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Panama Invests in Infrastructure: Good Just Got Better

Panama Invests in Infrastructure

Panama’s government has shown time and again that they are committed to enhancing the country’s attractiveness to businesses, tourists, and investors.  This was recently evidenced when Congress announced a budget of $16.3 billion for 2013, which includes infrastructure projects to the tune of $15 billion to be completed over the next 5 years.

This is good news for investors, particularly those who own real estate.

This record-breaking budget is a large increase over the $14.5 billion it spent in 2012, which was already up 11% over 2011.  While these expenditures may seem a bit ambitious, they’re arguably justified for a country whose economy grew a whopping 10.7% last year.

In anticipation of continued double-digit economic growth, the government has planned additions to each of the country’s airports, the building of a Metro subway system, a multi-billion dollar expansion of the Canal, and many more infrastructure projects.  The $16.3 billion budget also has $8 billion earmarked for education, healthcare, housing, jobs, and other social programs.

While its economy certainly stands to benefit from the enhanced infrastructure, Panama is already a great place to invest.  With a gross domestic product of $30.68 billion, its economy is the third largest in Central America and the fastest growing.  Because it uses the dollar as its national currency, those in the U.S. can do business in Panama with zero foreign exchange risk.

Panama’s location and its operation of the Canal have secured it a permanent place in the international trade scene.  It also boasts a tax system that is pro-business, pro-investor, and pro-foreigner.  In addition, Panama’s laws are quite favorable for anyone wanting to do business there.

Real estate, in particular, continues to be a good investment in Panama.  The cost of living is low, making it a very attractive destination for expats and retirees.  And you can’t beat the scenery.  Panama enjoys a year-round tropical climate and a setting to suit any preference: bustling cities, mountain retreats, or beachside villas.  These all combine to make the country a hotspot for short-term vacationers as well.

Another reason real estate is such a hot commodity in Panama is because the country’s infrastructure, which is primed for a $15 billion facelift, is already better than you’ll find in most of its neighboring countries.   Also attractive to investors are Panama’s host of government incentives, such as property tax exemptions and duty-free trading zones.

What does it mean when third-world property gains first-world amenities?  For the savvy investor who can spot a great deal on real estate, it could mean the difference in buying property that’s merely a good value versus getting some serious bang for your buck.

Sure, Panama–like any other destination–has its share of overvalued real estate.  No amount of improvement is going to change that (other than making it ever-so-slightly less inflated).  It’s always important to do your due diligence and make sure you’re working with a team you can trust.  If you do that, you could stand to gain a lot from the planned capital improvements.

Better infrastructure goes a long way to make a place more attractive to businesses, investors, and tourists.  As roads and other means of transportation improve, there are fewer barriers to doing business.  Airport expansions equal more visitors to the country.

Systems that supply electricity, water, internet, and other utilities add even more value to a property.  These features also help to make previously lesser-known areas more attractive to visitors.  Plus, the government’s investment in infrastructure is prompting a secondary wave of private investment, as business owners try to capitalize on the emerging opportunities for increased commerce and tourism.

Of course, the hefty budget is not without its criticisms.  Many who oppose the current administration label it as just a well-timed political stunt to gain favor before the 2014 elections.  Others fear the debt created by the expensive projects will be more than the country can manage.

But Panama’s current leaders are confident the country’s continued growth will be more than ample to offset the cost of the planned improvements.  A growing economy, they argue,  warrants a bigger budget.

foro de costa Rica

So, other than the Canal, a Metro line, and some better roads and airports, just where is all of this money going?  Here’s a little bit more information about the projects, some of which are already underway.

Public Transportation

Approximately $1.5 billion will go to the construction of Panama’s first subway system, the Metro line.  Also in the works is a Metro Bus system, which will run around $270 million.

Roads

Plans are underway to construct five highways, establishing a value added logistics industry that will reduce transit times by as much as half.  These include the completion of the final stretch of the Panama-Colon Highway, connections to bridge gaps within Panama City, and improved access to Tocumen International Airport.

Additional improvements and road rearrangements will bring thousands of jobs to the interior of the country.

Airports

The budget calls for $100 million in improvements to Tocumen International Airport, in response to international travel and cargo demands.  In an effort to improve connectivity with other areas of the country, additional improvements are planned to all of the other four national airports.

Cold Chain

The logistical benefits of an 8-market Cold Chain will enhance competition among Panamanian farmers and, consequently, promote development in less-populated areas of the country.

Governmental City

This $360 million hub will house a whole host of governmental agencies in one location, reducing leasing costs and improving communication between the various entities.

Financial Tower

This 70-story Financial Tower will accommodate 10,000 users.  Home to the National Bank of Panama and the country’s Securities and Trade Commission, it will become an icon that symbolizes the nation’s role as a key player in the financial industry.

Electric Interconnection

Approximately $415 million is earmarked for the construction of an Electricity Transmission Line that will connect the Central American market to the Andean market by way of a substation in northeastern Colombia, reducing costs for end users.

Panama Canal

The addition of new locks is already underway and, once the $5.2 billion renovations are completed in 2014, the Canal is projected to more than double its revenue.

Bay Sanitation

This $538 million project is geared towards improving the sanitary and environmental conditions of the area in and around Panama Bay.

Hospitals

Five new hospitals are slated to open in 2013 in the provinces of Chiriqui, Colon, Veraguas, Los Santos, and Darien.

Curundu Urban Renovation

Also scheduled to open in 2013 is the Curundu Urban Renovation, which will provide 1,000 housing opportunities for up to 5,000 individuals.  Various training and enrichment programs will be offered.

Howard Air Force Base Conversion

$750 million has been set aside for the conversion of Howard Air Force Base into a duty-free zone that will house logistics operations, call centers, and technology hubs.

Bridge of the Americas Reconstruction

Another $80 million will go towards the rehabilitation of the iconic Bridge of the Americas.

Air-sea Stations

These seven sites are being constructed for enhanced security and will cost roughly $37 million.

Correction Facilities

Four jails are being constructed to house 5,500 inmates.  This $155.6 million project is being implemented to improve the rehabilitation of those imprisoned.

Mining Projects

Mining projects to extract copper and gold have the potential to bring in as much as $665 million in income to Panama’s economy in the form of royalties and taxes.

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