President Martín Torrijos of Panama last month unveiled
what could become one of the biggest investment projects in the country's history, with a value of up to $10bn. The creation of an urban centre the size of central London on the outskirts of Panama City is the latest sign of an economic boom that has invited comparisons between Panama and bigger international business centres, such as Dubai.
A specially created government agency will provide residents with streamlined regulation and there will be tax incentives
for selected industries. London & Regional, the UK-based company that will develop the site, said the project, on the former Howard US air force base, would reinforce Panama's attractions as a centre of international business. Ian Livingstone, of London & Regional, said it would combine industrial, retail and residential properties and its value could be worth up to $10bn.
Mr Torrijos's administration, which took office in 2004, is poised to
award the first contract for breaking ground in an ambitious $5.25bn plan to expand the canal, which connects the Atlantic and Pacific oceans and is one of the world's most important waterways.
Panama took full control of the canal in 1999 and the investment in three new locks
and physical widening will facilitate the passage of huge cargo ships, known as post-Panamax vessels.
International and local companies are pouring
billions of dollars into Panamanian residential property developments, in large part to capitalise on the peak of interest shown by US and Canadian retired people and second-home buyers. In addition, deals worth $14.5bn have been agreed recently to build two oil refineries and the US Congress is expected to approve a trade agreement soon between the two countries.
Mr Torrijos said recently that the refineries, canal expansion and trade pact are the three motors that could propel Panama towards developed country status. Panama's economy, which is fully dollarised
, grew 8.1 per cent in 2006, and economists believe it could grow more than 10 per cent this year. Inflation, meanwhile, is subdued
and lending rates are among the most competitive in the western hemisphere. However, some analysts suggest that the government must do more to reduce poverty, especially in rural areas, if development goals are to be achieved.
"Wealth is being concentrated more and more. This is very bad news," said Guillermo Chapman, an analyst at the Indesa consultancy in Panama City.
The London & Regional project hopes to attract
businesses from neighbouring countries that do not enjoy the sort of stability that Panama offers. Panama has begun to attract higher numbers of investors from Colombia and Venezuela than in previous years, and analysts expect that trend to continue.
Although London & Regional has yet to present the government with a master plan of the 1,800-hectare site, the plans are known to include a golf course, flats
, schools and a hospital.
"It will have an urban feel, with town-centre-type shops, public open spaces, condominiums
... We are going to build a sustainable community," said Mr Livingstone. "In terms of logistics, it's a no-brainer
,'' he said.
In addition to an initial $405m minimum investment over the next eight years by London & Regional and local partners, Mr Livingstone has committed another $300m over the remainder
of the 40-year concession.