Since its discovery in 1501 by the Spanish explorer Rodrigo de Bastidas, Panama has been a pivotal trade route and collection point for the world commerce. The beginning of the 21st century has seen a new influx of foreign investors that are looking upon the country's excellent geographic position and of its resources' potential for investment opportunities. Panama's real estate market is experiencing significant growth and opportunities abound for the keen investor. The future seems promising, nevertheless, it is essential to understand the macroeconomic fundamentals to determine the success of these new ventures. • The Macroeconomics of Panama Despite its small population and area, Panama is an important center for international trade in the Western Hemisphere, as both a major shipping thoroughfare and a regional economic power. Panama's economic structure is heavily oriented to the services sector. According to the Economist Intelligence Unit (EIU) estimates, the services sector represents 77% of total GDP for 2005. Panama's reliance on the Panama Canal, with its shipping and port services makes its economy highly dependent on world trade and economic trends. For example, the global downturn in 2001 and in 2002 slowed the growth rate of the country's economy considerably, which had enjoyed an annual average real domestic product growth (GDP) of 5.1% through the 1990s. Overall, Panama's real GDP growth rate slowed from 2.7% in 2000 to only 0.3% in 2001. In 2002, the economy began to recover slightly, with a growth rate of 2.2%. In 2003, a stronger global economy helped Panama post a growth rate of 4.3%, the highest since 1998. Over the last two years, Panama's economy has remained robust boosted by increased canal traffic, tourism spending and investment and Colon free-trade zone activity. Moody's Investors Services indicates that Panama achieved real GDP growth rates of 6.2% in 2004 and 5.5% in 2005. • Real Estate Investments in Panama Most sectors of the economy present low barriers of entry. The U.S. trade representative reports that “Panama maintains an open investment regime and is receptive to foreign investment… A 1998 investment law aimed to enhance new investment… by guaranteeing that investors will have no restrictions on capital and dividend repatriation, foreign exchange use, and disposal of production inside a limited number of sectors in the economy.” In the last three years, the real estate market in Panama has drawn a lot of attention from international investors. An excellent transportation and communication network, a well developed economic infrastructure, and low inflation contributes to Panama's appeal and makes it one of the world's top retirement and expatriate havens. Most importantly real estate prices are very reasonable when compared to what you will pay in the United States, Canada or Europe. Easy residency requirements and attractive tax advantages for investors and businessmen add to the country's appeal. In addition, non-citizens may purchase property and have the same rights as Panamanians. Preliminary figures from the Comptroller's Office shows a 91.2% rise in the value of new constructions, additions and repairs from USD 473 million in 2004 to USD 905 million in 2005. Recent developments encompasses the areas surrounding the Panama Canal, high- rise business towers and residential condominiums in Panama City, gated communities in Chiriquí Province and coastal developments in the Pacific and Atlantic side (specifically in the Provinces of Coclé and Bocas del Toro). • Future Outlook for Panama According to Standard and Poor's “the economic outlook for Panama incorporates further development of logistics services that leverage the Panama Canal and port infrastructure, as well as from its fiber optic network. A stronger investment climate accompanying a bilateral trade agreement with the United States would likely attract more foreign direct investment”. Also the expansion of the Panama Canal could enhance economic opportunities in Panama and support growth in the future. Panama has undergone major political and institutional changes since 1999, including the transfer of ownership of the Panama Canal. The use of the U.S. dollar as the official currency since 1904 provides international investors a low convertibility risk and long-standing monetary stability. Furthermore, Panama's fully dollarised economy and the absence of monetary policy by the government has worked as a shield against inflation which has averaged 1.2% for the past five years. The country offers some of the very best banking and telecommunication services in Latin America. In the last three years, vigorous world trade growth has benefited Panama's economy with the Colón Free Zone, ports infrastructure and canal activity showing impressive performance. International investors would find many real estate opportunities in Panama, that may be the hidden gem you are looking for.