An Answer That Arrived, Sort Of

When we left off in Part 1, Ley 93 de 1973 had just carved daily-rate and short-term seasonal rentals out of Panama's tenancy law, leaving them in regulatory limbo. If a landlord-tenant law wasn't going to govern hotels, boarding houses, and short vacation stays, logic suggests something else should have stepped in fairly quickly to take over that territory. And in a sense, something did: three years later, in 1976, Panama passed a law specifically aimed at short-stay lodging.

The question is whether it actually closed the gap, or just built a smaller, more specific box around part of it.

Ley 74 de 1976: Naming the Businesses It Could See

Ley 74 de 1976 regulates what its own text calls "el servicio remunerado de hotelería y hospedaje público" — the paid service of hotel-keeping and public lodging. Article 2 requires anyone building or operating "hoteles y demás establecimientos de hospedaje o alojamiento público" to submit their plans for approval and request authorization through a special form prepared by the national tourism institute of the time.

On its face, that phrase — "hotels and other establishments of public lodging or accommodation" — sounds broad enough to include almost anything. And there's a reasonable legal argument, made in later commentary on this law, that the phrase was written broadly enough to theoretically reach short-term home rentals too, even though the concept of a private individual renting out a spare room or apartment to travelers wasn't yet a recognizable phenomenon in 1976. The law simply didn't have the vocabulary for something it couldn't yet imagine as a distinct commercial category.

Decreto 17-B de 1977: Where the Vocabulary Actually Narrowed

The following year, Decreto No. 17-B de 1977 was issued to regulate how Ley 74 would actually work in practice. And here's where the ambition of "hotels and other public lodging establishments" quietly shrinks into something much more specific. Article 2 of the decree lists exactly which establishments are subject to its rules: Hoteles, Moteles, Residencias, Pensiones y Apart-hoteles — hotels, motels, residences, pensions, and aparthotels.

That's the whole list. Five categories, all of them recognizable, built, signed, staffed commercial operations. Nowhere in that list do we find casas or apartamentos rented out habitually for periods of less than six months — the very activity that Ley 93 de 1973 had explicitly excluded from its own scope just a few years earlier. The gap identified in Part 1 is sitting right there, unaddressed, in plain sight of the regulation meant to answer it.

Legislating What You Can See, Not What's Actually Happening

Why the omission? The most plausible explanation isn't a conspiracy or a deliberate loophole — it's a matter of visibility. In 1977, a hotel was an obvious commercial entity: a building constructed for the purpose, with a lobby, a sign, employees, and a business license application on someone's desk at the tourism institute. A private homeowner renting out a room or a beach house to travelers for a few weeks looked like a personal, informal arrangement, not a business category deserving its own line item in a decree.

Lawmakers, understandably, regulated the businesses they could point to. They wrote rules for the visible, structured hospitality industry of their era. What they did not do — because the activity hadn't yet crystallized into something identifiable — was regulate the underlying activity of renting out a dwelling short-term for money, regardless of who was doing it or how formal the arrangement looked.

That distinction between regulating a type of business and regulating a type of activity is the thread this whole series is pulling on. It's also exactly the distinction that, decades later, would let clandestine operators argue they weren't running a "hotel" or a "pensión" at all, just quietly lending out their apartment for cash.

So, What Filled the 1973 Gap? Not Much.

If you were hoping this chapter would reveal the law that finally caught up with short-term home rentals, the honest answer is: not yet. Ley 74 and Decreto 17-B didn't fill the vacuum left by Ley 93 — they mostly just formalized the hotel side of the hospitality industry that was already easy to regulate. The box got a little more detailed, with named categories like pensiones and apart-hoteles, but it stayed a hotel-shaped box. Casas and apartamentos rented habitually to travelers for under six months remained exactly where Ley 93 had left them: unmentioned, unclassified, and unregulated.

It would take almost two more decades, and a very different kind of law aimed at promoting tourism rather than just licensing hotels, before Panama's vocabulary started expanding enough to describe smaller, more personal forms of lodging — cabañas, hostales familiares, albergues — categories that, as we'll see in Part 3, start to look a lot more like what we'd now call an Airbnb. The net wasn't wide enough yet in 1977. But it was about to start growing, one category at a time.

For now, if you're trying to understand why so much confusion still surrounds short-term rentals in Panama, it helps to remember that the confusion has deep roots: even the law's own vocabulary took decades to catch up with a rental market travelers had already been using for generations. Looking for stays that have since caught up with the rules? Our directory only lists properties that comply with the frameworks this series is tracing.