Howard: Panama’s newest city center

April 25, 2009

El Economista

A $705 million project will transform the former Howard Military Base into a mixed-use community called Panama Pacifico. With the best in modern infrastructure and first-world technology, business here will operate in a sustainable environment.

(Panama) – The Panama Pacifico Special Economic Zone is a 1,400 hectare project, located at the site of the former Howard U.S. Air Force base. It’s referred to as one of the “reverted areas,” as the land here reverted from U.S. to Panamanian ownership (as per the terms of the 1977 Torrijos-Carter Treaty).

The new community is located by the Pacific entrance to the Panama Canal, a mere 15-minute-drive west from the capital. The location is key—from both a real estate and a business standpoint—as it offers easy access to the Interoceanic Railway, major airports, and national seaports.

The plan is ambitious, as the aim is to mold Panama Pacifico into the best logistic and transport hub in America over a 40-year period. To this end, developers are taking advantage of the excellent connectivity and telecommunication facilities. (Panama is a point of convergence for five of the region’s major fiber optic lines.) By the time the $705 million project is completed, sources estimate it will have created 40,000 jobs.

The master developer of the mixed-use development is London & Regional Panama (LRP), the local branch of the British-based London & Regional Properties. The master plan was approved by the government agency that regulates the Panama Pacifico Special Economic Zone (known as the Área Especial Económica Panamá Pacífico, or AEEPP).

In addition to residences, the area will house businesses from a range of sectors—including technology, communications, tourism, trade, logistics, and light manufacturing—in a sustainable environment. Residents and businesses will benefit from the strategic location and the natural environment.

LRP Managing Director Henry Kardonski says Panama Pacifico will be transformed into a First-World City that is unique in its ability to provide multinationals with the ultimate strategic location—a place where they can establish regional headquarters from which to serve or expand into the Latin America region.

The project will feature an industrial center for high-tech product manufacturing, an aircraft logistic and repair hub, and a specialized learning center. It will also boast a 26-hectare International Business Park (IBP) with 100,000 square meters of office and flex space. The IBP was specifically designed for regional headquarters, call centers, offices, and light cargo and distribution companies.

Competitive Advantages

Panama Pacifico welcomes all types of businesses, but the tax regime outlined in Law 41 of 2004 offers more benefits to businesses in specific sectors, particularly those whose main function includes one of the following business activities:

  • Multimodal and logistics services
  • Aviation industry services
  • Maintenance and repair operations for aviation
  • High-tech product manufacturing
  • Call centers
  • Back office operations
  • Data transmission (radio, television, audio, and video)
  • Offshore services
  • Transfer of goods and services
    • Between onsite companies and agencies, including the AEEPP and London & Regional Panama.
    • To other petroleum free zones
    • To the Panamanian ports
    • To ships and their passengers

Source: Panama Pacifico

40 YEARS – AMOUNT OF TIME IT WILL TAKE TO COMPLETE THE FULL PROJECT

Per Kardonski, Panama Pacifico is one of the nation’s most significant projects and one of the region’s most unique, thanks to the high-tech, sustainable development that promises a better quality of life for its residents.

Over the long term, Panama Pacifico could become Panama City’s new urban center, as it will house offices specially designed to meet occupants’ needs and 20,000 residences of varying costs. In addition, it will boast a million square meters of commercial space, schools, restaurants, and hotels.

The idea is to create a mixed-use community where home is close to work, and where you have the option to walk to the office in a peaceful environment, far from the city noise, pollution, and crowds. Per Kardonski, the master plan shows that the 1,400-hectare community is being designed in accordance with the principles of sustainable development. Only 850 hectares will be developed, while the remaining 550 have been designated as green areas.

MOVING FORWARD

The Panama Pacifico Special Economic Zone was established by Law 41 of 2004. In 2007, London & Regional won a public bid to become the area’s master developer. When LRP took possession of the land, basic utilities were already in place. It also came with an airstrip, an internal road network, and various buildings—some of which are in use, and some of which will be refurbished.

After weighing the importance of physical progress against other considerations, such as economic growth, sustainable development, and quality of life, LRP decided to divide the project into four different phases. Construction commenced last year and sources estimate that by the end of 2009, LRP will have invested $100 million. The first phase is expected to take eight years to complete, by which time LRP will have invested $405 million (over 50% of the total investment amount).

According to Kardonski, work is progressing according to plan, and the first flex-warehouses and office buildings are currently under construction. In 2009, LRP will begin construction on a few restaurants in the Town Center, followed by apartments, shops, and offices. The first buildings to be completed will be located in the International Business Park, the PanAmerica Corporate Center, the Town Center, and Kobbe Hills. The latter will feature a golf course, luxury residences, and hotels. An airstrip for executive flights is already operating here, and future plans call for another business park and a residential area called Puente Verde.

Because of the world crisis and downward shift of the real estate market, LRP admits, housing will take a backseat for the time being. Residences will be constructed, but only as the demand rises. “When planning a long-term project such as this, it’s understood that these types of crises are on the horizon, and that economies tend to fluctuate,” says Kardonski, adding that the company is prepared to face challenges.

According to the GM, investment will continue because the project consists of a diverse, mixed-use community. This gives the developer a wide range of alternatives when choosing which sectors to develop first. Even though the residential sector is sluggish, LRP says the distribution and warehousing sectors are experiencing growth. This growth is an important factor in the search for international investors who are interested not only in a strategic location for their regional operations, but also in a safe, efficient market.

LRP’s 2009 marketing plan includes visits to various countries. During these visits the developer will focus on attracting multinationals, real estate brokers and companies, and high tech operations. Thus far the plan has been successful, since fifteen firms have already established themselves here, including Aerospace Engineering (a branch of Singapore’s ST Aerospace), IP Leather, 3PL Panamericana, Caterpillar, Dell, 3M, and North American Aircraft Services Panama. Several more have applied and may receive approval to set up shop in the coming months.

Says Kardonski, Panama Pacifico and other mega-projects like the Panama Canal Expansion will contribute “significantly to economic growth in Panama by providing the type of infrastructure that will attract the world’s most important companies.” For a maritime sector representative, Panama Pacifico has been vital to expanding the services he offers to other countries in Central America (primarily because of improved cargo movement and multi-modal connectivity).

Though experts estimate that the Panamanian economy will slow to 5% growth in 2009, short term projections indicate that companies will continue to look to the nation for opportunities and benefits such as those offered by Panama Pacifico.

THE ADVANTAGES

AEEPP Administrator Miguel Angel Clare emphasizes the many benefits of doing business in Panama Pacifico.. Per Law 41 of 2004, companies in Panama Pacifico enjoy fiscal and labor benefits that make it easier to set up shop here. “During these times of economic crisis, the project is of particular interest—not only for the investment value but also for the potential to generate employment,” says Clare. Over the next 40 years, the project is expected to generate some 40,000 jobs.

Clare says the benefits also include the creation of a special office that cuts down on red tape by streamlining the procedures of 11 government offices into one location. The law also stipulates tax exonerations for companies operating in specific business activities, such as high tech product manufacturing and aviation industry services, maintenance, and repair. Additional benefits include a special labor regime, legal stability guarantees, and a special learning center to encourage the labor force to acquire new skills.

As elections are around the corner, Panama Pacifico will ask the next Panamanian government to include certain projects in its five-year plan. Among these is the improvement of access roads, as the arrival of new companies will increase the movement of cargo between Panama Pacifico and nearby ports.

Though the global crisis presents challenges, Panama Pacifico continues to be a competitive advantage for the national economy, as it is ideal not only for high-tech players, but also for tourism activities.

PANAMA PACIFICO AT A GLANCE

  • Approximately $705 million in investment over 40 years of development
  • A completely new destination, located in the former U.S. Howard Air Force base
  • Created in 2004 via Law 41 to attract a variety of investors with a regime that offers special legal, customs, migratory, labor, tax, and other incentives for certain types of businesses
  • Of the 1400 hectares to be developed, nearly 50% have been designated as green areas to preserve the natural environment
  • Will boast a million square meters of commercial space, as well as hotels, clinics, schools, a professional golf course, and other facilities
  • Will create 20,000 new houses and apartments
  • Will generate 40,000 new jobs

“[Panama Pacifico will contribute] significantly to economic growth in Panama by providing the type of infrastructure that will attract the world’s most important companies.” - Henry Kardonski, Managing Director, London & Regional Panama