Identifier
Created
Classification
Origin
06PANAMA317
2006-02-17 15:25:00
UNCLASSIFIED
Embassy Panama
Cable title:  

RETIREES & INVESTORS FLOCK TO SUNNY, SAFE &

Tags:  ECON EINV BTIO CASC CPAS CMGT KMRS 
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VZCZCXRO1303
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHZP #0317/01 0481525
ZNR UUUUU ZZH
R 171525Z FEB 06
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 7417
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2172
RUEHCV/AMEMBASSY CARACAS 0943
RUEHMD/AMEMBASSY MADRID 0251
RUEHME/AMEMBASSY MEXICO 2881
RUEHOT/AMEMBASSY OTTAWA 0201
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAUSA/DEPT OF HHS WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEHXC/ALL US CONSULATES MEXICO COLLECTIVE
UNCLAS SECTION 01 OF 03 PANAMA 000317 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV BTIO CASC CPAS CMGT KMRS
SUBJECT: RETIREES & INVESTORS FLOCK TO SUNNY, SAFE &
DOLLARIZED PANAMA

This is part one of a two part series on Residential Tourism.
Part I introduces the industry and discusses the
implications for the USG. Part II describes the economic and
political implications for Panama.

UNCLAS SECTION 01 OF 03 PANAMA 000317

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV BTIO CASC CPAS CMGT KMRS
SUBJECT: RETIREES & INVESTORS FLOCK TO SUNNY, SAFE &
DOLLARIZED PANAMA

This is part one of a two part series on Residential Tourism.
Part I introduces the industry and discusses the
implications for the USG. Part II describes the economic and
political implications for Panama.


1. SUMMARY. With an estimated 30 million Americans
scheduled to retire in 2006 (and every year for the next 18),
the race is on for affordable attractive property in mild
climates. Panama is set to become the third most popular
destination for American expatriates in the hemisphere
following Mexico and Costa Rica. American baby boomers are
also joined by their Canadian counterparts. Investors
include retirees, working adults in their 40's and 50's
seeking an investment/winter property with appreciation
potential and those intrepid folks seeking employment in a
booming real estate market. These Amcits are requesting
assistance from the USG in resolving property disputes,
renewing passports, where to invest and how to use the
internet. END SUMMARY

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HAVE WE GOT A DEAL FOR YOU
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2. (U) In 1994, Panama passed tourism incentive laws offering
20-year tax exemptions, permanent residency visas and duty
free importation of vehicles and household effects for
investors in the tourism industry. Nine years later, Panama
was named the number one place to retire by International
Living Magazine and similar publications. Websites abound
with advice, information and advertising. American property
developer and Director of Prima Panama, Sam Taliaferro,
credits Panama's booming expatriate property market to the
nexus of the internet, America's most populous generation,
the baby boomers, reaching retirement age and excellent
marketing.


3. (U) From high rise city apartments to beachfront
condominiums to inland acreage estates, Panama has a
lifestyle option for everyone. Panama offers a mild climate,
no hurricanes, few earthquakes, low cost of living, a
dollarized economy and a stable, democratic government. Elda

Sanson, General Manager of the Panama Real Estate Association
estimates new housing prices for Panama City at $1000/square
meter and as low as $200/square meter in the interior.
Undeveloped land can be had for $80/square meter. Taliaferro
estimates land prices outside a planned development at $10 to
$15/square meter and within a planned development at $30 to
$100/square meter. Residential Tourism magazine Paradise
Panama published the following average prices: Beach homes
(2500 sq/ft) $400,000, Inland/Mountain homes (2500 sq/ft)
$245,000, Island Home (3500 sq/ft) $650,000 and High Rise
City Apartment (1400 sq/ft) $185,000.

--------------
WHOA CANADA
--------------


4. (U) Canadian econoff Walker Young told Econoff that the
Canadian Embassy is seeking wardens in David, Boquete, Bocas
del Toro and Veraguas due to burgeoning communities of
Canadian citizens in these areas. Taliaferro confirmed that
80% of expatriate buyers are North American. According to
Sanson, other expatriate real estate seekers include upper
class Colombians, Venezuelan businesses and the Spanish. UK
Embassy Officer Penny Walsh, told Econoff that British
interest in Panama was limited as low cost retirement options
continued to be available in Spain and Greece with new sites
developing in Turkey and former Yugoslavia.

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CAVEAT EMPTOR
--------------


5. (U) Many expatriate investors are making big ticket
purchases with little or no research, on the strength of
internet marketing and a herd mentality. Former Emboff and
now sales agent for property developer magnate Empresas Bern
and a Canadian sales agent for Vista Mar both warned Econoff
of delivery standards below U.S. norms, problems with the
quality of workmanship and timeliness of delivery. For
example, new properties in Panama generally do not include

PANAMA 00000317 002 OF 003


appliances or hot water heaters and measurement norms for
square meterage can include non-living and common spaces.
For the part time owner, reliable property managers and
maintenance personnel required by absentee landlords are not
readily available. However, this represents an additional
business opportunity for enterprising expatriates.


6. (U) For many expatriates, this is their first experience
living outside the U.S., and they are struggling with such
basics as using the internet to manage their finances
remotely. Post has received several calls from Amcits with
property disputes expressing surprise at the lack of redress
available through the local government and judiciary. The
most aggressive are Amcits who purchased in Panama many years
ago and are dismayed at the development and what they see as
encroachment on "their" land by new neighbors and large scale
development.


7. (U) ACS staff note that residents of Boquete in the
Chiriqui province, complained of isolation, having to travel
to Panama City to process Panamanian immigration paperwork
and driver's licenses, and confusion about Panamanian
requirements for obtaining "retired tourist" status.
Residents of Boquete also complained of having to travel to
Panama City for consular services.

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AMBASSADOR HOLDS TOWNHALL MEETING
--------------


8. (U) Ambassador Eaton held a January 25th Town hall Meeting
for American Citizens in Boquete, Chiriqui province.
Approximately 55 of the estimated 600 Amcit residents
attended. Attendees asked the Ambassador about the expansion
of the Panama Canal, the possibility of a U.S. Consulate in
Chiriqui, U.S. government programs in Chiriqui province,
continued Panamanian incentives for retirees, and the
on-going Free Trade Agreement negotiations between the U.S.
and Panama. The Ambassador announced the designation of a
vice-consul as Special Envoy to Chiriqui Province who will
visit the area regularly.

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NO ONE WANTS TO PAY ANY TAX
--------------


9. (U) One local real estate agent reports that most
foreigners are advised to establish a Panamanian corporation
and to purchase their Panamanian property through this
corporation. This enables the property to be sold by selling
the corporation itself which a) avoids the reevaluation of
the property b) avoids a 2% transfer tax and c) preserves the
tax exemption offered to incent the original buyer and d)
protects the asset from any personal liability claims against
the owner. Real Estate Attorney, Ronalda Matakelly, adds
that probate is the main reason to title one's property in
the name of a corporation. Probating a U.S. will in Panama
is very difficult and Panama does not recognize any rights of
survival. To ensure a smooth transition of one's Panamanian
assets to a U.S. citizen heir, the Amcit buyer puts the
shares of his/her Panamanian corporation into his/her U.S.
family or living trust.


10. (U) Although Amcit investors can receive up to 20 year
tax exemptions in Panama, no American citizen is exempt from
his/her obligation to report worldwide earnings to the IRS.
Of all the issues raised at the January 25th townhall
meeting, not one question was asked related to income tax
forms or filing assistance from the Embassy. On the eve of
the townhall meeting Conoff and Econoff had dinner with an
Amcit and retired Care International Aid worker who said she
did not want the Embassy to engage in outreach programs to
the area. "If we need something from the U.S. government,
we'll ask."


11. (U) Sanson claims that many expatriates engage in small
business and employment activities, including real estate
sales and related services to other expatriates for which
they do not have the requisite Panamanian work permits or
licenses.

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PANAMA 00000317 003 OF 003


COMMENT
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12. (U) Whether these investments will be lucrative in the
long run remains to be seen. Many owners are evaluating
their appreciation based on the value of the equivalent, new
unit when the secondary market for these properties remains
in its infancy. However, it is maturing rapidly.
Speculators are buying up residential units "off the plan"
and flipping them just before they are ready for occupancy
for a 20 to 30% return.


13. (U) For now, expatriate retirees are seeking active
retirement lifestyles. However, the inevitable prospects of
declining health and lone, surviving spouses will be
problematic for their relatives in the U.S., the Embassy's
consular section and Panama. Sophisticated medical care
outside Panama City and assisted living facilities are
currently unavailable. The growing expatriate Amcit
population may also seek to get the USG to make Medicare
benefits portable for foreign (and often cheaper) health care.
EATON