Panama City’s Old Quarer or ‘Casco Viejo’

Ruben Blades, singer/actor-turned Tourism Minister, declared several months back that Panama will not only compete heat to head with Costa Rica for tourism supremacy in the region, but will surpass Costa Rica as leader by 2010.  A bold statement for a country still wearing tourism’s equivalent short pants, but is it a realistic one?

Panama’s Recent Surge
In the past two years Panama has seen a level of growth unprecedented in the region, posting stunning 8% in 2006 and over 14% GDP growth in 2007.  Dozens of cranes dot the Panama City skyline as over fifty new high rise condos rise from the earth.  What added fuel to the fire?  The recent signing of its very own free trade agreement with the U.S. and the $8 Billion dollar Canal expansion project are two major factors, along with a sudden increase in interest among the worldwide tourism community. 

Can Panama Compete With Costa Rica?
Panama enjoys several key advantages over Costa Rica that are attracting world-class investors.  A solid banking system that efficiently loans money to both projects and foreign buyers is a huge plus.  A network of multi-lane, well maintained highways cross the countryside, making driving to even remote areas painless.  Police are professional, well equipped and highly visible, creating a sense of safety that has eroded in Costa Rica of late.  Lastly, Panama still has some benefits and tax breaks for foreign investors and retirees that Costa Rica dismissed years back.

Although Panama is seeing money pouring in like never before, there are many who doubt its ability to compete with Costa Rica for the same tourists.  One major disadvantage of the sudden boom in Panama real estate has been to drive prices all over the country through the roof.  Because Panama does not have any of the forward-thinking laws to protect beachfront development, asking prices for beachfront properties under two hours from Panama City are already as high as prime property in Costa Rica.  Thus, a property purchased at sky high prices obligates a developer to build a sky high condo project.  Indeed, nearly every project underway on Panama’s Central Pacific coast looks eerily like something from 80s-era Waikiki or Cancun.

Organic Growth vs. Hyper Growth
Along with smart environmental laws and beachfront development restrictions, Costa Rica also had the unforeseen advantage of minimal capital. Because the majority of early tourism development was done on a shoestring by a handful of small hoteliers, the coastal growth of Costa Rica’s tourism network was slow and organic.  This has created a uniquely Costa Rican tourism landscape, featuring dozens of fantastic destinations, each with boutique hotels and a platform that integrates tourists and locals.  It would seem that Panama is taking a completely opposing tack, going straight from zero to mega-projects overnight. Unfortunately, this is contrary to the trends of high-end tourists who seek an “authentic” local experience and prefer boutique hotels.

Costa Rica Slipping, or Entering New Era?
In some ways, Costa Rica seems to have taken its eye off the prize recently and thus has opened itself to competition.  Increasing crime, water shortages, waste problems, and loosened restrictions on beachfront development are among the short list of problems that are beginning to tarnish the country’s once golden image.  Fortunately, it seems that for now, nobody cares too much, as a wave of high end hotel brands are all racing to complete their projects.  Fifteen years ago not many could have imagined the Four Seasons, Hyatt, Hilton, Ritz Carlton, Rosewood and other famous brands in Ticolandia.  While this signals a change in the demographics of tourists arriving in Costa Rica that may be unpleasant for some, it would also indicate that our little Costa Rica, in tourism terms, is all grow’d up.

Friendly Competition Never Hurts
In reality, Mr. Blades statement contains more bravado than bite, for Panama is currently in no position to compete with Costa Rica for the same travelers.  Costa Rica’s Southern neighbor may begin to siphon off some of the resort-loving types that would otherwise opt for the Domincan Republic or Jamaica, but until the product offering resembles Costa Rica, local tourism operators should not fret.  What Panama’s recent popularity boost does forewarn is that Costa Rica must constantly improve, think ahead, and protect its resources to remain competitive.

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Filed under: Business, Politics on April 22nd, 2008