May 2011 Newsletter

May 5th, 2011

What does President Obama mean for Panama’s prices, labor, and relocation alternatives for foreigners? Ever wish you had gotten to Costa Rica before everyone else? This month’s newsletter, we’ll skip all the Osama jokes and explore the plethora of opportunities made available by the pending US free trade agreement as well as a short expose on what we consider to be Panama’s most certain beach real estate investments.

This past week, Ricardo Martinelli met with President Obama in an effort to solidify the completion of the Panama/USA free trade agreement.  It’s been approved and on the docket since the Bush administration, but now it looks like it may actually have a chance to pass before Congress in August.

Experts have no doubt the passage of such a bill would be a huge boost to the Panamanian economy, both on the consumption and production side.  The bill also has it’s advocates in the US, including farmer’s unions and the manufacturing sector who see the robust  Panamanian economy as one of the most lucrative markets in Latin America.

The implications of the passage of such a bill could create huge opportunities for companies looking to do business in both countries.  With the easing of tariffs, goods such as high quality beef, tomato products, and even products that are produced locally like chicken and pork would see some pricing corrections as imported goods become cheaper.   And we’re not just talking about the agricultural sector: take a look at the list of items that will now be tax exempt:  things like automotive parts, liquor, and lots of old restrictions being lifted in the service sector including the ability of foreign franchises to be able to operate in Panama without a Panamanian National.

Thinking about moving to Panama but worried about leaving your current industry?  With trade restrictions being eased, I have a feeling that new markets are going to open up in industries that we hadn’t ever imagined down here. This paired with an inevitable loosening of Panama’s immigration laws will make for a tremendous allure. The sky is the limit!

Granted, there are those on both sides that are not happy about the deal, including Panamanian producers who will lose the protection that tariffs afford, however consumers in the end will benefit from less barriers to trade.

As a service to our clients, we’ve compiled based on the last round of reports that has come out from Reuters and the Associated Press.

* More than 88 percent of U.S. exports of consumer and industrial goods to Panama will become duty-free once the agreement is implemented, with remaining tariffs phased out over 10 years.

* The agreement includes “zero-for-zero” immediate duty-free access for key U.S. sectors including agricultural and construction equipment, information technology products, and medical and scientific equipment.

* Other key U.S. export sectors such as motor vehicles and parts, paper and wood products, and chemicals will also obtain significant access to Panama’s market.

* Apparel products made in Panama will be duty-free under the agreement if they use U.S. or Panamanian fabric and yarn. A special textile safeguard will provide for temporary tariff relief, if imports under the agreement prove to be damaging to domestic producers.

AGRICULTURAL GOODS

* More than half of U.S. farm exports to Panama will become duty-free immediately, including high-quality beef, other meat and poultry products, soybeans and related products, most fresh fruits and tree nuts, distilled spirits and wine, and a wide assortment of processed products.

* U.S. farm products benefiting from expanded market access opportunities through tariff-rate quotas include pork, chicken leg quarters, dairy products, corn, rice, refined corn oil, dried beans, frozen french fries, and tomato products.

SERVICES

* Panama will accord substantial market access across their entire services regime, including financial services.

* It agreed to eliminate measures that restrict investment in retail trade to Panamanian nationals, to provide improved access in sectors like express delivery, and to grant new market access to professional services that previously had been reserved exclusively to Panamanian nationals.

* Panama also agreed that both mutual funds and pension funds in its territory will be allowed to use portfolio managers in the United States.

** The country receives about 45% of national exports and imports averaged U.S. $ 4 billion annually. Is the leading supplier of products used or consumed in our country.**
Will take approx 20 months to implement

Labor

Panama has a major unemployment problem, but it’s not the one you think.  Finding qualified labor, including bilingual entry level positions is getting more and more difficult as multinational companies continue to relocate to Panama.  Compounding the problem are projects like the Trump Hotel, who has already hired 150 employees with plans to bring another 335 on, all of whom must be bilingual. One way to address the shortage is by easing labor restrictions, which may be coming sooner than we would have thought.

Published in the April 21^st edition of the La Prensa newspaper is a report detailing the Martinelli administration’s plan to gradually lift labor restrictions on specialized employees in wide range of industries.  Panama has already seen a 28% increase in  foreign personnel being hired to fill local positions, according to the same article.

This bodes well for foreigners coming to Panama, looking for work.  Look for big changes over the next few months!

Area spotlight

For our readers in places like Santa Barbra or Nags Head, this will come as no surprise:  Surf real estate is big business and will continue to be as long as pristine, unexploited surf spots can still be found along the world’s beaches.  The secret will be out soon on Playa Venao, as the Billabong world championship of surfing moves into town in the coming months.  With the international exposure that the competition brings, we expect this to be one of the next hottest spots in residential real estate in Panama.

Only four years ago, the secret breaks on the beach were known only to local surfers and the occasional out of towner. The success story of this little beach area is undeniable and long overdue.

Playa Venao is nestled into one of the most pristine bays on Panama’s Pacific coast, about an hours drive along paved roads south of Pedasi.  Over the last several years, small but active development groups have been slowly building up the area which can barely be called a town just yet.

In one area, over four million dollars has been invested in the Brisas Venao Hotel, a 55 room tourist project that will bring some much needed infrastructure to the area. Another project  following on the heels of development is Playa Venao Heights, a low density neighborhood in the hills overlooking the break at Playa Venao.  Owners in Venao Heights include world class surfer and local celebrity Gary Saavedra, one of the first to buy.

For comparables, just look up the road at projects now selling for upwards of $400,000 for house+lot.  This is a stark contrast to similar properties in Venao where one can still pick up a full serviced lot with amazing views for less than $75,000. Look no further than neighboring Costa Rica, where real estate prices along the beach have skyrocketed to accommodate for hoards of baby boomers in search of second homes.  Prices are down in Costa Rica, but they’ve barely started to inch up in Venao!

Interested in other opportunities in the area?  As a direct result of Playa Venao’s progress, we now have an office  in Pedasi! Use our agents to snag the best deals with the best views in, hands down, Panama’s fastest and most positive developing beach town.