Vol. 12, No. 2,856W - The American Reporter - March 18, 2006

Market Mover

by Mark Scheinbaum
American Reporter Correspondent
Panama City, Panama

PANAMA CITY, Panama -- Panama and its famed canal might make the perfect home for a "capital" of the Americas, but it looks as if both Central and South America will lose out to "North" America.

Don't get me wrong, the Iraqi War was good for Panama's shipping, banking, and insurance economy. Just not good enough.

"I hate to say itīs too bad the war is officially over, but for a while there I did my largest business ever," said Cosmo Gonzalez, a wholesaler and distributor of genuine Cuban cigars, in the back room humidor of his combination office and shop.

"It didnīt matter which direction the ships were traveling, especially the officers - they knew we could deliver Cuban cigars to them for their long stay in Kuwait or Iraq. And typical orders were $700 to $900," he said.

Low inflation, low interest rates, 1:1 currency ratio with the U.S. dollar, the publicity from the recent Miss Universe pageant in Panama, and easing fuel prices have kept new housing and office construction steady.

But consolidation in banking, telecommunications, agriculture, and retailing have taken its toll. Proposed free trade agreements for the Americas could even favor less-developed regional economies over Panama's.

"Let's face it, Miami is the capital of Latin America," a 20-year veteran insurance executive with offices in both Miami and Panama told me. "There are always attempts to consolidate Latin American divisions in Buenos Aires, Mexico City, San Juan, and so forth, but for transportation and political stability, there will again be a trade focus on the importance of Miami."

Even if it is Miami which gets new legal and financial clout as a de facto free trade headquarters, Panama is still hoping for a renaissance in corporate appreciation of basic geography.

"We are getting more business from pharmaceutical companies that realize it is cheaper to ship to either the Pacific or the Atlantic from Panama," said Leo Rodriguez, president of Imprenta Herndandez, a 60-year-old printing company specializing in international pharmaceutical clients.

Remarking about the boom in luxury high-rise apartments, shopping malls, and expatriate investment from around Latin America, Luis Larocca, the president of Telecarrier of Panama joked, "I may have to move to Sao Paolo to find a place where the rush hour traffic is a bit lighter than here in Panama."

Dell computers recently completed the first round of interviews for 300 bilingual and computer-savvy telephone customer service operators. This is the latest in a bilingual "800 number" boom for heavily bilingual Panama.

Yet a widening gap between rich and poor, and a troubled social security funding system (the social security workers have variously been on strike, slowdown, walk-outs, and demonstrations), show the basic infrastructure problems of President Mireya Moscoso's administration.

Next yearīs presidential race is wide open, and rural vs. urban interests seem to be polarizing many national issues. City folk complain about gasoline prices, crime and new mortgage finance rules, while country folk talk about banana cooperatives and commercial overfishing of the coastline.

"There is still a future, and a feeling of excitement, but you work longer and harder for much less money than in the U.S.," said Marisa Rojas, 25, a graduate of Oglethorpe University in Atlanta, an assistant buyer for an upscale clothing store.

"At a certain level people want the latest European fashion, and the hot label, but when you look at the challenge in making a profit in retailing, you have to attract a larger client base, which will now browse in your shop but make their actual purchase at a discount outlet store," she said. Nowadays, there are few customers at the pricey Davidoff, Kenneth Cole, and Tommy Hilfiger shops in Panamaīs World Trade Center building in fashionable Marbella district.

Office manager Cecilia Hauck, the single mother of two young daughters, summed up the upscale trade center crowd this way: "Even though business is down, and we technically might feel a recession, the stores actually have a fairly good flow of people. The problem is they look and look and then discuss what they will buy, when and if they get more money."

AR Correspondent Mark Scheinbaum is chief investment strategist for Kaplan & Co. www.kaplansecurities.com.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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