The latest news from South America is disturbing the world. Pictures of serious unrest and partly violent demonstrations dominate the news about Latin America. Of course, I am often asked about the consequences of the South American crisis for Panama.

A Colombian business friend answered this question a few years ago with a visual comparison:

“Panama is like a cork and always floats above, even when the sea gets more turbulent. And never sinks. If the South American economy is doing well, the goods are shipped via the Panama Canal. If the situation is bad, the rich people of South America bring their money to Panama or Miami for security reasons. Both Spanish-speaking and both USD locations.”

Before we come to the current impact of the South American crisis on Panama, let’s take a first look at the crisis hotspots in South America.

The reason for the unrest is usually the great social imbalance paired with a poor education policy and corruption. Often small events are enough to set a process in motion. For example, the price increase of subway tickets by a few cents in Chile.

Some journalists already compare the crisis in South America with the “Arab Spring” many years ago. In contrast to these countries, however, it should be noted that the current South American crisis countries (with the exception of Venezuela) are democratic states.

Here is a brief overview of the current crisis areas in the region:

• The irregularities in the presidential elections in October triggered unrest in Bolivia. As a result, President Evo Morales resigned fled into exile to Mexico.
• In Chile the price increase for subway tickets was the trigger for the protests in October. After weeks of demonstrations, it was agreed to draw up a new constitution. The current crisis is the most serious in the country since the return to democracy in 1990.
• The increase in gasoline prices at the beginning of October led to serious unrest in Ecuador. The protests were so fierce that the government had to withdraw the increase in gasoline prices.
• In Colombia, hundreds of thousands of people went on the streets in November, mostly peacefully against the government. Several people died in the few violent clashes. Here, too, it is a question of calling for more social justice and a better education and social system. The implementation of the 2016 peace treaty with the FARC guerrillas is also on the agenda.
• In Costa Rica, government elections took place in spring 2018, which led to a left slide. After talks with long-term real estate investors in Costa Rica in the last few days, it has become clear that current policy is discouraging investors due to bureaucracy, costs and taxes.
• The big countries Argentina and Brazil are struggling with an economic crisis, debt trap and a failed environmental policy.

In the current very turbulent times in Latin America, but also in other parts of the world, such as Hong Kong, Panama stands out positively with extraordinary economic growth and a stable political situation. We do not see any violent protests in Panama. As in any other country in the world, Panama, of course, demonstrates peacefully from time to time. Here, too, we are dealing with issues such as education and social policy. And of course there are a lot of things that Panama can improve (Info-Link). However, the average income in Panama is 1,200 USD per month, a multiple of the countries of South America and the GDP per capita is the highest together with Uruguay.

As a USD country, Panama does not have its own central bank and therefore has no possibility to start the money printing machine and generate galloping inflation. The economic growth (IMF estimate 5-6% p.a. for the next 4 years), the USD and legal certainty are the key arguments why most major international companies now have their headquarters for Latin America in Panama City.

There are three major differences to most other Latin American countries, all of which have their origin in the USA:

• The USD as a safe currency since 1904
• The Panama Canal as a safe source of income (Info-Link)
• No military, because the United States protect Panama

Panama serves as a “safe haven” for investors and companies in the USD region. This is unlikely to change due to the current situation in South America. It looks more likely that this will be intensified by the crises in neighbouring countries. Rich people in crisis countries are looking for safe investment locations such as Panama for their capital. And those who want to invest in the Latin American region will probably also have Panama on their agenda right now for lack of alternatives.

As real estate investors, we are noticing this these days, as we are facing increasing international competition when buying real estate in Panama. However, this should have a very positive effect on prices.

Hopefully, issues such as social justice, education and corruption will be addressed throughout Latin America in a sustainable way to improve people’s quality of life.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

On 05 May 2019 the presidential elections took place in Panama. The new president of Panama is Laurentino “Nito” Cortizo (66), candidate of the center-left-oriented party “Partido Revolucionario Democrático” (PRD). The former Minister of Agriculture and businessman was the favorite. Panama is a democratic country where elections are held every five years. These elections have a big influence on the start of new major projects in Panama and are therefore very important for international companies that are interested in doing business in Panama. 

Laurentino Cortizo has set himself the goal of fighting corruption in the country, improving the public education system and giving new dynamism to the economy. Panama’s economy has been one of the fastest growing in the world since the early 2000s, but last year it grew by only about 4% below the average of previous years. With new investment programs, the president will focus on further boosting economic growth. The fact that one of the largest copper mines in the world went into operation in Panama at the beginning of the year will also help. According to the IMF, Panama’s economy will grow by about 6% p.a. in the coming years. It will also remain interesting to see who will win the new major projects, especially on the Panama Canal, under the new government. These were often Chinese companies under the last government after Panama and China established diplomatic relations and chose Panama as the country in Latin America for their silk road policy. Here, of course, the US and Europe will also try to get more access again.

In summarizing, we can say that the business-friendly politics and focus of Panama will not change after the elections.

We would like to briefly describe the characteristics of the electoral system in Panama and its effects.

In the Panamanian elections, a new president and the governing parties are elected. The major political parties in Panama are called “Panameñista”, “Cambio Democratico” (CD) and “Partido Revolucionario Democrático” (PRD). The political direction of the three major parties is basically similar, namely “democratic-center“. Left-wing parties have no great significance, since they have learned to appreciate free market economy by living closely with Americans for a hundred years and do not want to follow the mistakes of many South American left-wing countries.

Panama’s law stipulates that presidents may only be re-elected after a break of 10 years. Their parties can again be re-elected. Panamanian presidents often come from economically influential families who run large companies in Panama.

In this context, we are currently in an interesting and good phase for entrepreneurs who are interested in Panama as a business location. Over the next few months, the focus will be on looking for lucrative projects in Panama and finding local joint venture partners.

Klaus Happ advises and supports international companies that want to become entrepreneurs in Panama. Based on his experience and contacts, he finds partners and interesting business opportunities for companies.
Information on the business consulting Panama

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

In Germany, you sometimes get the impression through the media that you don’t have to pay taxes in Panama…this is wrong. Panama has a progressive tax system in which tax rates and rules are clearly defined. Generally you can say that the taxes in Panama are lower and easier to understand for investors, entrepreneurs and citizens compared to Germany. And the tax system in Panama has a positive feature.

Panama has a territorial tax system, which basically means that Panama only taxes the income that is earned within Panama’s borders. For companies and investors resident in Panama, this means that foreign income is taxable in the other country, but not in Panama. This is a significant difference to the German tax system, where you also have to pay tax on foreign income.

Here is a brief overview of the tax rates in Panama (as of 10.2022):

• Corporate tax 25% (small and medium-sized companies have lower tax rates / multinationals negotiate their own tax rates)
• Income tax ( salary, rent, etc.), progressive
  • 0 – 11 TUSD annual income: 0%
  • 11- 50 TUSD annual income: 15%.
  • > 50 TUSD annual income: 25%.
• Capital Gain tax 10%
• Interest income is tax-free
• Inheritance tax does not exist in Panama
• Real estate sales tax: 2% on the sales value
• Property tax (valid from 2019, based on real estate value, valid for investors):
  • up to 30.000 USD / exempt
  • 30,000 – 250,000 USD / 0.6% p.a.
  • 250,000 – 500,000 USD / 0.8% p.a.
  • over 500,000 USD / 1.0% p.a.
• Value added tax 7%

Especially in the field of property tax in Panama there are many (mostly very positive) exemptions to the above mentioned rules. For example, real estate completed before 31.12.2011 is usually exempt from property tax in Panama for 20 years. Furthermore, the “first real estate” that you occupy is tax-exempt up to 120,000 USD real estate value. And there are very special tax benefits for investments in the UNESCO old town “Casco Viejo“ in Panama, such as a 10-year exemption from taxation of rental income.

The beautiful Panama doesn’t make everything perfect, but it tries with its own resources to attract investors and people to the country.

As we are no tax advisors, we are not responsible for the accuracy of the information and you should consult a tax advisor. We would like to give you a good overview and are available to answer your questions with our team of specialists.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

In January the World Youth Day with the Pope took place in Panama. 300,000 visitors celebrated the Christian festival with the Catholic population. Panama invested about 50 million USD in the organization of the event. Economists expect a positive impact of an additional 1.5% GDP growth for 2019 through direct revenues and the international awareness of the country, which among other things supports tourism.

This should also have a positive effect on the real estate market in Panama, so that investments in real estate in Panama are still very interesting. The real estate prices in Panama are cheap in international comparison, because in best location the real estate prices in Panama City are about 2,500 USD / sqm and the rents about 15 USD / sqm.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

China’s President Jinping visited Panama in December to discuss economic agreements with the government. China has chosen Panama as the country in Latin America to continue its policy of the Silk Road. Panama’s geographical location makes it an ideal partner for a free trade agreement, investments in infrastructure and tourism. Further information on the infrastructure projects (Link).Infrastructure projects are good for the economy, create jobs, improve the quality of life and are important elements for the attractiveness of the investment location and the real estate in Panama.

Infrastructure projects are good for the economy, create jobs, improve the quality of life and are important elements for the attractiveness of real estate market in Panama.

With the establishment of diplomatic relations between Panama and China in 2017, Chinese real estate investors will now also receive a visa for Panama for the first time and will find attractive real estate prices in Panama. In prime locations, property prices in Panama City are approx. 2,500 USD / sqm and rents are approx. 15 USD / sqm.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

The largest new copper deposit in the world was found in Panama and the copper mine will go into operation in 2019. This will have a positive impact on the real estate market in Panama. Panama’s economy is dominated by the service sector, which accounts for about 77% of the economy. Now the raw materials sector has been added as an important new component, giving the booming economy further momentum and diversifying it.

After the largest new copper deposit in the world was found in Panama years ago, the copper mine will go into partial operation in 2019 and be fully operational in the following year. The mine is a $6.5 billion project managed by Minera Panama, a subsidiary of First Quantum Minerals Ltd, Canada. The mine is located 120km west of Panama City in a lonely area on the Caribbean side of Panama where 11,000 (7,500 Panameños) people are currently employed. Once fully operational, the mine will, according to experts, be one of the largest copper mines in the world and one of Panama’s largest export sources. As a result, the mining business will be Panama’s fastest-growing industry, representing approximately 5% of Panama’s GDP. The homepage of Minera Panama and its presentation give a deeper insight into this megaproject.

The copper mine will have a positive influence on many economic sectors (infrastructure, trade, construction, etc.). The real estate market in Panama will also benefit from this, as this new economic activity will bring new manpower and demand for housing. Many of the copper mine employees live and rent their homes in Panama in the nearby beach area of Coronado. This is located on the Pacific side (i.e. on the other side of the narrow country) and is about an hour’s drive from Panama City. Investors of us buy profitable and beautiful beach apartments in Coronado (Link) and generate rental income from short and long term rentals.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

Panama’s economy has always benefited from major infrastructure investments. In 2019, the airport terminal 2, metro line 2, the third bridge over the Panama Canal, the new cruise port and the congress centre will be completed. And a new giant project is just about to start construction.
Photo © Autoridad del Canal de Panamá (ACP)

At the beginning of 2019, several major infrastructure projects will be completed in Panama.

• After the inauguration of the first metro line in Central America in Panama City in 2014,
  Metro Line 2 is now close to completion. This will expand the public transport network and hopefully reduce the city’s major traffic problem a little.
• The modern Terminal 2 of the international airport in Panama City should be opened in the first quarter of 2019. The airport is currently working well beyond its capacity limits and urgently needs the new terminal. With over 80 direct connections, Panama flies directly to far more destinations than any other airport in Central and South America.
• After a construction period of five years, the third bridge over the Panama Canal will be completed at the beginning of 2019. This bridge was built on the side of the Atlantic Ocean and is part of a major infrastructure plan by the government to develop the Caribbean side of Panama (85% of life in Panama is on the Pacific side).

• The cruise terminal in Panama City on the Pacific coast will be completed by mid-2019. Until now, cruise ships could only dock on the Caribbean side of Panama (city of Colon). Now thousands of cruise tourists will be able to arrive or depart directly from Panama City. This will promote tourism in Panama, which is still in its very early stages, and increase the low hotel occupancy rate in the city.
• With the visit of the Pope and the World Youth Day in Panama at the beginning of 2019, the new congress centre, which will be the largest in Central America, will also be opened. The project with construction costs of approx. 200 million USD will bring more trade fairs, companies and tourists to Panama.

Construction of the fourth bridge over the Panama Canal will start in 2019. This bridge will be built in Panama City and will completely change the traffic situation of the city. In addition to cars and pedestrians, this bridge will also bring the new Metro Line 3 across the Panama Canal, connecting the hundreds of thousands of inhabitants of the suburbs with Panama City. This billion USD project is divided into the construction of the bridge (Chinese consortium), the metro line and the purchase of the metro trains (Hitachi). Completion is scheduled for 2022.

The infrastructure projects mentioned are good for the economy, create jobs, improve the quality of life and are important elements for the attractiveness of the investment location and the real estate in Panama.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama

The Panama Canal closed the 2018 fiscal year with a historic tonnage record, an increase of 9.5% over the previous year. This significantly exceeded the original forecasts for 2018. The revenues from the Panama Canal and the national currency, the USD, make the big difference between Panama and most other emerging market countries in terms of a country’s economic stability.

The expansion of the Panama Canal, which was completed in 2016, is paying off. The increase was driven in particular by liquid gas tankers (LNG & LPG), container ships, chemical tankers and vehicle transporters. LNG tankers could hardly use the original Panama Canal due to the draught of the ships. The following overview shows the sub-segments in the time before the extension of the canal (Panamax) and currently (Neopanamax).

62.8 percent of the cargo that crosses the canal comes from the United States or is destined for the United States. The main countries using the interoceanic route were: United States, China, Mexico, Chile and Japan. Panama is benefiting from economic growth in the USA. At the same time, however, Panama would also suffer from an intensified trade war between the USA and China.

The income from the Panama Canal is between USD 2 – 2.5 billion annually, which is a stable and high income for a small country like Panama with 4 million inhabitants. The country’s national debt, measured as a percentage of GDP, is around 39%, partly because of the revenues from the Panama Canal. This is low by international standards (EU 81%, USA 108%, Japan 235%).

The booming Panama Canal is an important component of the economy and promotes prosperity and the growing infrastructure in the country. These are important elements for the attractiveness of the investment location and the real estate in Panama.

FRAPAN-Invest

Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

Profitable, safe and beautiful:
Investments in Panama