Inside Panama’s Boom

“The Brand That Built Panama”

That’s what they call my friend, Jose Bern’s company, Empresas Bern.

When you take a look at the Singapore-style skyline of Panama City… know that Jose’s company is responsible for a big chunk of the city’s—and the country’s—growth.

But in many ways, Panama’s growth is not like that of Singapore… or Dubai… or other “new wealth” hubs that have sprung up in recent decades…

Panama’s growth was not centrally planned by government bureaucrats, based on a big sovereign wealth fund…

Panama City has no “white elephants”… no “ski resorts in the tropics,” as Jose puts it.

Panama’s growth is largely thanks to individual investors and businesspeople seeing opportunity and taking it. The old-fashioned kind of growth.

A free market that doesn’t come at the expense of a crackdown on other freedoms…

Fifteen years after starting our Live And Invest Overseas business in Panama… I’m still bullish about the country.

Just last month, I held my annual Offshore Wealth Summit in Panama City.

After the main conference, some members of my Private Network stayed over the weekend to dig deeper into their offshore options and opportunities right now…

We had lunch with Jose Bern, preeminent real estate developer, Vice President of Empresas Bern, “The Brand That Built Panama,” and got his insights on what makes Panama tick—and why the country remains such a hot destination for offshore business and investment…

Jose explained why Panama gives you 80% of what you get in Miami but for 50% the price…

He explained why—unlike some bigger nations around the world—Panama has to earn its economic growth and can’t continually max out its credit card…

Plus, we covered why Panama was not hit by the 2008 crisis in the same was as America and Europe…

And, why your dollar goes further here than maybe anywhere else in Latin America…

You can watch a portion of our conversation right here.

If you prefer to read rather than watch—here’s an edited transcript of our chat… Enjoy!

LIEF SIMON: Welcome, Jose. Thank you for joining us. We are here for our Executive Weekend in Panama. We just finished our annual Offshore Wealth Summit. And we have a handful of people who joined us for the weekend to dig in deeper into offshore topics…

We’ve invited Jose Bern from Empresas Bern to talk to us today in the group about Panama—why Panama is such a great international hub and offshore hub. It has everything anybody needs. It’s safe. It uses the dollar. It’s got offshore banking options. It’s got easy access. And it’s a stable economy—a stable economy and stable politics, which everybody’s looking for these days.

So, Jose, why don’t you just dig in and tell us…

JOSE BERN: I’m Panamanian, so I’m a little bit biased…

LIEF SIMON: But Panama is a great place.

JOSE BERN: I would have to agree with that. I think Panama basically offers a pretty good quality of life, both business and personal. And I think that’s what makes a difference when you compare it to other locations in the world. I’ve traveled a little bit, and I still haven’t found a place like Panama that I would like to go back to every time.

But what you say, Lief, is actually quite true. We’ve been enjoying for the last 20 years a real globalization of Panama—in terms of real estate at least. And I think that has a lot to do with the quality of life that we take for granted sometimes.

And Panama definitely has great connectivity. Obviously, the Panama Canal is a big draw. People have heard about it, have seen it maybe. And that’s a big part of it, for sure. Great logistical connectivity, all the container ships that go through it, and gas that comes from the Pacific up to the Atlantic and the other way around.

So, yes, connectivity is very important in terms of logistics, but there’s also logistics of people. And our infrastructure is oversized. Not just the canal, which serves 5% of world trade, a lot more than what Panama, with its four-and-a-half million people, requires in terms of trade. But the infrastructure that we’ve built around the canal, like our port system—we have 50 container cranes. That’s more than all of the other port systems in Latin America put together. So it’s not built for the four-and-a-half million people we have here. It’s built to serve 700 million that you have in Latin America.

And when you look at our airport, it’s also built oversized. It’s really not for the Panamanian market. It’s for the Latin American market. We are four-and-a-half million people, and we have 16 million passengers going through the airport every year. So it’s not like every one of us takes four trips a year!

Our convention center is also overbuilt. It’s not built for local conventions. It’s built to bring in people from the Caribbean, Latin America.

We were having a conversation a few days ago with a group from Colombia. We’ve been getting a lot of business from Latin America, Colombia in particular. And we were saying Panama offers about 80% of what you get in Miami for 50% of the price. So it’s a good deal.

At the end of the day, that’s what we have to offer: A good deal.

I mean, Panama as a country since our inception, we do not control the issuance of currency. We use the U.S. dollar. So we cannot devalue our currency. We cannot increase or decrease interest rates. Whatever Jerome Powell says, goes. Same thing that happens in the States. Interest rates there increase—our interest rates also increase. And basically, the country risk of Panama is about 2%. So there’s a 2% difference between whatever business you do in the States financially and what you find here in Panama.

LIEF SIMON: There’s about a two point difference on the interest rate.

JOSE BERN: Yeah. And certainly, since we do not control interest rates, we do not issue currency, in order for us to make our economy grow, we have to provide incentives. That’s the key. We need to have more foreign direct investment, make Panama a good destination for growth.

And at the end of the day, that’s what we’re all about. We have to offer a good quality of life, both for corporations and for individuals, for our economic system to grow.

We cannot print more money. We cannot move the interest rates. So that does give our politicians some sense of normalcy. They have a credit card, but they can only max it out so many times. They have to increase the size of the pot by other means.

LIEF SIMON: Panama has to earn it, right? They can’t make it up.

JOSE BERN: No, you can’t fake it.

LIEF SIMON: But that’s the one thing that we’ve seen over the last 10 years or more. Since 2008, the global real estate crisis decimated many markets. Spain, Ireland. Others. The U.S. included.

It didn’t decimate Panama. Panama prices went down about 25%, compared to 50% in Ireland, 70% in Spain. And that’s because Panama is a hub. It’s a safe haven hub.

Americans kind of made the market here in the early 2000s. Europeans came in too. But then after 2008, it was really the Latin Americans trying to get their money to a safe dollar haven, which was Panama. Especially since getting to the U.S. became more complicated after 9/11, with visas and all those kinds of things. That’s really helped people from Latin America turn to Panama and see what it’s all about.

You fly into Panama City at night, you wake up the next morning and you feel like you’re in Miami. You’ve got all these high rises, you’ve got all this infrastructure that you’re talking about, restaurants. And Panama City is a First World city.

JOSE BERN: Well, in many ways. Obviously we still have things to solve. I mean, it’s not Alice in Wonderland. It’s not perfect. We do have issues like everybody else. Social Security, the retirement age, people living longer. Guess what? Social Security can only take you so far. We need to work that out. But it’s a problem that involves about 300,000 people. That’s all of our retirees. So it’s not millions and zillions of people that we need to work things out for.

But I think, very importantly, what you see in Panama today is the result of individual decisions by investors, large and small, who decide it’s a good deal. It’s not like there’s a central government agency just funding buildings and all kinds of crazy things. We don’t have indoor ski areas in the tropics or none of that nonsense.

What you see is what you get. And for us, it’s very important that the decisions of investors are what makes Panama strong. So in order for us to become stronger, we have to get more investors in.

And we need to provide them a good deal, a good return on their investment, and a good experience both personally and financially.

LIEF SIMON: Right. And again, I think the biggest thing for our audience to take away is that Panama is a safe haven. So the world’s going to go up and down, Panama is going to go up and down. But Panama is growing and will continually be growing as long as there’s still a globalized market. Panama is a market that is relatively stable compared to many other markets around the world.

JOSE BERN: Well, I was listening to a politician the other day, he was explaining about his plans for government. We do have elections in May. And he said, “Don’t compare me to the Almighty, compare me just to the alternative.” And when you think about the alternatives that you have for investment in Latin America, well, I still think my dollar goes further investing it in Panama, where I do know the market, obviously I have some home court advantage. But I do think that the best is yet to come.

And for us at Empresas Bern, as a company, I think we’re at the beginning of a great run that’s probably going to last at least three, four years.

There’s several things going on in our economy that we need to figure out how to really take advantage of—and this is much beyond just the canal—but if we can make that jump… I think we have all the ingredients for success. Just have to mix them up right and cook them correctly.

LIEF SIMON: All right. Well, we’re going to break here. Lunch has arrived in the room for all of our Executive Weekend Program attendees. So thank you, Jose. We’ll continue the conversation during lunch here in the room. For those at home, sorry you’re not here to hear the rest of the conversation. But maybe you can attend the next Executive Program.

(If you want to be part of Executive Weekend’s like this in the future—click here.)

Stay diversified,

Lief Simon

Editor, Offshore Living Letter