What’s Going On In Panama?

The future for Panama looks very bright!  Panama is a safe haven with a growing economy which attracts investments and foreign immigration.  Panamanians, and foreigners,  are very optimistic about their future living in Panama!   Read the new article (reprinted with permission) by Bob Adams at RetirementWave.com to understand why…

Report from Panama – July 2016

Important Note – This commentary is also available in PDF form which can be read on your monitor or printed out. The PDF is in larger type so it can be easier to read for some folks. If you would like to download a copy, click here [Additional Note to readers: you may wonder why, whenever I mention the word “billion” as a statistic, that I immediately follow that with the same number, expressed differently. For example, I may write “$2 billion ($2,000 million)”. The simple fact is that there are two different definitions of “billion”, each used by many nations. By presenting “billions” in this manner, I am simply clarifying exactly what I mean to both groups. For similar reasons, I try to avoid English contractions like “don’t”, “isn’t”, “it’s” and so forth. These can be annoying to some readers for whom English is a second language.]

[2 July 2016] Once again, here is a “Report from Panama”. I hope you find it useful.

First and Foremost I will be brief, but I want to take a moment to congratulate the people of the Republic of Panama on this last Sunday’s successful inauguration of the expanded Canal. It was a beautiful day, the ceremonies were well-planned and executed, and the first “official” ship passed on its way without incident. It was the second time that the Canal has made history and every Panamanian was proud to be there, whether physically, by television, or by Internet as I was.

It is not just a Canal expansion, but more. Only a few smaller ships carrying liquefied natural gas (LNG) can use the old Canal locks, but about 80% can now use the new locks. This is a big financial savings for them and it means a great deal more traffic for the Canal. Realizing this, Panama has signed a $650 million contract for the construction of an LNG terminal that will include a power plant in Colon Province, about 60km from Panama City with the capacity to generate 380 MW of power and an LNG import terminal with a 180,000 cubic meters storage capacity. This is smart. Instead of just settling for the increase in shipping, Panama is finding ways to leverage the new expansion to further benefit the nation and its economy.

Now the launch of the expanded Canal expansion is part of Panama’s history and, like any nation that has overcome obstacles to grow rapidly and successfully as Panama has in the 21st century, the nation can turn its eyes back to the potential of the future, not the glories of the past. As I have said more than once here, the nations that look to the future, not the past, are the ones that continue to progress.

Enough. Moving right along…

The World We Live In As Best We Can 

“The trouble with our times is that the future is not what it used to be.”
Paul Valéry (Ambroise-Paul-Toussaint-Jules Valéry), French poet, essayist, and philosopher, 1871-1945I am 71, born to and raised by two fine analytical minds, my parents, and trained in analysis, not by lecture, but by example and plenty of loving, constructive criticism (although I did not always see it that way back in the day!). Any talent I may have ever had in analysis I owe entirely to them. Any failure is my problem, not theirs. I count them as the two biggest blessings in my life.

Following two challenging but wonderful years as a US Peace Corps Volunteer, I sat down in 1969 to write my first formal analysis for the use of others and the first of its kind on that topic. For those interested, the topic was juvenile delinquency in the Philippines based on direct experience working with these young men and a few young women, as well as statistics that I had collected over those two years in interviews with them, having first gained their trust. It was exhausting, but it was good to be able to leave something behind that could help others in that field.

Following that, I spent decades in nations all over the world doing analysis on a wide variety of topics, most of them important perhaps, but not quite so exciting or exhausting! Eventually, I focused on global issues beyond national or regional issues, publishing articles when time allowed. Analysis is now part of who I am, but I never forget how difficult true analysis is. After all, if you do the job well, you often find that your prior assumptions are wrong and you have to change them to fit reality, not your emotions.

I do not write about my past normally. I expect it is uninteresting to most people and irrelevant to their lives, so I prefer to spare you from that! I only raise it today because it was the foundation for five decades of living, working, and always analyzing, in nations all over this beautiful planet (and it really is beautiful!).

In all these years, I have never seen so many nations consumed by so much confusion that they no longer know where they are going or what they are going to do when they get there. The great majority of those nations are what we used to call the “First World” in the past century. Today, that term is more nostalgic than anything else.

I choose the word “confusion” deliberately. There is nothing else common to all these nations. I know that because I hear from you and you are from many nations on every continent. Retirement Wave is a global site and my correspondence reflects it.

I do not discuss politics and I do not intend to begin today. I know what every real analyst knows. No human can accurately predict the future. As my friends from Scotland might say, it is “beyond our ken”, beyond our knowledge, but I will say two things.

First, my best estimate is that we are only at the beginning of a multi-year period of confusion. There is likely much more to come. Everything not only changes, as it always has, but it now changes more quickly and unexpectedly than ever before and it is more likely to accelerate before it slows.

Second, if you find yourself feeling as if you are sitting in a tiny boat, adrift in a sea of confusion, now may be the right time for you to raise your sail and find a new home, a new “sea”.

Whether that is Panama or not is totally unimportant to me. This is about you, not Bob. There are many choices, but when all is said and done, I have one simple recommendation to those who find themselves in the situation I describe above.

Choose, set your sail, and get on with your life.

Meanwhile, down here in Panama…In past reports, I have had a long list of single items on a wide variety of topics, but I am going to skip that today. They take up a lot of space and these reports are long enough. Instead I will focus on a few major items. They take up space too, but not so much from text, but from the charts and graphs included. So let us get on with it.

IMAE – The Beat Goes OnIMAE is the Spanish acronym (initials) used for the English, “Monthly Indicator of Economic Activity”. It does not include all activity (that is why it is called an “indicator”), but it includes most of the total which is called GDP (Gross Domestic Product), but GDP is reported on a quarterly basis, not monthly, and takes a long time to put together. IMAE represents the majority of the GDP information and does a very good job of providing the direction that will eventually show up in the GDP.

The IMAE also takes time to collect and prepare, so this is the latest which covers January through the end of April of this year and the five years before. The pink line shows the movement each month. The blue line shows the trend over time. If the lines go down, it does not necessarily mean that the growth is negative, only that it is slower than in the past. If we actually have negative growth (and we have not for a very long time), the lines will fall sharply and very obviously.

Nothing especially exciting up there. However, you can see a slowing down over the last couple years and this year that has “flattened” the line. That is no surprise. We all know that the current administration that took office two years ago purposefully slowed down the rate of government spending because they felt the increase in debt was too fast and too much. I wish every government felt that way. I expect that the slower movement will continue for the next few months, but now that the budget is in better shape, important government projects (a second Metro line with a third being prepared, a second airport terminal, a new convention center, and a lot more) will have their impact.

And do not forget that the expanded Panama Canal is now operational and it will raise those numbers too. In recent years, the Canal has contributed a little over $1 billion (1,000 million) to the national treasury after paying all expenses and retaining what it needs for operations and maintenance. Each year, it goes through the process of preparing its budget for the coming fiscal year. That would be 1 October 2016 through 30 September 2017. The current estimate of their contribution for that period is $1.6 billion (1,600 million). That is excellent. Even if business is not as heavy as predicted, despite being conservative in their estimates, it will exceed past receipts and be a great benefit to Panama.

For those really interested in GDP, it rose 4.6% during the first three months of this year, less than had been expected. But that is likely to be higher than in any other Latin American nation, higher than the EU and most individual European nations, and the US which just revised its first quarter growth upwards to 1.1%.

Foreign Direct Investment (FDI)FDI is the total of major investments made by international business and banks, not the homes or other investments made by individuals, and is used as an indicator of how foreigners feel about a market.

In 2014, Panama hit a new record of $4.3 billion (4,300 million) and it was thought that we would be fortunate to do it again in 2015 as the global economy was slowing. In fact, in 2015, it rose to just over $5 billion (5,000 million), setting a new record.

FDI for the first quarter of 2016 in Panama has been reported as $1.37 billion (1,370 million) for those three months alone. If the remaining three quarters remain the same, the 2016 total will be nearly $5.5 billion ($5,500 million), another new record. However, that cannot be known now, the numbers might fall, but the first quarter certainly looks good.

Now let us look at this in comparison to other small nations, the five nations of Central America to our west and north. If you combine all the FDI received by these nations, you will find that Panama got nearly 39% of the total, far more than any of the others, and 43% of all FDI for 2015.

But as I have said here before and as any household knows, it is not simply a matter of your income; it is also a matter of how many mouths you have to feed. So if we take the total FDI for each nation and divide it by its population, we get an amount per person (per capita). That really tells you the full story. So let us take a look at that.

Some may ask, sure, Bob, but what about our other neighbor to the east and south, Colombia? Well, they get more FDI, but they have a much greater population. So the results for Colombia are $340 for 2014 and $252 for 2015, a drop of 25.8%.

I will finish with this comment. Everything is relative. If other nations in our neighborhood were doing better than Panama, those numbers up there would be nothing to be particularly proud of, but that is not the case. Yes, every once in a while another nation or two might do better in a specific year or two, but for more than a decade, Panama’s economic growth has been more rapid than that of any other nation in the western hemisphere from Canada at the northern end to Argentina at the southern end on every major scale, not just FDI. That is the real story. Is there something special about Panama? I guess so.

Who Is Coming To Panama Now?People often ask me what nations people come from who receive residency visas in Panama. Well, it is hard to tell them these days. In the first few years I lived here, the government’s immigration agency actually listed every person who had applied for a residency permit, their nation of origin, and whether they were accepted, but they never gave the statistics by nation.

In 2005, many RW members back then believe that Americans were the majority, but I knew that wasn’t correct. Colombia was far more likely to be first in number. After all, in 1902 before Panama separated from Colombia, there were no Panamanians. They were all Colombians. There are many Colombians living here and always have been, but no one had any statistics.

So I went into the public website of the immigration division and sat down and counted more than 12,000 people who had received residency visas by nation of origin. I was then able to demonstrate that Americans were certainly present, but nowhere near a majority.

A couple years later, I have forgotten exactly when, I went back in to get new totals, only to find that the information was no longer public. I was a little disappointed, but I approved. Why should every individual’s private information be out there for everyone in the world to see?

However, since I have been here, the government has never made it a practice to publicly report the number by nation and that remains the situation today, so I have never been able to update that old information which I still have buried at the site in an old page.

Then last year, the government publicly provided the results for the top ten nations. So I can now present the statistics I counted in 2005 with those presented by the government a decade later in 2015.

But please do me a big favor! Do not misunderstand. These are not the number of people from each nation, they are the percentage of the total from each nation. If one nation’s percentage goes up dramatically, every point they go up must be deducted from another nation’s percentage.

Also, keep in mind that Panama has been a “nation of immigrants” for more than a century. We have people of Chinese, Indian, Lebanese, Jamaican and other nationalities who have lived here for a very long time and many generations. The first Chinese to become a Panamanian was registered in 1854, for example. He was probably here to help build the railroad where the Canal is now. When the French made their attempt to build a canal in the 1880s, many more came. Finally, the American canal construction brought people from all over the world. In addition, since the Canal was built, people who passed through sometimes stayed and they added to the wonderful mixture of cultures that make up Panama today.

Okay. Here it is.

As you might imagine, most people notice the rise in Venezuelans immediately. They were coming in small numbers in 2005, but that poor nation has been on a downward spiral into economic disaster ever since and their number has dramatically increased, up 34 percentage points in these stats. Every one of those percentage points had to come out of some other nation’s total. The percentages of Colombians, Americans, and others may fall, but that does not need to mean fewer of them are coming. It just means that Venezuelans have come in such great numbers to escape the disaster in their own nation that they completely changed the percentages.

You may note that one other nationality has increased, Nicaraguans. Nicaragua is one of Latin America’s poorest nations and they have come in large numbers in order to find work, but they are still a small proportion of the total.

The above numbers are very good samples, more than 10,000 in each case, but neither covers a full year and since I am not sure how many months were covered in 2005, comparing the “raw numbers” does not really tell us anything. In addition there are other factors which can affect numbers selected at one specific point in time. But we are interested in where people are coming from and they are very useful for that.

Frankly, none of those numbers I just mentioned impressed me or surprised me and if that is all there was to say, then I probably would not bother with them. They do not tell me or anyone else in Panama interested in expat arrivals anything we do not already know. Except for one thing.

I was blown away, not by the Venezuelans, but by the Europeans! If you did not notice that, go back and look again. The three European nations in the top ten combined represent 17.3% of the total, more than the Colombians! No European nation made it into the top ten in 2005.

In 2005, Spain was #14 on the list and is #3 in 2015’s statistics. Italy was #18 in 2005, but #4 in 2015. And Portugal was #43 in 2005 at one-tenth of one percent and now it is in the top ten!

Now you know why I welcomed the new “wave” of residents coming from Europe in my last Report from Panama. If matters continue as they are now in Europe, those numbers could easily rise. And the Germans, French, British, Dutch and other Europeans may not have made it into the top ten, but we know they are coming too.

Oddly enough, although the 2015 statistics were published in the major newspapers here, I have never heard one person comment on the rise of the Europeans. Well, I can assure my European members that I certainly noticed and I am happy you are joining us.

I often tell my Panamanian friends that the arrival of residents from all over the world is a great blessing. Panama is a nation of only four million people, one of the smallest populations in the western hemisphere, other than Caribbean islands. Only Uruguay is smaller. With the dramatic increase in the Panamanian economy, it finds itself short of enough workers for the needs of its private sector. In addition, as I have mentioned many times in past reports, the public education system is simply not producing graduates with the many skills required in the 21st century.

The arrival of new residents has helped immensely in meeting the need while the nation works on improving its education system, not an easy task done rapidly. Foreign residents have been a critical assistance to Panama’s development and will continue to be as the economy grows and the education system is reformed to meet today’s reality. Without them, the last decade would have been marred by lost potential due to a small and under-educated workforce. Panama would be in a very different place today and not as good a place.

Some of you may think Panama will experience the angry conflicts underway in Europe and the US regarding immigration. Anything is possible, but it is not the same thing, so it does not have to have the same end result. People who move to another nation in search of citizenship are called “immigrants”. I call those like most of us who come to Panama to live indefinitely, but not seek citizenship, “relocators”. That is a crucial difference.

In Panama, residents have many of the same rights and responsibilities of citizens, but they are not citizens. They do not have Panamanian passports, vote in elections, hold government office, or have the other political rights and responsibilities of citizens. They are relocators. Panamanians retain complete control of their nation’s political structure. Citizenship is granted to only a small number of foreigners each year. That policy may change at some point in the future, but that is the situation now.

As a result, discussions about foreign residents do not have the extreme emotional content that we see every day in the US and Europe and many other nations, another blessing of the way things work here for both Panamanians and everyone else. We do not need or want the anger and extreme emotionalism of less fortunate nations and I sincerely hope we can continue to avoid that. My one request to you is that, if you are one of those angry and emotional on the topic in your home nation, you leave that behind when you come down. If nothing else, please remember that you are sitting on other side of the table when you relocate to another nation, wherever you choose to go.

It is not so hard. It is easy. If you come to live in Panama, just remember to treat the citizens of Panama (and any nation) with exactly the same respect you expect from foreigners living in your home nation.

In Summary 

“Don’t fear failure so much that you refuse to try new things. The saddest summary of a life contains three descriptions:
could have, might have, and should have.”
Louis E. Boone, American author, 1941-?I am going to conclude this Report with some of the same words I used in the last Report from Panama. They remain every bit as true today and I think every bit as useful.

The 20th century is over and never coming back. It is history. I celebrated my 55th birthday in 2000 and my 71st earlier this year. I have spent the great majority of my life in the 20th century and sometimes it can still “seem like yesterday”. Today, the average Panamanian is 28 years old. He or she has already spent the majority of his or her life in the 21st century. It is probably safe to guess that 90% of their real memories are from the 21st century. Three years from now in 2019, Panama will hold its next national elections and among the voters will be some who were born in the 21st century. The same will be true in many nations. This is their century.

But it is our century too, we share it with them. We all need to make this our best century. Any goal less than that is a mistake.

That is it for this Report. I hope you found it useful and interesting.

If you are someone who has read my past Reports from Panama, you know exactly what comes next. The final words are always the same from the very first report I wrote many years ago. So let us all read this together, once again.

No one knows the future. Free markets go up and free markets go down. The future is not a simple extrapolation of the present. Anything can happen. Everyone has an opinion and those words above are just opinions.

Note…

You can read all of Bob Adams previous and future articles about Panama when you become a member (for free) of his website www.RetirementWave.com