Wall Street Journal Panama Seeks Miami 's Heat

March 14, 2005 Latin American Nation Lures Banks & Travelers in Post-Sept. 11 Era

By JOEL MILLMAN in Panama City, Panama, and EVAN PEREZ in Miami Staff Reporters of THE WALL STREET JOURNAL March 14, 2005;

Anna Paula Gama, an accounts executive for MTV Brasil, got a cold reception when she arrived in Miami last year for a vacation. Despite having visited the U.S. four previous times, she was pulled aside by immigration agents and grilled about her finances. She emerged teary-eyed, vowing to never visit Miami again. "They pened all my bags, opened my wallet, dropping money all over the floor, then they left me to pick it up myself," she recalls.

Complaints about stepped-up U.S. border scrutiny since the Sept. 11, 2001, terrorist attacks are prompting any Latin American travelers to do more than gripe: They are using places like Panama City's Tocumen international Airport as a regional hub instead of Miami, once the preferred way station for Latin fliers making connections to Europe or North America or even destinations within the region.

It is just one way in which Panama is taking advantage of the post-Sept. 11 environment to help itself -- usually at the expense of Miami . The small isthmus nation, normally off the radar of international travelers and investors, also is luring banks that want to protect back-office operations from terrorist attack and is pitching itself as a safe but friendly port-of-call for businesses as diverse as cruise ships and call centers. Panama 's historical ties to the U.S. and its relatively large number of English speakers -- 14% of the opulation -- also make it an attractive alternative to Miami .

So far, the strategy is paying off. Airline seat capacity from Miami to Latin America, an indicator of assenger traffic, is down 15% in the current quarter compared with the same period in 2000, according to BACK Aviation Solutions, a New Haven , Conn. , consulting company. At Panama 's Tocumen, seat capacity to other Latin American destinations is up 26% during the same period.

For business travelers like Ernesto Baca, an Argentine who moved to Panama last year to run Telecarrier SA, a new data-services provider, being based in Panama helps him serve far-flung clients throughout the region and save two to three hours compared with flying through Florida . " Miami , with all the security checks, has become a hell for international connections," Mr. Baca says.

To serve people like him, Panama's main airline, Compañía Panameña de Aviación SA, known as Copa, soon will have two daily nonstops between Panama City and both Sao Paulo, Brazil, and Buenos Aires. In 2002, there were only four direct flights between those cities and Panama each week.

In October, Spanish carrier Iberia Airlines shut down its Miami hub, which previously ferried travelers between Central America and Europe . Iberia found too many passengers were missing connecting flights, and began flying passengers directly to different destinations in the region on different days.

"We were losing money because the new security rules turned what used to be a very good hub into a nightmare," says Jaime Pérez Guerra, an Iberia spokesman in Madrid . To help attract carriers like Iberia , Panama approved a $12 million plan last year to remodel Tocumen Airport and add a second runway.

Also, last week Panama 's Copa made a surprise bid to take over Colombia 's second-largest airline, AeroRepublica SA. The move by Copa, which has the U.S.'s Continental Airlines as a 49% partner, could double traffic through the Tocumen hub by routing AeroRepublica travelers bound for the U.S. or other Caribbean destinations through Panama instead of Bogota.

" Panama today is the meeting point for all of the Americas ," boasts Pedro Heilbron, Copa's chairman, who notes the airline is Boeing Co.'s biggest customer in Latin America and has just added a fleet of 10 Embraer commuter jets to increase short-haul traffic through Tocumen.

Miami officials play down the notion of competition for Latin visitors and investors. Last year, Miami registered a 2.4% increase in overnight visitors from Latin American countries, says William Talbert, head of the Miami Convention and Visitors Bureau. That indicates that while fewer travelers may be using Miami as a way station, the number making Miami their destination is slowly growing.

Panama hopes more air traffic will give a boost to its cruise-ship business, too. As part of negotiations with Washington for a bilateral free-trade agreement, Panama is looking for a change in U.S. maritime regulations to encourage U.S. cruise lines to treat Panama City and Colón as home ports, a change that could make Panama more of an origination point or final destination instead of simply a canal crossing point for cruises going from one sea to another.

Panama 's offshore bank sector already has attracted some permanent residents from Miami . After Sept. 11, some banks based in Miami that catered in part to Latinos moved back-office and back-up operating systems to places like Panama to reduce vulnerability.

Telecarrier SA, a unit of Grupo Motta , Panama 's largest private conglomerate, invested $50 million to lure back-office business from U.S. banks, airlines and retailers. Telecarrier won't divulge its client list, but says nearly a dozen customers recently closed their Miami offices and moved to Panama.

Tighter scrutiny of financial flows to the U.S. similarly helped boost deposits in Panamanian banks. Deposits here reached $38 billion last year, mainly from offshore clients, despite tightening of local regulations since Panama was considered a major narcotics money-laundering center in the 1980s. The amount was up $5 billion in the year after 2001 alone. Meanwhile, foreign bank agencies in Miami held $17.1 billion in assets as of September 2004, according to the Florida Department of Financial Services. In September 2000, those banks held $20.6 billion.

After the Sept. 11 attacks, Panama eliminated a $1-per-call surcharge on international phone connections. That has brought nearly 5,000 call-center jobs here since 2002, led by such U.S. employers as Dell Inc., Spherion Corp. and Sitel Corp. "The reason we're in Panama is the great availability of bilingual workers," says Dell spokeswoman Cathy Hargett. "That, and the time zone: Same as Miami ."