Construction Boom in
Panama is Built on Drug
Money
By Andrew Beatty
PANAMA CITY (Reuters) -
The shiny skyscrapers
that soar above Panama
City's coast and loom
over the small Central
American capital give it
a skyline more suited to
an Asian powerhouse like
Hong Kong or Singapore.
While a subprime
mortgage crisis batters
the United States,
construction has been
booming in Panama.
According to the most
ambitious construction
plans, Panama was to
have been home to nine
of Latin America's 10
tallest buildings by the
end of the decade.
But the lights are off
in many of the luxury
apartments, new
buildings sit empty, and
suspicion is growing
that Panama's property
boom may turn out to be
a bubble built by
speculators on South
American drug money.
Real estate agents say
the large number of
temporary residents in
the country is the
reason for the city's
dim skyline at night.
U.S. anti-drug officials
say a more likely reason
is that Colombian drug
cartels use the real
estate sector to launder
money.
In September, when
Panamanian police
arrested Colombian drug
lord Jose Urrego, they
discovered he owned
properties and
businesses across
Panama, including the
Pacific island of
Chapera, valued at
around $12 million.
"It has become more
difficult to transfer
money through banks, so
we have seen a lot more
people carrying cash
into Panama through
Panama City airport,"
said a U.S. government
official in Panama, who
spoke on condition of
anonymity.
"They launder money
through the real estate
sector, the banking
sector and the Colon
Free Trade Zone," he
added, referring to
Panama's import-export
park.
Panama's unguarded
jungle border with
Colombia and its
numerous coastal
islands, bays and inlets
have made the country a
major stepping stone for
the drug trade between
South America, Mexico
and the United States.
Its relaxed immigration
laws and its good air
transport links make it
an easy place for
Mexican and Colombian
cartels to meet.
"The Colombians do not
need a visa to get in to
Panama, so they are
increasingly using it as
a place to meet, saying
to their Mexican
contacts, 'Let's do
Panama'," the official
said.
APARTMENTS ABOUND
Around 11,000 apartments
are forecast to come on
the market in Panama
City before the end of
the decade, according to
estate agent Sam
Taliaferro. More luxury
apartments could be
built in Panama over the
next few years than the
number built in Miami
between 1995 and 2005.
All that is for a city
of some 800,000 mostly
poor Panamanians, some
of whom live in rickety
wooden homes built a
century ago to house
workers who built the
Panama Canal.
While Panama is a major
shipping route and the
canal is undergoing a $5
billion expansion, the
country's economy
remains small and few
Panamanians say
developers can justify
the need for so many
skyscrapers.
The increasing numbers
of Americans who retire
in Panama head for the
country's cooler
mountain region, for
instance.
Some pressure groups and
opposition politicians
accuse the Panamanian
government of approving
construction permits
regardless of real
demand because building
creates construction
jobs and develops the
impressive skyline,
photos of which adorn
the country's tourist
brochures.
Enrique Montenegro, head
of the Anti-Corruption
Front, said around a
fifth of all real estate
projects are bought
using drug trade cash.
"Some promoters do not
ask where the money
comes from," he said.
"Drug traffickers buy
the apartments and use
them for their meetings
in Panama, or rent them
on," he added.
"ILLICIT INVESTORS"
Panama's Attorney
General, Ana Matilde
Gomez, acknowledged
there are "illicit
investors" in Panamanian
real estate but said the
government was powerless
to limit the skyscraper
boom.
Gomez said the
government's focus was
on preventing money
laundering in the
banking sector, which in
the 1980s and 1990s was
a haven for drug money
but has been drastically
cleaned up via stricter
regulation and controls
on money flows.
"Outside the financial
sector, there are things
we cannot control. Any
lucrative economic
sector that is booming
is attractive to ...
illicit investors," she
told Reuters.
Even without the
suspected drug money,
real estate agents say
speculators are creating
a dangerous bubble that
is pushing up rents
throughout the country,
where 40 percent of the
population lives on less
than $2 a day, and could
litter Panama City with
half-finished, abandoned
buildings.
Already, there are
high-profile casualties.
The 104-story Ice Tower
was to be one of the
most prestigious
addresses in the city,
with projected
construction costs of
$200 million.
Today, its foundations
are half dug and there
is not a worker to be
seen at the construction
site.
(Reporting by Andrew
Beatty; Writing by Robin
Emmott in Monterrey;
Editing by Eddie Evans)
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