I see a lot of opportunity in Panama right now for entrepreneurs and small businesses; in fact, I see more opportunity here than in just about every other country in the western hemisphere with few exceptions.
Panama has two strong emerging consumer markets.
The first is the obvious low hanging fruit: foreigners. Their ranks in Panama are growing by the day, swelling the country with their capital and their consumer demands. Simply put, they are accustomed to certain products and services, not all of which are available in Panama. That spells opportunity.
Sure, there are droves of foreigners here already posing as real estate agents trying to sell the next expat on an overpriced, generic condo in Panama City…but that business model is dead for now. There are better options.
One possibility is a professional property management company. There are thousands of new condo units in the city whose owners might only visit a few times a year. During the vacant periods, there are bills to be paid, maintenance to be performed, and in many cases, tenants to be found and managed.
Only a few companies in Panama focus on this business model, and they’re completely slammed. The market could use some competition, especially considering all the new construction coming online in the next 12-months.
Another consumer demand that needs to be addressed is high-end storage. Panama’s heat and humidity can be disastrous for sensitive belongings like wine, paintings, and antiques; thus, a high-end self-storage facility would likely do quite well here, and it would be fairly inexpensive to start up.
One idea that I have been considering myself is providing services for companies involved in Panama’s two major construction engines right now—the Canal expansion project, and the Panama Pacifico redevelopment project.
(Panama Pacifico is a $1 billion mixed use commercial/residential development on the former Howard Air Force base just outside of the city near the Canal.)
These two projects are attracting a myriad of foreign companies, and right now there are limited options available for corporate services, especially lodging for business travelers.
Nearly every reasonable hotel in Panama province is tucked inside the city, making for an unreasonable commute, and the first business class hotels outside of the city aren’t due to be rolled out until 2016. A well-located existing structure could be renovated, marketed, and profitable as a business-class hotel within 12-months.
The second consumer market worthy of an entrepreneur’s attention in Panama is its emerging middle class, and this is another group that is growing by the day thanks to the income effect of Panama’s growing economy.
The wealth of most developing countries is concentrated in the hands of the few, leaving the remainder of the population living on scraps; these types of markets should generally be avoided by smaller enterprises.
The mark of any well-developed country is a solid middle class—roughly 60% to 80% of the population that earns enough to provide a comfortable standard of living, savings, and discretionary spending.
Panama is clearly moving in this direction; middle class households earn between $800 and $1,500 per month, which is enough for them to buy a house and car while having plenty of money left over for savings and mindless consumption.
One clear opportunity is the current shortage of housing units for middle class Panamanians, which fall in the range of $60,000 to $80,000. The government projects that roughly 70,000 units are needed just in the area around Panama City; existing approvals show only around 8,000 in various stages of planning or development.
Retail opportunities also exist; by nature, Panamanians are a consumptive group—as a culture, if they have money, they’ll spend it. It seems like everyone has a new car these days, and given how poorly everyone drives here, there’s opportunity for maintenance and body shops.
Assisted living facilities and elderly care is also a fantastic opportunity, particularly when targeting the Panamanian middle class; for the first time ever, this group now has the income to outsource the care for their elders, and they’re starting to do it. The few facilities that offer this service in Panama are booked solid.
These are just a few small business ideas in Panama that I’ve noticed recently; if you spend much time on the ground here you will probably come up with several more on your own.
One thing I would caution you about is running any employee-intensive business; Panamanian labor laws, while relatively relaxed in comparison to the rest of Latin America, clearly favor the employee.
Between the mandatory “13th month” annual bonus, 40+ days off, increasing minimum wage, and Byzantine termination rules, it’s in your best interest to keep the workforce slim and/or temporary.
Editor’s note: International Living’s Live and Invest in Panama Seminar takes place April-20. There are a few places left. You can read more about the event here…but if you want to regsiter, you’ll have to act fast.