Category: Economy & Politics

Partnership between Panama and China

Having now opened an embassy in Panama, China has announced large-scale investments which will see direct flights between both countries and also high-speed Chinese trains opening up Panama`s transport network. In future, China wants to use Panama as its hub of the Americas.
These represent decidedly positive changes for Panama`s economy and real estate market alike.

A lot has happened in 2017 concerning the relationship between Panama and China, things which could hardly have been predicted at the beginning of the year. To start with, China revealed infrastructure projects in Panama to the tune of 2 billion US dollars. This includes the construction of a container port on the Canal for 900 million, a thermoelectric power station for a further 900 million and the most state-of-the-art conference centre in Central America (200 million).
After diplomatic relations between the two countries were taken up in June, both governments have greatly increased their levels of cooperation. Over the last few weeks new embassies have been opened in both locations and talks have now begun regarding the first direct flights. This will serve to bring both Panama and China (including their investors and tourists) even closer together.
Asian banks are additionally showing interest in opening subsidiaries in Panama City`s financial district. Should China receive authorisation for the planned high-speed train project in Panama, a new milestone for the infrastructure of the nation will be reached. Faster journeys throughout the country will result. So too, it would mean an absolute game changer for our Boca Brava island plans, as our plot is only one hour away from a proposed station in David, the provincial capital of Panama`s most beautiful state. An international airport already exists there.

China Foto

China is currently preparing everything on a political and economic level so that Panama will become its entry gate to Latin America. It sees Panama as its hub of the Americas, a trading and logistics platform which it can use for its activities in the region. Panama itself is the ideal partner for China on the American continent for many reasons: the US dollar currency, legal and political security, geographical location, excellent infrastructure and openness to foreign investors. Panama`s exports to Asia grew by 23% in 2016, and the mutual existing potential is enormous.

Panama`s President Juan Carlos Varela recently gave an interview at the United Nations in New York on the partnership with China and the future of his country. You can find the interview here.

The arrival of Chinese investors is going to have a very positive effect on real estate market prices in Panama, as the Chinese will discover a market with currently attractive prices. Apartments on the Pacific promenade of Panama City offer a wonderful view of the ocean, the Canal gateway and the islands. Investors can purchase accommodation here for an average of 2500 dollars per square metre. Such prices are extremely hard to find in comparable settings in other parts of the world.

Skyline Panama City

The real estate market in Panama counts internationally as one of the most interesting locations for property investments. We would like to be your local trusted adviser and to take care of your investments in Panama.

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Real estate investments in Panama




Tax Agreement between Germany and Panama

As announced some days ago, Germany and Panama have signed a new tax agreement. This provides for an automatic exchange of tax and financial data from 2017 on. The agreement complies with the international standards of the OECD. Panama wishes to free itself from the reputation of the “Panama Papers” and this represents a further step in the right direction, following the OECD decision to remove Panama from its list of tax havens. With this, two important preconditions have been created for a pending double tax agreement between Germany and Panama.

OECD takes Panama off tax haven list

The OECD (Organisation for Economic Cooperation and Development) officially removed Panama from its international list of tax havens at the end of June 2017. The OECD explained this as being part of the good development and cooperation of Panama with regard to tax transparency and international relations. The country itself has signed numerous agreements with various nations over the last months (eg with Germany in June 2017) in terms of exchanging tax information. The OECD has furthermore given Panama its second-best rating status, that of “highly respectable”.

Highest GDP per head in Latin America

Panama`s economy has been growing at an average rate of 8.5% per annum since 2002. The International Monetary Fund predicts an average annual growth of 6% over the next four years. Due to its sustainable and strong economic development, Panama will show the highest GDP per head (economic performance per inhabitant) in Middle and South America come 2018. It will displace Chile as the leading nation.
(Source: La Tercera/IMF).

Chinese Investors have arrived in Panama

Panama`s economy has always been hallmarked by foreign investors. This began with the US construction of the Panama Canal in 1903 and continued over the years through infrastructure funding, capital deposits and real estate investments from the USA, Canada and South America. Europeans have only recently begun to arrive, and that in small numbers. In the past, investors from China and the Arab world were hardly represented at all. That is presently changing as China has now discovered Panama. Investments in their billions and Chinese companies and investors alike are now on the way. Here you can read more about the ongoing changes that Chinese interest brings.

Chinese groups were already involved in some Panama infrastructure projects during the last few years. Yet new developments between both nations are of a more significant and extensive size, and will have massive effects on Panama`s economy. The Chinese telecommunications giant Huawei and the world`s largest building firm China Construction both opened head offices for Middle and South America in Panama at the end of 2015. Chinese companies have currently approved projects to the tune of 2 billion US dollars. This is immense for a small country like Panama. Chinese businesses will establish a new container port on the Canal (900 million USD), a thermoelectric power station (also 900 million) and the most state-of-the-art conference centre in Middle America (200 million).

Yet the biggest bombshell came just two weeks ago. Panama took up diplomatic relations with China and simultaneously ended them with Taiwan. China is a more significant economic partner for Panama. It represents the largest trading partner in Panama`s free trade zone (number two in the world after Hong Kong) and the country which uses the Canal the second most.

Where does Chinese interest in Panama come from?
In Latin America, China has made plans for trade deals worth 500 billion and direct investments worth 250 billion over a 5 year period (2015-2019). It would accordingly like to use Panama as a trade and logistics centre. In the meantime, China is financing more infrastructure investments in Latin America than the World Bank. So too, since Panama`s currency is the US dollar, China`s requirement for dollar investments is satisfied.

Such a development between the two countries is not only positive for Panama`s economy (GDP growth since 2002: 8.5% per annum), it will also influence real estate prices. Workers and employees will come to Panama thanks to the big companies and new projects. Furthermore, Chinese investors will be in a position to see that there are not many places in the world offering best-located apartments on the Pacific promenade for 2500 USD per square metre and a 7% rental yield per year. And all that in a democratic, emerging country with the US dollar as its currency.

The reasons for Panama`s huge economic growth

The Washington Times reports on the reasons for Panama`s enormous growth (8.5% per year since 2002).

You can find the report here:hierWashington Times-Bericht.

What effect will Trump have on Panama?

This question is just as difficult to answer as the one relating to the influence of his politics on the entire world...

I would, however, like to provide you with some interesting information:

  • Donald Trump has his roots in the real estate sector and opened his first hotel outside of the USA in Panama in 2011. He was present at the opening ceremony and was especially taken with Panama itself.
  • As President of the USA he is now trying to strengthen the economy at home, specifically the US oil and energy markets in the field of liquid natural gas. That means positive news for Panama, as the recently extended Panama Canal can now for the first time handle the huge tankers necessary for this business. For the US energy companies it brings a time and cost saving of over 30% on the way to their biggest customers in Asia. For Panama it brings a further source of income. On the following link you can find a very informative Bloomberg report (simply click).
  • President Trump would like to economically burden those nations with whom the US has a trade deficit. The USA has, in fact, a trading surplus with Panama, so the country is not on the radar here.
  • When it was announced that Donald Trump would be the USA`s next President, the website of the citizenship office in Canada crashed. We have noticed something similar in Panama. Institutions which help foreigners to settle in Panama have undergone a wave of demand from the US. This serves to bring affluent people to Panama who wish to live in the country and can do the economy some good.
  • Can there also be a negative influence on Panama through the new President? Yes, of course. At the moment the matter remains open, as it does all over the world.

100 million dollar contract with US company Del Monte

At the beginning of 2017 Panama`s government approved a 100 million US dollar contract with the American firm Del Monte concerning banana production.

This will create thousands of new jobs and further economic growth in the already flourishing region of our Boca Brava island project.

Good news, of course, for our plans.

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