Panama launches diamond exchange for bling-loving Latins

Latin America is getting a new financial market. But forget frenzied open-outcry pit trading or the dizzying blur of numbers on screens. In the new bourse, due to open in Panama this year, deals worth millions of dollars will be sealed with a solemn handshake and the Hebrew phrase “Mazal u’ Bracha” – “luck and blessing”.

Welcome to the hallowed world of diamond dealing. Panama is this week formally launching a $200m Panama Gem and Jewellery Center that will also house the Panama Diamond Exchange (PDE) – a market expected to help the $8bn fine jewellery retail business in Latin America grow to more than $10bn by 2017.

The PDE, which is expected to start trading before the end of the year in Latin America’s fastest-growing economy, is the 29th such market worldwide.

But it is the first in a bling-loving region that is home to a fast-growing middle class, large luxury set and which also has an established tradition as a producer of coloured gemstones, such as emeralds from Colombia.

“Latin America is a jewellery market of great potential that, to date, has never fulfilled its promise,” said Eli Izhakoff, honorary president of the World Federation of Diamond Bourses, the World Diamond Council and the World Jewellery Confederation.

A lack of a diamond exchange in the region has meant that Latin American buyers typically had to travel to the US or Europe, or to buy second-hand at a premium, Mr Izhakoff told the Financial Times in emailed responses to questions.

Diamonds will be flown in from places such as New York, Antwerp, Tel Aviv, Dubai, Hong Kong and Mumbai, says Erez Akerman, PDE president.

Exchange members – who are carefully vetted, must provide personal guarantees and adhere to a strict code of conduct – will scrutinise the rough or polished stones under neutral lights in the high-security trading centre before deals can be concluded.

The idea is that the PDE will become a hub for the region billed as the world’s most untapped jewellery market.

“The retail value of the fine jewellery business in Latin America is about $8bn and given current growth rates, it is fair to state that it will be worth in excess of $10bn by 2017. The wholesale value will be in the region of about $5bn,” said Mr Izhakoff.

Latin America has more than 11,500 jewellery shops and there are more than 320 mining companies and nearly 750 wholesalers of diamonds, precious stones and jewellery in the region, added Mr Akerman.

The Gem and Jewellery Center will enjoy a tax-free regime and hopes to capitalise on Panama’s strategic location and status as a commercial and financial hub that is home to one of the world’s major shipping lanes.

It aims to attract some 200 Latin American companies and another 200 international businesses – including from the US, Israel, India, China and Russia – spurring direct and indirect income for Panama of more than $3bn a year by 2020, Mr Izhakoff says.

“In terms of luxury consumption, the Latin American market is forecast to see growth of 14 per cent [a year],” Mr Akerman concludes. “To put that into perspective, it is just slightly below Asia’s growth rate of 16.5 per cent.”