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September 2, 2015

The Panama Canal is likely the first thing that comes to mind when one mentions Panama, and not without reason. As one of the largest infrastructure projects in the world and with nearly five percent of the world’s trade passing through, the Panama Canal has contributed significantly to its economy. With a $5.25 billion expansion nearing completion, this will continue to be the case.

However Panama is much more than a canal. With a U.S. Dollar-based economy providing low inflation and moderate interest rates as well as tax incentives, multiple trade and investment agreements and the second largest free trade zone in the world, Panama is close to becoming a global logistics and financial hub. Such strong economic and trade factors have enabled Panama to attract major multinational corporations, such as Proctor & Gamble, Caterpillar, LG and Hyundai, to establish headquarters in Panama, and with foreign direct investment (FDI) consistently outpacing other Central and Latin American countries, hitting a near high of 12 percent of GDP in 2013, it is clear that Panama has firmly positioned itself as the outperformer in its region.

Although Panama is the smallest country in Central America by population, it is the second largest economy in Central America. With GDP growth averaging 6.9 percent between 2000 and 2014, including over 10 percent in 2011 and 2012, Panama is also the fastest-growing economy in Central America and one of the fastest growing in all of Latin America. This growth momentum is expected to continue, with forecast growth of 5.7 percent over the next five years.

Panama’s tourism industry is significantly outpacing its neighbors, ranking as the fifth most attractive tourist destination in the Americas, behind the United States, Canada, Brazil and Mexico. With excellent connectivity to major gateway cities in not only Latin American but also North America, price competitiveness, world-class tourism infrastructure as well as significant natural resources, tourism accounts for nearly 6.0 percent of Panama’s total GDP.

The industry has been further boosted by strong economic incentives in the form of Law 80, which was enacted in 2012 and provides various tax reductions and/or abatements and elimination of import tariffs. In 2014, international tourism arrivals reached nearly 2.3 million people, with revenue from tourism reaching nearly $5.5 billion – an impressive growth rate of nearly 20 percent year-over-year from 2005. Looking to capitalize on these strong growth trends, Panama has seen major brands such as Hyatt and Trump Towers enter the market over the past few years. Based on JLL’s Latin American Hotel Investor Sentiment Survey, investors are showing a positive net balance of performance expectations for resorts in Central America (i.e., Costa Rica, Panama).

Carlos Burneo, a senior vice president in JLL’s capital markets business focusing primarily on Latin American cross-border investment, commented: “The exceptional growth of the tourism industry and the general openness to doing business in Panama has attracted major hotel players to the market; however we are also seeing HNWs and family offices that are seeking land banking opportunities with future development prospects. JLL is currently launching the sale of Hannibal Bank Marina and Yacht Club, located on the Pacific Coast, which we expect to attract a strong element of international interest.”

View this exceptional investment opportunity in the Republic of Panama.

Carlos Burneo

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