyPanama.com address, but they do not want to make that public yet.  This page is used so anyone who comes in will think they made a mistake!  They did not make a mistake.  It was done on purpose by Disney.  But not for the Brazil website because it is not yet necessary.  These last sentences are my guesses, not facts, but I have operated more than two dozen websites and have used the “redirect code” frequently, so it is a guess based on experience.  Do you want to see an example?  Click on http://PanamaEast.com and see where you go.  We also own that domain name, plus three more that are not redirected at the moment – LagoBayano.com, PanamaEste.com, and EasternPanama.com.  We have long-term plans too.

Is the “Chepo project” connected to the Disney corporation?  I do not know, but I will say this.  It is the only suggestion that we have heard that fits a $500,000,000 project.  If you have a better one based on facts you have collected, please share it!

Whatever the final results may be, Panama Wave S.A. continues to be a “bull” on the market for eastern Panama Province and, eventually, the Darién Province. It is only a matter of time, perhaps less than many people think now.  At this moment, we are happy to hear that someone is willing to spend half-a-billion US dollars on a project in Chepo District, home to the land we represent.  That is a nice Christmas gift.

A PDF of this commentary can be downloaded here.


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COMMENTARY - October 2017 (3)

With Panama’s “patriotic days” upon us, I will post this a little earlier than I normally would, but now is a good time to congratulate my Panamanian friends and co-workers as they celebrate their independence from Spain and their separation from Colombia in November.  ¡Viva Panamá!

Over decades of working as an economic development analyst in more than 40 nations I was often challenged to try to understand a situation with only limited information, much of it “guesswork” on the part of others, not real statistics. Even population figures were wrong.  You can only claim the population that your census has actually counted, not just an estimate.  Most of the nations I worked in during the 20th century did not have the human and financial resources to do a proper census.  The result was an “undercount”.  You knew the population was larger, but you did not know how much larger and estimates were not acceptable.  Estimates of income and poverty were also very rough and almost certainly wrong.

As a result, you learn to work with what you have in the way of decent statistics to give you an idea of what the future holds.  Let me share an example with you today.

A couple posts ago, I mentioned a new project proposed for Chepo District in Panama Province.  If you have forgotten it or did not see it, you can see the simple description at Central American Data (CAD) in English or in Spanish.  CAD is a very useful publication.  It provides information on major public and private contracts available in the Central American nations to our west and north, and also in Panama.  CAD is well-respected for its work and accuracy is very important to them as they have many paying clients who need to know the details of contracts they can bid on.  That additional information is where they make their money.  For the rest of us, it keeps us informed of what is happening now and in the near future.

The announcement I linked to is unusual.  It makes no reference to any contracts.  CAD does provide a list of these projects waiting for approval, but with no detail.  Once or twice a year, they pull one out and mention it separately, as they did with the “Chepo Project” linked to above.  Over the years, you know this means one thing.  CAD was surprised by what they found.  Although they know nothing more about the project than what they report, they separated it from the others and shared it with us.

Why did they treat this project separately?  The obvious reason is very simple.  A $500,000,000 project in Chepo District is definitely something very unusual.  So how does an analyst deal with this when he or she has no idea of what the project includes other than that it is “residential and commercial”, has a budget of $500.000,000, covers 320 hectares (about 800 acres), will take 15 years to complete, and is in Chepo District?

All you can do at this stage is determine whether this is really an important project or not.  The best way to do that is to compare it to another project that is “residential and commercial”, has a budget of hundreds of millions of dollars, covers hundreds of hectares, will take a long time to complete, and was created in the 21st century during Panama’s growth period.  Do we have one?  Yes, we do and you know its name.

 It is Panama Pacifico.  This is a “residential and commercial” project that began with a budget of $720,000,000, covers 1,400 hectares, will take 40 years to complete, and is definitely a 21st century project.  You can read about it in Spanish or in English.

This is a very high-end project with all the amenities of a first-class community with housing, parks, office buildings, warehouses, and much more.  It even has its own airport with scheduled flights!  Okay, so tell me which project is more expensive?   That will help me understand how important the Chepo Project is.  It seems that Panama Pacifico is the most expensive, right?

Not necessarily.  As we say in English, this is “comparing apples to oranges” because the two projects are very different in size.  Since we know their initial budget figures and their size, we can compare the expense of developing the average hectare for each project.  Here are the results, but I will also provide the results in acres for our North American friends.

Per Hectare.jpg
per acre.jpg

So, the Chepo Project will cost more than three times as much to develop an average hectare as the Panama Pacifico project.

But along with the expense, we should also consider the intensity of spending.  In other words, how quickly is the money spent?   Fine, we have the length of the project, so we can divide the expenses shown above on a “per-year” basis.  Here are the results.

per hectare per year.jpg
per acre per year.jpg

To an analyst, this suggests strongly that the Chepo Project, whatever it is, is both more expensive and more intensive than the Panama Pacifico project looked at from this perspective.   Now it is clear why Central American Data made a special announcement.

Do I now know what this project will offer?  No, I do not.  Do I know if it will receive permits to begin construction?  No, I do not.  Do I know when the project will be approved or not?  No, I do not.  What I feel comfortable in saying at this time is:

1)    This is not a “fairy tale”.  It is a real project and the developers have spent a lot of money on their Master Plan and Environmental Study, so this is obviously a serious proposal.

2)    Chepo is one of the most neglected districts of Panama Province in terms of high-end residential and commercial development.  If this project is approved, Chepo District will never be the same.

3)    If it is a good project, Panama Province will never be the same.

4)    If it is a great project with natural appeal to Panamanians and foreigners alike, the whole nation will be positively affected.

Why do I care?  That is an easy question to answer!  Panama Wave S.A. is the sole representative for the sale of a property on Lake Bayano located in Chepo District.  With 3.2 kilometers (2 miles) of lake waterfront and beautiful surroundings, but with an asking price of only $3.60 (yes, three dollars and sixty cents, and yes, I always laugh when I mention that, it is so ridiculous) a square meter, this is already a very good deal without any other new projects, anywhere, being developed.  However, if the Chepo Project is a good one and is approved, you can guess which direction that price will go.

For fun, I will share another example of analysis.  An average family income is extremely difficult to determine for an entire nation.  I have been in this business for five decades and the statistics I find on that topic are not impressive.  Most of them, even by organizations with good reputations, are poorly conceived and poorly implemented.

So, if I was asked to compare the average family income in Panama to those of families in Central American nations, I would understand that it is impossible to get exact figures.  I would use a simple comparison that would not give me a specific number, but would demonstrate the differences.

Here is an example.  I call it my Chicken Index.  Chicken is a popular food in Panama and throughout Central America.  Not all, but most of the production is sold in markets and statistics are collected on the total amount of chicken purchased.  All we have to do is divide that by the number of people.

Nearly everyone in Panama and Central America eats chicken.  `Chicken is not an extremely expensive food, but it is also not an extremely cheap food.  How often people eat it and how much they eat is seriously influenced by income, so I think it provides a rough estimate of income that can be compared across borders. 


I think that makes a point that everyone can understand.  And it is also a good reminder as we pass through a month celebrating great historical moments in Panama’s history that we should all be very thankful to live where we live!

A PDF of this commentary can be downloaded here.


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COMMENTARY - October 2017 (2)

In recent days, there has been discussion of Panama's "two-speed economy".  This is very obvious and deserves analysis.  Ours is more detailed, but I will share the basics.  I call the two economies the "Macro" and the "Micro".

The Macro economy is doing very well again, as it has for years.  Although estimates of this year's GDP growth are now only around 5.5%, that is still above last year's 4.9% and, very importantly, is still expected to be the highest GDP growth rate in the Western Hemisphere from Alaska to Argentina and Canada to Chile.  The Panama Canal has surpassed its goals with a 22.2% increase in tonnage transported, just one of several measures demonstrating the success of the expansion.  That appears ready to reach higher levels in coming months as the Canal Authority has changed its rules to allow for more ships to transit.  For the first time in several years, the Colon Free Trade Zone is showing an increase in activity and profits, an important turning point.  Foreign Direct Investment (FDI) is up 5.8% for the first six months and is on its way to another new record.  There is more, but that is enough to make the point.  The Macro economy is fine and growing.

The Micro economy is another matter entirely.  By this, I mean what people in the "street", the average Panamanian, feels.  The profits from the Macro economy will eventually find their way to the general population, but that can be a very slow process.  Unemployment has increased.  It may be a lot lower than it was a decade or so ago, but we forget that now and focus on the fact that it is rising.  ITBMS (Panama's "sales tax") receipts have fallen, indicating a serious slow-down in retail activity.  Hotels still have very low occupancy rates, well below what they need to be profitable.  Many restaurants are having problems staying in business.  Do we really need another sushi-pizza-arepa "fusion" restaurant?  I doubt it.  Real estate sales in the city are down and even worse on Panama's so-called "gold coast" which does not look very golden now.  New car sales are down dramatically after years of equally dramatic growth.  Really, all you have to do is talk to retailers in Panama City and outside to know that their business is not good.

When I first arrived in Panama in 2004, Panamanians told me that Panama was not just a nation, it was a "village".  And in some respects, that is very true.  I have noticed over the years that when there is a change in attitude among the commercial upper class, it does not take long for the same attitude to appear in the rest of the upper class, the middle class, and the lower-income working class.   That has been occurring for at least a year.  When that happens, everyone pulls back from spending money.  This is logical and intelligent, but it also makes the Micro economy worse.  

This is not a "bubble" bursting.  There is no bubble.  However, there is a supply-demand imbalance at the Micro level.  The supply of hotels, restaurants, shopping malls and other businesses has grown, but demand has fallen.  In the real estate sector, the emphasis on building developments in the over-built, over-priced areas, especially along the coast, is a clear example of too much supply and too little demand.  

Without sufficient demand at the Micro level, what happens in the Macro economy cannot meet the needs of the Micro economy.

So why did this happen and what needs to be done?

Panama is a very small nation in population, even including expat residents.  With such a small domestic market, Panama depends on people from other nations spending their money here.  It is working very well at the Macro level, but very poorly at the Micro level.  There are many reasons for this, but I will focus on only two in this commentary.

1) We went without a national advertising campaign for too long.  We have more than a dozen "competitors" in our region, including the Caribbean, and they advertise in North America and globally as they have for decades.  They did not stop.  We did.  When people in North America and Europe feel the cold weather coming, they think about taking a vacation where it is warm. 

Where do they go?  It depends on the nation that comes to mind when they are making their decisions.  If Panama is one of those they have seen advertised, they consider it, but if they do not see ads for Panama, they will have plenty of other nations to choose from.  The new advertising campaign is excellent, in my opinion, and I congratulate those responsible.  It just took a long time to develop and it will take more time to recover our position.

2) But the factor that is much more important - the delay in the construction of the new convention center.   We are told now that it will handle up to 25,000 delegates, rather than earlier estimates of 30,000.  Okay, that is not the issue.  The issue is that it does not exist yet.  When it does, just 25 conventions in a year (that is a low estimate) with an average of 20,000 delegates will mean 500,000 visitors to Panama. If it is 40 conventions (not impossible at all) of only 12,500 delegates (half the center's maximum), you still end up with 500,000 potential clients. 

And the best thing about this?  Their visit is being paid by someone else!  It is "free" for them, but they will bring money of their own and spend it as well.  We don't care whose money it is, as long as they spend it.  If 500,000 foreigners are visiting Panama at someone else's expense, they are going to be very happy people and arrive expecting to have a wonderful time.

These are very special people.  Each will be a living advertisement for Panama when they return home.  While they are in Panama, they will spend plenty of money on hotels, restaurants, bars, casinos, and other activities.  If the tourism sector is smart, they will sell tours of one day to a week to delegates.  If the real estate sector is smart, it will find ways to attract delegates to consider relocating here or purchasing a second home.  We will have only ourselves to blame if we miss this golden opportunity. 

At Panama Wave we understand this, and we have developed a strategy for use by the real estate sector.   This does not mean just buying an ad in the convention brochure or including an advertising brochure in the delegate's "information packet".  That is not a strategy.  It is just spending money.  That will not be enough.  But we cannot wait until the conventions come.  We need to be prepared in advance as there is a lot of work involved, but the "pay-off" can be impressive, if we are smart about it.

I believe that a year from now, assuming the convention center is open for business, a few conventions will have a very obvious impact on the Micro economy.  Two economies will become one economy again.  Until then, we must hang on and do the best with what we have.

When I went through difficult times in my life, there was one phrase I repeated to myself over and over again.  However difficult life may have been, I always told myself, "This too shall pass."  And it did.  What we are passing through now is nowhere near as serious.  Other Latin American nations would love to have our problems!  But that is not enough to make people happy in Panama.  They do not compare Panama to other nations.  They compare their current financial situation with what it was a few years ago and what they expected it to be today.   That will always be the case for humans and we are all humans.  Today, they are not happy, but this too shall pass.

Ultimately, I think Panama needs one thing to make its economy, Macro and Micro combined, not only successful, but extremely successful.  I think we need a major attraction that is easy to promote.  Something that people around the world already know and like, but we do not have yet. Something our regional competitors do not have.  It should be something that comes under the general category of "Entertainment".  It should be something that offers enjoyment for all ages and all nationalities, and it should be long-term, not just a one-time attraction like World Youth Day.

I think that is very possible, even likely, but that is a story for another day.

A PDF of this commentary can be downloaded here.


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COMMENTARY - October 2017

In my last commentary, I mentioned a survey completed by 673 expatriates from different nations who were seriously interested in buying, building, or renting a home in Panama.  They are members at my non-profit site, Retirement Wave (RW).  RW became active early in 2005 and has operated for 12 and a half years now without advertising or commercial activity.  It currently has about 6,000 members, but the survey was focused on people who were not just interested in overseas relocation and might consider Panama, but those seriously interested in joining us.

I set up RW because I found the other "Panama websites" of that time to be too commercial and not really helpful to people thousands of miles away.  Everyone was selling something and that took priority over service to their readers.  I have not spent any money advertising Retirement Wave.  RW gets mentioned at other websites sometimes, but that is their decision.  I am not involved.  I never expected more than one or two hundred "members".  However, those members started telling their friends and the site grew into thousands of members by their referrals (I call that "word of mouse").

Panama Wave is a marketing and consulting firm.  We know that the basis of good marketing is understanding your market and the only way you can do that is to communicate directly with them, but not just the people who contact you as a business.  As I tell professionals in Panama real estate, maybe one of 100 people who search the Internet for relocation to Panama will visit your website long enough to learn something about you.  And maybe one of 100 of them will write you or visit you while they are in Panama.  Talking to them is good, but is not acceptable market research.  You must talk to people before they arrive and they must feel that their personal information is kept private.

I have often told my RW members that my "profit" from running the site is getting to know them and understanding what they want and how they react to what they are offered in Panama.  If people do not think you are trying to get their money, they will relax and share their real feelings.  I take this seriously.  For example, I have promised my members that I will never sell or share their email addresses with anyone without their specific permission and I have never (and will never) break that promise.  In research, email addresses are not important.  Accurate information and feedback are important.

For more than a decade, I have corresponded by email with thousands of RW members and I have met hundreds when they first visit Panama.  This survey is additional information that helps my understanding part of the market, an important part.  Because of the name, Retirement Wave, everyone assumes that the members are all traditional retirees who will no longer be working, but the truth is many of our members are either too young to retire or not interested in retiring yet.  They come to the site because they like the information I provide and they appreciate that I do not try to sell them anything.

As for real estate, I have told RW members in the past that I would recommend a development if I ever found one where the developers were honestly interested in providing something better than the average "big white box on the water".  And if I was involved in helping them design that project and had a financial relationship, I would tell them very openly and honestly.  RW members trust me and I will not sacrifice that trust.  However, in twelve and a half years that has not happened and perhaps it never will, but we can all still benefit from their responses to a survey where their personal privacy is guaranteed.

So, if you are interested in reading a general overview of the survey results, I will provide a link to a PDF copy of the report I have already shared with RW members.  Ii hope you find it of interest.

The survey report alone can be downloaded here.

A PDF of this entire commentary, including the link to the survey report, can be downloaded here.


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COMMENTARY - September 2017 (3)

If five years ago, even a year ago, I had suggested that there would be a major residential and commercial project on a scale comparable to Panama Pacifico, but in Chepo district in eastern Panama Province, you would have laughed!  In Chepo?  Really?  But as you can now read here in English and here en español, that is exactly what is proposed.  The project will develop 320 hectares (800 acres) into a major residential and commercial complex.  With a budget of $500 million, this is one very large project. Imagine the change that a half-billion US dollars can bring to a lightly-populated, under-developed district like Chepo, the district that includes Lake Bayano.  500 million is more than 10,000 times the 2010 census population of Chepo district (46 thousand).

If this environmental impact study is acceptable and the project proceeds to implementation, Chepo district will never be the same.  And it means Lake Bayano's future is even more attractive than is already the case.  I have no idea what the project details are.  Everything is being done quietly, but that is to be expected at this stage as this involves private capital.  The simple fact is that whatever the details are, this is a game-changer.  If you are interested in land in Chepo district, now would be a very good time to do something about it.

In my last commentary, I mentioned the survey we had taken of 673 expatriates, all of whom express serious interest in relocating specifically to Panama.   I mention that in this survey, as well as others we have done in the past, demonstrate that there is a significant portion of the expat community who look for three factors when choosing a new home.

In Panama's case, I am going to call them "The Three P's"

The first P is price.  What is a good price?  A "good price" is defined as "a price I can afford" and each buyer decides what that is to him or her.  The lesson in real estate is that there is no one price that is perfect.  You need to provide a range of prices if you want to maximize sales and profits.  Why?  Because the market of buyers constantly changes.  If you offer a variety of price points, you have the flexibility to respond to the market when it changes.  However, if you succeed in convincing the public that properties in one area are "expensive", then you will never see many potential buyers who will assume you have nothing to offer them.  That is the situation facing many developers and promoters in the city and along the coast west of the city.  In reality, there is a wide range of possibilities in both areas, but if buyers do not see them, they do not buy them and the "expensive" reputation continues.

The second P is proximity.  Everyone wants to be close to excellent medical care, the best shopping, Tocumen international airport, restaurants, theaters, fitness centers, sports events, and a wide variety of other activities.  Unfortunately, all of this is associated with the most "expensive" areas of the nation.  

The third P is Panama.  These expats are not looking for a "second Florida".  They want to live in Panama.  They want to think this is an adventure in a tropical nation with unusual plant and animal life.  It does not necessarily take a lot to impress them, but just putting up another condo box on the beach will not do the job, especially if the apartment is more expensive than a similar apartment in Florida!  In any case, when they go outside, they want to think they are in Panama and nowhere else.  After jumping through all the hoops required for a visa and all the expense and time involved, they want to be somewhere "special".  Who can blame them?  And we have plenty that is "special" to share in Panama.  We just have to learn how to do it.

What happens when a large part of the market of potential buyers are disappointed in what they find?  They rent.  



This is the opposite of what we found a decade ago and it is not what people in real estate want to hear!  Rentals provide an agency with a very small commission.  If you want to stay in business and prosper, you have to sell, not rent, properties. 

Those are very brief comments, but they are the foundation for what I will be discussing in the next couple weeks based on our survey work.

But I can tell you this much right now.  If you are a developer or promoter and you can provide all three of the above P's, you are going to be very successful.


[If you would like a PDF copy of this commentary, click here.]


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COMMENTARY - September 2017 (2)

The real estate sector in Panama is going through a very unpleasant "correction", particularly in the city and along the coast west of the city.  No one likes to talk about it in public, but it's no secret.  There are indicators of growth, but they seem to be centered on the social housing market of properties selling for 120K or less which receive various incentives to meet the needs of our growing middle class.  If so, I am happy to see that.  The demand exceeds supply.  It deserves attention.  But for more expensive housing, the situation is far more negative.  The same goes for high-end rentals.

In the first decade of the 21st century, Americans (and a hearty crew of Canadians) were a "wave" that took Panamanians by surprise.  I know because I arrived in February of 2004 during the initial stages.  I met with real estate people in the days following my decision to relocate, not just on my own behalf, but to understand the sector as I expected to focus on it in future years.  I met with many people, developers, promoters, RE agents, and builders.  One man summed it up so well, "I don't understand why they are coming.  Is this going to continue?  Or is it going to stop as fast as it started?"  I told him I could see no reason for it to end suddenly.

Whatever, they came and they bought.  Meanwhile, I was doing my traditional analysis.  Over and over, I told people, "Everyone has an opinion on why North Americans are coming to Panama, but no one has any facts."  So I began my research in 2005 where it needed to begin, not in Panama, but up north.  I contracted with a major opinion survey firm and conducted nine statistically-valid surveys from 2005 through 2011 of more than 115,000 Americans, a couple of them with 20-25,000 respondents giving me a "margin of error" of far less than 1%.  I asked dozens of questions on every topic I could think of that might influence their decisions.  The largest surveys also allowed me to sample a sub-group of Americans interested specifically in Panama and the surrounding region to see if they differed from people looking in other parts of the world.

The response was fascinating, sometimes surprising.  I presented my results on two occasions at Barron's, a leading US financial publication.  I was interviewed by CNBC, Australian public television, French public radio, and others.  I was even interviewed by a representative of India's largest press association.  More articles were written on our survey results in India than in any other nation outside the US!  I was interviewed so often, I cannot remember them all.  When I was called here in Panama by Fox Business News to comment on a story, I asked the gentleman how he had found me.  He said he had read an interview with me published in Singapore's Straits-Times.  I had completely forgotten about that interview!  I prepared and published a full report for free distribution to anyone interested.  My real purpose was to get the message through to Panamanian developers.  Yes, that's true.  I have been published perhaps 50 times in various publications globally.  I don't need an "ego boost".  I wanted to help my new nation understand what was happening and why.

The one nation where I was ignored?  Panama.  Honestly, when I just typed that, I laughed!  I am not at all "bitter" or anything silly like that.  I am amused.  The irony is so obvious.  Why was I ignored?  Panama's real estate developers and promoters do not have a history of this kind of research.  And as far as they were concerned at the time, they didn't care.  They were selling properties and that was enough!  Using some of their profits to build a statistical foundation (baseline data) for further research when sales were falling was not on their list of things to do.

Above all, I made a terrible mistake.  I offered the information for free!  The attitude was that, if it was free, it wasn't worth anything.  The whole experience was very instructive, if frustrating.  I stopped doing the US surveys in 2011 because, despite being very interesting to me, the expense was not worth it if no one in Panama was interested in the results.

As that period drew to a close, we all went through the global financial crisis.  As I have discussed here before, there was genuine concern that the real estate market was going to collapse as was happening in the US and, later, some European nations.  As I have already shown statistically, there was a major influx of Venezuelans (with serious money) in 2009, the worst year of the crisis.  The American and Canadian retirees were replaced with Venezuelans seeking refuge and a new home.  

The result was that the Panama City market came through without significant damage, if any at all.  Some areas rose in price.  It was not the same in the far west where Boquete prices slumped as they were (and are) dependent on retirees, among the people hardest hit by the US real estate collapse.  They still came, but often with less money and finding the prices set by earlier retirees too high for them.

So who will make up the next market of buyers?  As I have written here, we are seeing the beginning of a "third wave", following the retirees and the Venezuelans, arriving from Europe, and there is potential for a "fourth wave" from Asia in years to come.  However, neither of these groups are yet sufficient to purchase the growing inventory of high-priced properties and I see no serious attempts to reach out to Europeans, a very different "set of markets", not a single market.

As for North American retirees, as I have shown with US government statistics before, they not only continue to come, they continue to increase in number as they have for every year from 2002 through 2015.  When I update with the 2016 figures, we will see they continue to grow, but at a slowing rate.  Above all, far fewer buy today than was true in 2006, for example.  They rent.  Why?  Is it all about price?

Enough for now.  What the above demonstrates is the core reason for why real estate is not selling well to expats today.  The Panamanian real estate sector does not know how to do market research in foreign markets.  Why bother?  Buyers have always come to them.  They were not responsible for the wave of North American retirees.  They were not responsible for the arrival of Venezuelans with money.  They have never really needed to do market research where it needs to be done - in the nations where potential home-buyers live now.

I have operated a non-commercial Panama information website, Retirement Wave, without advertising for twelve-plus years.  I have developed a long-term relationship with my members who trust me to be sincere and balanced in what I provide.  I have about 6,000 members, of whom roughly 3,000 to 3,500 are occasionally active and about 2,000 are regularly active.  I spend no money on advertising or promoting the site, not a penny.  I am currently completely updating the website, so there is not much to show now, but that will change.  However, it is still very active through its newsletter and at YouTube.

In late July and early August, I sent a newsletter to members with a request.  I asked those who were seriously interested in buying, building, or renting a home specifically in Panama to complete a professionally-designed questionnaire on-line.  Many of my members have yet to decide on a nation.  Panama is one of several they are considering.  I wanted this to focus on those who had chosen Panama and were serious about it.

Despite running the survey during the height of their vacation season, 673 took the time to fill everything out, including two open-ended questions where they could write as much as they wanted on any topic they chose.  69% came from the US and 31% from other nations.

All 673 answered the multiple-choice questions.  512 took the time to answer the open-ended question - What are your concerns about living in Panama?  552 answered the other open-ended question - What attracts you to Panama?  I have read every single one of those 1,064 "mini-essays".  Multiple-choice questions are not enough.  People need the opportunity to freely express themselves on a topic as important as relocating to another nation.

Beyond that, there is more data than you might think.   For example, it is not just a question of how everyone in the full sample answers a given question, but do those in their 40s differ from those in their 50s, 60s, or 70s?  And if so, how?  What about single people, couples, or those with households of 3 or more people?  Do they look for different things?  If so, what?

What will happen to all this data?  I will provide my members with a general overview of the results and that will likely be passed around in cyberspace, but to include all the detailed results would require at least 40 pages, probably more.  That's much too long.  As for the real estate sector, I told the members at our YouTube channel that I did not intend to simply hand it all over for free.  I have done enough of that.  And preparing a full detailed report for sale does not really mean it will help change things.

The purpose of the survey was not to provide dinner table conversation.  It was meant to have an actual impact on future developments.  My attitude is simple.  When and if we find a developer serious enough to use the information for the right purpose, we will talk and, if successful, I will let members know the full results.  

One additional note is necessary, I know from past experience.  The names, email addresses, and any other contact information of people who took part in this survey are not available.  My members know I never have and I never will sell or share my mailing list or any of their personal information with anyone. 

I will discuss some of the results here in the future, but there is one result that stands out.  When I first began survey work in 2005 and in the surveys following that, it slowly but surely became apparent that there was a very substantial portion of the foreign market looking at Panama and its neighbors with the hopes of finding a real estate development that satisfied their desires in three respects.  Although Panama could provide that combination, they could not find it in Panama in the past.

They still can't.


[If you would like a PDF copy of this commentary, click here.]


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COMMENTARY - September 2017

I am going to take a moment to answer a question I have been asked on more than one occasion in recent weeks.  What will the impact of Panama's recognition of the People's Republic of China (PRC, mainland China) beon the Panamanian economy?  And more specifically, are they going to have a major impact on Panama's real estate sector?

There are three major ways for foreigners to make money in Panama.

1) They can invest in our stock market, but this is extremely unlikely.  Panama's stock market is too small, offers too little, and without enough "liquidity" for this to make sense to any foreigner with a decent amount of money to invest.  The mainland Chinese will be no different, so we can put this aside.

2) They can invest their own money in a project with the goal of profiting in the future.  Real estate is just one sector where this is possible.

3) Other people can supply the money and they can contract to help build or implement the project.  In Panama, this typically means major infrastructure projects, not real estate.

So which will they be, investors or contractors?

Take a moment to look at another web page.  You do not have to be Spanish-speaking or even use Google to translate the page.  All you have to do is go to the list of nine companies and consortia at the end of the article who are bidding on Line 3 of Panama's Metro.  You will get the idea quickly.  The mainland Chinese are already here and competing for major contracts.  

The August 18 decision by the PRC's State Council to specifically restrict foreign real estate investment is also a very significant factor.  China is pushing its OBOR (One Belt, One Road) initiative that is meant to tie together various Asian markets and connect them directly to Europe.  This is their #1 priority and Panama is definitely not part of their strategy for OBOR.

We do not expect any major real estate investments from mainland China in the near future.  However, I say "mainland" for a reason.  Having lived and worked in east Asia in the past, I am very much aware of another group of the Chinese people; some of them are major investors and very active.  They are referred to as Overseas Chinese and number about 50 million.  They do not answer to the PRC's State Council.  

Chinese visitors to our website are from among this group, primarily living in Singapore, Malaysia, and the Philippines. This is the group that we focus on for our consulting services, but which we do not expect to have an immediate impact on Panama.  Direct flights from Asia will be very helpful when they begin.

Finally, I will share a brief thought on the growing crisis on the Korean peninsula.  It seems Kim is absolutely determined to force this "to a head", as we say in English, regardless of the dangers involved.  I have no idea what the final results will be, but I suspect we will know soon enough.  With one exception, the results are almost certain to be literally earth-shaking.

It is more than just demonstrating that his missiles can strike the US.  He has dramatically added to the tension by demonstrating that he also has hydrogen bombs, not simply atomic bombs.  Without all the detail, an "atomic bomb" is an example of nuclear fission (the same as used in a nuclear power plant).  A "hydrogen bomb" is an example of nuclear fusion.  Fusion is much more powerful than fission and someday may be a common source of energy here on earth, but we have not yet discovered how to do that successfully, outside of a bomb.  

However, I can offer you an excellent example of nuclear fusion in action.  We call it the Sun, that yellow ball up there in the sky every day.  Like all stars, the Sun is powered exclusively by nuclear fusion.  It is estimated that a hydrogen bomb can yield as much as a thousand times the energy of an atomic bomb.  Whether it is 100 or 1000, this is a major new provocation.  Finally, today's news suggests that Kim will launch another ICBM (inter-continental ballistic missile) very soon.

I have followed this situation for years.  With one exception, I believe that whatever ultimately results from this series of provocations will be disastrous.  It will have global social, economic, and political consequences for a long time to come.  It is a nightmare in the making, for Panama as well as everyone else.

The exception?  No one knows what is going on in the minds of North Korea's generals.  It is possible that at least some will appreciate the simple fact that, if the US strikes, they could end up being the equivalent of slices of burnt toast.  That is an incentive to change the course they are on.   But only they know what is on their minds.

Or perhaps there is some course of action that I am not considering that may save the day, but I am definitely not counting on it.  All we can do is hope.  However, let those of us living in Panama be thankful that we are far from that troubled peninsula.

It is ironic, but entirely a coincidence, that we put up a page this weekend with the initial announcement of our new Pied à Terre service.  It is designed for our visitors living in "troubled nations" who are looking to diversify their investments and even themselves!   Originally created in response to visitors from Europe who are not as familiar with Panama as North Americans, it now sounds as if it would be a real possibility for many others.  Take a moment to see what we mean by Pied à Terre.

If you would like a PDF copy of this commentary, click here.


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COMMENTARY - August 2017

We say that 2016 was a "bad year" for Panama.  It was the year of the Panama Papers.  We received truly intense global attention in what appeared to be a very negative way.  Many Panamanians and expatriates were convinced this would be a disaster for economic development in Panama, especially for foreign investment.  I reminded my friends that sometimes negative publicity is better than no publicity at all, but that did not satisfy most of them!  I understood.

We can also say that 2016 was a "good year" for our neighbors in Colombia.  It was the year that the Colombian government and the FARC (Fuerzas Armadas Revolucionarias de Colombia - Revolutionary Armed Forces of Colombia), a famous criminal cartel with a far-Left ideological orientation, signed a peace accord.  Their President received the Nobel Peace Prize as a result.  

Now, we know the situation in Colombia is a lot more complicated than foreigners may understand and that we will not know the results for some time, but those are details and the global media does not care about details.  It was the same with the Panama Papers, the over-simplification of a complex situation.  But in these two cases, Colombia ended up with positive press and Panama ended up with negative press.

So, what were the results in terms of foreign investment?

CEPAL (Comisión Económica para América Latina y el Caribe - Economic Commission for Latin America and the Caribbean) has now come out with the results of Foreign Direct Investment (Inversión Extranjera Directa) in both nations and others in Latin America for 2016.  Without going into all the detail of how FDI is determined, all we need to know is that it is a measure of how interested foreigners are in making major investments in a nation.  From what I wrote above, we might expect Colombia's to have grown and Panama's to have taken a hit.

First, we can take a look at the rate at which FDI grew in each nation and some others between 2015 and 2016.

Colombia had its best year in a very long time, growing 19.5% in one year.  Obviously, the "good news" was noticed.  However, Panama's 15.9% was not far behind and also excellent, so our "bad news" did not have a major impact on us at all.  It was another good year, the fifth year in a row that our growth rate reached a new high.

But that is not the most important story, in my view.  The quotation I used in the chart above is one I have written many times.  The one in the chart below is one I use even more frequently when discussing a nation's economic development.

As you can see immediately, Colombia may have had a good year in 2016, but Panama has had at least 15 good years as a foundation.  That foundation makes a difference.

A final way of looking at 2015 is to realize that Colombia's FDI rose by $45 "per-Colombian" that year.  But Panama's FDI grew by $182 at the same time, despite our slower growth rate.

When comparing nations where one has a much higher population than the other, I always look at per-capita (per-person) statistics.  This "levels the playing field". With a population more than 12 times greater than Panama, Colombia has more mouths to feed, so they need a lot more money than we need to provide for their people.

This is not meant as an insult to Colombia.  If any nation outside Colombia wants Colombia to successfully deal with its cartel problem, it is Panama!  No, it is not an insult to Colombia.  In their case, what is good for them is also good for Panama.

Instead, it is a way of saying that our "bad year" with its "Panama Papers" was not such a bad year at all.  Foreign investors hate risk.  We would have seen a sharp drop in FDI if they felt we were high-risk.  Not at all.

That does not mean we can sit on our success and ignore the lessons of the past, but when someone tells you that the "Papers" frightened foreign investors away from Panama last year, keep these charts in mind.

If you want a copy of CEPAL's report on Latin American FDI, you can download it here in English or here in Spanish.

If you would like a PDF copy of this commentary, click here.


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COMMENTARY - July 2017 (2)

Are we up or are we down?  Are there two Panamas?

On the one hand, both Gross Domestic Product (GDP) and the Monthly Indicator of Economic Activity (IMAE in Spanish) are rising far higher and faster than had been predicted last year.  These measures of economic growth are clearly signaling that all is well and improving.

On the other hand, retail sales, hotel occupancy, real estate sales, collection of our sales tax, and other individual indicators show a fall in economic activity.  And there is no doubt among those of us who live here that the economy's growth that affects us directly has slowed down substantially this year.  You can hear it in the streets of Panama City and in social media.

So what is happening?  You can spend all day looking at each of the various economic sectors in detail, but I think there is a simpler way to express it.

The Panama Canal's expansion has led to a sharp increase in tolls collected, more than had been expected.  That makes a big difference.  In addition, one of the most ignored but very important sectors of our economy, the Colon Free Trade Zone (FTZ), is finally seeing a rebound after a long struggle resulting from the Venezuela's ongoing financial disaster and Colombia's failure to live up to its trade obligations.  People often are unaware that the FTZ employs 25,000 people compared to the Canal which employs roughly 10,000.  The combination of both rising sharply has undoubtedly helped the overall economic picture.

But that money has not yet moved down into the pockets of the people on whom the retail trade depends, the "people in the street".  We have several factors that are causing problems at that level.  For one example, this is the "summer season" in North America and Europe, but they have great weather now, so Panama's warm temperatures are not as attractive as they will be in a few months.  This is no surprise.

That is a seasonal issue and not the most significant.  I believe one major factor is the long delay in the construction of the new convention center that will be able to handle as many as 30,000 delegates at one time.  Yes, the second terminal at Tocumen will help, but it is the convention center that is key.  However, it will not be finished until next year.  Even the roof will not be attached until next February, if everything proceeds on schedule.  So we may have a year before we see it fully functional, but I hope they can cut that back a couple months.

I suspect that if the first convention has only 15,000 delegates, half-capacity, that you will see and feel the difference immediately. If they spend an average of $1,500 a delegate (and they will on hotels and everything else), that's $22,500,000 dollars spent in a week.  The hotels will feel the impact immediately.  So will the restaurants and the casinos and the bars, etc.  That is money that will show up in more jobs and in people's wallets and pocketbooks rapidly.  The attitude on the street will be very different than it is today.

Even the real estate market will benefit, if not immediately.  I have been to conventions.  I know people stay to take a tour or otherwise visit other areas.  But most importantly, 15,000 people with money will return to their homes, wherever that may be, with a good impression of Panama and talk about it.  If we do our job well, they are the best advertisements Panama can have.  And instead of our paying for the "advertising", they are paying us.  I think we can all live with that.

Now let's assume that we average 30,000 delegates each month.  That can be one convention, or three averaging 10,000 delegates or five, each with only 6,000 delegates.  In a year, that is 360,000 visitors spending at least $540 million dollars.  And if the center does its marketing well, the total can be much, much more.

So don't despair!  I have said here before and elsewhere that I believe 2017 will be a "building year', that 2018 will be a "completion and opening year", and 2019 a "boom year", especially following the Pope's visit in January.

I have additional information to provide in the next couple weeks that will be of interest to the real estate community nationally, not just in the Lake Bayano area where my company is focused, but nationally. It will be unique and valuable.

If we work together and use the brains God gave us, we have some great times coming.  All the more reason to begin the initial work right now when it is comparatively cheap.

I will be back very soon.  Thank you for taking a moment to visit.

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COMMENTARY - July 2017

The Gallup organization provides the largest, most extensive opinion surveys in the world.  They regularly poll people in more than 150 nations, including Panama.  Every few years, they report a very specific and unusual report.  In each of those nations, they ask a single question and the answer is either "yes" or "no".  Very simple.  The question is....

"Ideally, if you had the opportunity, would you like to move permanently to another country, or would you prefer to continue living in this country?"

Note the word, "permanently".  That is a strong statement.  However, it does not require the person to say they are planning to do it or even if they have the resources to do it.  They just ask them what they would if they could do it.  In "good years", the percentage is likely to be smaller.  In "bad years", the percentage is likely to be larger.  So the percentage can rise and fall quickly over a short period of time and that can be very misleading.  

Gallup deals with this by what is called a "rolling average" in statistics.  They average the results over several years and several polls.  That helps eliminate the major high and low points to give us a more stable idea of how people feel.  They did this over three years from 2010 through 2012, and again for four years from 2013 through 2016, and reported the results last month. In the earlier survey, they polled 521,182 adults in 154 nations and in the latest survey, they polled 586,806 adults in 156 nations.  No one else provides anything close to this.

Here are the results by global region for both surveys, listed from highest to lowest in the most recent survey and showing the change, if any.  An asterisk (*) indicates a. statistically significant change.  With huge numbers of people involved, a small change in some regions can be significant. "Northern America" means the US and Canada because they have included Mexico in Latin America in this specific poll.


You could call this an "Unhappiness Index", seriously unhappy.

As you can see, the average for the whole world is 14%.  Only one region is 30% or more, considered a very negative result.  But individual nations in each region can be very different.  Gallup provides us with a list of 31 nations where the percentage is 30% or more.

So what difference does this make to us in Panama?  Normally, very little, but for the first time, a nation of special interest has broken through the 30% level.  There are a few small and troubled European nations on this list (Albania and Kosovo are examples), but only one major European nation.  That nation is Italy.

32% of Italian adults said they would permanently leave Italy to live in another nation if they had the opportunity.  That is only one percentage point behind Uganda and two points behind Africa's Gabon and Senegal. It is also up 7 points from the 25% of the first survey, one of the largest increases in the world.  Italy is a nation whose people are open to global relocation and investment.  Many of those with financial resources will relocate outside Italy.  Many of those with financial resources will invest outside Italy.  The only questions is, where?

Panama and Italy have had a long and friendly relationship, including a special residency visa for decades, the template for today's "Friendly Nations" visa.  However, that visa was not widely used until the last few years.  If you keep your eyes and ears open, you know the Italian community in the Panama City metro area has grown.  

Italians can be very good investors and relocators in Panama.  Their language and culture are close enough to the Spanish to make integration into Panama's society relatively easy.  And because they have to take a long and expensive trip just to visit Panama, most of them have financial resources that can boost the Panamanian community without being a burden.  Some of them have enough money to be major investors.

I am very familiar with polls.  My US company polled more than 120,000 Americans in nine polls from 2005 through 2011 regarding relocation to other nations.  That led to two articles in Barron's among others, a CNBC interview with Erin Burnett, and multiple interviews all over the world from Singapore's Straits-Times to French public radio and many others.  The reason I first commissioned these polls was that I wanted to share the results with Panamanians, but I found no real interest in market research outside of Panama.  When homes were selling quickly, no one cared.  When homes were selling slowly, no one wanted to spend the money to do something smaller, but directly useful to them.  The problem is a lack of market research.

Some years ago, I was called by an owner of a large real estate firm in Panama City and asked to stop by to talk to him.  I did so.  He said business from Americans had fallen off and he wanted to know why.  I told him the only way he could find out is to ask them.  He needed to do some market research.

He very aggressively responded, "But I do market research!  I speak to every American who visits our offices.  I tell the secretaries to bring every American to me first when they arrive."  He almost sounded insulted.

My response was that he was not researching the right "market".  I asked him, what about the 19, or 29, or 39, or 49 Americans who saw your advertisements or visited your website, but did not come to your office?  Don't you want to know why?  They are the only ones who can tell you where you are having problems, but you have to ask them.  That takes effort and some money, but it can be done.  That is what I mean by "market research".

Well, that was the end of the interview.  He was satisfied that his market research was all that was necessary.  

Nothing has changed today.  Market research is still market research and you cannot research your "success", you have to research your "failures" too.

But Europe is a special problem for most people I talk to in Panama.  It is too big.  There are more than 40 nations in Europe, some in the EU, some not.  How do you do research in a market that large?

The first thing to do is stop looking at Europe as a single market.  Think in terms of 40 markets, each with a different set of requirements.  Look for one where the odds are best that you will find people interested in Panama, if they know what is available.  And ignore Spain unless you have a special relationship there.  Everyone in Spanish-speaking Latin America looks at Spain.

How do you choose that single market?  Well, I have just demonstrated one way. That is what we do as consultants at Panama Wave.  We get "outside the box", find useful statistics and other indicators, consider the client's needs and help them design their approach.  Do we have ideas as to how Italy and Italians might be approached?  Yes, we do, but that's business.  If you can use assistance in that respect, just let me know.

I first mentioned Italy as an important potential market in the first of my two commentaries in April.  I watch it on a continuous basis, as I do several others.  I have done this all my professional life, so I am used to it.  Italy is especially interesting to me.  It has the potential of providing a great deal of investment more rapidly than most other nations, but we have to have something to offer and we have to let them know!

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Myopia (near-sightedness) is no fun.  I have been severely myopic all my life.  I am very fortunate to have been born at a time when something could be done about it.  I started with glasses, then hard contact lenses, than soft contact lenses, and now implanted lenses.  I was so myopic that I could only get a clear focus on something one inch (2.5 centimeters) in front of my eyeball.  

Without correction, I could see incredible detail.  A handful of "white" sand turned out to include grains of a dozen colors.  Even looking at something as common as a ballpoint pen was amazing.  I could see so many tiny lines, imperfections, differences in color and more that someone with good vision could never see.  I could see every detail of an ant eating.  To see things as I saw them, someone with normal vision would have to see it on NatGeo or the Discovery Channel!

It was special, but if I did not have a way to correct my vision, that would have been my entire world.  Everything else was just shapes and colors.  With correction, I can tell you that your entire world explodes!  Yes, I am fortunate to have been born when I was. 

In five decades of working all over the world in many different sectors for corporate clients, foreign aid programs, and others, I had one fundamental goal - economic development.  Everything from nutrition to road infrastructure to business development and many others were my professional focus for one or another job, but they were all designed to improve economic development.

I was hired to find potential.  I was hired because they needed a professional analyst with "fresh eyes" to look at what they saw every day, but could not always see.  I was their "corrective lenses" to help them overcome their myopia.

One thing became especially clear after all those decades.  Regardless of what nation I was in, including the US, economic myopia is as much a problem for local people in their home nations as for foreigners.  Sometimes, local people were upset that foreigners would "analyze" their development.  How could a foreign consultant do a better job than someone who was born in their nation and lived there all their lives?  

Analysis in economic development is not about nationality.  Just like another famous variation of analysis we call "the scientific method", analysis knows no nationality.  So this is nothing special to Panama or the US or China or Germany or any other nation.  It is human.  Anyone can be myopic...or not.

Myopia is a problem with some forms of economic development in Panama.  Let's call it "investment myopia" Sometimes our investment myopia is so bad, we cannot even see what is in front of us and has been for decades.

From my experience, I say that that there is only one truly world-class resort in Panama.  Yes, only one.  It is expensive.  If you want to spend a week, bring thousands of dollars with you, not hundreds.  It draws a large and very wealthy clientele.  It required vision when it was first established.  Myopia would have killed it.  The person responsible, an expat, was thinking so far out of the box, he almost left Panama!  But amazingly enough, after more than thirteen years talking to and working with Panamanians and expat residents in Panama's business community, I have never heard one of them mention it, not once.  It is one thing to be unable to see potential in a totally new area.  It is another to completely ignore it when it has already been clearly demonstrated and anyone can see it, if they open their eyes.  

But it has a "problem".  It is "impossible".  It was built in the Darién!  Not just across the provincial border between the Panama and Darién provinces, but on a distant portion of the Pacific coast (it is the tiny red circle on the map).  Driving there is out of the question.  Renting a boat from the city is very expensive and very slow, if you can find one.  Everyone arrives by plane.  And if you want to spend one week at this fishing lodge, depending on the month and the number of people in your party, prepare to spend somewhere between $4,000 and $13,000, per person.  

Here is the best part!  It has been successfully operating for 54 years!  If you have never heard of Tropic Star Lodge, take a moment to visit its website.  You can read its history there too.  Ray Scott, a Texas "oil tycoon", did not suffer from investment myopia when he built his lodge there in 1961 and then opened it as the Club de Pesca in 1963.  It is now owned by the Kittridge family of Orlando, Florida.  No myopia there either.

At Panama Wave, we believe that there is great potential in Lake Bayano.  It is beautiful, tranquil, tropical (it is Panama, not an imitation of Florida) and an hour and a half from downtown Panama City, less from Tocumen, Santa Maria, and Costa del Este.  That is a lot closer than Tropic Star and you do not have to have Ray Scott's vision to see its potential.  It is all very obvious, especially once you visit.  It is not meant to be an ocean fishing lodge, obviously, but it is perfect for a lake resort and homes, even a fantastic personal estate, or a combination of all of that.  

To ignore it is not only investment myopia, it is profit myopia.

So, if you are willing to step outside The Box and open your eyes, this is the time to do it.  If you have the necessary resources and are interested, just let me know and I will be happy to introduce you.

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In Panama, we have a distorted view of one major segment of the real estate market.  That segment is waterfront properties. We seem to be convinced that the only real waterfront is oceanfront. We don't even consider lakefront.  Panamanian real estate assumes that everyone who comes from the US and is interested in waterfront must be looking for oceanfront. Even those who have spent years living and working in the United States are unaware that the two kinds of waterfront are equally important, despite the huge US lakefront market. 

People here often say to me, “But Bob everyone who comes here tells me they're looking for oceanfront.  Nobody talks about lakefront.”  My response is simple. They come looking for oceanfront because that is what we advertise. We never speak about lakefront, so people who are interested in lakefront never think of Panama.   It is just that simple.

If you seriously follow real estate in United States, than you know Zillow.   They include real estate properties from every state in the US,  the District of Columbia, and even Puerto Rico and the US Virgin Islands. They have a database of more than 100 million properties.  Yes, you read that correctly, more than 100,000,000 properties.

With that huge database, a large staff, and plenty of money, they are able to do serious in-depth research that traditional real estate agencies cannot hope to do. I will share the results of one research project with you today.

Three years ago,  Zillow completed a national survey of US waterfront homes.   The title of their report is, “What is Waterfront Worth?”   By waterfront, did they mean oceanfront? No they meant both oceanfront and lakefront equally. They did not divide the report into two sections. After all, if you know Americans and Canadians and many Europeans, you know millions of them have homes on lakes all over North America and Europe.  For them, a property on a lake is every bit as much a waterfront property as one on the ocean.

What was Zillow’s conclusion? “Nationally, waterfront homes are worth more than double of the value of homes overall.”  Good.

Although they treated all waterfront properties equally, it is interesting to note that the areas with the highest waterfront prices were all on the ocean.  But of the 10 areas with the lowest waterfront prices, nine were on the ocean too.  Only one was on a lake. 

It is also interesting to note that all nine of the ten cheapest waterfront areas were on the Florida coast.  Many people I talk with in real estate in Panama seem to assume that Florida is the King of oceanfront properties, but that clearly is not always true.  This helps explain why I get so many emails from Americans and Canadians after visiting Panama who left without buying. The most common complaint is, “We can find a much cheaper property in Florida.  Why should we pay more in Panama?”  Good question.

But there is a problem at this end and it concerns why people do what they do. Often, friends in Panama will ask me, “Why would anyone buy a home on a lake instead of a home on the ocean?”

There are many reasons, but here are a few you can hear in the major expat markets:

  • Lakes are peaceful and tranquil. You feel as if you are really in the middle of nature. 
  • Ocean beaches are too congested.  There is less privacy.  You never know who may be walking down your little piece of the beach.  And there is too much traffic around the good beaches.
  • We believe our younger children are safer at a lake then they are on the ocean. We are safer too.  We don’t surf.  [Remember that Panama is a Pacific nation, not a Caribbean nation. The surf is not always your friend.]
  • Lakes are better and safer for swimming, boating, canoeing, kayaking, waterskiing, and other water sports then the ocean.
  • And did we say lakes are peaceful and tranquil, and you feel as if you are in the middle of nature?  We did?  Sorry.

There are more, but these are good examples.  You may not agree with them, but you are not the buyer.

At Panama Wave, we know that waterfront in Panama is more expensive than land without waterfront.  We do not need Zillow to tell us that.  But there is a serious misunderstanding as to what “waterfront” means, not to people in Panama, but to people in North America and Europe.  Of course, there is a market for oceanfront, but that is not the whole story of waterfront.  Lakefront represents a major market segment and it is being almost totally ignored, despite the real opportunities right here in Panama.

As they say in business, I am “talking our book”.  As representatives of the most beautiful lakefront property in Panama, we have an obvious commercial interest, but only in this one case.   We are not real estate agents, we are consultants.  But given how much interest there is in real estate among expatriate investors, it is truly sad that Panama is ignoring this major market segment.  As a result, as I discuss in my March commentary below on this page, Panama real estate has built “The Box” and it is trapped inside. 

It is time not only to think outside the box, but act outside The Box.

If you would like to read the Zillow report, you can find it here.

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COMMENTARY - May 2017 (2)

In the last post, I offered some statistical evidence of the trend in relocation by US retirees to Panama, Mexico, Costa Rica, and globally.

Today, I want to share another kind of trend indicator.  It is not as strongly related to the full reality as the last one, but it is associated and very useful.  There is much more detail to this than is presented here and I will not provide all the details of why we approach these statistics in the way we do.  Not only would that take up too much space, it is the exactly the sort of thing we provide to paying clients!  As a result, this is just a small portion for free distribution.  If you or your firm would like a full presentation of this and a number of other indicators, let us know.

The statistics we use below are for people arriving at Tocumen airport, but only those who pass through immigration and visit Panama specifically. It does not include the many who are in transit to another nation.  The statistics are publicly provided by INEC, the Spanish acronym for the National Institute for Statistics and the Census, an official agency within the government of Panama.  The analysis and interpretation is our work.

Let me state the obvious.  Just because someone visits Panama does not mean they intend to relocate to Panama, either for personal or professional reasons.  And of course, many of these trips will be repeat trips, especially for business people.  But there are three groups we watch especially carefully. 

One group is from other nations in Latin America.  They are less likely to visit us for our beaches, mountains views, or historic ruins.  They have their own.  They are more likely than others to come for business reasons or, in some cases, relocation due to problems at "home".  Big changes in their numbers over short periods of time interest us.

In the past, I have mentioned that one reason Panama real estate was not severely impacted in 2009, the worst year of the global financial crisis, was that declining numbers from other nations like the US were replaced in large part by Latin Americans.  So what we call the First Wave of North Americans slowed down seriously while the Second Wave of Latin Americans took their place, and Venezuelans led the pack.

Below is a simple chart of arrivals from the three nations that are the leading nations for visitors to Panama today, during the period 2007-2011.

In 2009, the number of arriving Americans fell 14%.  The number of arriving Colombians fell 17.1%.  But the global total fell only 7.2%.  Why?  Because the Venezuelan total rose 372.6%.

I do not have to tell you why the Venezuelans came and continued to come.  But one thing I think we can all understand.  From the beginning, many were looking to relocate and that is one big reason why Panama’s real estate market, especially in the Panama City metro area, did not suffer from the real estate crash up north.

There is much more to the Second Wave than just Venezuelans, but they do serve as an excellent example of why it is useful to watch a statistic like this carefully.

However, that is the past.  What about the future?  We talk about a Third Wave from Europe.  Is there anything in these statistics that can tell us something about that?

For what we think are good reasons I will not bother mentioning here, we look specifically at the 2011-2015 period.  Let’s take the nations who sent us at least 30,000 residents in 2015 and show how they had changed since 2011.

A lot of data, but hard to analyze.  Let’s take three more steps and see what happens.  First, we will simply highlight the European nations.

Let’s make another small change and rank them by their traffic in 2015 instead of 2011.

That shows some differences, primarily Spain’s growth, but Spain has always been a leading European nation sending Panama visitors and we are looking for trends.

Let’s take a look at the same statistics, ranked by their percentage of growth over that period.

Vive la France!  And this does not take other nations into account, the Germans for one example.  Their rate of growth has already passed Italy’s, but they started at a lower number and have not quite reached a level to include on this list.  They will get there soon enough, as has been confirmed by 2016 statistics.

Are these Europeans just more tourists?  Some are, no doubt, but it is a long way to go and a steep price to pay only for a vacation.  Plus, the lack of a Panama advertising campaign last year which hurt us in some markets like the US had no significant impact on the primary European markets.  Even the strong US dollar had no effect.  That, by the way, is why Canada shows a negative number.  It costs a Canadian nearly a third more to buy a home in Panama than was true in 2011.  That hurts.

I know some people will probably ask, “But Bob, the number of direct flights from Europe has nearly doubled.  Isn’t that the reason for these increases?”  No, it is not.  If Alitalia was not up for sale by the Italian government, as it is right now, there would almost certainly be a direct flight from Rome, but there is none.  That would be helpful, but it has not stopped the Italians.

That question above is upside-down.  It is not the “supply” of direct flights that is responsible.  It is the “demand” for those flights.  Today’s airlines cannot afford to set up additional very expensive trans-Atlantic routes and flights for any other reason. 

Tocumen arrival statistics are not enough to make predictions, but they are an important part of a much bigger picture.  Alone, they mean very little.  Combined with other factors, they mean much more.  Panama Wave is a consulting firm that helps people understand what is going on in Panama today and what is very likely tomorrow without reference to politics or opinion, but based on trends, statistics, and above all, informed expert interpretation.  If we can help you, let us know.

In the meantime, thank you for visiting.

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The following is excerpted from an essay I prepared for another newsletter.  It demonstrates a principle we follow at Panama Wave whenever possible.  We appreciate opinions, but we always look for any "hard" facts behind the opinions.

Every once in awhile, someone claims that retired Americans are no longer coming to Panama.  Indeed, they are going home and their number is falling.  This is never backed by any hard statistic, just opinion, usually from someone unhappy.

What difference would it make to someone who is not American?  Americans and Panamanians have more than a century of experience with each other and, despite some difficult times in the past, they have been good friends.  If Americans were leaving Panama, that would be news.  We would all want to know why.

Okay, are there any statistics that are “hard”?  The US does not require its citizens to register if they leave the US, but retirees who want their Social Security payments deposited to an overseas account do need to register for that.  As a result, we have a real statistic reported annually by nation of residence.

This statistic does not include those who have their checks deposited in the US or who have not yet claimed their payments, but there is one fact that makes this statistic useful.  It is very “sensitive” and will quickly reveal a trend, if there is any.  If Americans receiving Social Security in Panama go back to the US or anywhere else, you can bet they change their bank fast!  So anyone having it deposited electronically in Panama is definitely living in Panama.

To see a trend over time, we need statistics for more than one year. Fortunately, these statistics are available to us for 2002 and every following year through 2015.  The statistic for 2016 will not be ready for a few more months.

But I want to do a little more. I want to compare Panama's results with two other nations, Mexico and Costa Rica, and with global statistics for all those Americans claiming residency outside the US for Social Security, the global total.

We do not want to use actual numbers as obviously the global total would be far more than any one nation, and Mexico has always had a very large American resident community (over 1,000,000) since it is a next-door neighbor to the US.  So how can we compare them?

We can “index” the statistics. Briefly, we can use 2002 as our base year and represent each group as “100”.  Then if one area goes up 8% the next year, the index number is 108.  If it goes down 8%, the index number is 92.  In other words, we are showing the percentage gains and losses, but since each group is set at 100, they can be shown in direct comparison in a graph. After all, we are not really concerned with the numbers, we are only concerned with the trend and this will show up quickly on a graph using this approach.

Fine.  Let’s see the results, taken directly from US Social Security Administration reports.


Let's start at the bottom with Mexico, the green line. It has grown very slowly for several years now, some years falling.  There are still many more American retirees living there than in Panama, but their growth is certainly not impressive.

Next up is Costa Rica, the red line. Here we see a fall in 2012 and another in 2013, and another in 2014, and now another in 2015. The trend in Costa Rica in this regard is very clear. The statistic is lower today than it was in 2005. That is significant, the sort of thing we would expect in Panama, if Americans were leaving in large numbers.

Above it is a purple line that represents the number for the entire planet. You can see that continues to rise modestly, but steadily.

Finally we have Panama, the blue line. Notice how it started out at about the same level of Costa Rica in early years, but then sped up and increased much faster.  As in Costa Rica, the trend is clear, but in the opposite direction.  Although it slowed a little in 2015, it is still growing faster than the others as the index numbers at the bottom demonstrate.

Why compare Panama only to Mexico and Costa Rica?  This is not a “contest”, but these two nations provide us with a comparison with similar nations in a key respect. Mexico and Costa Rica have attracted American retirees for decades. They are very well-established as attractive to American retirees over time and thus provide a good comparison.  That was why I chose them and I think I was as surprised as anyone that they both have had real difficulties in the 21st century.  Certainly, they are fine nations and happy homes for many retirees.  I wish them well.

Remember, these are trends. They do not predict the future, but they do show what has happened in the past and they make a legitimate comparison of Panama with two other nations and with the total, world-wide. This is a statistic that can be accepted as accurate and “hard”, as opposed to someone's guess.  I think the trend is as clear as it can be and it is definitely positive.  So much for rumors.

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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.