Exhibit E
RECENT DEVELOPMENTS
The information included in this section supplements the information about Panama contained in Panama’s annual report for the year ended December 31, 2007 on Form 18-K filed with the Commission on September 30, 2008. To the extent the information in this section is inconsistent with the information contained in such annual report, the information in this section replaces such information. Initially capitalized terms used in this section have the respective meanings assigned to those terms in such annual report.
Government
On November 17, 2008, President Torrijos appointed Dilio Arcia as the new Minister for Government and Justice, replacing former Minister Daniel Delgado Diamante; Olmedo Espino as Minister of Agricultural Development, replacing former Minister Guillermo Salazar; Rafael Mezquita as new Minister for the Presidency, replacing former Minister Dilio Arcia; Gisela Álvarez de Porras as new Minister for Industry and Commerce, replacing former Minister Carmen Gisela Vergara; and José Simpson Hiu as Viceminister of Finance, replacing former Viceminister Gisela Álvarez de Porras.
On June 5, 2008, Law No. 34 of 2008 was ratified, establishing a new Social and Fiscal Responsibility Regime, in order to promote sound fiscal policies and management. This Law was published in the Gaceta Oficial Digital No. 26,056 of June 6, 2008, and came into force on January 1, 2009. The new Social and Fiscal Responsibility Regime established by Law No. 34 of 2008 will require any new government to present, during the first six months of its administration, a multi-year social strategy, a five-year financial plan and the macroeconomic criteria to manage public expenditures and to incentivize current savings.
Recent Governmental Initiatives
On December 11, 2008 the Cabinet Council of Panama approved Cabinet Resolution No. 221, published in the Gaceta Oficial Digital No. 26,184 of December 15, 2008, approving a transaction to provide a cap on the cost of bunker fuel for electric generation in 2009, based on fuel prices prevailing at that time. The transaction is aimed at limiting government subsidies for this cost. The cost of the program is not considered to be material to the 2009 budget of the Republic.
On January 23, 2009, the Financial Incentive Program (“Programa de Estímulo Financiero” or “PEF”) was announced by President Torrijos. The program will provide up to $1.1 billion to promote economic stability and growth of employment and commercial activity. The program is intended to compensate for the contraction in credit available to Panamanian banks from international sources due to reductions in credit lines from correspondent banks abroad and from the credit contraction in the international financial markets. The funds for the program will be borrowed from Corporación Andina de Fomento (CAF), the Inter-American Development Bank (IADB) and Banco Nacional de Panamá (BNP). The funds will be deposited in a trust to be administered by BNP. The trust will make credit available to Panamanian financial institutions, which will be required to provide full collateral for their borrowings from the trust. Interest will be charged at rates determined with reference to the interest on the loans used to fund the trust and fees will be assessed to cover administrative costs of the program. The participating institutions are expected to fully repay their borrowings under the program. Furthermore, they will provide collateral according to their level of creditworthiness as a requirement to gain access to the program funds.
1
The Economy
The Government estimates that real gross domestic product (“GDP”) growth for 2008 was not less than 9.0%. The Government expects growth to slow in 2009 due to the anticipated impact of the global economic crisis on the Panamanian economy. Nevertheless, although no assurance can be given, the Government expects positive real GDP growth for the current year.
For the nine months ended September 30, 2008, Panama’s GDP registered an estimated real increase of 9.5% compared to the same period of 2007. The agriculture sector grew an estimated 6.9% for the nine months ended September 30, 2008 compared to the same period of 2007, primarily due to increases in the amount of land used for farming. The fisheries sector grew an estimated 14.9% for the nine months ended September 30, 2008 compared to the same period of 2007 due in part to favorable climatic conditions. The mining sector grew an estimated 32.0% percent for the nine months ended September 30, 2008 compared to the same period of 2007 primarily due to a greater demand for raw materials used by the construction sector. Manufacturing activity increased an estimated 2.7% for the nine months ended September 30, 2008 compared to the same period of 2007 due in part to a rise in the processing of food and beverage products.
For the nine months ended September 30, 2008, the construction sector grew by an estimated 31.2% compared to the same period of 2007 due to the construction of new high-rise buildings and family residences, the expansion of certain container ports and the Government and the Panama Canal Authority’s investments in infrastructure. The Colón Free Trade Zone (“CFZ”) grew an estimated 6.2% for the nine months ended September 30, 2008 compared to the same period of 2007. The commerce, hotels and restaurant sector grew an estimated 8.5% for the nine months ended September 30, 2008 compared to the same period of 2007 primarily due to increased tourism. The transportation and communications sector grew 13.5% for the nine months ended September 30, 2008 compared to the same period of 2007 primarily due to an increase in cargo tonnage at ports, increased air travel and the use of cellular phones and the Internet. The financial intermediation sector grew an estimated 2.0% for the nine months ended September 30, 2008 compared to the same period of 2007 primarily due to greater development in international banking. The real estate sector grew an estimated 7.8% for the first nine months ended September 30, 2008 compared to the same period of 2007.
Panama estimates that its nominal GDP for its fiscal year ended December 31, 2008 was $23.0 billion.
The Assembly approved Panama’s 2009 budget on December 4, 2008. The 2009 budget contemplates total expenditures of $9.8 billion, with budget estimates based on an anticipated 13.5% growth in nominal GDP and an anticipated consolidated non-financial public sector deficit of approximately $263.0 million (or approximately 1.0% of nominal GDP) for 2009.
2
The following tables set forth Panama’s GDP, including sectoral origin (in constant dollars) and percentage changes from the prior year for the period from 2003 through 2007 and the nine months ended September 30, 2008:
Sectoral Origin of Gross Domestic Product
(in millions of dollars)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2003 | | | 2004 | | | 2005 | | | 2006(R) | | | 2007(P) | | | As of
Sept. 30,
2008(E) | |
Primary Activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Agriculture(1) | | $ | 958.9 | | | $ | 971.9 | | | $ | 997.0 | | | $ | 1,039.1 | | | $ | 1,056.4 | | | $ | 882.8 | |
Mining | | | 120.9 | | | | 136.0 | | | | 136.1 | | | | 159.5 | | | | 195.7 | | | | 188.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,079.8 | | | $ | 1,107.9 | | | $ | 1,133.1 | | | $ | 1,198.6 | | | $ | 1,252.1 | | | $ | 1,071.1 | |
Industrial Activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Manufacturing | | $ | 965.4 | | | $ | 985.5 | | | $ | 1,026.9 | | | $ | 1,066.7 | | | $ | 1,125.7 | | | $ | 873.3 | |
Construction | | | 516.7 | | | | 588.6 | | | | 594.6 | | | | 671.2 | | | | 809.0 | | | | 808.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,482.1 | | | $ | 1,574.1 | | | $ | 1,621.5 | | | $ | 1,737.9 | | | $ | 1,934.7 | | | $ | 1,681.6 | |
Services: | | | | | | | | | | | | | | | | | | | | | | | | |
Public utilities | | $ | 387.0 | | | $ | 410.6 | | | $ | 433.4 | | | $ | 447.6 | | | $ | 488.6 | | | $ | 374.3 | |
Commerce, restaurants and hotels | | | 1,191.9 | | | | 1,298.2 | | | | 1,370.0 | | | | 1,524.3 | | | | 1,718.5 | | | | 1,335.9 | |
Transportation and communications | | | 1,408.1 | | | | 1,648.0 | | | | 1,880.0 | | | | 2,920.9 | | | | 3,427.2 | | | | 2,860.2 | |
Colón Free Zone | | | 801.1 | | | | 931.3 | | | | 1,063.5 | | | | 1,186.9 | | | | 1,247.4 | | | | 950.7 | |
Panama Canal Authority | | | 590.9 | | | | 648.3 | | | | 688.0 | | | | 781.9 | | | | 805.3 | | | | 32.4 | |
Financial intermediation | | | 939.4 | | | | 887.0 | | | | 1,032.4 | | | | 1,187.1 | | | | 1,416.3 | | | | 1,056.7 | |
Real estate | | | 1,955.6 | | | | 2,103.1 | | | | 2,257.4 | | | | 2,384.6 | | | | 2,558.5 | | | | 2,069.6 | |
Public administration | | | 1,188.0 | | | | 1,217.0 | | | | 1,208.3 | | | | 1,231.8 | | | | 1,272.7 | | | | 960.9 | |
Other services | | | 701.5 | | | | 735.3 | | | | 762.5 | | | | 800.1 | | | | 854.2 | | | | 689.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 9,163.5 | | | $ | 9,878.8 | | | $ | 10,695.5 | | | $ | 11,700.8 | | | $ | 12,984.2 | | | $ | 10,330.2 | |
Plus Import Taxes(2) | | $ | 757.6 | | | $ | 800.9 | | | $ | 880.2 | | | $ | 944.3 | | | $ | 1,133.2 | | | $ | 851.0 | |
Less Imputed Banking Services | | | (300.2 | ) | | | (262.5 | ) | | | (289.0 | ) | | | (374.3 | ) | | | (379.7 | ) | | | (232.9 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Gross Domestic Product | | $ | 12,182.8 | | | $ | 13,099.2 | | | $ | 14,041.2 | | | $ | 15,238.6 | | | $ | 16,997.6 | | | $ | 13,701.0 | |
| (2) | Including value-added tax. |
Source: Office of the Comptroller General and Ministry of Economy and Finance.
3
Percentage Change from Prior Year for
Sectoral Origin of Gross Domestic Product
(percentage change)
| | | | | | | | | | | | | | | | | | |
| | | 2003 | | | 2004 | | | 2005 | | | 2006(R) | | | 2007(P) | | | As of
Sept. 30,
2008(E)(3) | |
Primary Activities: | | | | | | | | | | | | | | | | | | |
Agriculture(1) | | 9.3 | % | | 1.4 | % | | 2.6 | % | | 4.2 | % | | 1.7 | % | | 6.9 | % |
Mining | | 35.4 | | | 12.5 | | | 0.1 | | | 17.2 | | | 22.7 | | | 32.0 | |
Total | | 11.7 | | | 2.6 | | | 2.3 | | | 5.8 | | | 4.5 | | | 10.6 | |
| | | | | | |
Industrial Activities: | | | | | | | | | | | | | | | | | | |
Manufacturing | | (3.4 | ) | | 2.1 | | | 4.2 | | | 3.9 | | | 5.5 | | | 2.7 | |
Construction | | 32.5 | | | 13.9 | | | 1.0 | | | 12.9 | | | 20.5 | | | 31.2 | |
Total | | 6.7 | | | 6.2 | | | 3.0 | | | 7.2 | | | 11.3 | | | 14.7 | |
| | | | | | |
Services: | | | | | | | | | | | | | | | | | | |
Public utilities | | 1.4 | | | 6.1 | | | 5.6 | | | 3.3 | | | 9.2 | | | 3.7 | |
Commerce, restaurants and hotels | | 5.7 | | | 8.9 | | | 5.5 | | | 11.3 | | | 12.7 | | | 8.5 | |
Transportation and communications | | 12.7 | | | 17.0 | | | 14.1 | | | 55.4 | | | 17.3 | | | 13.5 | |
Colón Free Zone | | (2.0 | ) | | 16.3 | | | 14.2 | | | 11.6 | | | 5.1 | | | 6.2 | |
Panama Canal Authority | | 6.7 | | | 9.7 | | | 6.1 | | | 13.6 | | | 3.0 | | | 128.2 | |
Financial intermediation | | (7.2 | ) | | (5.6 | ) | | 16.4 | | | 15.0 | | | 19.3 | | | 2.0 | |
Real estate | | 4.7 | | | 7.5 | | | 7.3 | | | 5.6 | | | 7.3 | | | 7.8 | |
Public administration | | 1.4 | | | 2.4 | | | (0.7 | ) | | 1.9 | | | 3.3 | | | 3.9 | |
Other services | | 2.4 | | | 4.8 | | | 3.7 | | | 4.9 | | | 6.8 | | | 6.8 | |
Total | | 10.5 | | | 7.8 | | | 8.3 | | | 9.4 | | | 11.0 | | | 8.2 | |
| | | | | | |
Plus Import Taxes(2) | | 0.1 | | | 5.7 | | | 9.9 | | | 7.3 | | | 20.0 | | | 4.2 | |
Less Imputed Banking Services | | 4.2 | | | (12.6 | ) | | 10.1 | | | 29.5 | | | 1.4 | | | (17.6 | ) |
Gross Domestic Product | | 4.2 | % | | 7.5 | % | | 7.2 | % | | 8.5 | % | | 11.5 | % | | 9.5 | % |
| (2) | Including value-added tax. |
| (3) | As compared to the nine months ended September 30, 2007. |
Source: Office of the Comptroller General and Ministry of Economy and Finance.
4
The following table sets forth Panama’s principal price indicators for each of the years 2004 through 2008:
Inflation
(percentage change from previous period)
| | | | | | | | | | | | | | | |
| | | 2004(R) | | | 2005(R) | | | 2006(R) | | | 2007(R) | | | 2008 | |
Period Average: | | | | | | | | | | | | | | | |
Consumer Price Index | | 0.5 | % | | 3.3 | % | | 2.3 | % | | 4.2 | % | | 8.8 | % |
Wholesale Price Index: | | | | | | | | | | | | | | | |
Imports | | 7.3 | | | 10.4 | | | 10.1 | | | 5.8 | | | 21.1 | |
Industrial products | | 1.7 | | | 1.6 | | | 1.8 | | | 4.5 | | | 11.6 | |
Agricultural products | | 2.6 | | | (0.2 | ) | | 3.2 | | | 6.3 | | | 3.5 | |
All products | | 4.4 | | | 5.7 | | | 6.1 | | | 5.3 | | | 15.8 | |
End of Period: | | | | | | | | | | | | | | | |
Consumer Price Index | | 2.0 | % | | 3.5 | % | | 2.0 | % | | 6.5 | % | | 6.5 | % |
Wholesale Price Index: | | | | | | | | | | | | | | | |
Imports | | 8.7 | | | 11.2 | | | 5.2 | | | 16.5 | | | (19.4 | ) |
Industrial products | | 2.7 | | | 1.4 | | | 2.3 | | | 6.2 | | | 0.6 | |
Agricultural products | | 2.2 | | | 5.6 | | | 3.8 | | | 7.0 | | | 0.1 | |
All products | | 5.3 | | | 6.2 | | | 3.9 | | | 11.4 | | | (10.7 | ) |
Source: Office of the Comptroller General and Ministry of Economy and Finance.
As the Republic is a net importer, the recent decrease in the price of oil and other commodities has had a short-term positive impact on the Panamanian economy, relieving some of the inflationary pressures and allowing for more disposable income of the population in general.
5
Employment. In 2008, the unemployment rate decreased to 4.2% from 4.7% in 2007, primarily as a result of improved economic conditions. The following table sets forth certain labor force and unemployment statistics for the years 2004 through 2008:
Labor Force and Employment
| | | | | | | | | | | | | | | |
| | | 2004 | | | 2005 | | | 2006 | | | 2007 | | | 2008 | |
| | | (thousands of persons) | |
Total Population | | 3,172 | | | 3,228 | | | 3,284 | | | 3,340 | | | 3,395 | |
Working-Age Population | | 2,169 | | | 2,216 | | | 2,263 | | | 2,310 | | | 2,357 | |
Labor Force | | | | | | | | | | | | | | | |
Employed | | 1,212.7 | | | 1,269.8 | | | 1,294.9 | | | 1,357.0 | | | 1,422.3 | |
Unemployed | | 161.4 | | | 137.7 | | | 122.8 | | | 92.3 | | | 83.8 | |
| | | | | | | | | | | | | | | |
Total | | 1,374.1 | | | 1,407.5 | | | 1,417.7 | | | 1,449.3 | | | 1,506.1 | |
| |
| | | (annual percentage change) | |
Total Population | | 1.8 | % | | 1.8 | % | | 1.7 | % | | 1.7 | % | | 1.6 | % |
Working-Age Population | | 2.2 | | | 2.2 | | | 2.1 | | | 2.1 | | | 2.0 | |
Labor Force | | | | | | | | | | | | | | | |
Employed | | 4.6 | | | 4.7 | | | 2.0 | | | 4.8 | | | 4.8 | |
Unemployed | | (7.1 | ) | | (14.7 | ) | | (10.8 | ) | | (24.8 | ) | | (9.2 | ) |
| | | | | | | | | | | | | | | |
Total | | 3.1 | % | | 2.4 | % | | 0.7 | % | | 2.2 | % | | 3.9 | % |
| |
| | | (in percent) | |
Labor Force: | | | |
Participation Rate(1) | | 63.3 | % | | 63.5 | % | | 62.6 | % | | 62.7 | % | | 63.9 | % |
Employment Rate(2) | | 88.2 | | | 90.2 | | | 91.4 | | | 93.6 | | | 95.8 | |
Unemployment Rate(3) | | 9.2 | | | 7.6 | | | 6.7 | | | 4.7 | | | 4.2 | |
Of which: | | | | | | | | | | | | | | | |
Metropolitan Area(4) | | 11.1 | % | | 9.6 | % | | 8.2 | % | | 5.7 | % | | 4.9 | % |
| (1) | Total labor force as percentage of working-age population. |
| (2) | Employed labor force as percentage of total labor force. |
| (3) | Open unemployment based on the annual August Employment Survey. The open unemployment rate excludes persons not actively looking for employment. |
| (4) | Including the cities of Panama and Colón. |
Source: Office of the Comptroller General.
Public Sector Finances. Panama’s non-financial public sector balance at year-end 2008 registered a preliminary surplus of $97.8 million (or 0.4% of nominal GDP).
6
The following table set forth the revenues, by source, and expenditures, by sector, of the consolidated non-financial public sector for the years 2004 through 2008:
Consolidated Non-Financial Public Sector Operations
(in millions of dollars)(1)
| | | | | | | | | | | | | | | | | | | | |
| | | 2004 | | | 2005 | | | 2006 | | | 2007 | | | 2008(P) | |
Revenues: | | | | | | | | | | | | | | | | | | | | |
General Government | | | | | | | | | | | | | | | | | | | | |
Central Government | | $ | 1,963.7 | | | $ | 2,264.8 | | | $ | 3,076.7 | | | $ | 3,651.2 | | | $ | 3,986.3 | |
Caja de Seguro Social (“CSS”) | | | 796.3 | | | | 827.3 | | | | 898.7 | | | | 1,104.0 | | | | 1,330.2 | |
Consolidated agencies | | | 79.2 | | | | 82.7 | | | | 100.4 | | | | 120.6 | | | | 134.5 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,839.2 | | | $ | 3,174.8 | | | $ | 4,075.7 | | | $ | 4,875.9 | | | $ | 5,451.0 | |
Public Enterprises Operations Surplus | | | 95.9 | | | | 156.9 | | | | 128.1 | | | | 163.7 | | | | 275.6 | |
Nonconsolidated Agencies Surplus | | | 38.1 | | | | 98.3 | | | | 37.2 | | | | 184.5 | | | | (36.4 | ) |
Capital Revenues | | | 27.5 | | | | 44.2 | | | | 41.6 | | | | 250.0 | | | | 247.0 | |
Donations | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 31.2 | | | | 83.2 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,000.7 | | | $ | 3,474.2 | | | $ | 4,282.8 | | | $ | 5,505.3 | | | $ | 6,020.4 | |
Expenditures: | | | | | | | | | | | | | | | | | | | | |
General Government | | | | | | | | | | | | | | | | | | | | |
Central Government | | | 1,285.8 | | | | 1,350.2 | | | | 1,507.6 | | | | 1,625.3 | | | | 1,912.3 | |
CSS | | | 1,150.9 | | | | 1,196.2 | | | | 1,251.8 | | | | 1,374.5 | | | | 1,504.7 | |
Consolidated agencies | | | 149.2 | | | | 156.3 | | | | 160.9 | | | | 164.7 | | | | 161.0 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,585.9 | | | $ | 2,702.7 | | | $ | 2,920.3 | | | $ | 3,164.5 | | | $ | 3,578.0 | |
Capital Expenditures | | | 501.5 | | | | 466.0 | | | | 530.3 | | | | 973.6 | | | | 1,619.4 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,087.4 | | | $ | 3,168.7 | | | $ | 3,450.6 | | | $ | 4,138.1 | | | $ | 5,197.4 | |
Balance(2) | | | (86.7 | ) | | | 305.5 | | | | 832.0 | | | | 1,367.3 | | | | 823.0 | |
Debt Interest Paid | | | 604.3 | | | | 694.0 | | | | 744.3 | | | | 684.2 | | | | 725.2 | |
Surplus (Deficit) | | | (691.0 | ) | | | (388.5 | ) | | | 87.7 | | | | 683.0 | | | | 97.8 | |
Overall Surplus (Deficit) | | $ | (691.0 | ) | | $ | (500.1 | ) | | $ | 87.7 | | | $ | 683.0 | | | | 97.8 | |
Percentage of GDP (nominal) | | | (4.9 | )% | | | (3.3 | )% | | | 0.5 | % | | | 3.5 | % | | | 0.4 | % |
| (1) | Figures exclude savings generated by Brady Bond repurchase operations, anticipated BNP dividends and the operational surplus of the Panama Canal Authority. |
| (2) | Excluding external interest payments. |
Sources: Office of the Comptroller General, Ministry of Economy and Finance and other public institutions.
7
Banking Sector. Total assets of the banking sector were approximately 54.4% higher at year-end 2008 than at year-end 2004. Deposits were approximately 60.4% higher at year-end 2008 than at year-end 2004. The table below sets forth information on the banking sector at December 31 for each of the years 2004 through 2008:
The Banking Sector
(in millions of dollars)
| | | | | | | | | | | | | | | |
| | | December 31, |
| | | 2004 | | 2005 | | 2006 | | 2007 | | 2008(P) |
Assets: | | | | | | | | | | | | | | | |
Liquid Assets: | | | | | | | | | | | | | | | |
Deposits in local banks | | $ | 1,088 | | $ | 1,414 | | $ | 2,027 | | $ | 2,211 | | $ | 2,264 |
Deposits in foreign banks | | | 5,928 | | | 4,799 | | | 4,935 | | | 6,009 | | | 8,281 |
Other | | | 367 | | | 507 | | | 609 | | | 590 | | | 649 |
| | | | | | | | | | | | | | | |
Total Liquid Assets | | | 7,383 | | | 6,721 | | | 7,571 | | | 8,811 | | | 11,193 |
Loans | | | 19,900 | | | 22,905 | | | 22,449 | | | 26,842 | | | 30,243 |
Investments in Securities | | | 5,760 | | | 6,857 | | | 5,782 | | | 7,600 | | | 9,307 |
Other assets | | | 1,566 | | | 2,133 | | | 2,220 | | | 2,389 | | | 2,684 |
| | | | | | | | | | | | | | | |
Total Assets | | | 34,610 | | | 38,615 | | | 38,021 | | | 45,642 | | | 53,427 |
Liabilities: | | | | | | | | | | | | | | | |
Deposits: | | | | | | | | | | | | | | | |
Internal: | | | | | | | | | | | | | | | |
Official | | | 1,795 | | | 2,289 | | | 2,442 | | | 3,310 | | | 4,140 |
Public | | | 11,065 | | | 12,001 | | | 14,617 | | | 17,052 | | | 19,596 |
Banks | | | 1,083 | | | 1,421 | | | 2,145 | | | 2,558 | | | 2,454 |
| | | | | | | | | | | | | | | |
Total Internal Deposits | | | 13,943 | | | 15,712 | | | 19,203 | | | 22,921 | | | 26,190 |
External: | | | | | | | | | | | | | | | |
Official | | | 35 | | | 31 | | | 43 | | | 22 | | | 15 |
Public | | | 6,235 | | | 6,589 | | | 3,349 | | | 5,244 | | | 6,646 |
Banks | | | 4,319 | | | 4,765 | | | 3,926 | | | 4,697 | | | 6,501 |
| | | | | | | | | | | | | | | |
Total External Deposits | | | 10,589 | | | 11,385 | | | 7,318 | | | 9,963 | | | 13,162 |
Total Deposits | | | 24,531 | | | 27,096 | | | 26,521 | | | 32,884 | | | 39,353 |
Obligations | | | 4,478 | | | 5,154 | | | 5,261 | | | 4,944 | | | 5,085 |
Other Liabilities | | | 956 | | | 1,343 | | | 1,666 | | | 1,560 | | | 1,881 |
| | | | | | | | | | | | | | | |
Total Liabilities | | | 29,965 | | | 33,593 | | | 33,448 | | | 39,388 | | | 46,319 |
Capital and Reserves | | | 4,644 | | | 5,022 | | | 4,573 | | | 6,253 | | | 7,108 |
| | | | | | | | | | | | | | | |
Total Liabilities and Capital | | $ | 34,610 | | $ | 38,615 | | $ | 38,021 | | $ | 45,642 | | $ | 53,427 |
Source: Superintendency of Banks.
Interest Rates. Interest rates show a downward trend, especially borrowing rates, which are consistent with international rates, and consolidate the system’s financial margin. In December 2008, the average interest rate paid by Banca Panameña for one-year deposits was 4.10%, while the interest rate for personal credit transactions with a maturity of one to five years averaged 11.67% at the end of the month. In general terms, the differential between borrowing and lending interest rates for Banca Panameña exceeded 7% at December 31, 2008.
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Public Debt
As of December 31, 2008, Panama’s internal debt totaled $2.0 billion, a decrease of $234.9 million from December 31, 2007. Panama’s internal debt as a percentage of GDP was 8.5% as of December 31, 2008. The following table sets forth Panama’s outstanding public sector internal debt by source at year-end for the years 2004 through 2008:
Public Sector Internal Debt
(in millions of dollars)
| | | | | | | | | | | | | | | |
| | | December 31, |
| | | 2004 | | 2005 | | 2006 | | 2007 | | 2008(P) |
Private Sector Sources: | | | | | | | | | | | | | | | |
Treasury notes | | $ | 708.2 | | $ | 775.1 | | $ | 815.1 | | $ | 565.1 | | $ | 565.1 |
Treasury bills | | | 236.6 | | | 192.1 | | | 249.8 | | | 206.8 | | | 59.0 |
Domestic bonds | | | 31.4 | | | 21.5 | | | 12.2 | | | 2.2 | | | 2.2 |
Long-term private financing | | | 14.0 | | | 2.7 | | | 2.1 | | | 22.3 | | | 35.6 |
Labor notes(1) | | | 3.9 | | | 2.6 | | | 1.2 | | | 0.0 | | | 0.0 |
SIACAP Bonds | | | 307.4 | | | 269.6 | | | 231.9 | | | 198.8 | | | 165.7 |
| | | | | | | | | | | | | | | |
Total | | $ | 1,301.4 | | $ | 1,263.6 | | $ | 1,312.5 | | $ | 995.2 | | $ | 827.6 |
Public Sector Sources: | | | | | | | | | | | | | | | |
CSS | | $ | 622.6 | | $ | 604.2 | | $ | 583.9 | | $ | 563.5 | | $ | 541.2 |
Official banking institutions(2) | | | 833.7 | | | 783.9 | | | 768.0 | | | 636.3 | | | 591.3 |
| | | | | | | | | | | | | | | |
Total | | $ | 1,456.2 | | $ | 1,388.1 | | $ | 1,351.8 | | $ | 1,199.8 | | $ | 1,132.5 |
Total Public Sector Internal Debt | | $ | 2,757.6 | | $ | 2,651.7 | | $ | 2,664.3 | | $ | 2,195.0 | | $ | 1,960.1 |
| (1) | Notes issued under the Government’s early retirement program. |
| (2) | The remaining unpaid overdraft debt that the Central Government incurred at BNP during the 1987-1989 period is reflected in this category. |
Source: Ministry of Economy and Finance.
As of December 31, 2008, Panama’s external debt totaled $8.5 billion, up $201.7 million from December 31, 2007. Panama’s external debt as a percentage of GDP was 36.8% as of December 31, 2008. The following table sets forth Panama’s outstanding public sector external debt by source at year-end for the years 2004 through 2008:
Public Sector External Debt(1)
(in millions of dollars)
| | | | | | | | | | | | | | | |
| | | December 31, |
| | | 2004 | | 2005 | | 2006 | | 2007 | | 2008(P) |
Commercial banks | | $ | 9.3 | | $ | 79.6 | | $ | 8.3 | | $ | 6.5 | | $ | 169.6 |
Bonds | | | 5,702.9 | | | 6,104.8 | | | 6,359.8 | | | 6,809.8 | | | 6,747.6 |
Multilateral agencies | | | 1,212.9 | | | 1,136.1 | | | 1,183.0 | | | 1,235.4 | | | 1,349.9 |
Bilateral entities | | | 294.2 | | | 259.2 | | | 237.2 | | | 224.0 | | | 210.3 |
| | | | | | | | | | | | | | | |
Total | | $ | 7,219.2 | | $ | 7,579.7 | | $ | 7,788.3 | | $ | 8,275.6 | | $ | 8,477.4 |
| (1) | Debt stated at its outstanding principal amount and not at trading value in the secondary market. |
Source: Ministry of Economy and Finance.
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Panama’s total public sector debt as of December 31, 2008 was $10.4 billion, down $33.2 million from December 31, 2007.
In an effort to promote the development of Panama’s capital markets, the Government continued in 2008 with a program of Treasury Bill issuances with seven auctions from January 15, 2008 to August 26, 2008. Panama issued $211.0 million of zero-coupon Treasury Bills with short-term maturities of one-year or less in Panama’s capital markets. In relation to the program of Treasury Notes, the program remains suspended since 2005. As of December 31, 2008 outstanding Treasury Bills amounted to $59.0 million and outstanding Treasury Notes amounted to $565.1 million.
During the year 2008, the Republic entered into the following agreements with multilateral organizations and foreign commercial banks totaling $543.5 million, summarized in the table below:
| | | | | | | |
Lender | | Program | | Amount (in millions of
US dollars) | | Date signed |
Inter-American Development Bank | | Phase II: Social Protection | | $ | 20.2 | | January 15, 2008 |
International Bank for Reconstruction and Development (“World Bank”) | | Assistance for development policies | | $ | 75.0 | | February 13, 2008 |
World Bank | | Technical assistance for public policy reforms | | $ | 6.0 | | March 10, 2008 |
Inter-American Development Bank | | Improvement to the administration of justice | | $ | 21.6 | | March 13, 2008 |
Inter-American Development Bank | | Modernization of the administration and management of the environment | | $ | 10.0 | | March 13, 2008 |
CITI/NEXI | | CMC | | $ | 165.0 | | March 14, 2008 |
Inter-American Development Bank | | Phase II Development of Bocas del Toro | | $ | 29.0 | | April 22, 2008 |
World Bank | | PPF - Equity Management | | $ | 0.8 | | May 9, 2008 |
Inter-American Development Bank | | Trade Liberalization and Competitiveness Phase I | | $ | 51.3 | | June 18, 2008 |
International Fund for Agricultural Development | | Rural Development and Modernization | | $ | 6.9 | | July 15, 2008 |
Inter-American Development Bank | | Technology Development | | $ | 19.7 | | September 2, 2008 |
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| | | | | | | |
World Bank | | Management and Development of the Province of Colón | | $ | 20.0 | | October 6, 2008 |
World Bank | | Enhancement of Educational System | | $ | 35.0 | | October 22, 2008 |
World Bank | | Healthy Equity | | $ | 40.0 | | October 23, 2008 |
Inter-American Development Bank | | Management and Development of the Central Provinces | | $ | 43.0 | | December 17, 2008 |
International Trade
On December 19, 2006, Panama announced the completion of negotiations for a free trade agreement with the United States. In 2006, more than 96% of Panama’s merchandise exports to the United States entered duty-free considering the application of various trade preference programs designed to promote economic development, such as the Caribbean Basin Initiative and the Generalized System of Preferences. The trade promotion agreement with the United States is expected to expand and secure those benefits for Panama in the long term. Upon effectiveness, the free trade agreement will eliminate nearly 71.2% of Panama’s tariffs on industrial goods immediately, with remaining tariffs phased out over 10 years. In return, the United States will eliminate immediately 99.7% of tariffs applied to industrial goods from Panama. On June 28, 2007, Panama and the United States signed a Trade Promotion Agreement that will come into force upon approval of each country’s legislature. In July 2007, Panama’s legislature ratified the Trade Promotion Agreement, but as of January 2009, the U.S. Congress has yet to ratify the Agreement.
As of December 31, 2008, Panama’s largest trading partners for exports were the United States, Netherlands and Costa Rica, with exports amounting to $435.1 million, $122.8 million and $66.0 million, respectively. As of December 31, 2008, Panama’s largest trading partners for imports were the United States, The Petroleum Free Zone, The Colón Free Zone and Costa Rica, with imports amounting to $2.7 billion, $1.4 billion, $840.0 million and $456.0 million, respectively.
Law No. 37 of November 8, 2006 ratified the bilateral investment treaty signed with Mexico in October 2005. On January 12, 2007, the National Assembly approved Law No. 7, which implements the free trade agreement signed with Chile in June 2006. This free trade agreement entered into force on March 7, 2008, eliminating nearly 93% of Chile’s tariffs on goods immediately, with remaining tariffs phased out over 10 years.
Panama has concluded the negotiation of comprehensive free trade agreements with Costa Rica, Honduras and Guatemala. In this regard, Law No. 17 of February 13, 2008, published in the Gaceta Oficial Digital No. 25,982 of February 20, 2008, serves as the ratification of the Free Trade Agreement between Panama and Costa Rica; the effective date of the agreement was November 23, 2008, and its Tariffs Program entered into effect on January 1, 2009. Law No. 23 of April 25, 2008, published in the Gaceta Oficial Digital No. 26,032 of May 5, 2008, serves as the ratification of the Free Trade Agreement between Panama and Honduras; this agreement has not entered into effect because the approval of Honduras National Congress remains pending. The Free Trade Agreement between Panama and Guatemala is subject to the occurrence of effectiveness procedures in both countries in order to enter into force. Upon complete effectiveness of these commercial agreements, nearly 90% of Panama’s total exports to these countries will enter duty-free.
–11–
The following table sets forth Panama’s balance of payments for the years 2003 through 2007 and for the nine months ended September 30, 2008:
Balance of Payments(1)
(in millions of dollars)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2003 | | | 2004 | | | 2005 | | | 2006(P)(R) | | | 2007(P)(R) | | | As of
Sept. 30,
2008(E) | |
| Account | | | | | | | | | | | | | | | | | | | | | | | | |
Current Account: | | | | | | | | | | | | | | | | | | | | | | | | |
Merchandise Trade(2) | | | | | | | | | | | | | | | | | | | | | | | | |
Exports | | $ | 5,071.9 | | | $ | 6,078.3 | | | $ | 7,591.2 | | | $ | 8,478.1 | | | $ | 9,338.4 | | | $ | 7,570.8 | |
Imports | | | (6,274.2 | ) | | | (7,616.6 | ) | | | (8,907.2 | ) | | | (10,190.0 | ) | | | (12,520.6 | ) | | | (10,955.9 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance | | | (1,202.3 | ) | | | (1,538.3 | ) | | | (1,316.0 | ) | | | (1,711.9 | ) | | | (3,382.2 | ) | | | (3,385.1 | ) |
Services | | | 1,197.7 | | | | 1,331.1 | | | | 1,436.3 | | | | 2,210.3 | | | | 2,817.7 | | | | 2,464.0 | |
Rent (3) | | | (821.3 | ) | | | (1,024.3 | ) | | | (1,124.9 | ) | | | (1,277.7 | ) | | | (1,311.1 | ) | | | (1,299.5 | ) |
Unilateral Transfer(4) | | | 246.4 | | | | 219.6 | | | | 245.3 | | | | 252.5 | | | | 253.2 | | | | 173.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance | | | (579.5 | ) | | | (1,011.9 | ) | | | (759.3 | ) | | | (526.8 | ) | | | (1,622.4 | ) | | | (2,047.2 | ) |
Capital and Financial Account: | | | | | | | | | | | | | | | | | | | | | | | | |
Capital Account | | | 0.0 | | | | 0.0 | | | | 0.0 | | | | 15.2 | | | | 43.7 | | | | 33.8 | |
Financial Account | | | 177.9 | | | | 496.8 | | | | 1,989.2 | | | | 382.3 | | | | 2,773.9 | | | | 2,108.2 | |
Direct Investment | | | 817.5 | | | | 1,019.1 | | | | 962.1 | | | | 2,497.9 | | | | 1,907.2 | | | | 1,782.2 | |
Portfolio Investment | | | 64.1 | | | | 125.1 | | | | (557.6 | ) | | | (748.0 | ) | | | (1,084.1 | ) | | | (547.8 | ) |
Other Capital | | | (703.7 | ) | | | (647.4 | ) | | | 1,584.7 | | | | (1,622.5 | ) | | | 1,500.8 | | | | 908.1 | |
Assets | | | 631.2 | | | | (1,542.8 | ) | | | (358.9 | ) | | | (3,781.8 | ) | | | (4,998.4 | ) | | | (4,029.6 | ) |
Liabilities | | | (1,334.9 | ) | | | 895.4 | | | | 1,943.6 | | | | 2,159.3 | | | | 6,499.2 | | | | 4,937.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance | | | (401.6 | ) | | | (515.1 | ) | | | 1,229.9 | | | | (144.5 | ) | | | 1,151.5 | | | | 61.0 | |
Errors and Omissions (net) | | | 134.5 | | | | 119.7 | | | | (555.1 | ) | | | 301.3 | | | | (773.7 | ) | | | (134.4 | ) |
Overall Surplus (Deficit) | | $ | (267.1 | ) | | $ | (395.4 | ) | | $ | 674.8 | | | $ | 156.8 | | | $ | 377.8 | | | $ | 74.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Financing | | | 267.1 | | | | 395.4 | | | | (674.8 | ) | | | (172.0 | ) | | | (621.5 | ) | | | (39.6 | ) |
Total Reserves | | | 266.6 | | | | 396.3 | | | | (521.3 | ) | | | (162.1 | ) | | | (611.4 | ) | | | (43.7 | ) |
Use of IMF credit and IMF loans | | | (9.5 | ) | | | (10.0 | ) | | | (9.8 | ) | | | (9.9 | ) | | | (10.1 | ) | | | (4.1 | ) |
Exceptional Financing(5) | | | 10.0 | | | | 9.1 | | | | (143.7 | ) | | | 0.0 | | | | 0.0 | | | | 0.0 | |
| (1) | Figures were calculated pursuant to Version V of the Balance of Payments Manual prepared by the IMF. |
| (3) | Includes wages and investment profits. |
| (4) | Unilateral transfers consist of transactions without a quid pro quo, many of which are gifts and migrant transfers. |
| (5) | “Exceptional Financing” refers only to financing from the exchange or the repurchase of Government bonds and the capitalization of PDI bonds. External financing raised in the international markets by the Central Government is included under the caption “Financial Account.” |
Source: Office of the Comptroller General.
The Panama Canal
In a national referendum on October 22, 2006, the citizens of Panama voted to approve the canal expansion project proposed by the Panama Canal Authority, and on December 6, 2006, the Cabinet approved the first $120 million of expenditures to begin work. As part of the canal expansion project, in April 2008 the canal awarded a $177 million contract to the Belgian firm Dredging International to excavate the Pacific entrance of the canal. Construction of a third set of locks is scheduled to begin in 2009.
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The Panama Canal Authority announced that toll revenues for the fiscal year ended September 30, 2008 reached $1.3 billion, an increase of 11.3% over fiscal year 2007. On July 21, 2008, the Assembly approved the Panama Canal Authority’s budget for fiscal year 2009, allocating $152.0 million to the Canal’s investment program and $835.7 million to the Canal’s expansion project relating to the third set of locks.
The United States, the main source of customers of the Panama Canal, has been experiencing an intensifying deceleration of economic activity. In spite of the economic conditions in the United States, trade via the Panama Canal during its fiscal year ended September 30, 2008 was only slightly affected and toll revenues remained firm. From the beginning of its 2009 fiscal year, which began on October 1, 2008, through January 31, 2009, approximately 4,341 transits passed through the Canal as compared to 4,380 transits for the same period during fiscal year 2008, resulting in a decrease of approximately 1.0%. Approximately 69.8 million long tons of cargo passed through the Canal between October 1, 2008 and January 31, 2009 as compared to 69.5 million long tons during the same period of time for fiscal year 2008, representing an increase of approximately 0.4%. Toll revenue remained firm despite the decrease in transits. As of January 31, 2009, toll revenue totaled approximately $481.8 million as compared to $427.2 million for the same period in fiscal year 2008, representing an increase of approximately 12.8%.
For the month of January 2009, approximately 1,133 transits passed through the Canal as compared to approximately 1,151 during January 2008, representing a decrease of approximately 1.6%. Approximately 17.5 million long tons of cargo passed through the Canal during the month of January 2009 as compared to 18.0 million long tons in January 2008, representing a decrease of approximately 2.7%. Toll revenue for the month of January 2009 totaled approximately $120.7 million as compared to $107.9 million during January 2008, representing an increase of 11.9%.
The Panama Canal Authority estimates that PC/UMS (Panama Canal Universal Measurement System) tonnage of cargo passing through the Canal will drop no more than 5.0% during fiscal year 2009, but toll revenues will not experience significant change due to the implementation of the last phase of a three step toll rate increase approved in May 2005. This estimate is subject to revision based on the duration and severity of the global economic downturn, and accordingly no assurance can be given concerning actual results for fiscal year 2009.
The following table sets forth the Canal’s statistical and financial information for fiscal years 2004 through 2008 (each ended on September 30):
Panama Canal Principal Statistics
| | | | | | |
Fiscal Year | | Number
of Transits | | Tolls
(millions
of dollars) | | Long Tons
of Cargo
(millions) |
2004 | | 14,035 | | 757.7 | | 200.3 |
2005 | | 14,011 | | 847.6 | | 193.8 |
2006 | | 14,194 | | 1,026.4 | | 211.6 |
2007 | | 14,721 | | 1,183.9 | | 208.2 |
2008 | | 14,702 | | 1,317.5 | | 209.8 |
Source: Panama Canal Authority.
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