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A difficult economy, no matter what they sayHalf empty, or half full? And going up, or down?
by Eric Jackson
Yes, you can go to the "now's the time to buy in Panama" real estate hype websites --- those that still exist --- and get the third-hand story about how the International Monetary Fund (IMF) economic prognosticators say that in the five-year period starting next year, Panama's economy will soar and Venezuela's will tank. Uh huh. But you always want to take future tense less seriously than past or present, and even more so the longer into the future it projects.
Or you can go to a community gathering and talk to a real estate professional who says that it's very hard to sell homes in the Interior now and that the collapsed upscale Panama City condo market shows no signs of recovery.
Drive out to the Interior on the Pan-American Highway and see all of the empty billboards. When in the supermarket, pay attention to what other people are putting in their baskets, and how much of which cuts of meat are in the cooler at the butcher's counter. Panama's hurting.
It is, of course, a relative thing. Much of Latin America is experiencing economic contraction this year, but thanks mainly to the Panama Canal expansion job, our economy is showing indications of economic growth. The government reports that for the first half of this year, our economy (Gross Domestic Product, or GDP) grew at an annual rate of 2.4 percent. That's not wonderful, especially when compared to 2008 GDP growth that the IMF pegged at 9.2 percent, but it's still growth rather than shrinkage. However, the IMF had predicted a 3 percent GDP growth for this year, and the government's figures appear to indicate that we will see less than that. Or maybe they don't. We still have Christmas shopping season ahead.
Slowly, however, the possibility of a jobless Christmas is becoming ever more real for many Panamanians. In the run-up to the May elections the Torrijos administration was putting PRD members on the government payroll, and now the Martinelli administration is laying these people off. In August, the jobless rate went up one percent from the same month in 2008 --- but only up to 6.6 percent, which, even if economists grumble that the government's methodology systematically understates joblessness, is low in comparison to the last quarter-century of Panamanian experience.
What about our great commercial engine, the Colon Free Zone? For September they're reporting an increase of 15 percent in goods passing through the duty free import-export zone when measured by the dollar value of the merchandise when compared to the same month in 2008, but when measured by the ton the flow of goods is down nearly 25 percent.
Our principal industry, the Panama Canal, is hurting along with the entire shipping industry worldwide. Tolls are up and thus so are revenues, but the ACP doesn't care to talk about the usage projections that they made for the 2006 referendum campaign. Traffic was supposed to be growing at the rate that it had between 2000 and 2005 and it hasn't increased at all, but decreased, since their propaganda campaign.
How bad is it? The ACP rarely allows truly independent experts access to the information they'd need to make proper evaluations, but consider what Standard & Poors said with respect to a closely aligned business, the Panama Canal Railway Company that moves containers among the seaports near the canal. They downgraded its credit rating from B+ to BB. S&P credit analyst Enrique Gómez Tagle told the Journal of Commerce that:
Higher-than-expected decreases in volumes due to the current economic environment and the consequent fall in international trade have impaired [the railroad's] main credit metrics. We believe a recovery will be slow and that it could take two to three years for the company to report financial metrics similar to those of year-end 2008....
The numbers that are being cast about vary, but it is generally agreed that visits from American tourists, the traditional mainstay of our tourism industry if one does not count Latin American business travelers in the mix, are down. European and Canadian visitors are only partially offsetting this decline.
Agriculture? Milk producers complain that they are being hurt by reductions in import duties that are part of free trade pacts with Central American countries, and some dry spells have stunted the rice that's now growing in the fields. Banana exports are down. Specialty coffees remain a bright spot, but that's a small fraction of an entire agricultural sector that the IMF says is only 6.2 percent of the economy.
The government reports that the cost of living went down by six-tenths of a percent from August to September, and the government has started handing out monthly $100 checks to people over 70 who don't have pensions. The World Bank estimated that in 2008 some 18 percent of Panamanians were living on less than $2 per day, and for this sector the lower costs are welcome news even if the reduction has mostly been for non-food items.
So, half empty, or half full?
Peter Hall, of Export Development Canada, says on the organization's website that:
Panama has been hit by sharply lower global trade, but will still post modest growth, thanks to huge public stimulus. The $5.3 billion canal expansion project is well underway, and completion is slated for 2014. Also, new credit facilities totaling $800 million will tide the economy through the lean years.
But on his Panama Investors Blog website, Boquete developer and businessman Sam Taliaferro sets the context for a slowdown in real estate sales in that idyllic retirement haven as follows:
Developers in Panama and the rest of the world are fooling themselves if they believe that the world economy is coming back and things will get back to "normal" anytime soon. The days of easy credit and second home buying by the marginally rich are over for many years to come. Panama projects can continue to sell properties if they are marketed as safe haven or primary homes as more and more people are wanting to move away from the predatory actions of the US and other governments around the world.
For leftist economist Juan Jované, world economic trends are sometimes beside the point when it comes to Panama's economic problems. Citing statistics by the UN's Food and Agricultural Organization on his Facebook page, he notes a 22 percent decline in worldwide food prices between August 2008 and August 2009, as compared to a small increase in Panama's food prices over the same time period, even as the prices that Panamanian farmers got for their products declined slightly. In Jované's eyes the local private sector's monopolistic predations are making Panama's economy so much harder on working people.
Take the IMF's five year plan with a grain of salt. The business cycle that's now down will eventually come back up but the gringos are probably not going to save the Panamanian economy this time because the United States has more serious problems than it's politically correct for Americans to admit. A Latin American economic rebound, and growth in trade between Asia and South America in particular, might be our salvation. But meanwhile these are hard times.
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