photo by Allan Hawkins
Whither the real estate boom?
The market is overheated mostly for high-end real estate in Panama City, although real estate prices are up right across the country, particularly on the beaches and in the mountains. But several highly promoted luxury highrise projects in Panama City have been canceled, and even if the people who bought units in them before construction began get all their money back as promised, many of these are complaining that while their cash was tied up in projects that didn't happen they could have invested it somewhere else in something profitable.
The lamentations of speculators don't tend to grab my heart strings. But a lot of people at all levels of the real estate and construction industries are now anxiously watching to see if "the bubble" has burst or is about to do so in this country's real estate boom.
I have been vicariously watching Panama City grow for more than a decade now, and I don't see much relationship among the amount of construction taking place, the types of construction projects, prices, supply and demand. A few years ago I noticed that half of all the city's office space was vacant, and still they were building upscale new office towers and it all seemed nuts to me. However, the glut didn't bring prices and rents down.
Ordinary market forces are not the only things at work here. A lot of money from foreign criminal enterprises, mostly drugs and political corruption, comes into the Panamanian economy and real estate development offers many different angles from which to launder it. There are anti-competitive practices in these as in most other sectors of this country's economy. There is a tendency for property owners to let an apartment or commercial property sit vacant for years rather than to lower the asking price. We have a lot of speculation, much of it by people with more money than brains.
Although I took a bunch of economics courses in college, I am not an economist. Even if I was, the paucity of reliable public information about the Panamanian economy would make it hard to thoroughly analyze our real estate situation. Moreover, foreign factors like whether the United States is about to have a real estate bust (which it already has in some regions) and the strength of the euro and other currencies against the US dollar would affect the housing market here.
My hunch is that in the city we are going to have a correction, not a collapse, in the real estate business. People who get hysterical during a "buy now" stampede also tend to be irrational in a "sell before it's too late" panic and I would expect that one of the results of the cancellation of a few upscale projects will be our economy shedding a few privileged foreign idiots. I would expect most serious buyers to be a bit more cautious. I would expect some of the abuses to prompt some reforms, mostly not as a matter of government action but as a series of consensus decisions among customers not to sign certain sorts of agreements, among lawyers that to allow clients to fall into certain traps is the hallmark of a disreputable shyster, and among developers and real estate salespeople who are in the game for the long haul to make a point of not having anything to do with certain odious practices.
Be advised, however, that I don't have Cassandra's gift and I sure hope that I don't have her curse. I have been wrong before.
However, I have also seen various market bubbles inflate and burst and a number of episodes of irrational public passion heat up and cool off. There's nothing like a few high-profile failures to sober up a market that has been on a binge.
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I am not being facetious to represent Panama's housing with the above photo of a "casa de quincha" --- a traditional mud and wattle construction --- in Chitre. There is a lot of housing construction underway in Panama that's not upscale, because we have a steadily growing demand for modestly priced housing, even as our middle class is shrinking and the percentage of our population living in abject poverty is holding steady.
The vast new matchbox communities of houses running from $120 to $400 per month in some ways horrify my bureaucratic building code appeals board eyes. What plans have been made for schools, roads, police protection, parks or utilities? In too many cases, hardly any at all.
Still, despite all the various problems the strong demand for these tract houses tells me that there may be shifts in construction and real estate, but there's a real need to fulfill that's not based on hordes of imaginary foreign millionaires. To me that fact argues against a total real estate collapse.
And what about quincha construction? Well, it's a social form as well as an architectural vernacular. The phenomenon of a gang of local men in an Interior community getting together, fortifying themselves with plenty of alcohol, taking off their shoes and rolling up their pant legs, locking arms and tromping through the watered down red clay to make a quincha house is a declining social custom, if nothing else because we're a much more urbanized nation these days. However, we have several ancient construction traditions in Panama, and a small corps of talented architects who are dedicated not so much to preserving them as they have been but incorporating them into more modern designs. The "vernacular architecture" movement advocates the growing of more bamboo for use in construction and the blending of techniques and materials that have long proven to be compatible with Panamanian nature into more modern building techniques. The Equestrian Club at Coronado is an excellent example of this. Some recent government financed housing projects in Ngobe country and some of the community centers I have seen in Embera villages are also noteworthy.
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A congressional delegation from the United States will be coming here in August, reportedly to demand certain changes in the ways that Panama does things as the price of Democrats' approval of the US - Panama free trade deal. It's most unusual to see legislators from one sovereign country demanding that their counterparts from another sovereign country modify the latter independent nation's laws and practices, but there you have it.
Both as an American and as a Panamanian (I'm a dual citizen, born here to American parents and having lived about half of my life in each country) I personally don't like this treaty because it harms the interests of working people in the United States and farmers in Panama. I could even be inclined to preach a bit of class warfare with respect to this agreement, except that I believe that a lot of business people on both sides, particularly on the Panamanian side, delude themselves when they believe that it's in their interest. On the other hand, as a dual citizen with an internationalist perspective I think that the principle of economic integration is not such a bad one, provided that the benefits are spread around and the process has democratic mechanisms to correct its shortcomings. Unfortunately, I see neither of these provisions met in the treaty that was jammed through our National Assembly.
Anyway, see the editorial page for my take on the real issue that the visiting American lawmakers will have to confront.
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The US - Panama Trade Promotion Agreement isn't the only thing hanging in the balance here. Where is Panama headed, anyway?
It doesn't look good to Dr. Miguel Antonio Bernal, and it sure didn't look good when presidential guards beat up protesting victims and relatives of victims in the poisoned cough syrup scandal. But still, President Torrijos stands higher in the polls at this point in his administration than any of his three predecessors did and even if the benefits don't reach everyone the overall national economy may end up the year with double digit growth.
The poisoned medicine scandal won't go away, and the most dangerous questions are yet to be asked by prosecutors or the corporate mainstream media, so maybe the president was smart to react to the crisis sparked by his guards beating up sick people and the relatives of those whom his administration poisoned to death by leaving the country for points unspecified to take a vacation. The scandal will be awaiting him upon his return, but then it has been a year since professionals in our public health care system noticed and commented upon the strange rash of deaths and illnesses and Torrijos has still not answered any questions about it in any serious fashion.
Maybe, however, the thing that should scare the president and his party the most is not any particular situation or issue. Maybe Billy Ford's re-emergence as the consensus leader of the new Union Patriotica party is what the PRD should fear more than anything else. Ford is clearly the best liked and most charismatic leader on the right wing of the Panamanian political spectrum, and even if he was on a slate that Torrijos beat in 2004 his enhanced leadership role is an early indication that the opposition may not be so divided and discredited in the 2009 election campaign as they have been in the current National Assembly.
The president's left-wing opponents are divided and for the most part letting their dogmas seduce them into a stupid approach to electoral politics. With maybe 10 percent of Panamanians on that end of the political spectrum they could win some representation and grow their movement if they participated as a united electoral coalition, but that apparently won't happen. In the 2009 elections if anyone beats the PRD, which has the loyal support of about one-third of the national electorate, it will be some sort of center-right alliance.
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Will General Noriega return to Panama? It's still possible but looking less likely.
People outside of Panama get more anxious about that prospect than we do here. Some people love the guy, a lot more people hate him, but most of both of those groups as well as most of the many Panamanians who have more moderate opinions about the erstwhile strongman will agree that the man's a spent political force who stands zero chance of ever coming back to power. Noriega hardly registers as a public issue here.
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By Panamanian standards, the price of food has become outrageously high lately. Good thing it's rainy season, when orchards produce and gardens grow. When you have a free supply of avocados, mangos and star apples, it takes some of the edge off of high prices for bread, milk and meat. Gardening is one more thing that makes Panama such an attractive place for foreigners to retire.
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