All signs point to the fact that Panama is about to clean up its act in a big way thanks to the release of last month’s Panama Papers, which revealed mischievous ongoing amidst one of Panama’s most recognizable law firms, Mossack and Fonseca. In the short term, we may see some collateral damage in the form of local banks, law firms, and brokerages being forced to either close or consolidate. Plus, it’s been a pretty serious sucker punch to Panama’s reputation.
Long term, Panama is still poised for major growth with some very strong macro-economic foundations and estimates that I’ve seen of the “Offshore Company Set-up Business” touted as small as 1.9% of a $47 Billion GDP economy…a blip on the radar.
It’s important to remember that Panama has an enviably stable banking sector (that avoided the last financial crisis) with $90 Billion in capital, largely a result of 10 years of 8% plus annual growth (with ratings agency Fitch predicting, post-Panama Papers, another 6% growth this year). Add to that a growing middle class, a shrinking poverty line, and a super healthy debt to GDP ratio that can finance infrastructure and social welfare projects galore.
Once the dust settles, the Panama Papers are great news for anyone who is long on Panama and understands that greater transparency means more investor confidence and ultimately more growth.
And what about Panama’s“hot” real estate market? Are we looking at a massive selloff of properties currently held by offshore corporations? Not likely, as most of the offshore corporation holders are not even in Panama. But realistically, global headline scandals aren’t “Demand” generators usually, and on the “Supply” side there could be some fallout in the real estate market depending on who’s got issues.
Savvy investors should be ready for possible fire sale opportunities as they come up.
And just as a reminder, the good old Panama Canal’s been here as a strategic asset for over 100 years, and it’s about to double in size. It’s still an average of 30 degrees Celsius year round and a 2 and a half hour flight to Miami. So as long as global retirees and young adventurers are looking for safe, low cost of living and a great warm weather lifestyle, Panama prevails.
Don’t worry too long about us!