Panama – A Developed Nation

Panama is currently making huge investments in infrastructure, estimates have it at more than $13 billion. This is paving the way (pardon the pun) to insure the world recognizes Panama as a ‘Developed’ nation as opposed to a ‘developing’ nation.

Panama-Infrastructure
Panama Construction Boom

When I arrived in Panama late in 2002 the construction boom in Panama City had already begun and it’s almost like it has been going ever since. Sure, there have been some hic-ups along the way, like the much needed ‘correction’ in residential construction, particularly in Panama City, but developers and the government have appeared to be quite adaptive by quickly switching emphasis to much needed commercial construction and infrastructure investment.

Aside – The under-lying reason that no one seems to talk about is the win-fall Panama is experiencing thanks to the U.S. protectionist movement. While the U.S. government has managed to alienate the country from most of the world, Panama is reaping the benefits. Let’s take air travel as an example. In the past European travelers heading to Central or South America could easily connect through the International Terminals at hub airports like Miami. But since 9-11, under the auspice of ‘containing the terror threat’, the U.S. government has made numerous changes. The reality is they’re determined to investigate and get data on every body on the planet who chooses to travel, oh and grab some of their cash while they’re at it! So, almost anyone, save Canadians and a few others, wishing to connect through the US has to apply for and pay for the right to have a transit visa. Of course the US government gives no guarantee the visa will be granted but they keep the application fee regardless. This has created a boom for Panama’s Tocumen International Airport as a number of airlines who service the Europe – Central – South American markets have simply moved their hub to Tocumen. It’s also made for big business on the commercial side of things as companies like Dell computers for example have set up shop in Panama to service these markets thus avoiding the bureaucratic red tape and tax grabs when trying to export directly from the U.S.

Panama Tocumen Hub of the Americas
Panama Tocumen Hub of the Americas

Back to Panama – investment in infrastructure always sounds like a good idea but there is always risk – what happens after these infrastructure projects are done in a few years? The goal is that the benefits of growth in the real economy continue and are large enough to pay for the investment in infrastructure. That’s the goal and it’s looking quite achievable however it’s not guaranteed.

But for now, Panamanians and ex-pats alike don’t appear to mind. The people have jobs – they’re making money and, best of all the country is improving. Life in Panama is good!

Yes, this is a good news story for Panama and the prospects look quite bright. Panama has one of the most resilient economies in all of Central America and one of the most impressive bits of evidence is a thriving middle class which continues to grow in size.

When I go to Panama City I see Panamanians ‘out on the town’ – spending their money. Sure in small expat towns like Boquete the majority of people in the shops and restaurants are expats but in the city you really see it – you really understand this concept of a growing middle class. Modern shopping malls, night clubs and great restaurants are filed with regular Panamanians. And these folks aren’t living off credit – spending on the never-never like Americans. Nope, credit is very tight in Panama – always has been. These folks are spending cash – hard earned cash – discretionary income and that’s more good news.

 

It’s important to understand that a strong middle-class with real disposable income (not plastic) is the key to a healthy economy and while Panama still has some way to go, it’s definitely moving in the right direction.

When I think back to Panama in 2002, when I first arrived and how it used to be vs what I observe today, the positive change is overwhelming. Unfortunately, when I think about how the United States was 10 years ago, the negative change is equally overwhelming.

I’m glad I discovered Panama when I did and the future so bright I gotta wear shades!

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