Panama's Green Revolution and Investment Opportunities

The Opportunity

Much has and will be said about Panama’s tremendous growth, during the past decade. Business opportunities are abundant and global investment dollars are pouring in by the billions. Panama has all the hallmarks of a world-class investment venue: inexpensive U.S. dollar assets, impressive tax exemptions, world hub for (shipping, air passenger and cargo transport, crossroad of five major fiber optic cables), $5 billion Canal expansion, $12 billion in oil refinery and pipeline projects, $5 billion in new container ports and expansion, $600 million proposed for twelve major hydro-electric projects, ethanol processing hub for Petrobas of Brazil, rampant hotel and condo construction, call centers, hospital and health care centers, and a burgeoning film and entertainment industry.

Panama has enjoyed a “runaway capitalist holiday” which desperately needs to be balanced and mediated with our once-pristine natural resources: air, water, eco-systems, indigenous populations, and tropical rainforests. Stress signs and irony abound. Panama’s warp-speed concrete and steel growth, is accompanied by warp-speed destruction of eco-systems, built with Divine patience over millenniums. Towering skyscrapers hover above ancient sewers and pot-holed roads. Gleaming shopping centers sell Rolex, Hermes, and Vuitton while some of the world’s best indigenous cultures and artisans struggle to keep their families and rainforest in tact. The gap between the Gucci rich and Raca-taca poor continues to widen; poverty breeds crime; and now Panama has the second highest per capita prison population in Latin America. Global corporations, more powerful than many countries, pit their capitalist precepts against communists, socialists and union leaders world-wide. In Latin America, Hugo Chavez’s Movimiento Bolivariano has gained valuable ground against what they call U.S. imperialistic/capitalistic hegemony.

These stress signs, and the skyrocketing price of oil, cry-out for new investment strategies in Panama. This paper will focus on just a few “natural capitalism” opportunities, now available in Panama. Panama has all of the basic ingredients for economic and environmental greatness --- far better even than two stalwart countries: Ireland and Singapore. We have more natural resources, a more culturally diverse population, better and more varied investment opportunities than any other small country in the world. The suggestions below are certainly not innovative. Panama has, and will be, a perfect Latin venue for successful environmental business ventures, now ongoing, in other parts of the world. Our purpose here is merely to offer a few notable pieces of Panama’s capitalist and environmental puzzle, and suggest that they will combine handsomely with new sustainable business ventures.

Three Select Focus Areas --- Water, Air, and Land

Green opportunities abound in Panama. Outlined below are just a few abbreviated suggestions.

I. Water

Panama continues to operate according to a world view that has not changed since the Industrial Revolution. Then, natural resources were abundant and labor was the limiting factor of production. Now, we have a surplus of people, while our natural resources and ecological systems are declining. Panama’s water, although still abundant, is being polluted at alarming rates. We need a whole array of innovative companies, capable of providing us with clean rivers, bays, and sewage systems.

Most of Panama’s ports have been totally polluted by industrial waste, oil spills, raw sewage, etc. Recently Petroterminales spilled over 5,000 barrels of heavy crude into the Bay of Chiriqui. This 30 mile diameter bay is bordered by about 15 indigenous Ngobe fishing villages. More than 8,000 Ngobes have lost their fishing “lifeblood” because of this oil spill. Petroterminales has admitted that they were negligent in the spill and are being sued by the Ngobe for the clean-up of their bay and damages suffered from the loss of their fishing grounds. Oil spill experts estimate that the Chiriqui Bay oil spill clean-up will cost millions and take years.

Entrepreneurs are needed to work with the Ngobe, who hope soon to have the funds needed, through their lawsuit, to clean the Bay of Chiriqui. The Ngobe, and other indigenous Panamanian tribes, have been studied and written about for decades. Countless millions in feasibility and cultural studies, financed by the World Bank, AID and other foundations have been under-utilized, to say the least. Many of these studies, brilliantly written, sit gathering mold in government offices. They await the next round of updating and sometimes not-too-subtle plagiarism, characterized by consultants, focused on analyzing problems and suggesting solutions. The “implementation phase” in most of these indigenous studies has been a disaster. Millions are collected and the indigenous Comarca’s await the next impressive analysis, always lacking implementation. The consultant’s suggestions and infrastructure plans should be available to the public and the indigenous tribes studied. These studies, in the hands of action-oriented businessmen, are valuable capital for those enlightened environmentalists, willing to work with the Comarca’s in sustainable development projects.

Panama’s indigenous people, most notably the Embera-Wounaan in the Darien, and the Ngobe-Bugle in Chiriqui and Bocas del Toro provinces, have been severely damaged by hydro-electric, petroleum, mining, and forestry companies. Their rivers have been poisoned and their eco-systems weakened. These people, who for thousands of years have been “guardians of their rainforest,” urgently need recognition and compensation for their environmental efforts. Without this, Panama’s natural wealth will soon disappear. Our indigenous populations, numbering over 300,000, have been abandoning their native Comarcas at an alarming rate. Our rainforest, without them as guardians, is akin to leaving Fort Knox without any guards. Corporations, such as Brinkman of Canada and their subsidiary, Barca of Panama, are working, quite successfully, with indigenous tribes in Canada and Panama. Their form of Natural Capitalism, vis-à-vis indigenous tribes, is vitally needed for Panama’s environmental and cultural wealth. Brinkman and Associates Reforestation Ltd. and Barca firmly believe, and their profits show, that theirs is a worthy business.

Finally, those businesses capable of resolving Panama’s sewage problems, are marked for success. Panama City’s entire sewage infrastructure must be revamped and most of it replaced. This multi-billion dollar effort will entail decades of work. Our waste water must be reduced and eventually eliminated totally through closed-loop systems. One multi-million dollar sewage business, highly profitable and worthy of mention, is the daily elimination of sewage and slops from ships transiting the Canal.

2. Air

Fresh air is undoubtedly the world’s most precious commodity. It has not yet been quoted on any exchange. However, the Olympic athletes, scheduled soon to compete in Beijing, have much to say about the inestimable value of fresh air. In Panama, we are being polluted, deprived of oxygen and its life-giving grace, with every gaseous belch from a “Diablo Rojo” bus or inefficient, under-maintained engine in the country. Our garbage dumps, notably Cerro Patacon, are polluting the air, and coating our lungs, with dioxins and other poisons. Innumerable solutions exist and corporations stand ready to address these problems. However, Panama needs to resolve intersecting transport, air, and fuel problems immediately and on a massive scale.

Thanks to the price of fuel, Diablo Rojos may soon be eliminated from the streets of Panama. Replacing these mobile mastodons with fuel efficient mass-transit options will be a great challenge. Panama has recently regulated in-door smoke pollution, and must now address the issue of inefficient industrial, bus, car, ship and other engines.

Panama needs experienced environmental consultants --- Preferably self-starters and risk capitalists, who see opportunity and act upon it. Environ Corporation, www.environcorp.com, may fit this mold. Environ is an interesting success story of an international environmental and health consultancy, now 25 years old. Environ has no representatives in Latin America. Panama, with its rapid growth and endangered environment seems like an ideal opportunity for Environ. One of Environ’s stated visions “…is to be the most innovative and responsive consultancy providing global health, safety, and environmental (HS&E) services to address the complex problems that challenge the business community.”

Environ and other venture capitalists should see, and act upon, the great opportunities here. One obvious example is how to mediate the extreme costs of fuel and energy with Panama’s explosive growth and growing environmental degradation. Solutions abound. Translating these sustainable solutions to profit and loss statements is where venture capitalism and consultancy firms should join forces. Key to this all is establishing a “mid-ground” of interests: between environmentalists and capitalists, between indigenous peoples and those that covet their Comarcas, between the poor and corporations wishing to use their labor, between energy consumption and “widget-based progress” and Panama’s precious natural assets.

An excellent model for a Panamanian consultancy company should, in our opinion start with a good dose of innovative plagiarism. Panama urgently needs corporate success stories. Small to medium companies, bearing offshore credentials as environmental consultants, should be profitable ventures in Panama. Steps now being taken to clean the air in Beijing for the Olympics, must be state-of-the-art and draconian. The Chinese will succeed and we will see marathoners, hopefully surviving their 26 miles, with lungs still in-tact. We cannot shut-down Panama City, as will be done in Beijing. We can resort to hundreds of other air and energy saving solutions --- now available --- and now economically viable thanks to the price of oil. Just a few of these are:

1) Implement legislation in Panama to closely monitor all types of engines, turbines, and manufacturing procedures in Panama for their energy and fresh air efficiency. Strict regulations could easily result in the phase-out and replacement of more than half of Panama’s out-dated noise and smoke producing clunkers. Europe is now implementing strict regulations in this area. National Energy Assessors are being licensed in EEU countries. They provide Energy Performance Certificates for commercial plants and buildings. EPCs will become a legal requirement in 2008 and, soon, corporations excelling in their energy and pollution reducing efforts will receive economic and tax incentives, on top of carbon-credit rewards already being granted.

2) One simple fresh air and energy-saving example, ripe for consultants in Panama, is the use of new motors and pipes used for industrial pumping. Seventy-five (75%) of all industrial electricity is used by these pumping motors. With proper Interface Designing Loops on piping layout, and more fuel efficient motors, Panama’s industry could easily save 50% of their energy bills. This would translate to at least a 25% savings for all of Panama’s energy needs. Smoother and shorter pipes, with less interior friction, properly laid-out and minimizing costly twists and turns, can perform bottom-line miracles for manufacturers. Similar, simplistic tactics, all focused on energy and transport saving innovation, have already proven their worth and need only be applied throughout Panama’s infrastructure --- i.e. moving people, products, ships and planes in a more efficient manner.

3. Land

This paper will focus mainly on investment opportunities in Chiriqui, the Darien, and the Canal reverted areas. Many investors, too late-in-the-game, are now waiting for Panama’s bubble to burst. Condo buildings and beach front developments may experience a brief slump. Condo prices, in many areas, may now be topped-out. However, Panama has at least one million well-off foreign residents, still needful of comfortable roofs over their heads and other investment opportunities. Condos and beachfront properties will probably hold their high-ground.

We suggest that great opportunities still await those willing to investigate non-beach front properties, keyed to location—location in Chiriqui Province. Specifically, great land buys are still available in the still sleepy cities of Puerto Armuelles and David, Chiriqui. Puerto Armuelles, just an hour’s drive from David, will soon be awakened to the resonant construction sounds of a $7 to $8 billion dollar refinery, backed by capital from Qatar and Occidental Petroleum. Puerto Armuelles has a deep water port, on the Pacific, and is already connected by a major pipeline, owned by Petroterminales, which crosses the Isthmus to the Atlantic port of Chiriqui Grande. The original, Pacific to Atlantic Petroterminales pipeline was built in 1989 to carry Alaskan crude to Panama’s Atlantic coast and then on, mainly, to the U.S. East coast. This pipeline, now 20 years old, is under-utilized and needful of repairs. A new pipeline, running from Chiriqui Grande on the Atlantic to Puerto Armuelles, is still on the planning boards, but is a logical choice for carrying Venezuela’s urgently needed crude to the Puerto Armuelles refinery and then on, mainly to China.

This immense petroleum business, further buttressed by large Chiriqui hydro and mining projects, means major business potential, coupled with environmental challenges, for Chiriqui. The Government of Panama has delayed their announcement on the pipeline and refinery. Their delayed decision may be due to many political and economic “preparatory” factors. However, most bets favor the pipeline and refinery. Environmentalists will undoubtedly scream. Oil spills, worse than Chiriqui Bay, are a good possibility. Also possible is that the indigenous tribes and poor farmers, bordering and immersed in these development sites, will be left for last on the money and benefits “food-chain.” These are grandiose socio-economic-cultural and environmetal problems, which demand innovative consultants and corporations, similar to Brinkman, Barca, and Environ, who can reach mid-ground solutions, attractive to opposing sides.

Puerto Armuelles’ population is highly dependant on their banana plantation business. This town is an old United Fruit and Chiquita Banana bastion. Puerto still has their colonial remnants: swimming pools, golf courses, and some decent homes. Puerto Armuelles land, strategically located on main streets and near the port, is still a great buy. Once the refinery and pipelines are officially announced, prices are bound to multiply, particularly in locations suitable for good hotels, restaurants, and bars. All of these sights, if properly classified by IPAT as tourist ventures, with over $50,000 invested in construction, will benefit from many tax exemptions.

David, Chiriqui, is Panama’s third largest city. David is surrounded by rich tourist, mining, petroleum, and hydro developments. Maintaining a sustainable balance, in David and Puerto Armuelles, is another great challenge for eco-consultants.

The David Airport is soon scheduled to be enlarged by at least three-fold its present size. Large jets, mainly from Europe, the U.S. and Canada, will flood this area with thousands of tourists. Most will be grateful that they avoided the Panama City airport and traffic bottleneck. Strong rumors prevail, that a C/V petroleum fuel pipeline is scheduled to be built from Puerto Armuelles to David’s airport. This pipeline makes sense. Petroleum companies’ vertical integration and investment with major world airlines is a logical happening. Jet fuel costs now run more than 65% of a plane’s overall expenses.

Well located land, near the David airport, is an excellent investment opportunity. Particularly so, if intended for the immense flow of European, Canadian and U.S. tourists, arriving in David.

The Albrook, Clayton, and Howard areas are all still ripe for investment. Clayton, with its Ciudad de Saber, U.S. Embassy, impressive homes and Condos, is a cloistered city unto itself. Making Clayton, Howard, and Albrook more environmentally holistic, and less dependant on Panama City, will be a major and challenging task. Panama is already fast on its way to establishing important “burbs.” Punta del Este, Punta Pacifica, Albrook, Clayton, and Howard are most notable for their improved quality of living and some semblance of community planning. City planning, by the way, is desperately needed in Panama.



Michael Pierce

Pierce Global
Panama City, Panama
office: (+507) 260-8619
cell: (+507) 6782-2459

Monday,June 29, 2008