Mark Twain once said, “History does not repeat itself, but it does rhyme.” So as time goes by, Panama’s housing boom is increasingly looking alike its doomed American par, the bursting mother of all housing bubbles.
Panama City: Enter the Dragon!
By Manu Cron
Boomers looking for well-balanced information about Panama will find out rather promptly that it is one very scarce commodity these days. The wizards of R.E.A. (a.k.a. real estate advertising) and their well-off Maecenas have managed to create, out of a country that could be beautiful indeed, a three-headed Dragon (developers, brokers and profiteers) that can devour almost anything crossing in its path.
Panama, long time renowned by its famous navigable canal and the good-nature of its people, has more recently been sold as the newest Gold Rush of the 21st century.
Unfortunately, current American history shows tangible proofs that the speculation beast, once freed by greed and deception, will sink its fangs into both men and nature, swallowing the whole landscape. As a result, our world could be awfully transformed in a gloomy realm of negative equity and amortization.
But reckoning days are coming!
An impartial observer neither should have any stakes in the game nor does he/she should kneel to serve those with a vested interest. Regrettably, the great majority of “self-proclaimed” experts in Panama are somehow connected to the local real estate and tourism industries.
Sadly, Saint George is not out there slaying the Dragon. Like it or not, Big Money rules.
But not all is lost! While reviewing the substantial exposure that Panama City has received, mostly overrating the capital as one highly secure, well-structured and very affordable “paradise,” we have found some dubious claims:
1. High security rating.
2. High-end real estate property at bargain prices.
3. 20-year taxes break on new real estate property, but no mention of the taxes enforced upon the land.
4. World-class infrastructure.
Slaying the Dragon: (debunking Panama City myths with factual statistics)
1. Panama City high insecurity rating. Numbers don’t lie:
According to Panama America, one local newspaper, the statistics reported by the Technical Judicial Police (PTJ) show high levels of crime, reflecting a 32% increase during the first two quarters of 2007. The General Treasury of the Republic reported 411 violent deaths (Murders, Suicides, Death from legal intervention and/or from undetermined intent, Unintentional Firearm Fatalities and Traffic Deaths) within 21 Corregimientos (Villages) of the metropolitan area. http://www.pa-digital.com.pa//archive/08132007/ciudad02.shtml “Traffic deaths and accidents are as frequent in Panama’s streets and roadways as are crimes, robbery and assaults.” http://www.pa-digital.com.pa/archive/09302007/index.html
Panama City (Population: 813,097) recorded 248 murders in 2006, 70% of the nation’s total (354). Murder (per capita) rate: 0.305006 per 1000. Simplifying: One murder per 3,300 persons!
Latin America (Total Population: 520 million) recorded 150,000 murders for the one-year period 2006. Murder (per capita) rate: 0.28866 per 1000. One murder per 3500 persons! (The world’s worst violent crime region.)
Panama’s national statistics for violent crime registered 194 murders and 1,075 gunfire victims during the first semester of 2007 (13% up from the same period of the last year). Although past performance does not guarantee future results, Panama City, unless that the murder rate plunges around 6%, could rank even worse than last year. Projected murder (per capita) rate: 0.332062 per 1000. One murder per 3,050 persons!
Who would dare to rate Panama City as a high security place?
Additional Crime Statistics for the Republic of Panama (January-June 2007):
Police booked 17,103 offenses. Thefts: 5,300; Burglaries: 3,559; Armed Robberies: 1614; Aggravated assaults: 532. During the past year, 231 crimes were committed against foreigners. This year, during the first two quarters, 117 crimes against foreigners have been booked, including 77 robberies. No data was offered for vehicle theft, but 328 home burglaries were reported in the capital. Quibian Panay, commissioner of the Alcalde Diaz Village, declared that property crime is growing, mostly due to well-organized gangs operating within the metropolitan area. http://www.ptj.gob.pa/estadisdicainicio.htm
Counting with thousands of members, 209 gangs nationwide (130 in the capital) are now bigger and deadlier. One hundred forty-three juveniles were killed in 2006. The rising murder rate can be directly linked to the soaring drug abuse. Panamanian juveniles have the highest narcotics consumption rate in Central America. The average age in which children are introduced to drugs is 12 to 14 years old, but some risk groups are exposed earlier in life.
The mounting narcotic’s consumption is casting a bleak shadow upon the country’s future: its children. According to the Ministry of Education, high school desertion has reached an astounding 70%! School desertion and family disintegration are both feeding juvenile gangs, but they are not causes, but consequences of poverty.
The World Bank ranks Panama as Latin America’s second-worst country in wealth distribution. The earnings of the upper economic sector, the so-called “Rabiblancos” (“White Tails” is a popular nickname for the wealthier families), account for 60% of the national income; while those at the lower end of the pyramid, 20% Panamanians, account for just 2%! Poverty is evident at both urban and rural areas.
Nonetheless, Panamanians complain that authority’s efforts to fight crime are lacking, additionally accusing the National Police of corruption and inefficiency. Although Panama’s Police have the highest per capita rate in Central America (one officer per 200 persons), they are generally regarded as under-educated, ill-trained and poorly equipped, unable to keep pace with growing violent crime, the kind that usually makes a much bigger impact on news headlines and society.
Linda E. Watts, former American ambassador to Panama, considered poverty as the biggest issue here, where 1, 2 million Panamanians, 40% of the total population, live below the poverty line, while one-fifth suffers from extreme poverty. http://panama.usembassy.gov/panama/Fundraising.html
A research published by the University of Panama shows that one tiny group, conformed by approximately 80 individuals, mostly interconnected by clan and/or financial ties, controls 50% of Panama’s Gross Domestic Product (GDP).
Even though GDP grew up 8% in 2006, 69.5% Panamanians live monthly with $400 or less; 30.5% live with a higher budget, but among this group, only 5.2% can afford to spend more than $800 per month. The minimum wage is $285. According to recent figures of the Ministry of Economy and Finance, poverty affects 37.2% of the total population (1.2 Million) and 16.7% are living in extreme poverty. However, the Third National Report of Human Development of the Program of the United Nations (PNUD) stated that 1.4 million Panamanians, 40% of the population, live in poverty and that 16% live on less than $1.00 per day.
Panamanian economy grew up 8.86% during the first half of 2007. Gross Domestic Product (GDP) per capita has reached $4912 ($411 monthly), 7.1% higher than 2006, but the unfair wealth distribution has remained almost intact. This issue could very well explain why crime is hiking higher, fueled by 8% rate of unemployment (10% in urban areas and Central America’s highest unemployment rate among juveniles and young adults 16 to 25 years old); plus 24% rate of informal employment (30% in 2005) and the highest shadow economy rate in the region (60% of the national GDP.)
The Food and Agriculture Organization (FAO) of the United Nations (UN) recently reported that malnutrition affects 25% Panamanians. According to Merilio Morell, FAO Representative in Panama, the problem is critical and tends to get worse due to the lack of adequate food programs. Inflation, at an all-time high, is pushing up the cost of the national basic food basket ($217.83), thus seriously affecting minimum wage workers and the poor.
Panama’s economic progress should not be coldly measured by GDP growing. The reduction of poverty and the improvement of the living standards of the marginated population need to be taken into account. Regrettably, the growing national wealth has mostly served an unmerited purpose: to make the rich wealthier while generally encumbering the middle classes and making the poor poorer. While the country is economically booming, the abysm between Rich and Poor has hardly shortened. Sure, King Midas is actually touring Panama, but his golden majesty has touched a very few chosen. http://www.pa-digital.com.pa/archive/09252007/colab02.shtml
The City of Sao Paolo, Brazil, can surely boast to be an ultramodern metropolis with many skyscrapers, commercial malls, huge parks and recreational facilities; but nevertheless it’s only second to Caracas, Venezuela’s capital, as the most dangerous cities in the Americas. So it really doesn’t matter how many skyscrapers does Panama City have or how many more are coming. Quality of life and security do not depend on that!
However, in order to be fair, the Republic of Panama, as a nation (contrary to its capital and the port City of Colon, another raging violent crime area), ranks yet fairly better than some of its more insecure hemispheric neighbors: Colombia, Jamaica, Mexico, Brazil, Venezuela, El Salvador, Honduras and Guatemala. But nevertheless, Panama is far from deserving a high security rating.
2.High-end real estate property at bargain prices? They should be kidding!
Three years ago, the average ocean front-side condo at Balboa Avenue was priced at $450 per square meter. Nowadays, prices have skyrocketed up to $3,500 and even higher in certain building complexes, up to $5000M2!
“One Prima Panama study looked at immigration trends from the US and residency visas issued to foreigners by Panama’s government as a proxy for end-user demand. Its findings suggest that the level of immigration might be insufficient to justify the building of so many luxury apartment complexes targeting foreign purchasers, and that the perception of foreign demand could be overly optimistic.”
“There are growing concerns that the building activity is too much for Panama’s market to absorb, particularly as property values are rapidly rising. The activity is even larger than recent property development in Miami metro area, which is a wealthier and internationally oriented city and business centre for Latin America.” (Miami is actually a deflating bubble just waiting to burst!) http://www.viewswire.com/index.asp?layout=VWArticleVW3&article_id=1601333945&rf=0
The easy dollar’s pump engine fueling Panama and Central America’s construction boom is badly sputtering. America’s subprime mortgage melt is just beginning and the landslide has yet a long way to go. US sales of existing homes slowed to their most sluggish pace in five years.
Home prices fell for a record 12th straight month. The index that tracks signing of contracts for sales of existing homes tumbled 12.2 percent for July, to its lowest level in more than six years, the National Association of Realtors (NAR) reported. New-homes sales tumbled in August to the lowest level in seven years, a stark sign that the credit crunch is aggravating an already painful housing slump. Sales of new homes dropped by 8.3 percent in August from July and NAR is predicting that 2007 home sales would be down 10.8% when compared to last year.
US house prices are likely to fall significantly from their present levels, the former Chairman of the Federal Reserve Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.
“We should be seeing, in some real estate markets, 30 and 40 percent declines in prices," said Joel Naroff, President of Naroff Economic Advisors. http://www.msnbc.msn.com/id/20461630/
Panama’s housing boom is neither healthier nor more viable on the long haul than its doomed American par. Condos’ flippers believing that there is enough charm here to trap ten legions of baby boomers are truly delusional. The odds that 40,000 American families would decide to dwell here are as good as the chances for the US government to retake the Panama Canal at anytime soon. Besides, with so much inventory becoming available, price levels, currently being driven up by speculation, are very vulnerable to plunge hard. Profiteers are well set for one major disappointment.
Last August, Ivan Carlucci, President of the Panamanian Association of Real Estate Brokers (ACOBIR), denounced that around 30 unlicensed real estate’s brokerages were selling new projects not yet approved by the authorities. Mr. Carlucci referred critically to the lack of control by the local authorities, asking for stiffer fines. Like a plague of locust, illegitimate intermediaries, as well as local and foreign hustlers, have spread nationwide, trying to make an easy buck from unsuspected buyers.
Many local short-sighted economists and investors are bragging that the Panamanian economy is shatter-proofed against any major financial storm. But if a severe slowdown or a full-blown economic recession finally strikes America, unchaining a rippling reaction throughout the world’s markets, the Panamanian economy will hit the wall too. No country is totally shielded in a globalized economy.
Jose Luis Machinea, Secretary-Executive of the Economic Commission for Latin America and the Caribbean (ECLAC), recently stated that “if the United States crisis drags down the world’s economy for more than six months, Latin America will be definitively shocked.”
"The global economy appears to be at a turning point," said Paul Sheard, an economist at Lehman Brothers, adding it had been hit by two related shocks. “First, the US housing recession has turned out to be considerably worse than we envisaged...Secondly; the subprime mortgage meltdown has triggered a broad sell-off across capital markets, with incipient elements of financial contagion and panic." He added that the key uncertainty revolves around how long and how severe the US housing recession turns out to be and whether it tips the US economy into, or close to, recession." http://www.ft.com/cms/s/0/360a732a-62c8-11dc-b3ad-0000779fd2ac.html
Fears that the troubled housing market and credit problems could short-circuit the six-year-old economic expansion have shaken Wall Street. The biggest worry is that people and businesses will cut back on their spending and investment, throwing the economy into a tailspin. Former Federal Reserve chief Alan Greenspan, in an interview with The Associated Press last week, said the odds of a recession are now higher than one-in-three but are still under 50 percent. http://www.msnbc.msn.com/id/21011127/
Kerry Killinger, C.E.O. of Washington Mutual (WAMU), the largest U.S. thrift bank, declared that America’s housing market faces rising delinquencies and foreclosures, higher borrowing costs, tighter underwriting standards and tough capital markets, "creating what we call a near-perfect storm for housing.”
Panamanian banks are not blind to the new realities. Capital Financiero, one local magazine, recently reported that the banking sector has established new conservative policies regarding construction financing. Before, they usually require 30% of a project’s pre sale at the time of providing financing. Now, they are requiring an average of 40% to 50%. Additionally, down payments for foreigners were raised up to 15%. Banks are carefully reviewing sales contracts and verifying foreigners’ incomes and nationality.
Furthermore, they are frequently limiting the sales price risk to $1,500 per square meter (10.7639 ft²), avoiding riskier high loan-to-value mortgages. This is very bad news for flippers, because due to rampant speculation the prices have been pushed upwards, sometimes reaching up to $5K m2! Logically, banks are not supposed to finance a whole lot more than the real worth of any building project.
Mario de Diego, Executive Vice-President of the Banking Association of Panama (ABP) declared that although banks cannot avoid a mortgage bubble, at least they should operate with financial prudence, abiding by the norms and rules of the superintendence. Banks should proceed with caution, doing its own appraisals and checking with more severe and conservative terms each project and buyer. http://www.critica.com.pa/archivo/09302007/eco01.html
How many boomers will be prone to overpay for properties that should be losing value instead of adding it?
How many North Americans will be willing to overpay for condos in which they could not live for more than 30 days, unless obtaining a 60-day extension to their tourist visas or a pensioner’s residency? The 30-day limited tourist visa does not affect profiteers (Most flippers do not live in Panama), but it surely affects their favored prey: American baby boomers.
3. Chronicles of a Death Foretold: 20-year taxes exemption for new real estate property.
Last August 31, the 20-year tax break on new real estate properties was wrongly pronounced dead. Nevertheless, after one initial moment of qualms and dismay, its best friends, developers, brokers and profiteers, recovered the composure and the tax exemption was forthwith conveyed to the highest authorities, and there was pronounced to be still living, although in very critical condition.
Paraphrasing Noble Prize Laureate Gabriel Garcia Marquez, it was a death foretold, but nonetheless ill-timed. Whilst in full force, it proved to be one useful tool in order to draw investors, as well as the real end-users, retired North Americans willing to save on their hard-earned pensions.
The now gravely ill and in intense care 20-year taxes exemption required dwellings to be constructed before the August deadline. For new projects that have not yet been built, as well as those already on construction that did not have an occupation permit before the deadline, things are clear: they do not qualify. And of course, properties’ value and their flipping potential will be greatly diminished.
However, with such a growing inventory to deal with, the 20-year tax break may manage to survive if finally connected to life support by the local legislature. Anything less could be life-threatening for the housing boom and Panama’s GDP. According to the Panamanian Association of Real Estate Brokers (ACOBIR), the construction industry accounted in 2006 for 22% (3,031 million) of GDP. Neither the authorities nor investors want to see the train derailing at any time soon!
Important Notice: The Wizards of R.E.A. have forgotten to disclose one very significant issue: the enforced taxes upon the value of the land. This one applies even if the property is currently entitled to the 20-year taxes exception (that covers dwellings less than 20-year-old, but not the land.) The land will continue to incur property taxes if its value is above $30,000. But lots are usually valued well above that amount in any suitable neighborhood!
4. World-class infrastructure. Are they talking about Zurich . . . ?
Daily receiving 300,000 cubic meters of raw wastewater, Panama Bay is the biggest toilet in the city. The authorities have already approved the construction of one $350 million modern sewage system that will lead the way to clean up the awfully smelly and badly polluted bay. Completion is planned within three years, but considering that most public projects run here in slow motion, it could take more time in order to deliver.
Streets and streetlights are in dire need of repair. There is also a lot of work to be done to the ankle-breaking sidewalks. The waste management system, partially impaired by both a deficient planning and a tight official budget, cannot keep pace with the disorderly expansion of the metropolitan areas, thus requiring a complete makeover in order to protect public health.
Panama City driving requires high skills, some guts and tons of patience. Although there are traffic laws, generally speaking nobody seems to abide by them. Traffic jams are part of daily life. Sundays’ mornings apart, the bottleneck has neither specific roads nor hours. Gabriel Diez, President of the Union of Industrialists of Panama (SIP), recently declared that traffic jams and full-street closures are affecting the country’s normal development as well as people’s pocket. http://www.critica.com.pa/archivo/10012007/nac02.html
To tack the traffic madness, the authorities have finally approved several large road investments. The Panama-Colon highway is actually underway and the concession of the new Coastal Beltway, designed to relieve the permanently congested Balboa Avenue, has recently been approved, as well as other important projects. However, the frequent road blocks, so typical of any local public protest, should also be regulated in order to control the traffic anarchy.
The controversial new bill Nº269 modifying Laws 14 and 34 of Public Transportation guarantees that the State will be able to grant new bus lines and routes with modern and secure vehicles. However, bus owners and union leaders has interpreted this reform as a call for the replacement of the traditional Diablos Rojos (Red Devils), recycled American school buses; colorful, hot, noisy and accident-prone.
The National Transportation Board (CANATRA) has threatened with a bus strike, fearing that the monopoly they have held on this sector could be coming to an end. Meanwhile, users continue to suffer under poor service, lack of buses and deadly accidents. Cab drivers are also defiant to any law forcing them to replace the typically old, hot, insecure and uncomfortable fleet of ugly taxicabs.
Who would dare to rate Panama as one world-class infrastructure country?
Vox Populi says that the old dwellings were built better. But it was long time before that in a northern, faraway enchanted land, some street-smart hustlers transmuted in a new species: the housing flippers. Shortly afterwards, the newborn breed increased its ranks and started conquering America, backed by greedy developers and reckless mortgage bankers. The housing boom swelled as a giant bubble and the invasion of Central America began.
Counting with the easy credit’s cavalry to lead the attack and the allied ground forces of many local and South American barons, Panama City was taken by assault and its landscape was changed forever by one dense jungle of skyscrapers and cranes. The construction rush took the city by surprise. So many flippers, so little time! Panama’s Gold Rush had finally begun.
As a result, some quality problems have been appearing as of lately, a backlash of the challenging building pace. Developers are trying to cash faster and a shortage of skilled workforce is making some dents here and there. Same problems happened during the US housing boom. Many Americans are actually complaining of defects in their new homeland dwellings. Mark Twain once said, “History doesn't repeat itself, but it does rhyme.” So as time goes by, Panama’s construction boom is increasingly looking alike its late American par, the bursting mother of all housing bubbles.
The Panamanian Consumer Protection Agency (CICLAC) has reported around 200 complaints filed against developers. The problems have reached such a significant level that one standard form has been proposed to be used by the brokers selling new projects. The form is supposed to protect both developers and buyers, but it could probably lead to more troubles: as soon as the local bubble starts publicly deflating, the speculators would try to void the pre construction contracts and get theirs deposits back. It’s actually occurring in America.
The Trump Ocean Club, originally projected at $250 million, has soared up to $440 million. Oddly, after spending quite a fortune in marketing the project, loudly bragging that it was selling like hell, the Donald’s venture has disappointingly come out short in both real sales and funds. Thanks to the usual suspects, flippers and brokers, condos, initially for sale at $220,000, are now priced at $375,000. Simplifying: units previously sold at $3,600 per square meter are now selling at $4,700!
In dire need of extra funds, Trump’s Panamanian enterprise has recently enrolled Bearn Stearns to offer $220 million in international bonds. (Year-to-date, Bearn Stearns has lost 200 million (61%) in investment returns and it’s actually very busy negotiating with several megabanks and creditors in an attempt to restructure troubled hedge funds backed by subprime loans, which have suffered heavy losses since last April!)
But curiously, the future of Panama’s housing boom seems to have arrived at a crucial crossroad: if the iconic Trump project follows suit to Palacio de la Bahia and Ice Tower, both formerly boasted as the highest skyscrapers to be built in Latin America and actually pitifully downgraded and besieged by financial, legal and technical troubles, many housing projects could fall like dominoes, startling the profiteers’ herd and probably causing a tremendous stampede that may crush Panama’s Golden Rush once and for all!
Conclusions:
However, the insecurity issue should have been added to the debit list. Although mostly contained to the downscale areas of the Capital and the City of Colon, violent crime could spread one day to the upscale neighborhoods. People dwelling at Panama City’s high-end areas should to start thinking about the crime rigged neighborhoods not just as some ring-fenced trouble which is off on its own. There are no walls high enough to deter growing violent crime.
Panama’s real poverty is much bigger and extended than the officially reported figures. Standards measuring poverty widely differ between rich and poor countries. The official line of poverty is significantly higher in developed nations. Many American families living under the US official poverty threshold would be considered here as entry level middle class. The same could be said for Latin America and fourth-fifth parts of the world. Third-world countries, packed with high poverty and extreme poverty, commonly generate more crime.
Higher Crime Rates + Higher Drug consumption Rates = Higher Violent Crime Rates.
On his recently published memoirs, “The Age of Turbulence: Adventures in a New World,” Allan Greenspan wrote that the rising income inequality could undo "the cultural ties that bind our society" and even lead to "large-scale violence." Panama’s well-offs classes have chosen to look the other way while pretending to ward off crime, but that will not make the lawless armies disband. Laying head and neck on the ground, as ostriches, will not make the hazard fade away either.
Final Advice:
Incongruously, Panama City’s new condos are getting closer or matching the average price of similar dwellings in the Greater Miami, South Florida’s international banking, fashion and film centre and the thriving hub for Latin American’s finances and commerce. Miami is a world-class tropical metropolis with thirteen year-round sunny beaches and it is also a fusion centre of world's cultures with an unparalleled diversity of lifestyles, cultural traditions and ethnic backgrounds.
But what's more, Liberty City, probably the worst Miami’s neighborhood could be considered as a peaceful and prosperous town when compared to El Chorillo, Curundú, Santa Ana, Panama Viejo and many other dangerous areas of the Panamanian capital! Security is one main issue to consider when relocating abroad since well-off foreigners living in poor countries are often preferred targets for resented antisocials.
In spite of all that, the Wizard of R.E.A. has dared to proclaim that Panama “banana” City living standards could match up to Miami’s. They are truly hallucinating, to say the least! Skyscrapers and shopping malls apart, Panama is one third-world country. If the underdeveloped nations could afford to have first world class infrastructures, living standards and security, then they wouldn’t be underdeveloped at all! Those saying otherwise are just a merry bunch of fairy tellers surely listed on someone’s payroll.
Corruption is also another big issue here. We are not just talking about bribe-prone traffic officers, perhaps the main complain of foreign drivers. One recent survey about this subject, done by Dichter & Neira Latin Research Network, reported that 81.2% Panamanians consider the actual government as mostly lacking and/or inefficiently fighting corruption. 71% consider the National Assembly as the most corrupt political body, while 65.4% perceive the Supreme Court as tarnished. Corruption has long time surpassed baseball as the national pastime. http://www.prensa.com/
Supreme Court Justice Winston Spadafora had his US visa recently revoked in uncertain, never made public circumstances. However, the local press has linked him to several cases of corruption. Unfortunately, rampant corruption vested with almost total impunity is fully integrated into Panamanian political life.
Pedro Miguel Gonzalez, the newly invested President of the National Assembly, Panama’s legislative body, was indicted in the US on charges including first degree murder, conspiracy to murder, and murder of a US national in the killing of US Army Sergeant Zak Hernandez and the attempted murder of US Army Sergeant Ronald T. Marshall on a drive by shooting on June 10, 1992. After five years on the loose, Mr. Gonzalez finally gave himself up in 1997 and was acquitted by a local Court, but the verdict was rejected by US authorities.
For many years, Panama was a sanctuary for Nelson Urrego, Pablo Rayo Montano, Arcangel de Jesus Henao Montoya and José Castrillón Henao, the leaders of the Colombian’s North Valley narcotics Cartel, three of them captured in Panama, where they had large investments laundering money through well-known banks and corporations, including the purchase of some islands. http://www.pa-digital.com.pa/archive/10012007/nation03.shtml
The 2006 Annual Report of Transparency International (TI) has once more kept Panama on the “black List” of the countries’ most deeply affected by corruption; but this time, due to a higher comparable Index of Perceived Corruption (IPC), Panama was given 3.2 in a 10 points scale, rating even worse than 2005 and ranking 94th among 179 nations. Only six of the thirty most important public entities of Panama were in compliance with the requirements of the Transparency Law . . . !
Angelica Maytin, TI Representative in Panama, declared that the public sector is projecting an awful image of dishonesty. “The government’s well-known slogan of <> has resulted far less successful than expected. We are still on the black list and it will affect somehow foreign investments.” http://www.transparency.org/
A preliminary study from Due Process of Law Foundation (DPLF), an independent organization based in Washington DC, reported that judicial corruption in Central America and Panama is “one serious problem that needs to be confronted and fought with energy and decision.” http://www.dplf.org/index_eng.htm
So finally, if you are currently searching for a foreign metropolis offering high security, reasonably priced housing and world-class infrastructure, Panama City is not such place. Suitable dwellings are ridiculously over-priced and totally out of touch with local living standards. Moreover, sinful pleasures apart, which are cheap and plenty all day-round, the city rates poorly in culture and entertaining.
A little web reading and a two-week trip are not what could be considered as a truly enlightening experience. So with eyes wide open, go check by yourself for a prolonged period of time. Experience the real Panama, with all its ups and downs, before taking a life changing decision.
Panama City’s developers, brokers and profiteers are betting to the odds that ten legions of North Americans will be trapped by all the hype. Worldwide, however, dwellings have a Price-earnings Ratio (PE) and incomes relate directly to prices. Panama’s housing boom is miserably failing on both counts and those who go astray of the economic principles are setting themselves to pay dearly for it.
Boomers, your attention, please! The Three-headed Dragon is freely roaming through Panama City. It’s a formidable hunter and boomers are its favored prey. Beware, or you could be its next meal!
Panama, long time renowned by its famous navigable canal and the good-nature of its people, has more recently been sold as the newest Gold Rush of the 21st century.
Unfortunately, current American history shows tangible proofs that the speculation beast, once freed by greed and deception, will sink its fangs into both men and nature, swallowing the whole landscape. As a result, our world could be awfully transformed in a gloomy realm of negative equity and amortization.
But reckoning days are coming!
An impartial observer neither should have any stakes in the game nor does he/she should kneel to serve those with a vested interest. Regrettably, the great majority of “self-proclaimed” experts in Panama are somehow connected to the local real estate and tourism industries.
Sadly, Saint George is not out there slaying the Dragon. Like it or not, Big Money rules.
But not all is lost! While reviewing the substantial exposure that Panama City has received, mostly overrating the capital as one highly secure, well-structured and very affordable “paradise,” we have found some dubious claims:
1. High security rating.
2. High-end real estate property at bargain prices.
3. 20-year taxes break on new real estate property, but no mention of the taxes enforced upon the land.
4. World-class infrastructure.
Slaying the Dragon: (debunking Panama City myths with factual statistics)
1. Panama City high insecurity rating. Numbers don’t lie:
According to Panama America, one local newspaper, the statistics reported by the Technical Judicial Police (PTJ) show high levels of crime, reflecting a 32% increase during the first two quarters of 2007. The General Treasury of the Republic reported 411 violent deaths (Murders, Suicides, Death from legal intervention and/or from undetermined intent, Unintentional Firearm Fatalities and Traffic Deaths) within 21 Corregimientos (Villages) of the metropolitan area. http://www.pa-digital.com.pa//archive/08132007/ciudad02.shtml “Traffic deaths and accidents are as frequent in Panama’s streets and roadways as are crimes, robbery and assaults.” http://www.pa-digital.com.pa/archive/09302007/index.html
Panama City (Population: 813,097) recorded 248 murders in 2006, 70% of the nation’s total (354). Murder (per capita) rate: 0.305006 per 1000. Simplifying: One murder per 3,300 persons!
Latin America (Total Population: 520 million) recorded 150,000 murders for the one-year period 2006. Murder (per capita) rate: 0.28866 per 1000. One murder per 3500 persons! (The world’s worst violent crime region.)
Panama’s national statistics for violent crime registered 194 murders and 1,075 gunfire victims during the first semester of 2007 (13% up from the same period of the last year). Although past performance does not guarantee future results, Panama City, unless that the murder rate plunges around 6%, could rank even worse than last year. Projected murder (per capita) rate: 0.332062 per 1000. One murder per 3,050 persons!
Who would dare to rate Panama City as a high security place?
Additional Crime Statistics for the Republic of Panama (January-June 2007):
Police booked 17,103 offenses. Thefts: 5,300; Burglaries: 3,559; Armed Robberies: 1614; Aggravated assaults: 532. During the past year, 231 crimes were committed against foreigners. This year, during the first two quarters, 117 crimes against foreigners have been booked, including 77 robberies. No data was offered for vehicle theft, but 328 home burglaries were reported in the capital. Quibian Panay, commissioner of the Alcalde Diaz Village, declared that property crime is growing, mostly due to well-organized gangs operating within the metropolitan area. http://www.ptj.gob.pa/estadisdicainicio.htm
Another newspaper, La Estrella de Panama (The star of Panama), reported that a wave of murders has recently rocked the capital. In less than a week, a spate of shootings has left eight people killed, all gunned down in public places at broad daylight. Organized crime is now more daring than ever before, openly defying the overwhelmed authorities. http://www.estrelladepanama.com/web/main/ver.php?idnews=59639
Counting with thousands of members, 209 gangs nationwide (130 in the capital) are now bigger and deadlier. One hundred forty-three juveniles were killed in 2006. The rising murder rate can be directly linked to the soaring drug abuse. Panamanian juveniles have the highest narcotics consumption rate in Central America. The average age in which children are introduced to drugs is 12 to 14 years old, but some risk groups are exposed earlier in life.
One recent survey, conducted by the National Commission for the Study and Prevention of Drug Related Crimes (CONAPRED), reported that illegal drugs are very cheap in Panama, where Colombian cartels team up with local gangs controlling the market. Laura Montenegro, Secretary-Executive of CONAPRED, declared that the domestic consumption of stupefacients is alarming and requires prompt and effective answers. http://www.estrelladepanama.com/web.main.ver.php?idnews=53738
The mounting narcotic’s consumption is casting a bleak shadow upon the country’s future: its children. According to the Ministry of Education, high school desertion has reached an astounding 70%! School desertion and family disintegration are both feeding juvenile gangs, but they are not causes, but consequences of poverty.
The World Bank ranks Panama as Latin America’s second-worst country in wealth distribution. The earnings of the upper economic sector, the so-called “Rabiblancos” (“White Tails” is a popular nickname for the wealthier families), account for 60% of the national income; while those at the lower end of the pyramid, 20% Panamanians, account for just 2%! Poverty is evident at both urban and rural areas.
“Although Panama has not experienced violence of the scope and magnitude of some other countries in the region, there has been a significant increase in insecurity indexes and insecurity perception in the last five years,” declared Juana Salazar, Team Leader of the Inter-American Development Bank (IDB). “That is why the topic of citizen security and violence prevention has become high priority for the government.” http://www.iadb.org/idbamerica/index.cfm?thisid=4173
Nonetheless, Panamanians complain that authority’s efforts to fight crime are lacking, additionally accusing the National Police of corruption and inefficiency. Although Panama’s Police have the highest per capita rate in Central America (one officer per 200 persons), they are generally regarded as under-educated, ill-trained and poorly equipped, unable to keep pace with growing violent crime, the kind that usually makes a much bigger impact on news headlines and society.
Linda E. Watts, former American ambassador to Panama, considered poverty as the biggest issue here, where 1, 2 million Panamanians, 40% of the total population, live below the poverty line, while one-fifth suffers from extreme poverty. http://panama.usembassy.gov/panama/Fundraising.html
A research published by the University of Panama shows that one tiny group, conformed by approximately 80 individuals, mostly interconnected by clan and/or financial ties, controls 50% of Panama’s Gross Domestic Product (GDP).
Even though GDP grew up 8% in 2006, 69.5% Panamanians live monthly with $400 or less; 30.5% live with a higher budget, but among this group, only 5.2% can afford to spend more than $800 per month. The minimum wage is $285. According to recent figures of the Ministry of Economy and Finance, poverty affects 37.2% of the total population (1.2 Million) and 16.7% are living in extreme poverty. However, the Third National Report of Human Development of the Program of the United Nations (PNUD) stated that 1.4 million Panamanians, 40% of the population, live in poverty and that 16% live on less than $1.00 per day.
Panamanian economy grew up 8.86% during the first half of 2007. Gross Domestic Product (GDP) per capita has reached $4912 ($411 monthly), 7.1% higher than 2006, but the unfair wealth distribution has remained almost intact. This issue could very well explain why crime is hiking higher, fueled by 8% rate of unemployment (10% in urban areas and Central America’s highest unemployment rate among juveniles and young adults 16 to 25 years old); plus 24% rate of informal employment (30% in 2005) and the highest shadow economy rate in the region (60% of the national GDP.)
The Food and Agriculture Organization (FAO) of the United Nations (UN) recently reported that malnutrition affects 25% Panamanians. According to Merilio Morell, FAO Representative in Panama, the problem is critical and tends to get worse due to the lack of adequate food programs. Inflation, at an all-time high, is pushing up the cost of the national basic food basket ($217.83), thus seriously affecting minimum wage workers and the poor.
Panama’s economic progress should not be coldly measured by GDP growing. The reduction of poverty and the improvement of the living standards of the marginated population need to be taken into account. Regrettably, the growing national wealth has mostly served an unmerited purpose: to make the rich wealthier while generally encumbering the middle classes and making the poor poorer. While the country is economically booming, the abysm between Rich and Poor has hardly shortened. Sure, King Midas is actually touring Panama, but his golden majesty has touched a very few chosen. http://www.pa-digital.com.pa/archive/09252007/colab02.shtml
The City of Sao Paolo, Brazil, can surely boast to be an ultramodern metropolis with many skyscrapers, commercial malls, huge parks and recreational facilities; but nevertheless it’s only second to Caracas, Venezuela’s capital, as the most dangerous cities in the Americas. So it really doesn’t matter how many skyscrapers does Panama City have or how many more are coming. Quality of life and security do not depend on that!
However, in order to be fair, the Republic of Panama, as a nation (contrary to its capital and the port City of Colon, another raging violent crime area), ranks yet fairly better than some of its more insecure hemispheric neighbors: Colombia, Jamaica, Mexico, Brazil, Venezuela, El Salvador, Honduras and Guatemala. But nevertheless, Panama is far from deserving a high security rating.
2.High-end real estate property at bargain prices? They should be kidding!
Three years ago, the average ocean front-side condo at Balboa Avenue was priced at $450 per square meter. Nowadays, prices have skyrocketed up to $3,500 and even higher in certain building complexes, up to $5000M2!
In a recent report analyzing Panama’s housing boom, The Financial Times warned about the fact that the median sales price of Panama City new condos is actually getting higher than the median sales price of existing single-family homes in America! According to the London’s newspaper, the “baby boomers” could start to lose interest in buying a second home or a two-bedroom apartment in Panama City for $224,500 or more, which not long ago could be bought for $60,000 or $80,000. http://www.pa-digital.com.pa/archive/08272007/finance01.shtml
The National Association of Realtors reported that US median national home price was $224,500 in August and prices are going down still further. http://online.wsj.com/article/SB119072589181638646.html?mod=hpp_us_whats_news
“One Prima Panama study looked at immigration trends from the US and residency visas issued to foreigners by Panama’s government as a proxy for end-user demand. Its findings suggest that the level of immigration might be insufficient to justify the building of so many luxury apartment complexes targeting foreign purchasers, and that the perception of foreign demand could be overly optimistic.”
“There are growing concerns that the building activity is too much for Panama’s market to absorb, particularly as property values are rapidly rising. The activity is even larger than recent property development in Miami metro area, which is a wealthier and internationally oriented city and business centre for Latin America.” (Miami is actually a deflating bubble just waiting to burst!) http://www.viewswire.com/index.asp?layout=VWArticleVW3&article_id=1601333945&rf=0
The easy dollar’s pump engine fueling Panama and Central America’s construction boom is badly sputtering. America’s subprime mortgage melt is just beginning and the landslide has yet a long way to go. US sales of existing homes slowed to their most sluggish pace in five years.
Home prices fell for a record 12th straight month. The index that tracks signing of contracts for sales of existing homes tumbled 12.2 percent for July, to its lowest level in more than six years, the National Association of Realtors (NAR) reported. New-homes sales tumbled in August to the lowest level in seven years, a stark sign that the credit crunch is aggravating an already painful housing slump. Sales of new homes dropped by 8.3 percent in August from July and NAR is predicting that 2007 home sales would be down 10.8% when compared to last year.
US house prices are likely to fall significantly from their present levels, the former Chairman of the Federal Reserve Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.
“We should be seeing, in some real estate markets, 30 and 40 percent declines in prices," said Joel Naroff, President of Naroff Economic Advisors. http://www.msnbc.msn.com/id/20461630/
Rodrigo Rato, the Managing Director of the International Monetary Fund (IMF), considers that the real effects of the housing and mortgage crisis upon the broader US economy will manifest more obviously by 2008. Europe won’t be spared either. http://www.elpais.com/articulo/economia/Rato/efectos/crisis/hipotecaria/veran/Espana/partir/2008/elpepueco/20070924elpepueco_3/Tes
Panama’s housing boom is neither healthier nor more viable on the long haul than its doomed American par. Condos’ flippers believing that there is enough charm here to trap ten legions of baby boomers are truly delusional. The odds that 40,000 American families would decide to dwell here are as good as the chances for the US government to retake the Panama Canal at anytime soon. Besides, with so much inventory becoming available, price levels, currently being driven up by speculation, are very vulnerable to plunge hard. Profiteers are well set for one major disappointment.
Last August, Ivan Carlucci, President of the Panamanian Association of Real Estate Brokers (ACOBIR), denounced that around 30 unlicensed real estate’s brokerages were selling new projects not yet approved by the authorities. Mr. Carlucci referred critically to the lack of control by the local authorities, asking for stiffer fines. Like a plague of locust, illegitimate intermediaries, as well as local and foreign hustlers, have spread nationwide, trying to make an easy buck from unsuspected buyers.
Many local short-sighted economists and investors are bragging that the Panamanian economy is shatter-proofed against any major financial storm. But if a severe slowdown or a full-blown economic recession finally strikes America, unchaining a rippling reaction throughout the world’s markets, the Panamanian economy will hit the wall too. No country is totally shielded in a globalized economy.
The New Herald’s journalist Andres Oppenheimer, a respected specialist in Latin American affairs, recently wrote that in the event that the American economy could experience a prolonged slowdown, Latin American exports will tumble. Mexico and Central America, both closely tied to the US market, should be the most affected. http://www.elnuevoherald.com/172/story/81587.html
Actual economic grow rate in Latin America is too dependent on external factors… The region’s economy has mostly benefited from rising imports of raw materials by US and China, pushing prices up… but it’s poorly related to competiveness in Global terms. But if US economy slows down further, causing China to decelerate, both economic giants will reduce imports and the region won’t be able to sustain the actual growing rates. http://www.elnuevoherald.com/172/story/94531.html
Jose Luis Machinea, Secretary-Executive of the Economic Commission for Latin America and the Caribbean (ECLAC), recently stated that “if the United States crisis drags down the world’s economy for more than six months, Latin America will be definitively shocked.”
The Wall Street Journal’s columnist E.S. Browning recently wrote, “The Federal Reserve cut interest rates… in order to address a pressing concern: the risk of recession and of a breakdown in credit markets. By lowering rates… however, the central bank has revived another fear that had been dying down: inflation… Which way is scarier?” http://online.wsj.com/article/SB119058515796236665.html?mod=hpp_us_whats_news
"The global economy appears to be at a turning point," said Paul Sheard, an economist at Lehman Brothers, adding it had been hit by two related shocks. “First, the US housing recession has turned out to be considerably worse than we envisaged...Secondly; the subprime mortgage meltdown has triggered a broad sell-off across capital markets, with incipient elements of financial contagion and panic." He added that the key uncertainty revolves around how long and how severe the US housing recession turns out to be and whether it tips the US economy into, or close to, recession." http://www.ft.com/cms/s/0/360a732a-62c8-11dc-b3ad-0000779fd2ac.html
Fears that the troubled housing market and credit problems could short-circuit the six-year-old economic expansion have shaken Wall Street. The biggest worry is that people and businesses will cut back on their spending and investment, throwing the economy into a tailspin. Former Federal Reserve chief Alan Greenspan, in an interview with The Associated Press last week, said the odds of a recession are now higher than one-in-three but are still under 50 percent. http://www.msnbc.msn.com/id/21011127/
Kerry Killinger, C.E.O. of Washington Mutual (WAMU), the largest U.S. thrift bank, declared that America’s housing market faces rising delinquencies and foreclosures, higher borrowing costs, tighter underwriting standards and tough capital markets, "creating what we call a near-perfect storm for housing.”
Panamanian banks are not blind to the new realities. Capital Financiero, one local magazine, recently reported that the banking sector has established new conservative policies regarding construction financing. Before, they usually require 30% of a project’s pre sale at the time of providing financing. Now, they are requiring an average of 40% to 50%. Additionally, down payments for foreigners were raised up to 15%. Banks are carefully reviewing sales contracts and verifying foreigners’ incomes and nationality.
Furthermore, they are frequently limiting the sales price risk to $1,500 per square meter (10.7639 ft²), avoiding riskier high loan-to-value mortgages. This is very bad news for flippers, because due to rampant speculation the prices have been pushed upwards, sometimes reaching up to $5K m2! Logically, banks are not supposed to finance a whole lot more than the real worth of any building project.
Mario de Diego, Executive Vice-President of the Banking Association of Panama (ABP) declared that although banks cannot avoid a mortgage bubble, at least they should operate with financial prudence, abiding by the norms and rules of the superintendence. Banks should proceed with caution, doing its own appraisals and checking with more severe and conservative terms each project and buyer. http://www.critica.com.pa/archivo/09302007/eco01.html
How many boomers will be prone to overpay for properties that should be losing value instead of adding it?
How many North Americans will be willing to overpay for condos in which they could not live for more than 30 days, unless obtaining a 60-day extension to their tourist visas or a pensioner’s residency? The 30-day limited tourist visa does not affect profiteers (Most flippers do not live in Panama), but it surely affects their favored prey: American baby boomers.
3. Chronicles of a Death Foretold: 20-year taxes exemption for new real estate property.
Last August 31, the 20-year tax break on new real estate properties was wrongly pronounced dead. Nevertheless, after one initial moment of qualms and dismay, its best friends, developers, brokers and profiteers, recovered the composure and the tax exemption was forthwith conveyed to the highest authorities, and there was pronounced to be still living, although in very critical condition.
Paraphrasing Noble Prize Laureate Gabriel Garcia Marquez, it was a death foretold, but nonetheless ill-timed. Whilst in full force, it proved to be one useful tool in order to draw investors, as well as the real end-users, retired North Americans willing to save on their hard-earned pensions.
The now gravely ill and in intense care 20-year taxes exemption required dwellings to be constructed before the August deadline. For new projects that have not yet been built, as well as those already on construction that did not have an occupation permit before the deadline, things are clear: they do not qualify. And of course, properties’ value and their flipping potential will be greatly diminished.
However, with such a growing inventory to deal with, the 20-year tax break may manage to survive if finally connected to life support by the local legislature. Anything less could be life-threatening for the housing boom and Panama’s GDP. According to the Panamanian Association of Real Estate Brokers (ACOBIR), the construction industry accounted in 2006 for 22% (3,031 million) of GDP. Neither the authorities nor investors want to see the train derailing at any time soon!
Important Notice: The Wizards of R.E.A. have forgotten to disclose one very significant issue: the enforced taxes upon the value of the land. This one applies even if the property is currently entitled to the 20-year taxes exception (that covers dwellings less than 20-year-old, but not the land.) The land will continue to incur property taxes if its value is above $30,000. But lots are usually valued well above that amount in any suitable neighborhood!
4. World-class infrastructure. Are they talking about Zurich . . . ?
Panamanian authorities are actually addressing the evils arising from an outdated infrastructure, failing to keep pace with the furious development that is taking place. The housing lobby is pressing the government to improve the overstressed waste management, sewage and drinking water systems. The storm sewer system is on the verge of collapse and the damage is evident on the Capital’s main arteries. http://panama.capitalfinanciero.com/edactual/editorial1259358.html
Daily receiving 300,000 cubic meters of raw wastewater, Panama Bay is the biggest toilet in the city. The authorities have already approved the construction of one $350 million modern sewage system that will lead the way to clean up the awfully smelly and badly polluted bay. Completion is planned within three years, but considering that most public projects run here in slow motion, it could take more time in order to deliver.
Streets and streetlights are in dire need of repair. There is also a lot of work to be done to the ankle-breaking sidewalks. The waste management system, partially impaired by both a deficient planning and a tight official budget, cannot keep pace with the disorderly expansion of the metropolitan areas, thus requiring a complete makeover in order to protect public health.
Panama City driving requires high skills, some guts and tons of patience. Although there are traffic laws, generally speaking nobody seems to abide by them. Traffic jams are part of daily life. Sundays’ mornings apart, the bottleneck has neither specific roads nor hours. Gabriel Diez, President of the Union of Industrialists of Panama (SIP), recently declared that traffic jams and full-street closures are affecting the country’s normal development as well as people’s pocket. http://www.critica.com.pa/archivo/10012007/nac02.html
To tack the traffic madness, the authorities have finally approved several large road investments. The Panama-Colon highway is actually underway and the concession of the new Coastal Beltway, designed to relieve the permanently congested Balboa Avenue, has recently been approved, as well as other important projects. However, the frequent road blocks, so typical of any local public protest, should also be regulated in order to control the traffic anarchy.
The controversial new bill Nº269 modifying Laws 14 and 34 of Public Transportation guarantees that the State will be able to grant new bus lines and routes with modern and secure vehicles. However, bus owners and union leaders has interpreted this reform as a call for the replacement of the traditional Diablos Rojos (Red Devils), recycled American school buses; colorful, hot, noisy and accident-prone.
The National Transportation Board (CANATRA) has threatened with a bus strike, fearing that the monopoly they have held on this sector could be coming to an end. Meanwhile, users continue to suffer under poor service, lack of buses and deadly accidents. Cab drivers are also defiant to any law forcing them to replace the typically old, hot, insecure and uncomfortable fleet of ugly taxicabs.
Who would dare to rate Panama as one world-class infrastructure country?
Vox Populi says that the old dwellings were built better. But it was long time before that in a northern, faraway enchanted land, some street-smart hustlers transmuted in a new species: the housing flippers. Shortly afterwards, the newborn breed increased its ranks and started conquering America, backed by greedy developers and reckless mortgage bankers. The housing boom swelled as a giant bubble and the invasion of Central America began.
Counting with the easy credit’s cavalry to lead the attack and the allied ground forces of many local and South American barons, Panama City was taken by assault and its landscape was changed forever by one dense jungle of skyscrapers and cranes. The construction rush took the city by surprise. So many flippers, so little time! Panama’s Gold Rush had finally begun.
As a result, some quality problems have been appearing as of lately, a backlash of the challenging building pace. Developers are trying to cash faster and a shortage of skilled workforce is making some dents here and there. Same problems happened during the US housing boom. Many Americans are actually complaining of defects in their new homeland dwellings. Mark Twain once said, “History doesn't repeat itself, but it does rhyme.” So as time goes by, Panama’s construction boom is increasingly looking alike its late American par, the bursting mother of all housing bubbles.
The Panamanian Consumer Protection Agency (CICLAC) has reported around 200 complaints filed against developers. The problems have reached such a significant level that one standard form has been proposed to be used by the brokers selling new projects. The form is supposed to protect both developers and buyers, but it could probably lead to more troubles: as soon as the local bubble starts publicly deflating, the speculators would try to void the pre construction contracts and get theirs deposits back. It’s actually occurring in America.
The Trump Ocean Club, originally projected at $250 million, has soared up to $440 million. Oddly, after spending quite a fortune in marketing the project, loudly bragging that it was selling like hell, the Donald’s venture has disappointingly come out short in both real sales and funds. Thanks to the usual suspects, flippers and brokers, condos, initially for sale at $220,000, are now priced at $375,000. Simplifying: units previously sold at $3,600 per square meter are now selling at $4,700!
In dire need of extra funds, Trump’s Panamanian enterprise has recently enrolled Bearn Stearns to offer $220 million in international bonds. (Year-to-date, Bearn Stearns has lost 200 million (61%) in investment returns and it’s actually very busy negotiating with several megabanks and creditors in an attempt to restructure troubled hedge funds backed by subprime loans, which have suffered heavy losses since last April!)
But curiously, the future of Panama’s housing boom seems to have arrived at a crucial crossroad: if the iconic Trump project follows suit to Palacio de la Bahia and Ice Tower, both formerly boasted as the highest skyscrapers to be built in Latin America and actually pitifully downgraded and besieged by financial, legal and technical troubles, many housing projects could fall like dominoes, startling the profiteers’ herd and probably causing a tremendous stampede that may crush Panama’s Golden Rush once and for all!
Conclusions:
After six years leading the Global Retirement Index of International Living, Panama was recently lowered to the fourth place, mainly due to the tourist visa reduction; a harder to get resident’s visa and the climbing cost of real estate properties. http://www.internationalliving.com/retire/paid/09-01-07-top-heavens.html
However, the insecurity issue should have been added to the debit list. Although mostly contained to the downscale areas of the Capital and the City of Colon, violent crime could spread one day to the upscale neighborhoods. People dwelling at Panama City’s high-end areas should to start thinking about the crime rigged neighborhoods not just as some ring-fenced trouble which is off on its own. There are no walls high enough to deter growing violent crime.
Panama’s real poverty is much bigger and extended than the officially reported figures. Standards measuring poverty widely differ between rich and poor countries. The official line of poverty is significantly higher in developed nations. Many American families living under the US official poverty threshold would be considered here as entry level middle class. The same could be said for Latin America and fourth-fifth parts of the world. Third-world countries, packed with high poverty and extreme poverty, commonly generate more crime.
Higher Crime Rates + Higher Drug consumption Rates = Higher Violent Crime Rates.
On his recently published memoirs, “The Age of Turbulence: Adventures in a New World,” Allan Greenspan wrote that the rising income inequality could undo "the cultural ties that bind our society" and even lead to "large-scale violence." Panama’s well-offs classes have chosen to look the other way while pretending to ward off crime, but that will not make the lawless armies disband. Laying head and neck on the ground, as ostriches, will not make the hazard fade away either.
Final Advice:
Incongruously, Panama City’s new condos are getting closer or matching the average price of similar dwellings in the Greater Miami, South Florida’s international banking, fashion and film centre and the thriving hub for Latin American’s finances and commerce. Miami is a world-class tropical metropolis with thirteen year-round sunny beaches and it is also a fusion centre of world's cultures with an unparalleled diversity of lifestyles, cultural traditions and ethnic backgrounds.
But what's more, Liberty City, probably the worst Miami’s neighborhood could be considered as a peaceful and prosperous town when compared to El Chorillo, Curundú, Santa Ana, Panama Viejo and many other dangerous areas of the Panamanian capital! Security is one main issue to consider when relocating abroad since well-off foreigners living in poor countries are often preferred targets for resented antisocials.
In spite of all that, the Wizard of R.E.A. has dared to proclaim that Panama “banana” City living standards could match up to Miami’s. They are truly hallucinating, to say the least! Skyscrapers and shopping malls apart, Panama is one third-world country. If the underdeveloped nations could afford to have first world class infrastructures, living standards and security, then they wouldn’t be underdeveloped at all! Those saying otherwise are just a merry bunch of fairy tellers surely listed on someone’s payroll.
Corruption is also another big issue here. We are not just talking about bribe-prone traffic officers, perhaps the main complain of foreign drivers. One recent survey about this subject, done by Dichter & Neira Latin Research Network, reported that 81.2% Panamanians consider the actual government as mostly lacking and/or inefficiently fighting corruption. 71% consider the National Assembly as the most corrupt political body, while 65.4% perceive the Supreme Court as tarnished. Corruption has long time surpassed baseball as the national pastime. http://www.prensa.com/
Supreme Court Justice Winston Spadafora had his US visa recently revoked in uncertain, never made public circumstances. However, the local press has linked him to several cases of corruption. Unfortunately, rampant corruption vested with almost total impunity is fully integrated into Panamanian political life.
Pedro Miguel Gonzalez, the newly invested President of the National Assembly, Panama’s legislative body, was indicted in the US on charges including first degree murder, conspiracy to murder, and murder of a US national in the killing of US Army Sergeant Zak Hernandez and the attempted murder of US Army Sergeant Ronald T. Marshall on a drive by shooting on June 10, 1992. After five years on the loose, Mr. Gonzalez finally gave himself up in 1997 and was acquitted by a local Court, but the verdict was rejected by US authorities.
For many years, Panama was a sanctuary for Nelson Urrego, Pablo Rayo Montano, Arcangel de Jesus Henao Montoya and José Castrillón Henao, the leaders of the Colombian’s North Valley narcotics Cartel, three of them captured in Panama, where they had large investments laundering money through well-known banks and corporations, including the purchase of some islands. http://www.pa-digital.com.pa/archive/10012007/nation03.shtml
The 2006 Annual Report of Transparency International (TI) has once more kept Panama on the “black List” of the countries’ most deeply affected by corruption; but this time, due to a higher comparable Index of Perceived Corruption (IPC), Panama was given 3.2 in a 10 points scale, rating even worse than 2005 and ranking 94th among 179 nations. Only six of the thirty most important public entities of Panama were in compliance with the requirements of the Transparency Law . . . !
Angelica Maytin, TI Representative in Panama, declared that the public sector is projecting an awful image of dishonesty. “The government’s well-known slogan of <
A preliminary study from Due Process of Law Foundation (DPLF), an independent organization based in Washington DC, reported that judicial corruption in Central America and Panama is “one serious problem that needs to be confronted and fought with energy and decision.” http://www.dplf.org/index_eng.htm
So finally, if you are currently searching for a foreign metropolis offering high security, reasonably priced housing and world-class infrastructure, Panama City is not such place. Suitable dwellings are ridiculously over-priced and totally out of touch with local living standards. Moreover, sinful pleasures apart, which are cheap and plenty all day-round, the city rates poorly in culture and entertaining.
A little web reading and a two-week trip are not what could be considered as a truly enlightening experience. So with eyes wide open, go check by yourself for a prolonged period of time. Experience the real Panama, with all its ups and downs, before taking a life changing decision.
Panama City’s developers, brokers and profiteers are betting to the odds that ten legions of North Americans will be trapped by all the hype. Worldwide, however, dwellings have a Price-earnings Ratio (PE) and incomes relate directly to prices. Panama’s housing boom is miserably failing on both counts and those who go astray of the economic principles are setting themselves to pay dearly for it.
Boomers, your attention, please! The Three-headed Dragon is freely roaming through Panama City. It’s a formidable hunter and boomers are its favored prey. Beware, or you could be its next meal!
