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Volume 14, Number 8
April 20 - May 3, 2008

business & economy

Also in this section:
Can Six Diamond adjust to local conditions and succeed in Bocas?
Government wants another electric rate hike
Flouting an ancient construction code in the San Carlos mangroves
Business & Economy Briefs
Bus problems prompt protests, but no quick solutions
Playa Bonita land concession held illegal
How will the US recession affect Panama?
Another risk of living and doing business in Panama
Panama, Costa Rica, El Salvador securities markets move toward merger
Can Howard's free zone save Cocoli's?
Indigenous activists plan to be players in development decisions
Previous Business & Economy Briefs

Bocas land tenure

Adjustments to local norms probably needed

Will Six Diamond come away with something to show?
by Eric Jackson

I first heard of Six Diamond Resorts International last year, first reading about a bitter land dispute that a Panamanian real estate holding company associated with it (Cinco Cruces de Oro Holdings SA) had a raucous confrontation with the developers of the Red Frog project on Isla Bastamientos. Later some readers from Bocas told me that I really needed to look into the situation. Then someone for whom I have little respect, at the behest of the Red Frog people, wrote a celebrated "exposé," got charged with calumnia e injuria and subsequently retracted his story. Last December some Miami publicists for Six Diamond contacted me, and recently I went on a press tour of Bocas with the company, talking at length with chief architect, Blair Korndorffer, and their main man on the ground in Bocas, vice president of operations Richard Kiibler. I also talked with a number of other people not directly connected with and in some cases actively hostile to Six Diamond, and spent some time wading through such directly and indirectly pertinent documents as are available online.

Considerations to set aside for the moment

The Panama News is not a "he said she said" publication that pretends that all public declarations are equal. There is truth and falsehood, and there are many mixtures and gradations thereof. There are heroes and villains, but most people are to greater or lesser extents mixtures of both. There are genuine disputes about which it's best to allow each side their respective day in court, whether it's a court of law or the forum of public opinion. The beliefs and interests of people making statements matter a great deal when judging those declarations.

With all of the above in mind, let me say that there is a very real and quite bitter set of disputes underway here, that various players who assert legitimate points have pecuniary or other personal interests at stake, and that in this rowdy and extended argument low blows have been struck.

Six Diamond trades shares in the United States and appears to be part of a web of companies in one way or another associated with --- but generally not majority-owned --- by Houston businessman Frank DeLape. (Setting aside things that have been written by detractors down here, the appearance comes not from SEC filings for Six Diamond in which I could find DeLape's name, but from its address, 700 Gemini Suite 100 in Houston, which is also the address of DeLape's Benchmark Equity Group.) When you get down to Panamanian subsidiaries, of course, the paper trail ends with our corporate secrecy laws.

Despite various allegations and denials, the general operating presumption is that DeLape is involved here and one of the central angles of attack by some critics of what Six Diamond is trying to do is to vilify the man. In these days of widespread Bush fatigue both in the United States and in the American community here, it makes propaganda sense for critics to promote the legend of a 'ruthless Texas tycoon,' the man portrayed as pulling the strings behind the scenes for the project they for whatever reason don't like. In a mostly bilingual community DeLape adds to that perception via the name that one of his companies uses, the Matador Acquisition Corporation.

Do a Google search and you will come up with various SEC filings and court documents in which DeLape is listed as doing business from an office in Houston. You find references to his having attended --- but apparently not having graduated from --- the US Naval Academy. You will find some messy class action civil litigation related to a biotech company he used to head, Isolagen Inc, which when he was at the helm promoted anti-aging skin treatments that didn't work very well. You will find various shareholder suits of the sort that you'd expect of any leader of an investment group with his fingers in well over a dozen companies. You will find a Bocas land dispute being played out in a US court. My Google search didn't turn up any references to criminal indictments or convictions.

My search also turned up PR tales of Frank DeLape, the Houston philanthropist, not all of them the product of his own publicists. He's a guy who likes to play Santa Claus for needy kids. He was one of the Houston elite who showed up in a tuxedo and sneakers along with the likes of Yao Ming at a benefit hosted by the Houston Rockets owner for a hospital in Africa sponsored by Dikembe Mutombo, the renowned Congolese shot-blocker around whom man does not fly.

A characterization of Frank DeLape may or may not have everything to do with what Six Diamond and Cinco Cruces de Oro are doing in Bocas, but it's something that can't be honestly done from down here on the information I have.

Let's also not get into which local politician in Bocas is or is not a crook. Absent a conviction like the one that put the former mayor behind bars, suffice to know them by such of their works as can be seen.

It may be naive, but unless and until compelling proof is shown to the contrary, let us presume that everyone with whom we deal is honorable. Let's treat the Six Diamond story on the basis of such salient merits as we can see rather than on pop psychology personality profiles.

And the Bocas Town park renovation project for the inauguration of which the company brought in this and other reporters? That will be treated separately in the lifestyle section.

The real issues

In law school and high school physics, one often sees questions on tests that can't be answered true or false or by picking one of several provided choices, and for which one who can't get the conclusion precisely right in the end will still rack up points for seeing the relevant issues. And so it can also be with living or doing business in Panama --- the relevant issues will quite often fly right over the heads of the clueless.

But talking to Six Diamond architect Korndorffer and executive Kiibler, they were the ones who brought up the key substantive issues here: land tenure, labor relations, infrastructure and environmental impacts.

This reporter is far from convinced that they have come to the right conclusions about everything, but at least they know about the most relevant subjects. Don't denigrate that --- a lot of others have come to Panama with big ideas and sometimes deep pockets, and come to grief (usually causing a lot of heartache and financial loss for others as well) because they hadn't considered key issues.

Bocas land tenure 2

Land tenure

On a boat ride around several of the Bocas islands that, among other things, took us by the Caribbean side of that neck of Isla Colon on which Six Diamond intends to build the Palacio del Mar residential - spa - marina development, I noticed someone living in a little wooden shack on pilings at the edge of the mangroves on which the development is contemplated. "A squatter," Korndorffer noted, adding that the company is trying to work with local officials to relocate such officials.

In the published criticism of Six Diamond, squatting sets the fundamental underlying situation in a disputed claim that the company makes to Wild Cane Key, in opposition to its previous occupant, Dario Vanhorne. There are also allegations of strong-arm tactics, unethical conduct by lawyers and public corruption mixed up in that dispute, but as important or contrived as they may be, what's really important is the Six Diamond approach to Bocas real estate, which is fundamentally based on what property records on file with the government say.

Because it was so long a backwater with hardly any lawyers; because the physical realities are that Bocas people have historically built on pilings over beaches, in mangrove swamps or over the sea, all of which is public property according to the Panamanian Constitution; and because there have been waves of public corruption --- especially in the past decade or so since Bocas has been "discovered" by national and international real estate speculators --- that have found one of their expressions in the falsification of public documents, the property records on file for Bocas are notoriously inadequate. And that's not even taking into account the traditional popular form of land tenure, squatters' rights.

One of the examples that Korndorffer gave of the land tenure problems his company faces is instructive. "People try to sell us property that they don't own," he complained. He cited the case of a man who had lived on a piece of property and claimed it as his own for more than 20 years, but according to the land records the man was mistaken --- his property was across the road.

Well, if that property across the road isn't occupied by somebody else, it would on its face belong to the man, as title holder of record. (If the man held it by right of possession rather than title and hadn't been using the property, that's an extra added legal complication, because one tends to lose unused rights of possession after so many years have passed.) The man would also own the land where he had lived and exercised dominion for all of those years, by squatter's rights.

Squatting is a nightmare for urban planners, developers and environmentalists alike, but it's an established part of Panamanian culture, economics, politics and law. The company that doesn't adjust its practices to this reality, particularly in a place like Bocas, is likely to have a lot of problems even if it may have the support of the government of the moment.

(Note, for example, that former Bocas Mayor Eladio Robinson was sent to prison for evicting people with squatters' rights from the properties they had occupied for decades, then selling those lands to naive foreigners. The buyers were by and large left with neither their money nor the property. You see, except for the most powerful aristocratic Panamanian families scams involving public corruption tend to have a shelf life of no more than five years, and those who would continue them after a change of government find that the price usually goes way up.)

So what does one do about squatters?

That depends on many things.

In the case in which the owner of titled property, or a valid right of possession, with respect to land upon which nobody was living suddenly finds his, her or its property invaded, the usual thing to do is file a complaint with the corregidor and get the new squatters evicted.

Those who acquire property that already has people living on it --- and if they do so by purchasing it unseen they get little sympathy from this reporter --- have to do some investigation, perform some calculations and make some decisions.

Does the person, either directly, or by way of inheritance or purchase of rights from a prior squatter, have enough time on the land to have perfected ownership? Then one must deal with the squatter as an outright owner, albeit one who may be at a bargaining disadvantage due to cloudy title.

Has the person been there for a period of years insufficient to establish ownership by squatter's rights? Even then, the customary and easier way to deal with the situation has been to buy that person out. In lieu of spending money on lawyers or self-help goons and gaining the reputation as a heavy in a small community, the practice is to offer the squatter a sum that will make it possible and maybe even attractive to move.

There are also situations in which landowners find it worth their while to actually encourage squatters on their land, or on adjacent public property. For example, that fisherman's shack on the public beach in front of the entrance to privately held property might be just the thing to discourage trespassers. The property owner helping the squatter out with proper water and sanitation, some building materials or a coat of paint could even make aesthetic and practical sense.

So how attuned to local land tenure customs, laws and contemporary realities are the Six Diamond folks? Their well publicized dispute over several hectares of land on Isla Bastamientos with the promoters of Red Frog has spawned confrontations between rival groups of armed security guards, headaches for local officials and litigation in Panama and in the United States. In the end, however, the ways in which they deal with less powerful but more numerous people with conflicting or possibly conflicting property claims will be the crucial land tenure test for Six Diamond.

Labor relations

It would probably be incautious to speak of the Red Frog development in the past tense, but it is stalled at the moment and has been for some time.

I spoke with Korndorffer and Kiibler about Red Frog, but only tangentially, and heard their brief take on the project's woes, which was basically along the line of small-timers biting off more than they could chew.

Red Frog is a tale unto itself, to aspects of which Six Diamond would do well to pay closer attention. A golf course community in the refuge of the endangered species from which the project took its name, at the edge of sensitive coral reefs, was an ecological nonstarter even under the current anti-environmental administration, and any large development is seen as a threat by both the people attracted to Bocas because of the laid-back small community way of life and by the small-time operators who are the backbone of the area's tourism industry. The antipathy of many in the community and some obvious environmental arguments that were available for them to make spelled the end of the golf course and thus threw many ends of the Red Frog project into the air. What has paralyzed Red Frog, however, is the red construction workers' union, SUNTRACS. It was a strike that shut the project down and set a row of dominoes falling.

Korndorffer readily admits what is well known. There is a shortage of skilled labor in the building trades in Bocas. He told tales of hiring attempts wherein men whose only real skills were slinging machetes or driving boats would apply for one position requiring a specialized building craft, be rejected, and get into line to apply for the next job for which they lack the skills.

One way to deal with this is to import all the skilled labor, and Six Diamond doesn't rule this out. However, that entails extra costs of bringing in people from the capital (or wherever), and also sets up a conflict with local people who don't get hired, as the company acknowledges.

Six Diamond is mainly concentrating on the Palacio del Mar project on Isla Colon at the moment, but they show videos of plans for other resorts in Bocas, the Chiriqui highlands and the Costa Abajo of Colon, and Korndorffer says that the current plan includes making the initial part of Palacio del Mar into an on-the-job training project to teach local workers who show an aptitude the skills they will need to work up to the company's standards.

The architect says that he has confronted similar problems on projects in some of the small Caribbean countries, and managed one way or another to surmount them.

Give Six Diamond points for understanding that there is a labor problem, and for working on strategies to address it. It's still too early to say if they have found a workable solution.

Infrastructure and environment

On our boat ride around the Bocas Islands, we went by a marina where millionaires' yachts were tied up, and a bit farther offshore where we navigated the stench of sewage was unmistakable.

Early in the Torrijos administration, in his first public presentation before the American Chamber of Commerce as IPAT director and de facto minister of commerce, Rubén Blades listed an expanded and improved sewage treatment system for Bocas Town as one of the government's key goals. Now the administration is approaching its end, many more people have flocked to Bocas, and the sewage problem has not been fixed.

Maybe these things don't belong in pretty drawings designed to sell upscale residential property, but their own sewage treatment plant, or large septic tanks, do not appear in the material Six Diamond has provided to The Panama News. Nor, for that matter, does the Six Diamond literature about the marina part of the project mention anything about disposal of the sewage on the watercraft that would be moored there. And would such things as septic tanks or an on-site sewage treatment plant even be appropriate, in a largely mangrove-covered neck of land between the Caribbean Sea and Almirante Bay where one could not dig very far down without hitting (unfortunately impotable) water?

Bocas del Toro Mayor Eligio Binns told me that "there are infrastructure improvements underway" via the national water and sewer authority, IDAAN, and that in conjunction with private businesses including Six Diamond the possibilities of municipal water and sewer improvements are also being considered.

And if the sewage problem is bad, the water system is even worse. In 2007 Isla Colon's water reservoir ran dry and Bocas Town residents lucked out when the US military was doing engineering and health care maneuvers on the nearby Bocas mainland and was able to provide a portable desalinization plant to prevent a far worse crisis.

The site Palacio del Mar has a well established neighbor, the Smithsonian Tropical Research Institute's (STRI's) Bocas marine lab. Being a US government institution, STRI and its personnel are cautious about what they will say on the record. But everyone in those quarters whom The Panama News contacted acknowledged concerns about a major development next door. Already, the bacterial count in the waters around Isla Colon is so high that people who would raise shrimp in tanks filled from offshore must put antibiotics in the water or else the larvae die. The local water supply is so limited and of such variable quality that the STRI lab filters its own water. Add a significant extra bit of gunk in the water from a nearby development and ongoing experiments in the waters just off the lab may be ruined. With respect to Palacio del Mar, Smithsonian sentiment appears to range from trepidation to pessimism.

The sewage problem, to be sure, can't be laid at the feet of big business. It's all those people who live in places over the water and who, in traditional fashion, flush their wastes into the sea. It's all those yachties who dispose of their sewage in similar fashion. It's a clearly inadequate IDAAN sewage collection and treatment system.

Any large development that adds to the sewer and water problems is trouble for the area. But what if it reduces those problems?

Korndorffer thinks that the big players that are coming into Bocas can and must reduce the problem. He expresses disappointment that improvements to local water systems that the government had said would be done by now are still in the talking stage. He advocates a $2,500 per unit utility hookup fee for new construction to defray the costs of improving and expanding systems. He suggests that on some of the islands, it would be appropriate for larger developers to put in water or sewage systems that would also serve the existing communities, in the process giving the would-be customers cleaner and more attractive conditions and enhancing the value of the developments.

Korndorffer adds that water and sewer systems aren't the only problem infrastructures in the Bocas islands. He thinks that for large-scale tourism to succeed, an airport with a longer runway and better facilities is needed, and that the better solution would be to move the airport and turn the site of the present one into a new city center.

The bottom line?

There are a bunch of them, from various perspectives. Six Diamond, its competitors and everyone big or small in the local real estate market has to roughly figure out where the market's going. In the immediate period it's a matter of how the US financial crisis will affect the influx of American retirees, and also factoring in potential Canadian and European customers, whose currencies are now strong against the US dollar.

There is a climate of suspicion, and Korndorffer and Kiibler were unaware of some of the more noteworthy scams and failures of the recent past that have played large roles in creating all the wariness. "There's always going to be somebody who gripes," Korndorffer notes, but "this has got to be an open book thing to succeed."

The American Embassy, however, has been watching Bocas for its own reasons --- mainly because it's advocating a more consistent rule of law in Panama --- and has along with a number of community and environmental activists found the process by which local authorities changed building regulations to facilitate Palacio del Mar and other large developments less than transparent. Local officials' flouting or subversion of the public hearing processes provided for in the new national urban planning law is not, however, a problem confined to Bocas.

So is Six Diamond up to surmounting the obstacles that a place like Bocas poses? It's too early to tell. Were they an ultra-huge multinational hotel or resort developer --- a Club Med or a Melia or the like --- they'd have the resources to be caught by surprise and still push through to their goals. If they hadn't a clue about the problems they face, they'd be a safe bet for failure. But even if they haven't fully acclimated to local ways of dealing with things, and even if saying is not the same as doing, this reporter gets the sense that they're at least cognizant of the problems they face.

Also in this section:
Can Six Diamond adjust to local conditions and succeed in Bocas?
Government wants another electric rate hike
Flouting an ancient construction code in the San Carlos mangroves
Business & Economy Briefs
Bus problems prompt protests, but no quick solutions
Playa Bonita land concession held illegal
How will the US recession affect Panama?
Another risk of living and doing business in Panama
Panama, Costa Rica, El Salvador securities markets move toward merger
Can Howard's free zone save Cocoli's?
Indigenous activists plan to be players in development decisions
Previous Business & Economy Briefs

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