Identifier
Created
Classification
Origin
06PANAMA319
2006-02-17 17:54:00
UNCLASSIFIED
Embassy Panama
Cable title:  

ECONOMIC IMPACT OF RESIDENTIAL TOURISM COULD

Tags:  ECON EINV BTIO CASC CPAS CMGT KMRS 
pdf how-to read a cable
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UNCLAS PANAMA 000319 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV BTIO CASC CPAS CMGT KMRS
SUBJECT: ECONOMIC IMPACT OF RESIDENTIAL TOURISM COULD
OUTPACE CANAL EXPANSION

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

UNCLAS PANAMA 000319

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV BTIO CASC CPAS CMGT KMRS
SUBJECT: ECONOMIC IMPACT OF RESIDENTIAL TOURISM COULD
OUTPACE CANAL EXPANSION

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


1. SUMMARY. The economic impact of the residential tourism
industry on Panama is set to rival that of the Canal
Expansion. Expatriates are having a profound impact on the
local economies and communities in which they are settling.
These part and full time residents have increased consumer
demand and employment levels. Demonstrating the American
tradition of service, Rotary Clubs, Lions Clubs and community
groups are already active. Supported by a sophisticated PR
machine, the residential tourism industry is organizing under
the direction of Amcit Sam Taliaferro. Determined to protect
their interests, property developers are beginning to flex
their political muscle. They seek to be an added force for
reforms to Panama's corporate, taxation and immigration laws
which they allege are critical to maintaining the meteoric
growth of this industry. They may also seek to influence
Panama's electoral outcomes. END SUMMARY

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GREY GOLD
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2.(U) Average incomes for retirees over 50 years old are up
to 24% more than their 18 to 50 year old counterparts.
Expatriate investors are shopping, hiring domestic help and
starting small businesses. They are also engaging in grass
roots diplomacy by forming charitable groups to buy text
books, school lunches, and computers for their indigenous
neighbors.

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WORKERS NEEDED
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3.(U) Respected Panamanian economist Ruben Lachman estimates
the contribution of the Residential Tourism industry to the
Panamanian economy to be at least $16 billion over the next
eight years. GOP Ministry of Economy and Finance Director of
Economic Policy, David Saied, identified more than 30
commercial projects including hotels, eco-tourism resorts,

office buildings and port developments underway. Taliaferro
told Econoff that 170 towers were currently under
construction in Panama City with 80 appropriate for the
expatriate buyer. The labor demand for construction, domestic
help and small businesses could cut unemployment in half,
driving it down to 5%. With a Canal Expansion on the
horizon, the implications for a labor shortage are
significant. For this reason, the industry is seeking
immigration reform to address an existing shortage of skilled
construction and hospitality industry labor and potential
future shortage of any labor.

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MONEY TALKS
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4. (SBU) Panama's residential tourism boom has attracted
investors ranging from middle-class couples to big
international players such as Mexican magnate Carlos Slim.
Previously sleepy communities are being buzzed by helicopters
and report sightings of yachts parked offshore as virgin
coastline is marked for development. This has put pressure
on the GOP to sort out Panama's arcane property titling
scheme. Only 30% of Panama's territory is properly titled
with several areas operating under Rights of Possession which
does not offer the same level of protection as titled lands.
Initial drafts of recently passed Law 2 substantially
weakened the Rights of Possession of existing owners. Post
was approached by several Amcit residents of Panama's remote
Bocas del Toro area (close to the Costa Rican border) for
assistance. After some dialogue and public outcry, the draft
law was amended to recognize the rights of existing owners.


5. (U) Although the Panamanian government has not sought to
control this booming industry, it remains a significant
challenge for the underfunded public sector to service the
increased demand for electricity, water, and sanitation as
well as to engage in proactive urban planning to avoid
congestion and haphazard growth. The industry is currently

proposing legislation which would make the developer
responsible for the water, electricity, sewage and access
roads. In return, the industry is seeking exemption from
taxes on the property, services, and materials used in the
development of a Residential Tourism complex, as well as a 20
years exemption on income tax.

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RESENTMENTS OF HAVE-NOTS COULD FUEL BACKLASH
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6. (U) Panama's construction boom is not all from
Residential Tourism. The Housing Ministry estimated that the
housing deficit in Panama as of 2005 was 193,000 units.
Architect Claudio Obregon told Econoff that these "homeless"
are not without shelter but are living with family and
friends or renting rather than becoming homeowners
themselves. He stated that many of these Panamanians work in
the informal economy, are not paying taxes and could not
qualify for a mortgage. Tax incentives to the construction
industry have prompted development across the spectrum and
the banking industry is responding by making mortgages easier
to obtain.


7. (U) Thus far, Panamanian reaction to the return of the
gringos has been mixed. For the vast majority, this
represents a tremendous economic opportunity. Landowning
Panamanians are enjoying property value appreciation. For
the lower socioeconomic Panamanian, new jobs are being
created by Americans who are predisposed to pay over the
legal minimum wage. It is possible that the Residential
Tourism industry and the small businesses of Panama's newest
residents will actually provide a missing element in
Panamanian society - class mobility.


8. (U) There is an incipient backlash as expatriates settle
into the best property Panama has to offer. This is mostly
exhibited by local and provincial officials whose position on
the food chain is being eroded by a more educated, foreign
landowning class. However, without the expatriate demand and
foreign investment, these sites would not have been
physically and economically developed to the current extent.
The disenfranchised, who could not constitute this demand
have not lost their existing homes, but have lost the
possibility of living in the most beautiful locations their
own country has to offer.

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KINGMAKING
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9. (SBU) To minimize nationalistic backlash, the residential
tourism industry is seeking a Panamanian as their public
face. The economic impact of the industry is beginning to
attract political attention. Industry sources have reported
to Pol Counselor that high profile Panamanian politicians
have begun to maneuver to get closer to this source of
growing influence and cash. As the 2009 election approaches,
that puts the industry in the position of potentially
influencing Panamanian politics.

EATON