to a superintendent. Office workers receive from $115 per month for a receptionist to $175 per month for a general accounting clerk. In the management areas and positions with high responsibilities, accounting supervisors receive from $325 to $350 per month and office managers receive from $425 to $475 per month.

GOVERNMENT

According to discussions with numerous Panamanians, the new military government is the best thing that has happened to Panama. The provisional government which took power on October 11, 1968 has devoted considerable energy to the problems of governmental reform and to drafting programs for economic recovery and growth. At the same time, officials have reaffirmed traditional policies favorable to private enterprise and foreign investment. The middle class man has taken charge of the government and is protecting the laboring class and the middle class. Prior to the new regime, eviction from a rental unit could be made on very short notice whereas, today, a Panamanian has to be given at least ninety days notice before any rent change can be effected.

The opinion voiced by several Americans in the Canal Zone was that the political situation keeps the Republic of Panama in somewhat of an uproar. This situation was not confirmed, however, by Panamanians and the Inter American Committee of the Alliance for Economic Progress concluded in February of 1969 that prospects for resuming and maintaining a high rate of economic growth for Panama were good. This appraiser is by no means a student of Latin American affairs but it is felt that the present government is stable and that economic trends will not be seriously affected.

CITY CHARACTERISTICS

Both Panama and Colon are typical busy Latin cities displaying extremely crowded and substandard living conditions in the older sections of both cities. Downtown Panama which is the Santa Ana and San Felipe areas is characterized by narrow streets, heavy traffic and poor traffic control. This is one of the major shopping districts of the city and is characterized by small and medium sized, tourist oriented stores to large department stores such as Sears Roebuck & Co. The better residential areas are located towards the center of the city in Bella Vista, Lacresta Campo Alegre and El Cangrejo. This better residential area surrounds the Panama Hilton Hotel and the Hotel Continental. These hotels are located on each side of Espana Avenue.

Another developing high class residential area is on Point Paitilla which extends out into Panama Bay. This area is characterized by wide streets, some divided, high rise apartment buildings and high class single family dwellings in the 50 to 80 thousand dollar price bracket.

Single family dwellings in the middle class are located in the Los Angeles area and the Miraflores area. In these areas, single family dwellings are crowded on 35 to 40-foot lots but the neighborhoods are well kept and the houses will market in a range from 14 to 18 thousand dollars.

Colon is a small and crowded city with the total population in an area encompassing two square miles. The streets in Colon are laid out on a grid pattern and are wide in comparison to Panama streets.

Colon is a city of three-story buildings with only three or four buildings in the whole town rising over three stories.

The figures shown below are from the 1960 Census and although the 1970 Census will show an increase in all categories, the proportion will probably remain about the same.

The average number of persons per unit amounted to 4.4 and the average rooms per unit amounted to 2 with the average number of persons per room amounting

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to 2.3. This is certainly high density living and densities in the Canal Zone as well as the United States are much lower.

It can be observed from the above figures that more than half the population lives in rooming houses or apartments. Panamanians purchase single family dwellings to live and die in and the dwelling market is very slow in comparing cities of comparable size.

TRANSPORTATION

Transportation in both cities is good but hectic. There are no trains or subways in the cities so public transportation is provided by busess. The busses are fast, numerous, noisy and crowded but they do move a large number of people for rates ranging from five to fifteen cents. Bus transportation is a way of life for most Panamanians and only a small percentage of the population can afford automobiles. A $3,000 automobile in the States will cost an additional 75% in the Republic of Panama. The tariff amounts to between 25 and 30 per cent and an additional tax of 30 per cent is added plus the shipping charges. There are some advantages in this situation because a Panamanian does not have to own an automobile for transportation; therefore freeing more money for food, clothing and shelter. For this and other reasons, practically all middle to upper class Panamanians and Americans employ full and part time maids.

EDUCATION

Panama has a complete system of education from kindergarten through to the university including vocational training at the secondary school level. Six years of education in elementary schools is compulsory and secondary education is optional. There are two universities in the city-the National University of Panama and the Catholic University.

ZONING

Zoning laws are in effect and are enforced in both Panama City and Colon. To a casual observer, it would appear that no zoning laws are in effect or enforced because slum areas can be found in close proximity to high rise apartment buildings. The fault is that zoning laws were late in coming and were not rigidly enforced at the beginning. Today, the government is striving to enforce all the 'codes and in the newer areas of Panama one can easily observe the results of this practice. Zoning laws and codes may not be like American standards, but they are certainly designed to meet the needs of the Panamanian population. Much higher densities are allowed for single family dwellings and lot requirements are somewhat smaller than American standards, but in a high rise apartment build'ings, one automobile parking space must be provided for each apartment unit. In the areas of apartment development, the first floors can be used for high grade retail space and office space. This situation permits neighborhood shopping in practically every residential district which is not such a bad idea.

Both the City of Panama and Colon have suffered disastrous fires in the past and as late as 1965 Public Records in the City of Colon were lost due to a huge fire. As a result, the building codes now require that all structures in the City of 'Panama and Colon be of masonry and concrete construction with no wood allowed in the buildings except in the roof and for trim material. On the following page is an excerpt from the City of Panama Zoning Map which displays the typical details of zoning. Street identification within the city is difficult. Street names on maps do not always agree with names posted on street corners. The City Council has recently appointed a city nomenclature board to deal with the problems of street identification and house numbers in response to public demand and to promote work of the census office.

TAXES

In order to promote new buildings in the Republic, only land is taxed up to the first five years. Real estate taxes are based on construction costs. Buildings valued under 20 thousand dollars are taxed on the basis of one per cent. Buildings costing from 20 to 50 thousand dollars are on the basis of 1.25 per cent and (buildings valued at above 50 thousand dollars are taxed on the basis of 1.75 per cent.

These rates are slightly lower than in America where taxes will run from one and a half to two and a half per cent of value.

Personal income tax ranges from a low of two per cent for an income of $1,000 to 22 per cent on incomes of $30,000. Corporations pay, generally on the same scale amounting to 15 per cent on a $30,000 net profit.

Land is relatively high priced and in good neighborhoods; residential lots will cost approximately $12.50 per square meter which is the equivalent of $1.16 per square foot. Land in a high grade neighborhood suitable for high rise apartment development will sell for as much as $100 per square meter which is about $9.00 per square foot,

INTEREST RATES AND CAPITAL REQUIREMENTS

The credit market in Panama, like the United States, is tight with bankers selective in their loan policies. In a recent move to facilitate industrial credit, however, the Panamanian Government raised the ceiling on interest rates on industrial loans to 9% in March. The question of raising the interest rates on other types of bank loans continues to be discussed and there are indications that the present ceiling of 7% is considered to be unrealistically low. To avoid the 7% rate, financial institutions are charging a discount off the top thus making 84-659-722

the cost of a loan between 11 and 14 per cent. Mortgage money is available at 60% for a term of three to five years and on good accounts, the note is renewable for addtional terms of five years. According to apartment building developers, investments will yield from 9 to 14 per cent net.

The information on the rates listed above was obtained from interviews with bankers, real estate brokers, builders and architects. Panama has not developed a self-amortizing mortgage payable over a period of from 15 to 25 years. With this exception, the capital returns required in Panama closely parallel the current market in the United States. Prime accounts in the United States can still borrow money at 8% and land leases are still being written with a net return to the owner of between 8 and 10 per cent. To be realistic, an 8% interest rate would have to be applied in both Panama and the United States. To develop a capitalization rate, an amount must be added to this which will return the investment over a period of 20 to 30 years. This will give a capitalization rate of between 11% and 12%.

CONSTRUCTION COSTS

The cost of costruction in the Republic of Panama is actually high when all factors are given consideration. The final costs, as were furnished this appraiser by contractors and architects, will run approximately $4.00 per square foot for basic warehouse construction to $6.00 per square foot for reasonably good housing units. Low rise apartment buildings without elevators will cost $10.00 to $11.00 per square foot and high rise apartment buildings with elevators will run up to $12.00 per square foot.

Material costs will run approximately the same as costs in the United States. Lumber is imported from North America and rough lumber costs from $0.18 to $0.22 per board foot and concrete costs $17.00 per cubic yard. Other costs checked, such as concrete blocks, jalousie windows, awning windows and plumbing fixtures, were also about equal to United States costs, except the plumbing fixtures are not as good quality and most are Japanese imported.

Labor cost runs less than a third of the labor cost in the United States with plumbers getting approximately $1.10 per hour. The quality of construction is entirely different from United States construction and in single family dwellings, for instance, 4-inch concrete blocks are used on exterior walls and acceptable. In the United States, 8-inch concrete blocks are required.

Electrical and plumbing codes are satisfactory, but are not up to the standards of United States building codes.

Another important factor is that no allowance has to be made for heating and interior walls are plastered directly over hollow tile or cement blocks.

Although it is possible to use construction costs as a base for estimating rental incomes, it is somewhat impractical in this case. First, to compare Canal Zone construction to similar units in the Republic is almost impossible because construction practices are entirely different. In the Canal Zone, for instance, the second floors of many new units are frame and plywood and in the Republic of Panama, all buildings must be concrete or masonry construction with wood allowed only in roof construction. Therefore, no recently constructed comparable buildings exist in the Republic. Even if adjustments are made, the quality of construction would still vary.

One could apply typical construction costs as found in the southern United States as a base but this would also be unrealistic and somewhat difficult to handle.

An active rental market exists in the Republic of Panama in both the cities of Panama and Colon. Considering the difficulty of abstracting a proper capitalization rate as well as the problem of construction costs, it is the judgment of this appraiser than an adequate rental market exists and that it is not necessary to use a cost base. This rental market is explained and analyzed on the following pages.

MARKET DATA

In the judgment of this appraiser, an adequate rental market exists in the Republic of Panama and with proper adjustments will reflect fair rental value for the subject units.

Although the Republic of Panama and the Canal Zone are in effect different countries, similarities exist and differences can be rationalized. This appraiser is of the opinion that the Republic of Panama offers enough variety in the rental market to make realistic comparisons with housing units in the Canal Zone. The proximity of the Republic of Panama is important. Sixty percent of the work force in the Canal Zone is made up of Panamanians; so at the outset we have similarities in employment where Americans and Panamanians work side by side.

With the exceptions of some islands in the Caribbean no countries in Central or South America feel the strong influence of America more than the Republic of Panama. The economy of Panama is relatively strong in comparison to other Latin American countries and Panama uses the same dollar monetary system as the United States. Panama in fact does not print paper currency and issues only coinage with the medium of exchange being the dollar. The major differences exists purely in physical characteristics; that is, the Canal Zone exhibits a parklike atmosphere with neighborhoods that resemble residential areas of the United States. The cities of Panama and Colon are typically crowded Latin cities but the city of Panama has well protected and attractive residential subdivisions. The utilities in these cities are comparable to utilities in the United States and the Canal Zone. In fact Panama is one of the few areas in Central America where drinking water is safe for foreigners.

The living units in Panama range from large and comfortable apartments and high rise buildings to packing crate slum dwellings. This appraiser has carefully avoided the depressed areas of the cities and slum areas for any comparison

purposes.

The greatest difference exists in the fact that we are comparing a Panamanian market with Latin attitudes to the Canal Zone market with American attitudes. In this light it is doubtful if the Panamanians would be happy in American quarters any more so than Americans would be altogether satisfied with Panamanian quarters. For instance, in Colon, a number of years ago, the Panama Canal Company sold housing units suitable for two families to the Republic who in turn sold the houses to Panamanians. These were three-story buildings with the first floor being built on piers. The Panamanians immediately closed in the first floors and made additional living units and the buildings currently accommodate from three to six families.

The rental value in any area should reflect typical conditions of a country or community in which the units are located. Comparison with the Panamanian rental market will therefore reflect typical rental conditions in the country and comparisons to any other areas could not possibly accomplish the same purpose.

UNITS FOR COMPARISON

In order to compare the Panamanian rental market with stateside rental markets, this appraiser has developed an annual rent per square foot and in monthly rent per room. This is done so that comparisons can be quickly made between all markets, but it should be applied only in a general manner. The market is actually more interested in the number of rooms than the total number of square feet if the rental unit is of adequate size.

It is realized that the rental market is not particularly discriminating in its selection of apartments in regard to precise number of square feet. Large areas can be absorbed in hallways and stairwells. Comparisons and adjustments are therefore made on a rather broad base with lump sum adjustments rather than precise square foot calculations. Square foot figures are shown in the subject properties so that units of approximately the same size can be compared.

In calculating the number of square feet, all of the area within the enclosed walls of the apartment or dwelling is considered. Maids' rooms and baths are counted, if located within the apartment or dwelling unit, and are not counted in the square foot calculations if the maid's quarters are detached from the main unit. The room count is calculated as follows: