What is the significance of Panama for Provivienda?
Provivienda started in Panama 22 years ago based on Colombian funding. We do not work through a holding corporation; instead each country has a separate company of its own. We try to replicate the best practices from each other's companies in the way we do business. We have created and delivered more than 20,000 units in Panama over 22 years and are currently the largest residential developer here in terms of units and sales. Our primary focus is middle-income residential housing; however, as Panama is such a small country we have to be present in every segment of the housing market.
In which segments do you have more of a presence?
We actively participate in the $50,000 and below segment, which is government-subsidized housing. However, regulations have changed in the past decade, making it extremely difficult to build profitable affordable housing. Developers do not generate profits in these segments so many have changed the scope of their businesses and moved out of the low-income, social housing segment. Provivienda and other large-scale developers of these segments have worked with the government to change current social housing regulations and now we begin to do social housing developments once more. We generally operate in the low-income segment of up to $50,000, in the second bracket of $50,000-$80,000, and in the segment between $80,000 and $1 million. We completed a luxury residential beach resort project in Bijao. It was one of the first luxury, second-home beach resorts in Panama, along with Buenaventura Beach Resort. Those are the two most successful projects of this kind in the country.
How is Panama's rapid growth driving the expansion of the real estate sector?
Panama has experienced constant growth over the last five years, although this has slowed somewhat and is predicted to continue to the level out to a more stable growth rate. Double-digit growth rates are worrisome because we might have a growing economy, but we do not have the right infrastructure behind it. Panama is still a third-world country with huge problems in areas such as education. Returning to a 5-6% growth rate is a safe place for the country to be in the years ahead. We have seen important growth in the middle-income segment, which represents most of the economy here. Provivienda has experienced stable growth in Panama, which has created dramatic changes in the industry and put more money into the mid and low-mid segments where we are focused. The downside is that all this growth in the real estate market has driven up construction costs. The average price for a residential unit has increased dramatically. Still, sales prices are cheaper here than in countries with comparable economies, such as Peru and Colombia. Fortunately, the world economic slowdown has put a stop on some of the increasing construction costs and this is keeping the real estate market stable here. Panama has no local production of the high-impact materials used in construction; thus, we depend on imports, and that is driven primarily by international markets. On the other hand, strong government restrictions, codes, and regulations counteract these decreases and continue to cause construction costs to increase. Panama will be in a good place for the next five to seven years.
Do you face challenges in hiring locally?
Labor prices and demand for labor are going up here; however, people without the right knowledge and skills are entering the construction industry, which is a problem. The current labor code in Panama is ancient and should not apply to an economy like this. It is not based primarily on productivity, which should be the driver for construction. We invest a great deal of money and time in our in-house training programs. We hired external trainers for all the different disciplines in which we work, which ensures quality control. We truly believe and invest in our people and development.