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.