Boomtown with growing pains

The explosions that shatter the early morning quiet here are perfect metaphors for another kind of boom, the economic one transforming Panama’s capital.

The blasts a few miles north of the city are part of the first phase of the $5.25-billion Panama Canal expansion project. They are clearing a path for new locks that will modernize the historic waterway and, in 2014, enable bigger ships to traverse the isthmus.

This country’s economy grew 11% last year, in large part because of expectations of continued prosperity resulting from a bigger and busier canal. But there is more going on in Panama than just a massive public works project.

Attracted by the climate, favorable tax policy and laid-back lifestyle, home buyers and investors are flocking here from Venezuela, Colombia, Ecuador, Europe and the United States.

The skyline increasingly resembles a mini-Sao Paulo, a dense forest of steel and concrete towers that includes dozens of new high-rise condominiums and apartment buildings. (Not enough of the buildings are hotels, apparently, because room rates have doubled in the last two years.)

The city is still redolent of the intrigue that fascinated John le Carre and Graham Greene, both of whom wrote books about Panama and its murky politics. It’s long been a meeting ground and place of exile for characters such as former President Juan Peron of Argentina, the shah of Iran and Colombian drug trafficker Pablo Escobar.

Its cosmopolitan ambience has a renegade element: Panama has long been and still is a staging ground for illegal arms going south to Colombian armed groups and for drugs traveling north to U.S. consumers.

But Panama’s leaders insist their country is on a trajectory toward First World status and respectability.

It’s received a series of boosts recently with the relocations here of several multinational companies that tout Panama’s location and friendly atmosphere.

This month, 3M joined other corporate giants Hewlett-Packard, Sinopec and Singapore Aerospace in announcing that it was opening an operation here.

All told, Panama added 51,000 jobs last year, double the number in 2006.

But the rapid growth has exposed the country’s infrastructure as woefully inadequate for its good fortune. Monumental traffic snarls, shortages of housing, electricity and water shortfalls and ugly land-use spats are the flip side of the bonanza.

Electricity use grew 6% last year -- four times the U.S. growth rate -- which has strained the country’s tiny power grid.

Last month, the government cut the workday and limited air-conditioner use to conserve electricity, the costliest in the region.

To close the deficit, the government plans to build 24 hydro- and thermal power plants. But Indian groups in the rainy western part of the country where most of the plants are planned complain that the projects will inundate their farms and force their displacement.

Roughly 6% of Panamanians live without running water. Residents of poor barrios have taken to the streets to protest the lack of infrastructure.

“Since the 1980s, there has been no centralized planning, and that’s the basis of the crisis we see today,” said Lucia Lasso of the Alliance for Conservation and Development environmental group.

Thanks to a $380-million loan from the Inter-American Development Bank, the capital at least is getting a treatment facility for the raw sewage that flows out into the ocean right in front of deluxe high-rises.

Panama is also taking dramatic, if belated, measures to deal with traffic by building nine overpasses in and around the capital and by plopping down a 2-mile-long highway called the Coastal Beltway on the capital’s Pacific shoreline.

As hectic as development is now, economic activity is only going to intensify starting next year, when the contract for the biggest piece of the canal expansion, the $3.5-billion deal to design and build new canal locks, is awarded.

Jose Manuel Bern, the owner of one of Panama’s leading real estate development firms, said San Francisco-based engineering firm Bechtel, one of four international bidders vying for the locks contract, has told him that if it wins, it will need 500 apartments for its employees, housing that will have to be built.

“It’s only going to get better,” Bern said with a smile.

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chris.kraul@latimes.com