The term Derecho Posesorio simply means, right of possession. Derecho Posesorio is a type of land reform which came to be in the 1960´s under the direction of General Omar Torrijos, the father of Panama´s current President, Martin Torrijos.

The original purpose of the derecho posesorio land reforms was to give poor farmer´s who worked land, but did not have title, some sort of legal right to the land that they farmed.

The main difference between having title and having derecho posesorio is that with title one has a registered deed in the public registry thus eliminating any questions regarding ownership. In other words, no one can contest ownership of land. Also, banks do not typically offer loans for land that has right of possession.

It is possible to title land that is owned through rights of possession. This method of obtaining land does have a degree of risk involved with it, however, it can be a very economic way of obtaining real estate.

A summary of steps required to title land that is owned through derecho posesorio are the following:

1. The land with right of possession status must be surveyed and have its boundaries formalized by a licensed surveyor.
2. A formal request must be presented to, and signed off by the neighbors of the land in question.
3. Once all of the neighbors have signed off on the property with derecho posesorio, the Agricultural Reform Office (Reforma Agraria) must do a formal inspection of the property.
4. Once this inspection is approved and all the neighbors have confirmed the boundary lines, the agricultural reforms office will emit a resolution.
5. The value set forth on the land by the government must be paid. This value depending on the location of the land.
6. Last but not least, the documentation of the land is sent to the Public Registry to recieve title.

The process of getting land titled from derecho posesorio status typically takes 6-8 months and is a right reserved for Panamanian Nationals alone.

Law N° 9 of August 27, 1997, set forth special incentive laws for investment into the restoration of Casco Viejo. A summary of Law N° 9´s most relevent aspects are as follows:

1. A system of mortgage loans with preferred interests is established for the restoration of real estate in the area of San Felipe.
2. The property owners of Casco Viejo are exempt from paying Real Estate Tax owed at the moment of the transfer or sale of a property.
3. The profits derived from the transfer of real estate in Casco Viejo will be exempt from Income Tax.
4. The land and improvements of restored buildings will be exempt from Real Estate Tax for a period of thirty years counted from the date of restoration of the property.
5. The first sale or sales that take place after the completion of a building´s restoration will be exempt from the 2% Real Estate Transfer Tax.
6. The profits generated by commercial, professional or industrial activities which are carried out in Casco Viejo, are exempt from Income Tax for ten years from the restoration of the occupied property.
7. The equipment and materials used in the construction, restoration, and equipping property in Casco Viejo will be exempt from Import Duties.
8. The tenants of properties in Casco Viejo can deduct from their Income Taxes, the rates of rental for a period of five years.
9. Those buildings destined for public parking will be exempt from Income Tax for a period of ten years.
10. In order to benefit from these incentives, the investments must be made during the ten years following the establishment of the Decree-Law, that is, until August 2007.