An American Builder on Building in Panama

I received this well-written and thoughtful response to my “Architectural Disaster” blog from Charles Metz which anyone who even thinks about building in Panama should read. It’s long, but well worth the read.

Hello Mr. Detrich,

My name is Charles Metz. We have met at Valle Escondido . You may recall that I am a custom home builder and developer living in Naples Florida. I still have a lot in VE , I think perhaps one of the last lots not built on . It is presently for sale but I will build a spec. in order to qualify for the tax exemption … if it does not soon sell.

I have designed and supervised the construction of one house in VE, long distance, also a bit of a disaster.

I am looking for a new process for the next one. Richard it has always been presented to me that ” no matter what quality of American plans you have … your plans must be submitted by and in the name of a Panamanian architect in order to get a permit ” am I wrong on this? This is largely taken advantage in Panama with the typical asking price being in the neighborhood of $15K to $20K by the Boquete / David architects to do anything. Custom plans for say a 3000 Sq. Ft. would not cost remotely close to that in Naples , one of the most expensive markets in the U.S. In addition once you turn your U.S. plans over to a Panamanian architect they are owned by him once he puts his name on a permit application. And if you decide “ever ” to change anything on your house you will need his permission to get a remodel permit. I have heard of Architects charging $10K for their permission. So it is good to get something in the contract about this. If the Architect is also the builder you will not be able to fire the builder halfway through the project… he controls the plans. You also will not be able to fire the contractor half way through the project and finish the job yourself… your ” original contractor ” must sign the paperwork for your occupancy permit. Which means also that you will have difficulty holding out say a final 10% of the contract as penalty for shoddy or incorrect work. And forget taking anyone to court. The courts are not very dependable and you are a stranger in a strange land.

As far as the talent of the Architects are concerned it is important to remember that few of them have ever had the experience with the ” budgets ” that we are used to in the states to build what we would expect in a custom home.

And the few that have , have generally designed for wealthy Panamanians who’slifestyle and home designs are totally different than expected by North Americans. And because of limited availabilty of trained craftsman the local Architects have learned to keep it simple. A large house plan for Panamanians is usually a small house plan with enlarged rooms.

There is very little supervision on a Panamanian construction site. I don’t care who the builder is. And if you want your house to look like your plan… you had better be there everyday. The workers will do what they are used to doing unless told otherwise. And unless you are there they will not be told otherwise. There will likely be no plan at the jobsite and if there were the electrical engineer is probably the only one at the job who could read them anyway.

For those thinking they can buy and American architect plan on the web and build it in Panama think again.

In Panama you are building a concrete block house for ” earthquakes ” not hurricanes. So your generic plans will not work. The steel reinforcement bar designs are very different and specific. Nor will a house plan from earthquake Califorinia codes work. The Panamanian” system ” is very different. A Panamanian house is built more like a “highrise condo ” than like a single family house that North Americans have experienced. All floor systems are poured concrete. We are talking welded red steel here. And although the first house that I designed in Panama was of M2 and not block construction, I would not do that again.

I have seen many ” experienced ” Amercians try to go to Panama and ” tell them how we do it back home” . Frankly, nobody cares how you do it back home and being the ” Ugly American ” will likely cost you more money . If not cost you your builder. It is amazing to me how easily the Panamanian people get insulted if they think you are being disrespectful. It is the Latin macho thing. So you need to have your contract very specific and then treat everyone with kid gloves. And unless you write your own contract it will be full holes and opportunities for extra charges. It does not take long to learn that there are Panamanian prices and there are Gringo prices.

To those American builders who think you are going to go to Panama and take the business from the local builders to build for the Gringos please don’t be so foolish. It is a closed and protected system. Not only do you not know what you are doing. You do not have the labor nor understand how to manage the labor. You do not know the true costs. Nor the construction systems, the the laws associated with all this… but the locals will blackball you in a minute. They are related and you are not. They know who to pay off and you do not. Heck if you are like me you probably do not even know the language very well….

So what is a person to do if you want to build a home in Panama. I have a few thoughts…

1) Find those web site plans that you like and buy them. Make sure they are designed for block construction and not wood frame. Buy the plans on disk in autocad so they can be easily modified and if you have any changes to make have “the original architect in the states” make them. And keep in mind there are few flat lots in Panama… foundations are expensive. As is site work for the grade.
Make sure your plans work for your grade and will fit on your lot before you buy them.

2) Go find the Panamanian architect ( forget the builder for a while ) who is willing to redraw your plans in metric and in spanish and for earthquake construction. All Panamanian Architects are licensed over the entire country. So look in the larger cities rather than in the hot spots for development in the boonies.

3) Negotiate with the Architect that “you”will Ownthe plans, what will be his charge for future revisions, and what if any oversite you want from him. Probably none. Keep in mind that your Architect will have to visit your constructions site and you will likely pay the expenses for that so try to keep your selection within your region of the country.

4) Find a Panamanian Attorney to work for you in the creation of your quirements for a contract. Your contract will have to be both in English and in Spanish. English so you understand it and Spanish so that it will be legal in Panama as a contract. May sure your attorney has the power to legally ” authenticate ” the translation. This is typically a specialty service from an authorized agency.

5) Establish an agreement with a local bank to make disbursements to your contractor based upon preagreed to phases of completion. They are not used to this but will do it for a fee. You will have to likely pay for each inspection by a bank person once your contractor requests a payment… but the contractor will be less likely to try to jerk you around if the bank is involed. And at least you will have somebody speaking your contractors language and who is paid to be on your side.

6) Now put your plans out for bid. Make sure your Architect has detailed the specifications to your satisfaction. What you will find is that most of the contractors will no longer be interested in your project… because you have taken away from them most of the tools to take advantage of you. But the ones remaining are the ones you want to talk to anyway.

7) If you are still inclinded to ” do it yourself and save money ” then I suggest you at least contract with a local to build the shell of the house , what is locally refered to as ” in the gray” and then finish it yourself. Anyone can contract for laying of tile or painting… but keep in mind your ” in the gray contractor” will still have to submit the paperwork to get your occupancy permit, so get that agreed to upfront in writing.

If you want to go to the next step contract for construction management only. Go to your Panamanian bank and deposit enough funds to establish credit and then go to the building supply houses and establish your own builder account. You place the order for materials and you make the payments. This for several reasons. If you don’t do this your builder will be getting a 10 to 15% discount and still will be marking up the materials to you at 20 to 30% over retail. And what did he do for that but make a phone call ? And it is the only way you will know that all subs and materials have been paid for at the end of the job. No mechanic lean laws and releases that you are used to in the states.

(9. Keep in mind that building only the shell is like building a log cabin. The log shell is a long way from the final cost of a house. Budet appropriately.

10) And finally… don’t even think about doing it long distance. You have got to be there. Period.

Sound daunting. Well sort of. But this is my recomendation after building one house in Panama … and a few hundred over a 30 year period in the states.

So let’s see. We need a qualified Architect willing to work under the terms outlined, we need a qualified Attorney charging fair market fees, we need a banker willing to perform the service outlined. And we need a contractor willing to bid on the project under the terms outlined. And it would not hurt to find some fresh out of university student willing to work by the hour as your translator in all this…..

Richard , unfortunately I do not have these people in place…. and I would be very interested in your or your readers recomendations for these positions.

Wishing you contunued success.
Charles Metz
metzcharles@yahoo.com

11 thoughts on “An American Builder on Building in Panama

  1. This is one of the most accurate and informative articles I’ve seen on what it takes to build a home in Panama.

    What Charles says is right on the money. His suggestions for controlling the building process is extremently helpful and absolutely correct. However, even though the 10 points Charles points out seem simple, don’t think they’ll be easy.

    The biggest mistake I’ve seen prospective homeowners make is trying to get things done cheaply. Some things are less expensive in Panama and, unfortunately, some things cost more.

    I would only add one more insight to Charles’ article. Despite your best intentions, your home will cost more than think and take much longer to complete than anticipated.

    My suggestion to would-be Panama homeowners? The most obvious solution is to try to find an existing home that meets your personal needs. Fortunately, there have been enough new homes built by foreigners over the past several years in many of the popular destinations so you have a fairly good supply to choose from.

    Take your time, do your research and, whether you build or buy, you can find a home here in paradise that is perfect for you.

    Good luck.

  2. Great article-thanks for your time to write.
    One thing I don’t understand is” buying” your plans. Seems a waste of money when you need an architect to re-do anyways.
    We drew our plans and submitted to our chosen builder. He, then took them to his architect who transposed them to official drawings for submission and approval. No problems there and all done at a very small fraction of what you suggested it would cost(BTW-we did the same thing in Canada-drew ourselves and had architect take it from there). I think we saved alot of money having our builder use his architect. As opposed to finding an architect and then a builder. We had no issues with using a Panamanian architect.
    I would agree that things take way longer to get done and if you count on it playing out that way-one would be less disappointed in the end.
    Of course, using a Panamanian builder would save on supplies etc…over an American builder.
    If it all sounds too daunting-then, for sure, I would recommend buying something already built.
    My two cents.

  3. Being a recent homeowner in Cerro Azul (I bought in early 2009), I can say that all that has been posted is much on-point. I acquired a two year old home that was built by a panamanian contractor for a US couple where one partner passed away just before they were to move in. The remaining partner elected to return to the US.

    I had looked at over 50 homes and found that most just didnt reach a standard of workmanship I could live with, having been a developer here in the states for many years. The home I did find isnt what I would have designed and built myself, but it has provided an excellent foundation for expansion. My solution to manage the expansion- consisting of a guest house and garage, 2400 feet of concrete decks extending over a 35 degree slope, a bohio and some site work – was to hire a project manager I could trust. ExPat Certified Construction is owned by a young Canadian that has settled in Panama and has worked for over 6 years in the building and development business with family. He has addressed many of the challenges for building in Panama. With a good network or architects and engineers, fluency in spanish, understanding of panamanian practices and laws, reliable sources for material at competitive prices and labor and subcontractors with whom he has established mutaul respect, Expat Certified and Adam Haney has helped me avoid many of the pitfalls.

    With use of email and weekly financial reports and digital pictures, we have been able to successfully manage our work together despire the distance. While the project has taken longer than I would have preferred, I am confident that the finished result will have lasting value and utility. Having travelled around the country fairly extensively and talked to many folks, I shudder to think what my project would be without the on-the-ground, in-country insightful help that Adam has provided.

  4. Hi Charles My name is Eladio and live in Houston TX. I’m willing to help anyone that go to Panama’ and in need of a translator or someone to oversee there construction project. Please send me a email. Thank you for your time.

  5. Request contact information for Adan Haney (as referenced by Jim Cornell). Am planning to retire in Panama and would like to have house built to my design.

  6. Great information. I am trying to determine how much it cost to build per sq/ft. Can anyone give me a ballpark figure for building in panama?

  7. I have the same question – for the standard shell construction (Panamanian style of block and concrete) what range of cost per sf are we looking at?

  8. Bottom line, learn Spanish. Heck, you;re going to live there anyway. It’s a better investment than trying to build it yourself.

  9. Richard,

    Thank you for sharing your wonderfully informative post. I have been living in Venezuela for the last five and half years. Due to the regrettable decline in political, social, and economic conditions here, thanks to Hugo Chavez and his robolucion, I am relocating to Panama. I am leaning towards the El Valle (Cocle) region, but have not ruled out Cerro Azul. Boquete is lovely, but I found it way too Americanized. I speak fluent Spanish and prefer a mixed community. If you have any suggestions in regards to locales, I would appreciate your input.

    A suggestion for managing construction costs is to develop a Bill of Quantities prior to bidding the work. Get all of your bidders to provide you with their unit costs for all items in your BOQ. Using this information from several bidders with allow you to understand the real costs of all elements of the work and negotiate the best price. During these negotiations, it will become clear which contractors are serious and honest, and which are not. Then, you can also use the BOQ to develop your payment schedule, and you can avoid the contractor from getting too far ahead in his collections. I used this concept in Venezuela for a complete remodel project of a large apartment, and it served me very well. Note that this management technique really should only be used by an experienced builder.

  10. Yikes !I have tried to learn spanish for over 4 years! I still have a 3 year olds presentation ! No structured conjugation ! Is there hope ?

  11. We are looking into moving to panama, I would appreciate information on cost per square foot to build and how to contact Adam Haney

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s