My name is Joseph Denham and I am a Panamanian citizen working as a real estate broker representing several projects in Boquete. These projects are mostly achieved by foreign investors which focus on bringing foreigners to Panama to retire. Most of the retirees are from North America although a fair number are from Europe and other countries as well. These projects began happening in the year 2002 and today there are about fifteen of them in the process which I can mention; Santa Sophia, Los Molinos, Cielo Paraiso, Montañas de Caldera, Boquete Country Club, Noare Boquete, among others.
The fact that some are nearly sold out in such a relatively short time clearly demonstrates the significant market there is for Panama to attract foreigners to leave their home countries and come here to live on a permanent basis. Many of these investors had to overcome a number of unnecessary difficulties that under some circumstances could have ended these projects. This is why is of great importance that foreigners who invest here seek for professionals like licensed realtors, lawyers, engineers and architects to facilitate what they want to accomplish.
Economic significance;
First, lets acknowledge that the retiree who comes here to live is both a tourist, and a foreign investor. When he first comes to Panama to investigate the possibility of moving here he makes at least one trip as a tourist. He stays in hotels and eats in restaurants and visits various parts of the country. During the construction of his home he typically makes a number of further visits to see the progress. The typical retiree who comes to Panama spends about $250,000.00 for his land, home, car, furnishings and legal fees for immigration. Because the amount of money is significant and coming from a foreign source he really is a foreign investor.
How significant is this in financial terms? For example, In the case of these mega projects one alone could represent about $30 to $50,000,000.00 in initial investment. The average retiree has about $2500.00 a month in expendable income. This represents another $6,000,000.00 a year in spending on food, maintenance and travel. In addition, he has on average three visitors a year who come as guests and tourists.
The projects in the Boquete area alone represent over 1000 new homes. That does not include the hundreds of individual farms that have been sold in the area to foreigners over the last few years. This represents about $250 million dollars of foreign investment into Boquete over the next 5-10 years as the homes are constructed and the retirees come to live here permanently. They will then continue to travel and spend another $30,000,000.00 a year in maintenance dollars.
Of the 1000 retired couples that come to Boquete some will make further investments into the area. Our experience shows 1 out of 5 make further investments mostly in the form of tourist infrastructure such as hotels, restaurants and activities for visitors. Already we have seen a number of small hotels and restaurants spring up to serve the growing foreign and local residents here.
By comparison, the amount of actual tourist dollars spent now in this area is under $10,000,000.00 a year. This estimate is based on the number for hotel rooms and occupancy rates posted by IPAT on their website.
To put this into further perspective we need to go no further than Costa Rica to see the effects of the retiree investing in that country. About 30 years ago Costa Rica opened its doors to immigration by foreigners who wanted to come and live there. Today over 30,000 North Americans live and invest in Costa Rica. They were the backbone of Costa Rica’s early tourism and built most of the small hotels and restaurant infrastructure that attracted further tourists and investors. It is only in the past 10 years that the large hotel resorts such as Marriott and Barcelo have ventured into that market. It took Costa Rica 30 years to reach their level of tourism but it could take Panama less than 10 years to accomplish the same success in this market. This is due to the large number of people now retiring (13,000 every day in North America alone) and the Internet, which is an incredibly successful way to reach them and it’s the tool that Panama needs to use to let the 70 million baby boomers that will retire in the next five years find out about the country.
For those who may think this many foreigners in this small country would be detrimental, I would point out that 30,000 couples represent only 2% of the current Panamanian population of 3 million. If we use the 30,000 number as a goal to achieve in 10 years and apply the same numbers as we are seeing in Boquete, Panama would receive about $7.5 billion dollars in initial investment and $180 million in maintenance dollars per year just from the retirees. This represents nearly one million construction jobs alone over this time period. Couple this with the additional investment in tourist infrastructure and you can see that the retiree is really the goose that lays the golden eggs. He comes here to visit, then to live and then to further invest.
Examples of difficulties faced by the foreign investor;
These are a few examples of the many difficulties investors encounter, many of which you will discover that they could be avoided with money.
Local officials can make things difficult. Since the power of the municipal is very strong in these rural areas they can and will make things difficult for investors (nationals or foreigners).
Officials from MIVI, Catastro, MEF, Reforma Agraria and others; causes unnecessary delays of project approvals costing thousands in lost revenue and added costs.
Representatives of the Technical Board of Engineers are always present to criticize building methods even if the plans are stamped by architects and engineers and with building permits issued by local municipal officials.
The Social Security officials will fish for any discrepancies in payments, making timely consuming audits, which results in a few thousand dollars of arguable issues.
Custom officials will make it easier or harder for you and at the end of the day you will acknowledge that is better to go the easy way.
Why do these things happen?
People who want to gain something for nothing find investors an easy target. Most people will agree that when someone from the government comes to tell you they are here to help you, its time to watch your wallet. It really comes down to a weak rule of law. Yes there are laws to protect investors but there is weak enforcement and corruption both in politics and the judicial system. The Panamanian people overwhelmingly voted in the past elections for a new government who gave more job opportunities and to rid the country of crime and corruption. In my point of view they need to work harder.
In closing I would like to mention that I believe Panama is in the right place at the right time to take advantage of a very bright future and foreigners need to understand they are looking at a whole different culture and finding the right people will make a HUGE DIFFERENCE.
By Joseph Denham, Nov 2006 |
