San José, Costa Rica, since 1956

‘Party’s Over’ in Panama City as Economy Slows

Sam Taliaferro has played poker with Mel Gibson, hosted Sean Connery and entertained a Saudi prince at his Valle Escondido development in Boquete, a mountain town in western Panama. He broke ground on the project in 2001 and helped kick off the country’s real restate boom. But is he optimistic about the current state of Panama’s real estate?

“Unfortunately, much of the building – in the city at least – has been driven by speculation,” Taliaferro says. “That party’s over.”

The high-rises, and cranes constructing more high-rises, continue to dot the Panama City skyline. But construction has slowed to nearly a screeching halt, as financing dries up, investors walk away from deposits and speculators flee.

Panama City’s rapid real estate boom was simply “not sustainable,” Taliaferro says.

“There was no actual business here. Now, there’s nothing going on, there are no sales in the city. We’re going to see a lot of buildings completed and sitting there empty.”

Taliaferro, a U.S. expatriate who worked in Costa Rica before marrying a Panamanian (TT, Nov. 2, 2007), used to keep track of how many new high-rises entered the market each year. He says he conducted his last study in 2006, when he found more than 40,000 apartments available in the city. After that, “We gave up trying to keep track,” he says. “We just threw our hands in the air and said, ‘It’s crazy.’”

Prices, too, rose dramatically, according to Jianella Torres, sales manager and broker at Panama’s New World Real Estate ( Since she received her real estate license four years ago, Torres says, prices have tripled.

“Right now, prices have been pretty much steady in the last eight months,” she says. “Maybe they will lower prices, but Panamanians are pretty stubborn.”

Developers, however, may be getting desperate. A Jan. 22 article in the Englishlanguage Panama Star warned of “Condo fire sales coming soon,” while in December the paper reported that construction investments were down 78 percent in October 2008 compared to 2007. And in early January, the Fitch Ratings group downgraded the debt rating of Panama City’s high-profile Trump Ocean Club project, developed by U.S. tycoon Donald Trump.

“Not long ago, the name Trump meant a pretty sure thing, but how things have changed,” Taliaferro wrote in his Panama Investor Blog, “This is a very telling tale of woe for Panama.”

There are, however, some silver linings on the horizon for Panama. The sprawling, 2750-hectare Panama Pacifico project (, on the former U.S. Howard Air Force Base 15 minutes outside Panama City, will continue to spur commercial, industrial and residential development.

Already, a number of multinational firms, including Dell Panama, the Red Cross, Caterpillar, Singapore Airlines and 3M, have signed on.

“It’s not just a golf course or a resort,” Torres says. “It’s basically a whole new Panama City.”

Also ongoing are the Cinta Costera, a $189 million infrastructure project designed to alleviate traffic on Avenida Balboa in the city center (, and the Panama Canal expansion, a 10-year undertaking some real estate agents hope will bring an influx of foreign workers to the country. But Taliaferro is skeptical, saying such speculation “adds fuel to the fire.” Such projects, he argues, don’t bring in large amounts of office workers and hire locals “to do the grunt work.”

Outside Panama City, prospects are somewhat brighter. Prospective buyers continue to explore the country as a retirement destination, often as a lower-cost alternative to Costa Rica, with fewer bureaucratic hassles.

“We’ve seen an increase in expats from Costa Rica,” says Alberto Socarraz of Pro Bocas Realty ( in Bocas del Toro, a Caribbean archipelago near the Costa Rican border. “They’re telling me they are tired of Costa Rica, it’s not what it used to be five years ago, that it’s not what they thought it was going to become.”

Panama’s government has taken the lead in crafting legal incentives to attract foreign investment, including real estate.

Last year, for example, the government extended a 20-year property tax exemption for new construction. The government also guarantees a preferential interest rate of 2 percent for small businesses, and recently passed a new immigration law allowing a special type of visa for people considering investing in Panama.

Such measures are “pretty unique,” says Carolina Lacerda, a lawyer with Mossack Fonseca & Co. (, an international law firm based in Panama. “I can tell you, from what I’ve seen, nobody’s giving a tax exemption on new property. It’s quite appealing.”

While Panama’s government has taken such steps to make investing in real estate easier for the foreign investor, Lacerda suggests seeking legal counsel to ensure the process flows smoothly.

“Before signing anything or sending money, always contact a lawyer first,” she says. “It’s better safe than sorry.”


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