Foreign investment sought as Panama Canal is privatized

NEW ORLEANS Eduardo de la Ossa, the affable marketing director for "the world's largest real estate project," worked the meeting rooms and hallways at the National Association of Realtors annual convention last weekend telling anybody who would listen about "the historic opportunities for investment partnerships in Panama."

De la Ossa is directing the marketing program for the Interoceanic Region Authority, known by its Spanish acronym ARI (Autoridad de la Region Interoceanica), which was established four years ago to administer U.S.-owned assets surrounding the Panama Canal to the Panamanian government.

The region has been administered by the U.S. Department of Defense since the building of the Canal started in 1904, and now is being gradually turned over to Panama. One third of the region has already been "reverted," with the rest to be turned over before the year 2000.

"Panama offers unparalleled real estate investment opportunities as Panama Canal treaties take effect," de la Ossa told Realtors. As a result of the 1977 Torrijos-Carter Panama Canal Treaties, the Republic of Panama is aggressively inviting international investors "to participate in one of history's most remarkable national economic development programs."

Like Hong Kong earlier this year, the Panama Canal is counting down to a change in sovereignty, with the man-made waterway switching to Panamanian control from U.S. authority at midnight on December 31, 1999.

Under treaty terms, thousands of former U.S. military buildings, installations and other facilities-ranging from schools and hotels, to golf courses and airports, and 328,645 acres of real estate-will be completely transferred to Panamanian ownership and control by 1999. ARI, directed by former Panamanian President Nicolás Ardito Barletta, was given authority by the Panamanian government to privatize and develop the area.

"Essential to ARI's success is international investment," de la Ossa said. In Panama, the project is seen as an opportunity to transform the economy for the nation of 2.6 million people.

The traditional gateway for Asia-Europe trade has some tough decisions to make in the next two years if it is to remain the trans-ocean link most used by global shipping lines, he said.

A new Panamanian law, effective January 1, 2000, will create the Panama Canal Authority, replacing the Panama Canal Commission and all U.S. laws.

According to the 1977 Panama Canal treaty, the U.S. is gradually returning property surrounding the canal, including more than 7,000 buildings worth an estimated $4 billion. About a third of the property is already in Panamanian hands.

The former U.S. military facilities reverting to Panama include five Army installations, two Air Force bases, one Naval station, several housing and residential areas, a military hospital complex, industrial and storage areas and thousands of acres of land available for development.

Included in the facilities are the Panama Canal College and other schools built to educate the thousands of U.S. military dependents living in Panama since the Canal opened at the turn of the century. There are also marinas, ports, theaters, bowling alleys, extensive recreational facilities, golf courses, dormitories and some 4,000 family housing units. All the facilities are contained in what once was the Panama Canal Zone, with the majority of the development at the Atlantic and Pacific entrances to the Canal.

So far in the Panama Canal areas, Taiwanese interests have developed an export processing zone in the former Fort Davis. Amador, at the Pacific entrance to the Panama Canal, is being converted to a tourism complex with a cruise ship port, duty-free shopping center, hotels casinos and restaurants.

Equally high on ARI's priority list is the creation of industrial parks, or export processing zones, which will boost the country's industrial output and exports, de la Ossa said. ARI intends to convince international investors that Panama now can offer unbeatable advantages to companies interested in developing assembly plants and manufacturing operations.

Existing U.S. military bases reverting to Panamanian control provide infrastructure, buildings, recreational facilities and land from which international hotel and resort companies are already creating highly competitive tourist attractions.

De la Ossa said the conversion of U.S. property also offers important opportunities in the fields of education and research. Schools, hospitals, and office buildings already in existence are waiting to be developed into state-of-the-art high-tech research centers, schools of higher education and training, centers for research in tropical medicine and ecology, international conference centers and corporate research and development laboratories.

Supporting ARI's ambitious efforts is a strong commitment from the Panamanian government to encourage and facilitate foreign investment. This is being accomplished through a series of laws and decrees that provide deregulation, tax and investment incentives, more open trade policies, more flexible labor conditions and privatization.

Included in 40 new Panamanian laws designed to attract new investment in Panama are strong incentives for tourism projects and the creation of industrial parks. Others provide incentives in specific industries such as textiles, mining and forestry.