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RR RUEHWEB

DE RUEHZP #0319/01 0481754
ZNR UUUUU ZZH
R 171754Z FEB 06
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 7420
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2175
RUEHCV/AMEMBASSY CARACAS 0946
RUEHMD/AMEMBASSY MADRID 0254
RUEHME/AMEMBASSY MEXICO 2885
RUEHOT/AMEMBASSY OTTAWA 0204
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAUSA/DEPT OF HHS WASHDC
RUEATRS/DEPT OF TREASURY WASH DC

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 
-------------------------------------------- 
 
¶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