Economic Factors In Panama

When considering property purchase in Panama, many buyers will be encouraged to know that the country offers a large number of economic advantages to overseas investors.

Strong Capital Growth

As the fastest growing economy (The International Monetary Fund) and the fastest-growing tourism market in Latin America (The World Tourism Organization), the property investment arena in Panama offers highly optimistic prospects for buyers seeking a rapidly growing market in which to gain strong returns on investment.

Based on recent years, real estate investors in central business or prime touristic areas of Panama can expect capital appreciation of up to 20% per annum along with rental yields of around 8% for buy-to-let investors.

High GDP

Panama is following a steep growth curve: in the first quarter of 2007, GDP growth was as high as 9.4%, far outstripping private and government projections. This growth has been fuelled by the real estate sector, along with Panama Canal-related activities and tourism. While many construction projects are still in their infancy, shrewd property investors in Panama are acting fast to supply a growing demand for all types of real estate in a tax efficient manner.

Discounts and Exemptions for Retirees

Panama has been voted number 2 best place in the world to retire to (UK Online) and retired foreigners are eligible for highly beneficial tax exemptions and discounts under the government’s Pensionado Programme. This includes: import tax exemption on household goods and/or cars; no property taxes for up to 15 years depending on the property; up to 20% off health care services; discounts on airfares, restaurants, fast food and movie theatres; discounted closing costs for personal loans and utility bills; and an amazing 50% off public transport (air, ground and sea). In addition, no tax is charged on income generated outside Panama.

A Booming Financial Sector

After Switzerland, Panama is the second largest banking centre in the world, currently hosting over 150 international banks from 35 different countries, including giants such as HSBC, Lloyds, and Citibank which all provide complete financial services to foreign investors in Panama.

Panama City simply bustles with international business activity and many people come to do business in Panama, enticed largely by the fact that corporations or private businesses are legally guaranteed complete anonymity and privacy, both in terms of business practice and banking activities.

On the back of Panama’s successful business and financial sector, investment in the real estate sector has reached record levels, boosted by the fact that Panama actively encourages foreign multinationals to become established in the country, all of whom require top-notch residential and commercial real estate and services to support them.

No Currency Exchange Controls!

Zero control of currency exchange operations allows cash to flow freely and anonymously in and out of Panama.

Investor Incentive Schemes

Government incentive schemes have produced no less than 40 decrees guaranteeing investors special import, tax and operational advantages when investing in Panama. These apply particularly to the tourism, maritime, real estate and mining sectors.

Purchasers of new homes benefit from exemption of property tax for 20 years.

Huge Colon Free Trade Zone (CFZ)

This is the second largest free zone in the world, welcoming some 250,000 international visitors per year, and is a busy hub for the international transhipment of merchandise. As importantly, companies located in the CFZ are exempt from import duties as well as guarantees, licensing, and several other requirements and limitations on imports.

Multinational Companies in Panama

Panama’s Law 41 is set to boost an already strong real estate market, encouraging the establishment of more multinational companies with the incentive of income tax exemption in Panama for all services provided to any entity domiciled outside Panama. In addition, it allows licensed corporations to hire trusted foreign employees to fill management positions, bringing an influx of international professionals moving to Panama to live and work.

Already large corporations such as Dell and DHL have established regional hubs in Panama, while Hewlett Packard and Caterpillar have announced new offices there and others, such as Proctor and Gamble, are also rumoured to be relocating a significant part of their operations to Panama – all great news for both commercial and residential real estate investors in Panama.

Low inflation

The government has managed to maintain an average inflation level of under 2% per annum.

Ever Growing Tourism

Despite tourism being the largest single industries in the country, accounting for some 9.5% of the nation’s GDP, the government continues to pour money into tourism investment programmes. The nation’s Special Tourism Zones actively encourage investors to Panama through a series of tax exemptions.

The construction of new hotels in the City includes prestigious hotel chains such as Marriott, Holiday Inn, Sheraton, Inter-Continental, Melia, Radisson and Crowne Plaza.

The government is expanding its port infrastructure in a bid to entice more cruise ship activity, particularly from wealthy European and American tourists, which at present are driving tourism growth. It estimates that one new job will be created for every 12 foreign visitors.

Other important projects include the promotion of Panama as an exquisite eco-tourism destination. Panama boasts some stunning rainforests, mountains, beaches and islands, all offering great opportunities for a thriving eco-tourism market. Opportunities exist for strong capital growth and reliable rental income from carefully selected properties within Panama’s most popular tourist resort areas, such as Bocas del Toro, the Pacific Beach area and Chiriqui.