Investors and entrepreneurs frequently ask me why they should invest in Panama. The background to this question is often that people don’t know much about this small country at the Panama Canal and that they have concentrated on their home market. And this although there is much competition and falling yields. In this article, I will look at the reasons why our investors invested in Panama. The main reason for them is often “diversification outside the euro zone”. This involves both investments in entrepreneurial projects and real estate in Panama.
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Most people know exactly three things about Panama. Namely the Panama Canal, the story “Oh, how beautiful is Panama” and the Panama Papers. All three have something to do with Panama, but Panama is much more important for the world economy and has much more to offer investors.
The economy, the real estate market and the stock market have performed well since the end of the financial market crisis in 2009. Especially the German market. This was the reason for many investors and entrepreneurs to concentrate on the domestic market, as yields were correspondingly attractive. For some time now, however, yields on German government bonds and first-class real estate have tended towards zero, and the stock market has also become more volatile in recent months. If you consider the weak growth forecasts of the European economy and the problems of individual European countries (Italy, France, Brexit, etc.), this is quite logical. In general, our investors all have a common reason for investing in Panama: Diversification outside the Eurozone. This involves the diversification of assets, the entrepreneurial portfolio and, in some cases, the life plan. Some of our investors no longer feel comfortable in Europe and are therefore establishing a Plan B. This means that they obtain a residence permit for Panama with our help and then often buy a property that can be rented out and used later by themselves. Panama has the USD as its national currency and is a very interesting country due to its political and legal security, which is why more than 250 multinational companies are based in Panama and most of them even have their headquarters for Central and South America. Companies such as Nestle, Adidas or the United Nations have done their country research and ultimately decided in favor of Panama. Under the following link you will find a good report on “Diversification”.
Diversification always makes sense, especially in politically and economically uncertain times. The only investor who should not diversify is the one who is always 100% on the right track! (John M. Templeton)
Yields In Panama City in the prime locations the gross rental yields are approx. 6-7% p.a.
Modern apartments in Panama City on the Pacific Promenade are priced at approx. 2,500 USD per square meter and are rented at approx. 15 USD per square meter. Here you have an amazing view of the Pacific, the islands and the old town. This unique location naturally also applies to the historic UNESCO Old Town. In both parts of the city, the multinational corporations are looking for rental apartments for their employees so that you can achieve regular and attractive rental returns in USD. Population growth and average age are important aspects of investment, as both have a major impact on future purchasing power and demand. In Panama, population growth is about 2% p.a. and the average age is 26 years, which is very positive compared to Germany (0.2% / 44 years). The following links provide an overview of yields on international real estate markets and historical price trends.
One of the fastest growing countries in the world
(GDP growth since 2002 approx. 8% p.a. average / IMF forecast 6% p.a. for the next 4 years)
Local currency is the USD
There are 250 multinational companies in Panama; most of them have their Latin American Headquarters (e.g. Nestle, Roche, Adidas, DHL, but also the United Nations)
Second largest free trade zone in the world
Government debt is very low at 38% of GDP (vs. 86% in the euro zone)
Panama is a democratic country where elections are held every five years and is considered politically stable. That is one of the reasons why international investors and companies have decided to invest here, because “an investment is only as safe as its country”. On 05 May 2019 the presidential elections took place in Panama. These elections have a big influence on the start of new major projects in Panama and are therefore very important for companies that are interested in doing business in Panama. Panama has made great efforts in recent years in the fight against money laundering and enacted various laws, so that Panama no longer appears on a black list. The European Union recently even decided to establish its diplomatic headquarters in Panama City.
Safety and security
Life in Panama is usually safe and normally you won’t get in touch with crime because Panama is considered the safest country in Latin America. This is also an important reason for the large corporations mentioned, because for them it is important that their thousands of employees feel safe in Panama. The following is still relevant in connection with security in Panama:
Panama does not have its own military, because the USA protects the borders of Panama.
Panama’s constitution protects private property for both domestic and foreigners
The land register of Panama and the purchase procedure are very similar to the procedure in Germany.
There are no hurricanes and no major earthquakes.
In 2019, the company “International Living” once again voted Panama the best country in the world when it comes to the question of where to retire. They justify it with the unique combination of natural beauty, climate, standard of living, medical care and safety, which no other country has to offer in its entirety. In Panama City you will find hospitals at a high international level, as many doctors have been trained in the USA. You can find the full report at this link.