Panama investment pays off. A recent example is the investment by the Panama Canal Authority (ACP) in system upgrades for the Panama Canal.

ACP has improved lighting at the locks, installed new track and turntable systems for the small trains that guide ships through the locks, added five tugboats to its fleet, and repaired or replaced other patrol boats throughout the system. According to ACP the entire system upgrade cost $320 million.

The payoff has been the ability for two more boats per day to move through the Panama Canal even before the expansion is completed. Considering that the toll for passage through the Panama Canal can run upwards to $100,000, this is a substantial payoff! A rough calculation of $100,000 x 365 days comes to $36,500,000 a year meaning that the long term upgrades can in theory be paid off in less then ten years.

Real estate in Panama is another prime example of payoffs in investment in Panama. Over the first decade of the century property in Panama has multiplied in value, especially in attractive areas of Panama City.

Now that the real estate market in Panama is in a pause due to the global recession there is another opportunity to invest in Panama at a low price before the value of real estate in Panama heads up again.

Both commercial property and residential real estate are currently underpriced in Panama when one does a forward looking analysis. Panama’s economy is growing at 3 percent per year despite the contraction of economies elsewhere. We can expect to see that economy accelerate as global conditions and world trade right themselves.

In the first trimester of 2009 Panama’s gross domestic product grew 3 percent. Despite a drop from the 9.2 percet growth rate of 2008 and 11.5 percent growth rate of 2007 this is spectacular news considering that almost all other world economies have shrunk in the last year.

However, living in Panama it has been apparent that, although the torid pace of growth of the last few years has slowed, that things have not come to a standstill. We see in the reports of the Panama Canal Authority (ACP) and there as been a drop of about three percent in transits and that perhaps a drop of five percent is expected in the later half of 2009. ACP also notes that they expect to see shipping recover in 2010 and 2011.

We have been talking about Panama tourism, Panama travel in general, and real estate propects in Panama during this lull in activity. In general, it seems that all sectors have slowed but not come to a stop. We have reported the substantial drop in farm exports, however, these crops are being sold locally and not spoiling. To the extent that more food is available locally it helps keep the cost of food down.

For those with cash this is still the time to look seriously at real estate in Panama before the recovery drives prices again.

The health of the Panama Canal affects the economic health of Panama including the real estate market in Panama. The recession has reduced shipping rates slightly through the Panama Canal. However, scheduled rate increases meant to help pay for the Panama Canal Expansion, have raised concerns among shippers who have threatened to send ships around Cape Horn instead of pay increased Panama Canal fees.

The Panama Canal Authority (ACP) has just announced a temporary plan to reduce rates from the level of the announced increases. This adjustment will last from June 1 to September 30 of 2009.

According its own press release the Panama Canal Authority is “demonstrating sensitivity to customer needs” as it puts a hold on rate increases. However, the way they are doing this is go ahead with the rate increases and then “provide short term cost reduction” to its clients.

The rate increases were to be put into place in accordance with talks that ACP had with the world shipping community. ACP has received loan guarantees of $2.25 Billion for the proposed $5.25 Billion Panama Canal Expansion. ACP has planned to pay the estimated $3 Billion remaining out of revenues. Shippers agreed to the increase in tolls because the completed Panama Canal Expansion will allow more traffic, larger ships, and more profits for shippers.

So, both sides have their argument. Shippers note that the recession makes it cheaper to go around Cape Horn and ACP notes that a deal is a deal. However, economics being what they are ACP is going to raise rates and then give a discount for the next few months.

The Panama Canal, Investment, and Real Estate in Panama

The Panama Canal is Panama’s biggest business. It provides nearly a billion dollars a year for the national treasury and is major employer. As the expansion goes forward there will be a big cash infusion into the country with more jobs for locals and lots of foreign engineers, administrators, and other technical personnel renting or buying real estate in Panama. The ability of ACP and shippers to come to an understanding will go a long way to keep shipping tonnage at reasonable levels as the world works its way out of a major recession.

Panama has avoided the worst of the recession so far and with President Martinelli talking about more job producing mega projects is likely return to its 10% growth rate in a year or so.

Panama real estate

is likely to get a boost as the winner of the bid for the new Panama Canal “third lane” locks starts sending personnel for this multi year construction project. Those first few engineers and administrators will be pleased to get good deals on Panama property as the high end of the market continues in “pause mode.” We at ABPanama expect to see prices on high-end real estate remain low for several months before Panama property values resume their climb.