The first thing to know about investing in Panama is that the moneymaking opportunities abound to a staggering degree.  Think 19th century Chicago swallowing up the prairies and birthing the biggest and best meatpacking industries, lumber yards, skyscrapers, public transportation system, department store businesses and futures trading.  Better yet, think of the American Wild West -  a place where anyone with a bit of cash and a lot of tenacity could become very successful.

The second thing to know about investing in Panama is that you’re not the only one thinking about investing in Panama.  In fact, if you’ve never been there, you’re about two years behind.  Don’t worry, there’s still plenty of opportunity available, but you need to use your head.  Americans have made so much money in real estate over the past several years - legions of agents, analysts, bankers, brokers, developers, gurus, and guys on TV in Hawaiian shirts all perpetuated cheap money loans in irrationally explosive markets.  It was so easy to make huge returns, and now that the boom is over, real estate investors are looking elsewhere to sustain the money machine.

Welcome to Panama, where the cost of living is cheap, the economy is booming, and the government supports business and foreign investment.  The country is posting such tremendous growth numbers in real GDP, per capita income, foreign investment, tourism that Panama is becoming the envy of the developing world.  The main city is elegant and sophisticated with daring skyscrapers and an oceanfront, international flavor.  In April of this year when Donald Trump announced his quarter-billion dollar luxury development in Panama, he essentially put to rest any argument about systemic emerging market risk.  Add to that the looming approval for a $5.3 billion Canal expansion project and you’ll see why the investment floodgates have opened.

Real estate developers have been the first to profit -  demand has been so high in the last twelve months that prices have doubled in many parts of the city.  Buyers are rushing down to Panama, desperate to speculate on new condo projects, and there are plenty of developers happily willing to sell properties to international buyers who don’t do their  homework.  During the ‘preconstruction’ sales phase, many projects have not even secured funding, allocated capital resources, or contracted material prices; they have simply drawn a picture of a tower and proposed floor plans, and yet, that seems to be good enough for foreign investors, most of whom want to purchase multiple units for speculative investment purposes.  And some developers will gladly sell 5, 10, 20 units, even whole projects at a time, regardless of what the speculation might do to the condo market in the long run (anyone been to Miami lately?).  On the other hand, there are some developers who maintain sound business practices while still building quality projects.

For example, Procasa Panama’s Jonathan and Elias Mizrahchi are men of integrity who know how to deliver to their residents.  The real estate boom in Panama (among other factors) has caused a rise in the price of local construction material.  Many developers have gone back to their buyers to demand more money in order to fill the void.  Procasa, rather than soil their reputation, completely re-engineered an entire project from the ground up, utilizing new technology, cutting costs, and significantly reducing their profits in order to deliver the expected quality at the agreed-upon price.  They understand that the long-term success of Panama depends on precise, thoughtful investment strategies across markets, not some condo flipping fad.

Don’t think that there still isn’t money to be made in Panama City condos; on the contrary, the long-term outlook looks great (just read the Credit Suisse report from March 2006).  But ladies and gentlemen, the days of being able to purchase an oceanfront penthouse for $80,000 are gone.  Welcome to 2006 when that same condo will set you back a cool 300 grand.  Consequently, you can’t expect to throw your money in market that is widely self-perpetuated by consumer optimism and expect the same huge historical returns without doing your homework… as with any investment, convince yourself of the fundamentals: is the price run-up based on a legitimate gap between supply and demand? Are the developers credible and reliable? Are there any local legal or business conventions that could create additional risk? Or hey, maybe you were one of the people who paid $350 for a share of Amazon.com when it had no earnings in the 1990s and feel comfortable just following the crowd.              - Article Continued Below -