Global Economic Crisis Issue

As the world sinks farther into an economic crisis investment in Panama is still doing well. The Colon Free Zone is a prime example of Panama business and investment thriving in the face of global adversity. This tax exempt area increased its total business by nineteen percent in 2008.

The Colon Free Zone

The Colon Free Zone is the world’s second largest duty free zone next to Hong Kong. Located in Colon, Panama near the Caribbean end of the Panama Canal it takes advantage of shipping from the Americas, Europe and Asia to buy and sell materials from the entire world duty free.

Investment in the Zone started shortly after World War II as a distribution point for materials coming in and out of Latin America. They prospered for years selling duty free goods to Latin Americans especially.

Changes in 2008

While the United States was sinking into recession in 2008 the Colon Free Zone was doing more business. According to figures they did $2.4 billion USD worth of business in November of 2008 which was a fifty percent increase over November of 2007. Total business for 2008 through the end of November was $18 billion USD which was a 19% increase over the same period for 2007.

2009 Update

Despite economic good times in the Colon Free Zone no one is blind to the reduction in trade worldwide. The problem for importers and exporters in the Colon Free Zone is to import enough goods to satisfy their customers’ needs and at the same time not make investment in excessive inventory.

Another issue is getting credit. Panama announced on January 21, 2009, that there will be an injection of 1.11 billion USD into its banking system. Panama’s banking system is solvent and not in need of a bailout. However, a three month study of the world’s credit crisis has convinced Panama that more ready cash is needed in Panama’s banking system to maintain investment and economic growth.

This decision to infuse capital into Panama’s local bank system will help keep credit going for Panama’s investments, including investments of operators in the Zone.

2009 and Beyond

An issue for the Colon Free Zone is protectionism. As other countries move to protect their economies it affects the Colon Free Zone. An example is Ecuador which moved in early 2008 to reduce imports by raising tariffs and imposing quoted on imported goods. In response several exporters in the Colon Free Zone have stopped doing business with Ecuador. However, officials of the Colon Free Zone are negotiating with Ecuador in this matter. Ecuador remains the Zone’s biggest trading partner behind Colombia and Venezuela.

Investment in Panama will also benefit from the free trade agreements that Panama has completed or is working on. The countries involved include Canada, the USA, Nicaragua, Guatemala, Costa Rica, Honduras, and Singapore. More trade will benefit investment in and around the Colon Free Zone.

Overall the Panama gross domestic product is expected to grow between 7% and 7.5% according to the Ministry of Economy and Finance and 2008 will end with a 9% increase. Although these numbers are off from 2007′s 11.5% increase in GDP they are spectacular compared to those of recession ridden economies around the globe. It would appear that investment in Panama will continue to prosper while the world works its way through its economic slump.

If you have questions regarding investment in Panama, especially in commercial real estate contact us at ABPanama. We have over 23 years experience managing real estate portfolios and do business throughout Panama.

Sub-Prime Mortgage Crisis

What caused the start of financial crisis as our global recession? The first main sign was the occurrence of the mortgage bubble burst. Rather than expressing it as a bubble burst, one can say it was more like a sack of rotten tomatoes that tore open unexpectedly, dumping them all on our heads. Although more than a decade of warning signals from educated scholars and economics tried to alert us of this upcoming problem, the mortgage burst still hit us with quite a shock. We just didn’t realize the magnitude of the problem. For more about the timeline of events that led to our global financial crisis, read on.

Knowledge is Power

You must become aware of the timeline of events leading up to the start of financial crisis. Knowing what has caused financial problems in the US and abroad is important. You may be wondering why that is. I strongly believe and hope you will agree that educating yourself as much as possible about the financial crisis will minimize the impact of its effects on you. This will also help you attain a more stable financial future.

Timeline

Four major events occurred in September of 2008: On the 7th Freddy Mac and Fannie Mae, two large infrastructures, were announced to become nationalized in order to make them financially stable. On the 14th Lehman Brothers were turned down support from the Federal Reserve and thus announced they were forced into filing bankruptcy. Later that day, Merrill Lynch publicized its purchase of the Bank of America. On the 16th AIG received $85 billion from the Federal Reserve to bail them out of financial trouble.

The development of the global recession arose as problems developed in the US banking industry. As a result, the global stock market suffered immense instability and market devaluation. Banks continued to fail over the following two-week period. To help minimize financial chaos and destruction, the Bush administration stepped in offering $700 billion in financial assistance.

During September of 2008 banks either have been bailed out or purchased by other institutions. As for the stock market, it was able to recover, but not completely. Still many of us are reeling from the effects of the global recession. Low classed and middle class citizens have been dragged down from conditions as unemployment, inflation, and foreclosures.

Moving Forward

Inflation is yet another factor that has adverse effects on Americans struggling to survive. Until we learn the causes of start of financial crisis, we remain rather powerless. The bailing out of banks by the Federal Reserve (an international and privately owned banking system) made it easy for them to print out a huge amount of money, granting these banks financial assistance. With the influx of new currency circulating in our monetary system, the American dollar is being devalued as inflation progresses. And who will be left footing the bill for the new system implemented since the global financial crisis began? You, the taxpayer!