For Latin Americans, Miami has been a lot of things– the major financial center, the cultural Mecca, prime tourist destination, the business capital, and a symbol of international success.
The city made its riches and opportunities available to all nationalities, reaching the point during the most recent real estate boom where one could become financially successful and never speak a word of English.
Truly, Miami was a frontier island between North and South, sort of a Hong Kong of the Americas, infusing business savvy and capital with cheap labor and an extraordinarily large market.
The fact that Miami is so close to the United States and participated in the US banking system (the world’s #1 tax haven for non-US citizens) was a major benefit to individuals and businesses.
Naturally this is all changing now.
I have friends and family in Miami and come through the city from time to time in transit… and I believe that the city represents the absolute worst of the economic bust– entire blocks of condo buildings sitting empty, former high-powered real estate agents working as pool boys, and the car repo lots filled with exotic sports cars.
(not to mention Miami has absolutely, unequivocally the WORST airport in the developed world)
This is the effect of the residential real estate bubble bursting, as well as the drying up of domestic and foreign tourist dollars that used to be a steady source of tax revenue.
An imminent drop in commercial real estate, the next bubble desperately seeking a pin, is likely to further damage the city’s medium-term prospects. Excess inventory of warehouses and office space will likely lose significant value, creating negative equity scenarios for banks and investors.
Even the drug trade, once the city’s key economic growth engine, has slowed down.
While it is not my intention to prognosticate a death sentence for the city of Miami, I do feel obliged to point out that the wealth and wealthy have not simply vanished from the face of the earth or passed on to money heaven.
Nay. They are simply regrouping in other locations. But where?
Sao Paolo would be the most logical choice given the size and scope of Brazil’s economy… but there are too many problems– notably the language, crime, utter lack of transparency, and capital controls. Plus it is just a crappy city.
Mexico City? ha. next.
Buenos Aires makes more sense with an established financial infrastructure, but the government is too unstable to take seriously.
Santiago is a major success story, but its paper thin financial industry will not be able to support regional capital flows for quite some time.
Bogota also makes sense given the size and potential of Colombia’s economy and its significant economic success; but the country still suffers from security stigma and paranoia, and problems with Venezuela do not do it any favors as a financial center.
That leaves Panama… an open, bilingual, vibrant capital city with a well-established international banking center, free flow of capital, stable government and economy, and an ace-in-the-hole to guarantee sovereign independence.
Best of all, it’s dead square between North and South America, and just 2.5 hours flight to Miami.
Not a bad compromise… and this is one of the key reasons that I am bullish on Panama.
Yes it has its share of problems– no place is perfect. But Latin America has woken up to the economic reality of Miami.
Capital is going to look for its most conducive home, and Panama represents a safe, cultural fit. And for individuals and business, the transition to Panama is easy. Besides, Panamanian immigration officials welcome visitors with open arms, in stark contrast to the immigration thugs in Miami.
While I do not believe there is going to be a huge sucking sound coming out of Miami, it is clear that Latin America is certainly looking to crown a new capital city.
I am convinced it will be Panama.
{ 10 comments… read them below or add one }
Hello, Simon,
You say, “Santiago is a major success story, but its paper thin financial industry will not be able to support regional capital flows for quite some time.
Will you please elaborate on the “its paper thin financial industry” portion of your observation>
Thanks, Simon.
Hi Simon,
I have been living and investing in Panama since 1997 and would agree with your take on things. Recent elections have brought an honest businessman to the presidency who is making things all the better for those wishing to live or invest here. I was the first foreign real estate developer in Panama have been credited with having been instrumental in starting the Panama real estate boom that has now gone bust due to over speculation and the worlds recent distaste for real estate investments. I write a blog called the Panama Investors Blog where I bring to light information about the investment climate here. I have posted a portion of this article with a link to your newsletter on my blog. Keep up the good work! http://primapanama.blogs.com/_panama_residential_devel/
“entire blocks of condo buildings sitting empty, and former high-powered real estate agents working as pool boys”
A good description of Miami today and Panama in the next 12-18 months. Only Ciudad de Panama has horrendous infrastructure, a polluted waterfront and (like Miami) tens of thousands of empty luxury condos that (unlike Miami) the average citizen can’t even afford to rent given the median incomes there.
As a Miami transplant, I enjoyed your city-by-city analysis and agree that people are finally waking up to the economic reality of “the Magic City.” I’m through with Miami, but I don’t enjoy Panama for the reasons mentioned above. Plus the “service-oriented” mentality is non-existent and the nightlife, dining and cultural offerings are seriously lacking.
Even though it’s an overnight flight, my plata is on Buenos Aires. The only negative you mentioned there, political instability, is turning around judging by the Congressional elections on June 28. The pendulum is swinging back to solid, pro-business candidates like Mauricio Macri and the radical socialists are on the way out.
http://www.economist.com/agenda/displaystory.cfm?story_id=13938421&fsrc=rss
Cheers
Good Atricle
Did I miss a perspective on Costa Rica or was it just not mentioned?
Dear Simon,
I have lived in Panama for 8 years and could not disagree more. The crucial difference between Panama and Miami is the rule of law. In Panama there is none. The legal system here is a circus where the judges are influence by money or friendship. If you get ripped off by one of our so called rabiblancos (the rich white elite) you will never see your money again. Black will be redefined as white to assure that they will win. Read the decisions of the supreme court here and you will see that it really is a sham. It is a joke that people compare Miami to Panama City. One is a large city in the world´s richest and most powerful country and the other is a facade hidding a slummy, cultureless, corrupt center of a Banana Republic that has spent most of it´s existence under military dictatorship and in the last administration veered very close to returning to that state.
I have been to Panama several times in the past 3 years to explore my retirement chances there. Thanks to its small size, I managed to seem most of the country from it’s capital to the smalles shack on the beach. Finally, I decided not to move there!
My findings were…
If you get entangled in their corrupt system, you may kiss your money and time goodbye. Almost nobody would give a damn about it.
Service mentality is non-existent! You’d almost have to beg for it. Try going to any cellphone store to BUY their service and see if the attendant even talk to you.
Infrastructure? Non existant.
Noise galore especially in the city. Pollution? Try walking on their glitzy Balboa Ave. and smell the sewage or should I say, swim in it when it down pours? The sewage has no where to go when it rains but up!
The only way to be successful in Panama is if you have loads of money (to sustain the bribes) and/or know the elite runing the place. Otherwise, you’d be just a small fish waiting to be caught and fried.
Real-Estate is a bubble that’s just about to explode. Mainly coz every Gonzalez, Sanchez and their mother have become professional developers! They think that’s just the thought of having a bathroom is a luxury in the units they build. Therefore, no need to have the toilet seat aligned, or the doors shut flat, or the electrical outlets splattered all over the place! For this, you’d have to dole out $100s of 1000s of US dollars coz it’s Panama!!
Enjoy your birds!
John.
Dear Simon
We live in and run a small business in Panama. I agree that Panama is becoming the center even with its benefits and drawbacks. A good 50% or more of our foreign guests are looking at Panama to invest (they visit us to first relax) - even now in this financial climate. We still feel that Panama City is vibrant and growing - more slowly now - but growing. Panama is feeling the economic slowdown but less than many other countries.
We know and still love Miami, but we avoid it to travel through, and I would not consider a vacation there at present. Interesting article, thanks!
I also author a blog which provides information to visitors and residents of Panama: http://destination-panama-blog.com/
Agreed on most points, particularly the Miami Airport comment. It is the most pathetic and disorganized excuse for an “major international” airport I have encountered anywhere in 35 years of global business travel. It is a national disgrace for the U.S.A. From the “casino style” layout, to the inefficent imigration, to some of the unfriendliest workers (cattle prodders) I have ever encountered, etc. Makes my blood pressure jumps about 20 points just getting off the plane there.
Simon:
You hit the nail on the head when you said that you come “through” Miami visiting. You don’t live here and therefore you don’t really know what is going on. You only know what others say or write about Miami. I can tell you that, after living here for two years, you are incorrect about many comments you make about Miami. Perhaps your comments about the airport are true, but an airport does not define an entire city!
Miami is not a tax haven! Miami is a destination for flight capital from Latin America but it is not a tax haven. I lived and worked in Europe for many years as an international tax specialist in countries like Switzerland and Luxembourg - they are tax havens! Latin Americans are not hiding their assets from tax authorities they are hiding their wealth from crazy dictators like Chavez. They pay U.S. Income tax on all earnings that they generate in Miami or anywhere else in the America. They are happy to pay U.S. tax on their income from their capital taken out of those countries, including Panama!