Panama is a country that often flies under the radar but savvy investors will know that the tide is turning. Ongoing growth, investment and expansion in the region are attracting the attention of investors - Panama is certainly a country on the up. While the unsettled external environment creates an element of risk, Panama is the fastest growing country in Latin America. In fact, it boasts an average annual growth rate of 8.5 per cent and per capita GDP has more than doubled over the past ten years, according to the International Monetary Fund (IMF).
This growth has been driven by a steady stream of public and private investment, the Panama Canal expansion and other large public infrastructure projects. The IMF claims a successful fiscal consolidation, which brought gross public debt from 66.2 per cent of GDP in 2005 to 39.2 per cent in 2012, has also increased stability. "The IMF welcomed the resilience of Panama’s financial system in light of recent global market turbulence, which can be explained by the banking system’s diversified ownership structure, low reliance on wholesale funding, as well as high capital and liquidity ratios," the body explained in a report.
Let's take a closer look at the key fundamentals that are helping to transform Panama into an attractive investment destination.
Panama Canal Extension
The extension of the Panama Canal has created a vast number of new business opportunities for investors all over the world. It currently handles five per cent of the world's trade, with two-thirds of the Canal's annual transits bound to or from ports in the US. However, there are opportunities to be had from UK investors as expansion goes ahead. It is hoped that by 2015 the capacity of the Canal will be doubled, creating a new lane of traffic suitable for larger ships.
Coastal Beltway Project
The Coastal Beltway Project is designed to reduce congestion in Panama City. Traffic has reached crisis point in the area, as the city continues to attract business, tourism and residents.
A bypass route past the city will be created, redirecting traffic through passages like the Avenida Balboa. Currently, 72,000 vehicles per day pass along the Balboa and the Beltway improves vital access to Panama City. It now has ten lanes, with six going from Punta Paitilla to San Felipe and four in the reverse direction.
Increase in tourism
Over the last five to ten years, tourism has increased in Panama, helping to give the economy a further boost. With 2,857 kilometres of coastline, it's not hard to see why. The country boasts tropical islands, beaches and wildlife, helping to generate an estimated USD 2,600 million in 2010, according to the Tourism Authority of Panama.
Holidaymakers usually enter Panama via the Tocumen International Airport in Panama City, with the lion's share of tourists coming from the US, Colombia and Venezuela. In 2012, the country received 2.1 million tourists and the first projects for 2013 indicate ten per cent growth for the year. This will be driven by a recovery in the cruise industry, which witnessed a 28 per cent decline in 2012. However, more needs to be done at local levels to ensure the country can attract larger volumes of visitors.
Rise in commercial space and activity
With economic fundamentals and infrastructure improving in Panama, it is little surprise that activity has also been hotting up in the property sector. In the office market, the vacancy rate for class A projects decreased to 7.5 per cent at the end of 2012, compared to the previous semester. Writing at the end of Q4 last year, CBRE explained: "In this semester the market was stable, and is projecting stability for the beginning of next year, because of the activity that the Industrial market has, where new companies are continuously entering and settling in our country."
The industrial market remains one of the most competitive, thanks to the economic activities that are being added and diversified. The submarket is currently able to demand a lease price of USD 12 per square metre in the Centre.
- Friday 14 June 2013