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. 
 
¶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 
 
-------------------------- 
HAVE WE GOT A DEAL FOR YOU 
-------------------------- 
 
¶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. 
 
------------- 
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. 
 
--------------------------------- 
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. 
 
--------------------------- 
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