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NEW YORK, March 07 (Fitch) Fitch Ratings has affirmed Panama’s ratings as follows: –Long-term foreign currency IDRs at ‘BBB’; Outlook Stable; –Long-term local currency IDRs at ‘BBB’; Outlook Stable; –Country Ceiling at ‘A’; –Short-term foreign currency IDR at ‘F3’.
KEY RATING DRIVERS
The affirmation reflects the following factors: Panama’s high growth rates since 2004 are a result of policy continuity centered on the expansion of the Panama Canal and the positioning of the country as a regional logistics hub. This strategy has driven a public and private investment-led growth cycle that has protected the economy from external shocks over the last eight years when Panama’s five year average growth has consistently outperformed that of peers.
Higher inflation and deterioration in current account deficits reflected some macroeconomic tensions that have built up over the last few years during the period of rapid growth. However, the flexibility of Panama’s economy – and its ability to adjust to shocks – has helped to mitigate the imbalances and prevented them from becoming problematic. Indeed, some of the macroeconomic imbalances now appear to be diminishing.
If Panama’s economic model is well administered, the country could enjoy sustainable growth over the medium term. Fitch expects growth to converge to a more sustainable rate of 6% by 2015 as investment projects come to fruition. Government estimates indicate that the economy expanded at a real rate of 8.5% in 2013.
Despite strong growth, Panama’s fiscal consolidation has been relatively slow, partly reflecting the government’s commitment to complete its ambitious investment plan. Consequently, public debt reduction has been driven more by the country’s fast growth rate rather than by a focus on fiscal consolidation. Debt to GDP fell to 38.4% in 2013 from 39.2% in 2012, representing the slowest pace of reduction since 2006 (except in the 2009 global financial crisis).
Nevertheless, Fitch’s debt dynamics analysis suggests that debt will continue to fall over the coming two years provided the government keeps its deficit in line with the ceilings incorporated in the Fiscal Responsibility Law. Future consolidation challenges include a slowing economy as well as continued social spending pressures. In addition, the need to address the social security actuarial imbalance, public education, natural disasters and security concerns will burden fiscal accounts in the medium term. Although some unwinding of public investment to more sustainable levels from the current 10% of GDP should provide space for future fiscal consolidation, turnkey projects could be a source of future fiscal rigidity.
Further potential delays on the construction works to expand the Panama Canal could make fiscal consolidation harder for any future administration as the fiscal windfall coming from the enlarged canal takes longer to materialize. The Panama Canal expansion is already one year behind schedule due to delays on the construction of the third set of locks, the main project of the expanded canal. On Feb. 27, the Panama Canal Authority (Spanish acronym ACP), the autonomous agency in charge of managing the canal operations, reached an agreement with the locks’ construction consortium to resume work after two weeks of stoppage.
Fitch’s base case assumes that the canal expansion will be completed by December 2015 and start operating in 2016 (as per ACP’s February 2014 updated estimate) with some margin of cost overruns. While the assumed completion date could suffer further delays, it is unlikely to undermine the canal’s value proposition in the medium term. However, Fitch believes that the ACP has the financial and technical flexibility to support any possible cost overruns or the change of the construction consortium.
Presidential and legislative elections will take place in Panama on May 4. The electoral contest is unlikely to introduce major risks to the economy as the overall growth strategy to leverage the canal and convert the country into a regional logistics hub and attract tourism is not under threat. Overall policy continuity is likely under any of the three leading presidential candidates. Tight poll numbers imply that all leading candidates remain in contention to become president. In fact, it has been difficult for opposition candidates to differentiate themselves from the incumbent given the unprecedented economic growth.
The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the rating are currently well balanced. Consequently, Fitch’s sensitivity analysis does not currently anticipate developments with a high likelihood of leading to a rating change.
The main factors that, individually or collectively, could lead to positive rating action are:
–A sustained reduction in government indebtedness. Adherence to fiscal targets will also be positive for fiscal credibility. –Maintenance of a sustainable growth trajectory. The main factors that, individually or collectively, could lead to negative rating
–A sustained fiscal deterioration that leads to a persistent weakening of the government debt dynamics;
–A long suspension of the Canal project with adverse material implications for growth and fiscal accounts. A significant reduction
in Canal transfers to the Treasury that materially reduces fiscal flexibility.
–A destabilizing bout of political uncertainty.
The ratings and Outlooks are sensitive to a number of assumptions:
–Fitch’s base case assumes that general elections will be held without disruptions to governance and power will be transferred
–Fitch base case assumes that the canal expansion will be completed by December 2015 (as per ACP’s updated estimate) with
some margin of cost overruns.
–Fitch assumes that the impact on the economy and financial system of the Colon Free Zone (CFZ) unresolved suppliers’ arrears
from Venezuelan will be manageable;
–Fitch base case assumes that the normalization of U.S. monetary policy will be gradual.
Contact: Primary Analyst Lucila Broide Director +1-212-908-0898 Fitch Ratings, Inc. One State Street Plaza New York, NY 1004 Secondary Analyst Shelly Shetty Senior Director +1-212-908-0324 Committee Chairperson Tony Stringer, Managing Director +44 20 3530 1219 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: [email protected] Additional information is available on www.fitchratings.com
While doing my research about moving to Panama, I stumbled across www.RetirementWave.com owned by Bob Adams. Before moving to Panama City, he spent nearly all of the 46 years of his adult life working globally in more than 40 nations in North America, Central America and the Caribbean, South America, Europe, Africa, the Middle East, and Asia. Bob has worked for non-profit humanitarian agencies, the “foreign aid” programs of the UN and the US, and several international business firms.
He’s been published five times in Barron’s, the well-respected financial journal, on topics including American migration to other nations. In addition, Bob has been interviewed by Erin Burnett on CNBC’s “Street Signs” financial program. Finally, Bob has also have written at the Wall Street site, Minyanville, on several occasions, as well as at Business Insider, the Asia Times, and others.
Needless to say, Bob Adams is has many years of experience investigating foreign countries. With all that knowledge, he chose Panama as his home. Bob’s website, www.RetirementWave.com offers a free member area where he shares economic news and other insights about Panama.
During the Panama Relocation Tours, when he has time, Bob meets with the group to discuss life in Panama City. He is a wealth of information!
We were honored when he recommended Panama Relocation Tours to his members. See the article here:
A Panama tour for your consideration by Bob Adams
In the nine years since I first established Retirement Wave, I have never recommended a commercial tour. I have nothing against tours, as such, but I have not been impressed with those available. They are “money machines”. Folks pay substantial sums of money to take part in the tours, but they are also responsible for their hotel rooms, meals, and other essential expenses which make the total cost much more. The speakers at some conferences are chosen not for their expertise, but because they have paid the tour to make a presentation, yet another source of income for the sponsor. Most aggravating to me is the practice of introducing visitors to “selected” real estate developments and properties where the tour sponsor is either paid a fee or a percentage of any sale made. Finally, many introduce folks to just one area of Panama, ignoring the others completely.
Business is business and I understand the need for tour sponsors to make a profit on their effort, but there is a point when a tour is no longer a genuine tour, but simply a sales mechanism, typically implying that it is “independent” and “objective” in its presentation, but which in fact is actually working as an agent for others without the knowledge of those attending. It can be a very expensive introduction to Panama without providing as good an overview as people expect who are paying the money. I think that is a reasonable way to explain my feelings. There are certainly expatriates who live in Panama whose negative opinions would be far stronger than mine.
For me, this has been a disappointment. The great majority of RW members arrive independently and make their own “tours”. I think that is an excellent way to do it. However, there is a segment of our membership who prefer a guided tour for any of a number of reasons and who do not mind paying for the opportunity. They often write and ask for a recommendation and I have had none to make…until now.
When Jackie Lange, an RW member, asked me if I would talk to a tour group she was escorting, I agreed. My “pay” was my meal. Fair enough. I met her and her group and left with a very positive impression. I was free to speak frankly and without any pressure of any kind to “push” any region or development or property in Panama. Jackie lives in the Boquete area of western Panama, but she introduces her tour groups to as much of the nation as she can in a short period of time. I was asked to talk about Panama as a whole, but also the Panama City area and what it is like to live here. It was a very nice evening and I did my best to provide some useful comments.
I have done that now a total of three times. I have had the chance to talk to the participants during their tour and also afterwards in some instances. Every one of them has nothing but good things to say about Jackie and her tour. None of them felt pressure to make a decision. In fact, Jackie’s personal preference is for people to rent first, before buying. In my experience with members over the years, I think renting can be very useful for some, but less useful for others. Everyone is different. But it is not typical for a tour sponsor to recommend renting and this is one clear signal that there are no “deals” made with developers or real estate agencies. I also like the fact that Jackie encourages her clients, once the tour is finished, to set aside time to return to areas that interested them on their own. So many other tours take you only where they want you to go for their own purposes and push clients, gently or not, to make a sales decision based on their tour. Jackie’s tours are pressure-free and I very much appreciate that. And finally, the tours are small, typically no more than 20 people at a time to allow for more personal consideration. As Jackie continues her tours, I hope she can expand them, but I do like the fact that a client is not one of a couple hundred people or more!
Another reason I like Jackie’s tours is that they are “inclusive”. Of course, you pay for your own transportation to Panama, but once here, Jackie pays for all your meals, your hotel rooms, tour bus, tour guide, and so forth. Other than things like alcohol, room service, telephone calls and similar personal choices, she takes care of your bills. Her tours are not “cheap”, but once you add up all the costs involved that other tours require you to pay yourself, I think it is a pretty good deal. That combined with the type of “guided but open” tour she provides and my personal observations of her work lead me to highly recommend her tours for your consideration, if a tour is what you desire.
I will leave it at that and let you visit her Web presentation and decide for yourself, with one exception. I do not receive a fee or any monetary consideration for this recommendation.
If this sounds interesting, you can visit Jackie’s “Panama Relocation Tour” at www.PanamaRelocationTours.com/tours
When I do a Panama Relocation Tours™, I can usually tell by the end of the tour who will relocate to Panama, and who will not. Some people need all the creature comforts of home. Others see the change in lifestyle as a new adventure. If you want to make it in Panama, that is the kind of attitude you need to have. There will be trade-offs when you live in Panama
Some people expect to see all the same brands of food at the grocery stores, a Walmart or shopping center just down the street, the same TV shows (in English) and the same kind of services you have in the USA. In Panama, that will probably not happen.
There are many varieties of food at the grocery store, some you will be familiar with,some will be new. And you may need to go to several stores to find all the things on your list. You can buy the Del Monte brand of can tomatoes for $1.69 a can or you can buy the Panama brand for $0.69 a can. There will be some things that you just cannot find if you live outside of Panama City (like Temptation cat treats or Friskies shredded cat food). You’ll learn that buying produce from the farmers market is fresher and more affordable than buying at the grocery store. Shopping is a whole new experience in Panama.
You won’t find a Walmart anywhere in Panama but there are other stores with even better prices. Conway is the Latin version of Target. You’ll be amazed at the variety of items at Conway. They even have furniture and household items.
Panama City has huge malls with anything you can imagine available but the malls in the interior are small. Think about all the times you went to the huge malls in the USA or Canada and still could not find anything you liked. Do you really need 100 stores in a mall? The good thing about a smaller mall is that you can get in and out faster with fewer distractions. Of course, you can always fly or drive to Panama City for a weekend shopping fix if that’s your thing.
The reliability of utility services will depend on where you live. When I first moved to Boquete we’d have electricity and internet outages a couple times a week. Now it might happen a couple times a month and usually only lasts for 10 minutes or less. So, for me, it’s not a big deal. Some people will be irritated by this slight inconvenience.
In some areas, because you won’t need air conditioning or a heater, you will save a bundle on your electric bill. Plus, if you have a Pensionado visa you can get a 25% discount off your bill. Try getting that back in the USA or Canada!
When you’re looking for a house to buy or rent, you should not ask, “do you have high speed internet?” The answer will always be yes if they have any internet service at all. The better question to ask is who is your internet service provider? how much does it cost? and what speed can you get? If the property is in an area serviced by Cable Onda you can get the highest speeds (25-6–mbps) for less than $50 per month.
Luckily, WIFI is readily available throughout Panama. If you need faster internet speeds, you need to find a place to live which is serviced by Cable Onda.
I have Sky Cable TV which has hundreds of channels plus I added the HBO movie channels. Some of the shows are in English, some are not. Just because you watch one show in English on a certain channel, it does not mean that the next show will be in English on the same channel. You’ll do a lot of channel surfing to find shows in English.
None of the network channels like ABC, NBC, or CBS are available through the Cable Onda or Sky TV but you can get them if you have an Amazon Firestick or by using USTVNow.com. Honestly, after you’ve been in Panama for awhile, you get to where you will care less about what is happening in the news”back home”.
There are also movie theaters with English language movies I have heard. I have not been to a movie theater yet because the closest one is 45 minutes away from my house in Boquete.
Water service could be interrupted a couple of times a month during the dry season in certain areas. That’s why it’s important to have a reserve water tanks. Water is only $100 per year for unlimited service where I live. I paid more than that per MONTH in the USA.
There will be trade-offs when living in Panama. Only you can decide if it’s worth it and if you can make the adjustment.
You will give up the convenience of some things but gain a better way of living for less money if you can deal with the trade-offs. Some can. Some can’t.
Come see if Panama is right for you during a Panama Relocation Tour™. You’ll probably be pleasantly surprised.