Latin Finance - May/June 2011 - 42

Panama outlook

to become more efficient, he says. rigid government expenditure plans and officials seem more A waning construction boom has left Panama City with an keen on spending than they do on belt-tightening, Arce says. impressive skyline, but buildings remain half empty. General’s Although the amount was small, the government’s decision Alemán, however, says he is not concerned about a bust and to pour $2 million into the capital’s Carnival celebrations that banks are not exposed to the luxury market slowdown. proved controversial, with left-leaning opposition group Construction jobs are transitioning to infrastructure projects. Frendadeso criticizing the president for reversing course on the “What we are looking at is a well-managed slowdown of administration’s previous stance to not put public money into the business,” says Alemán, noting that many projects were the event. prudently delayed before breaking ground. “The banks are not US-based Panama experts including Boris Segura, a senior exposed to this.” LatAm economist at Nomura Securities and Roberto SifónMuch needed educational reform seems on the back-burner Arevalo, a soveriegn ratings director at S&P specializing in and an overhaul of Panama’s internationally maligned judiciary LatAm, say the government should prioritize education reform does not appear to be on the agenda. Among the private sector’s and stimulating local capital markets. top concerns for Panama’s future is a lack of skilled human “For an investment-grade country, you should be able to capital and security, says issue a 10-year bond in Alemán. your domestic market,” Public debt falling “If you talk to any Sifón-Arevalo says. “At As percentage of GDP, government debt is expected to continue its decline outside investors that this point, we haven’t come to Panama, they say seen strong signals that 80% that there is scarce human (government stimulus of resource here in Panama,” local capital markets) is 71.1% 70% he says, adding that happening.” 70.4% 66.5% 69.4% boosting education will The government is 66.2% 61% bridge the gap between lagging in its promise to 60% the haves and have-nots. boost local capital markets 53% In the OECD’s even as it has taken on 50% 2009 Programme for some $900 million in two 45.1% 45% International Student major debt issuances this 43.1% 43% 41% Assessment of some year. It launched a $502 40% 39% 70 countries, Panama million yen-denominated 35% 35% ranked among the bottom “samurai” bond to roll over 30% five for reading, math debt and cover current and science. Singapore, spending. 20% by comparison, was The January issue 2000 2002 2004 2006 2008 2010 2012F 2014F a top performer the of the 10-year bond has OECD evaluation. The a 1.81% coupon that Source: Ministry of Economy and Finance World Economic Forum Mahesh Khemlani, the ranked Panama’s quality finance ministry’s director of primary education 129 out of 139 countries in its Global of public credit, told reporters would save some $100 million Competitiveness Report for 2010-2011. over its lifespan compared to a similar US issue. He said further While a top-50 performer in many areas of business financing plans for 2011 would be through multilaterals or local sophistication and financial market development, the issues. independence of Panama’s judicial system was ranked 125, In March, CAF approved a $400 million loan for a Panama though property rights and intellectual property protection City subway project that the multilateral says will cost about ranked around 50. Panama’s overall competitiveness rank was $1.8 billion – roughly $300 million more than the government 53. had initially hoped to spend. The government says it accepted By comparison, WEF ranked Singapore at third overall, with an additional $100 million loan from CAF which would partly judicial independence ranking 21, and the quality of primary address potable water issues in the aftermath of December’s education the world’s third-best performer. floods, which caused the Pacific-Atlantic trade route to briefly “The problem now is to manage the future, and to prepare shut down for the first time since the 1989 US invasion. (Panama) for the coming years,” IMF managing director Speedbumps Dominique Strauss-Kahn told reporters during a visit to Panama Stefan Roehr, supply chain director for Sanofi-Aventis, says in March. “The risk of overheating here, as in many other Latin Panama’s competitive advantage could be tested without American countries, is a risk that has to be addressed.” The IMF improvements in its logistics sector. Government bureaucracy is does not expect core inflation to rise, but Strauss-Kahn warned occasionally a burden and the growing logistics industry needs high oil and commodity prices could hurt Panama.

42 LatinFinance

May/June 2011

Latin Finance - May/June 2011

Table of Contents for the Digital Edition of Latin Finance - May/June 2011