Panama’s economy has been growing at a steady pace for the greater half of the past decade. Foreign investment is on the rise, jobs in the private sector are plentiful, and domestic growth is higher than it’s ever been. As Panama’s economy grows, so does the amount of money its banks are lending. So much so, in fact, that many consider the country to be going through a credit boom. And there’s good reason why.
According to statistics from the Superintendency of Banks of Panama (SBP), during the first 11 months of 2013, domestic banks gave out 14% more loans than in the same period in 2013, bringing the total balance to $24.8 billion. For a country of its size and region, these numbers are significant. More businesses are taking out substantial loans, which in turn, are being re-invested back into the economy. And it’s happening so fast, that many suggest this number will grow even greater by the end of 2014.
Where is the money going?
According to statistics from the National Banking System, or Sistema Nacional de Bancos (SNB), the majority of the increased loans are attributed to the trade sector, which accounts for $13.49 billion, and includes goods and services. Personal consumption accounted for $2.37 billion of loans, construction accounted for $2.33 billion, followed up by mortgages at $2.1 billion, and industrial expenditures at $1.82 billion.
A highlight of these stats is that Panamanian personal banking accounting for a whopping $11 billion of all loans, which is nearly a 10% increase on personal bank loans from the previous year.
What these numbers indicate, aside from overall growth, is diversified growth due to easy access to credit. This is one of the big reasons why this credit boom is significant to the national economy. When loans of this size are diversified across a number of sectors, it’s a strong indicator of the overall economic stability and growth.
What does this mean for the economy?
Increased lending can spur growth, but in the case of Panama, it can be inferred that it is an attempt to continue economic growth at the similarly high rates as recorded in previous years. As the Panamanian economy matures, it will become increasingly more difficult to maintain near double-digit growth rates. But, easy access to capital is one way the government can intervene and attempt to buoy growth. Furthermore, the continued entrance of multinational corporations into the Panamanian market is a welcomed sign of economic stability, which decreases the fear of corporate failure and loan defaults.
Assuming Panama suffers no major shock and continues to reward economic winners like multinational corporations, service industries, real estate developers, and entrepreneurs with easy access to credit, Panama is expected to maintain a healthy growth rate.
What does this mean for me?
For a foreigner looking to invest in Panama, the credit boom is great news. It means that your ability to access credit will be much easier in Panama than potentially in other countries abroad. As banks increase their personal lending and mortgages, individual consumers can reap the benefits and help spur the economy. It’s a win-win. Consumers can buy a home or all the goods and services they need, businesses can get a loan to expand and serve growing consumer demand, developers can continue to build, and thus goes a stable economic cycle.
Foreigners are able to apply for loans in Panama, even those without permanent residency. However, residency and employment in Panama does make the process easier. If you are interested in applying for a mortgage in Panama, than continue reading here.
Before taking a serious look at a personal or business loan from a Panamanian bank, there are some important steps you must take. First, you need to make sure that you qualify, and are eligible under Panamanian law to do so. One reason Panamanian banks were able to withstand the global economic credit crisis was their strict loan qualification standards and high level of collateral required. This is not expected to change anytime soon as Panama does not want to suffer the same fate as what the U.S. and Europe went through a few years ago. But Panama banks are now more likely to lend than when the rest of the banking world was suffering.
It’s best to seek the advice and consul of a skilled law firm when applying for a Panama loan. And a clean financial record from your home banking institution also helps. With thorough due diligence and proper planning, now is the time to invest in Panama. The future looks bright.