Exhibit E
RECENT DEVELOPMENTS IN THE REPUBLIC AS OF DECEMBER 23, 2016
The information included in this document supplements the information about the Republic of Panama (the “Republic” or “Panama”) contained in Panama’s annual report for the year ended December 31, 2015, on Form 18-K filed with the Commission on September 30, 2016. To the extent the information in this Exhibit E is inconsistent with the information contained in such annual report, the information in this Exhibit E replaces such information. Initially capitalized terms used in this Exhibit E have the respective meanings assigned to those terms in such annual report.
Recent Government Actions
In October 2016, Panama started an assessment process to determine the effectiveness of actions taken since it was removed on February 19, 2016 from the FATF list of high-risk and non-cooperating jurisdictions with AML and CFT deficiencies, commonly referred to as the grey list. The Government continues to work with FATF on Latin America (“GAFILAT”) to implement legislative and regulatory reforms. The fourth round of mutual evaluation began with a pre-assessment visit by a delegation of authorities from GAFILAT.
In October 2016, Panama signed the Convention on Mutual Administrative Assistance in Tax Matters to modernize and transform its financial and international services platform and to establish a legal framework for the implementation of transparency initiatives and international cooperation.
In November 2016, Panama and Canada signed a framework cooperation agreement to strengthen the institutional capacity of the Ministry of Public Security and for the acquisition of goods and services related to its security functions.
In December 2016, the Assembly approved Law No. 66, amending Decree Law No. 1 of 1999, which provides the regulatory framework governing the stock market in Panama. Law No. 66 modifies 37 registration fees, 17 supervisory fees and extends certain definitions, obligations, and functions of various parties involved in the stock market.
In December 2016, the Budget Committee of the Assembly approved funding of U.S.$99.8 million for ENA for the construction of a fourth bridge over the Panama Canal. This funding provided by the Budget Committee of the Assembly will form part of a larger financing package yet to be defined and approved by the Assembly.
The Economy
In the first nine months of 2016, estimated GDP growth was 4.8%, compared to 5.7% for the same period in 2015. Inflation, as measured by the average CPI with base year 2013, was –0.1% in the first nine months of 2016.
On October 13, 2016, the Ministry of Economy and Finance revised the projection for 2016 GDP growth, estimating GDP growth of 5.6% instead of the previously estimated 6.0%. This adjustment was due to a slowdown in world trade and its effect on Panama: in particular, lower than expected results for the transport, storage and communications subsector. Ports, the Panama Canal and the CFZ also underperformed compared to prior expectations.
For the nine months ended September 30, 2016, the FAP had revenues of U.S.$59.5 million, compared to U.S.$11.5 million in losses during the same period of 2015.
The Assembly approved Panama’s 2017 budget on December 2, 2016. The 2017 budget contemplates total expenditures of U.S.$21.7 billion, with budget estimates based on anticipated nominal GDP of U.S.$58.6 billion
(6.0% real growth from 2016) and an anticipated consolidated non-financial public sector deficit of approximately U.S.$584.7 million (approximately 1.0% of estimated nominal GDP) for 2017. The corresponding fiscal deficit permitted under the Social and Fiscal Responsibility Law is approximately U.S.$586.3 million for 2017. Compliance with the Social and Fiscal Responsibility Law is assessed only against year-end results. The 2017 budget allocates public expenditures as follows: 41.6% to the social sector; 12.3% to infrastructure; 2.3% to production/development; 15.9% to general services; and 17.2% to debt service of the non-financial public sector.
Public Finance
The Central Government’s current savings for the first six months in 2016 registered a surplus of U.S.$311 million (0.6% of nominal GDP) compared to a surplus of U.S.$201 million for the same period in 2015 (0.4% of nominal GDP). The Government’s overall deficit decreased from U.S.$2.1 billion in the first nine months of 2015 (4.0% of nominal GDP) to a deficit of U.S.$2.1 billion for the same period in 2016 (3.9% of nominal GDP). In the first nine months of 2016, Panama’s non-financial public sector balance registered a deficit of U.S.$911 million (1.7% of nominal GDP), a decrease from a deficit for the same period in 2015 of U.S.$1,013.0 million (1.9% of nominal GDP).
The non-financial public sector deficit for the nine-month period ended on September 30, 2016 was U.S.$911 million, a decrease of U.S.$102 from the deficit of U.S.$1,013 million registered for the same period of 2015. Total non-financial public sector expenditures for the nine-month period ended September 30, 2016 were U.S.$9.1 billion, an increase of U.S.$547 million (6.4%) from U.S.$8.6 billion for the same period of 2015. Total revenue for the nine-month period ended on September 30, 2016 was U.S.$8.2 billion, an increase of U.S.$650 million (8.6%) from U.S.$7.6 billion for the same period of 2015.
On the expenditure side, non-financial public sector capital expenses totaled U.S.$2,599 million for the first nine months of 2016, an increase of U.S.$272 million (11.7%) compared to U.S.$2,327 million during the same period of 2015. Non-financial public sector current expenses during the nine-month period ended on September 30, 2016 amounted to U.S.$6.5 billion, a U.S.$0.3 billion (4.4%) increase from U.S.$6.3 billion during the same period of 2015. On the revenue side, tax revenue during the first nine months of 2016 was U.S.$4.0 billion, an increase of U.S.$336 million (9.1%) from U.S.$3.7 billion during the first nine months of 2015, while non-tax revenue was U.S.$1,003 million, a decrease of U.S.$8 million (–0.8%) from U.S.$1,011 million for the same period in 2015. Capital revenue during the first nine months of 2016 was U.S.$0.
In December 2016, the Panama Canal Authority will pay U.S.$1.0 billion in taxes for the fiscal year 2016. This is an increase of U.S.$8.1 million compared to the budget projection for 2016. The total payment consists of U.S.$630.7 million from the operation of the Canal, U.S.$380 million from tolls and U.S.$2.4 million from services rendered by the Government.
Public Debt
As of November 30, 2016, total public debt was U.S.$21.5 billion. Internal public debt accounted for 22.2% of total public debt, while external public debt accounted for 77.8% of total public debt. The average maturity of the public debt portfolio as of November 30, 2016 was 10.8 years, with an average duration of 7.6 years. As of the third quarter of 2016, Treasury note and bond issuances reached U.S.$1,016.2 million and local secondary market transactions reached U.S.$737.6 million.
Primary market transactions during the first eleven months of 2016 included the issuance of U.S.$698.5 million of PABONO 2024 bonds and a reopening of the PANOTA 2019 bonds for U.S.$317.7 million.
On September 30, 2016, the credit rating agency Standard & Poor’s confirmed the investment grade of the Republic of Panama as BBB with a stable outlook. Ratings are not a recommendation to purchase, hold or sell securities and may be changed, suspended or withdrawn at any time. Panama’s current credit ratings and the rating outlooks currently assigned to Panama depend on economic conditions and other factors affecting credit risk that are outside the control of Panama. Each rating should be evaluated independently of others. Detailed explanations of the ratings may be obtained from the rating agencies. Panama discloses these ratings because, although it has no control over ratings, they are important to Panama’s ability to obtain financing on terms that are favorable to it.
The Panama Canal
On August 29, 2016, the Cabinet approved Bill No. 356, which approved the budget of the PCA for the fiscal year ending on September 30, 2017. This budget assumes an increase of 10.6% in transit revenues and an increase of 8.9% in total operating income and projects that dividends to the Central Government at the end of fiscal year 2017 will increase by 72.5% from U.S.$662.0 million to U.S.$1,141.5 million. On August 3, 2015, the Assembly approved the PCA’s budget for its fiscal year ending September 30, 2016, allocating U.S.$146.2 million to the Canal’s investment program and U.S.$72.0 million to the Canal’s modernization program.
Foreign Trade and Balance of Payments
Foreign Direct Investment
For the first nine months of 2016, Panama’s FDI was U.S.$4,211.2 million, an increase of U.S.$635.7 million or 17.8%% from U.S.$3,575.5 million in the same period of 2015.
The following table sets forth the foreign direct investment in Panama by investor residence for the years 2012 through 2015.
TABLE NO. 23
Foreign Direct Investment in Panama by Investor Residence
| | | | | | | | | | | | | | | | |
| | | Foreign Direct Investment | |
| Investor Residence | | | | | | | | | | | | |
| | | (in thousands of U.S.$) | |
| | | 2012 (R) | | | 2013 (R) | | | 2014 (P) | | | 2015 (P) | |
TOTAL | | | 3,210,533 | | | | 3,567,175 | | | | 4,458,666 | | | | 4,494,234 | |
EUROPE | | | (345,370 | ) | | | (680,087 | ) | | | 926,369 | | | | 775,037 | |
European Union | | | (508,682 | ) | | | (1,122,155 | ) | | | 576,830 | | | | 573,171 | |
Germany | | | 112,804 | | | | 5,832 | | | | 273,588 | | | | 84,484 | |
Belgium | | | (130,017 | ) | | | (154,536 | ) | | | (85,907 | ) | | | 2,491 | |
Denmark | | | (38,786 | ) | | | 18,691 | | | | (10,545 | ) | | | 7,970 | |
Spain | | | 67,956 | | | | (252,067 | ) | | | 152,812 | | | | 164,742 | |
France | | | 12,225 | | | | (26,221 | ) | | | 28,249 | | | | 18,846 | |
Italy | | | 20,773 | | | | 22,566 | | | | 30,377 | | | | 42,913 | |
Netherlands | | | 244,258 | | | | 60,958 | | | | 56,457 | | | | 94,166 | |
United Kingdom | | | (708,905 | ) | | | (840,235 | ) | | | 174,970 | | | | 143,224 | |
Sweden | | | 21,676 | | | | 13,167 | | | | (31,254 | ) | | | 7,021 | |
Other Countries (1): Austria, Greece, Hungary, Ireland, Poland, Portugal, and Finland | | | (110,666 | ) | | | 29,690 | | | | (11,918 | ) | | | 7,314 | |
Other European Countries | | | 163,312 | | | | 442,068 | | | | 349,539 | | | | 201,865 | |
Andorra | | | 4,567 | | | | 2,634 | | | | 3,930 | | | | 3,394 | |
Norway | | | 3,240 | | | | (404 | ) | | | (983 | ) | | | 685 | |
Switzerland | | | 152,073 | | | | 413,816 | | | | 325,893 | | | | 187,670 | |
Other countries (1): Liechtenstein, Russia, Turkey and Ukraine | | | 3,432 | | | | 26,023 | | | | 20,699 | | | | 10,117 | |
AFRICA | | | 612,130 | | | | (340,776 | ) | | | 145,187 | | | | 320,190 | |
South Africa | | | 612,130 | | | | (340,776 | ) | | | 145,187 | | | | 320,190 | |
AMERICA | | | 2,347,723 | | | | 3,998,628 | | | | 3,736,277 | | | | 3,022,670 | |
North America | | | 1,074,991 | | | | 1,497,003 | | | | 1,368,020 | | | | 1,314,104 | |
Canada | | | 1,097,219 | | | | 150,259 | | | | 23,920 | | | | 49,895 | |
United States | | | 28,472 | | | | 750,227 | | | | 1,320,407 | | | | 1,039,111 | |
Mexico | | | (50,700 | ) | | | 596,548 | | | | 23,693 | | | | 225,098 | |
Central America and the Caribbean | | | 363,367 | | | | 540,476 | | | | 382,337 | | | | 488,263 | |
Aruba | | | 3,589 | | | | (1,685 | ) | | | 5,899 | | | | 956 | |
Bahamas | | | 34,082 | | | | 47,712 | | | | 36,878 | | | | 30,382 | |
| | | | | | | | | | | | | | | | |
| | | Foreign Direct Investment | |
| Investor Residence | | | | | | | | | | | | |
| | | (in thousands of U.S.$) | |
| | | 2012 (R) | | | 2013 (R) | | | 2014 (P) | | | 2015 (P) | |
Barbados | | | 132 | | | | 3,154 | | | | 15,013 | | | | 1,642 | |
Costa Rica | | | 51,690 | | | | 175,231 | | | | 128,200 | | | | 118,987 | |
Cuba | | | 688 | | | | 322 | | | | 179 | | | | 386 | |
El Salvador | | | 43,088 | | | | 42,321 | | | | 5,737 | | | | 25,237 | |
Guatemala | | | 26,040 | | | | 19,911 | | | | 9,283 | | | | 32,015 | |
Honduras | | | 42,151 | | | | 9,187 | | | | 11,953 | | | | 13,476 | |
Jamaica | | | 13,888 | | | | 321 | | | | (26,479 | ) | | | 108,381 | |
Nicaragua | | | 21,388 | | | | 32,337 | | | | 19,916 | | | | 17,442 | |
Puerto Rico | | | 7,474 | | | | 119,123 | | | | 2,540 | | | | 12,698 | |
Dominican Republic | | | 30,991 | | | | 21,278 | | | | 32,206 | �� | | | 33,924 | |
Other countries (1): Belize, Cayman Islands, Haiti, Curacao, Leeward Islands (UK), San Martin Island, Virgin Islands (USA), Trinidad and Tobago | | | 88,167 | | | | 71,264 | | | | 141,013 | | | | 92,738 | |
South America | | | 909,365 | | | | 1,961,149 | | | | 1,985,920 | | | | 1,220,303 | |
Argentina | | | 6,010 | | | | 15,586 | | | | 25,349 | | | | 8,953 | |
Bolivia | | | 30 | | | | 74 | | | | 59 | | | | 38 | |
Brazil | | | 122,440 | | | | 13,500 | | | | 63,811 | | | | 148,830 | |
Chile | | | 9,418 | | | | 31,284 | | | | 2,930 | | | | 11,740 | |
Colombia | | | 533,340 | | | | 1,714,862 | | | | 1,110,441 | | | | 865,592 | |
Ecuador | | | 12,294 | | | | 11,967 | | | | 630,232 | | | | 99,162 | |
Peru | | | 25,062 | | | | 55,950 | | | | 31,068 | | | | 26,072 | |
Venezuela | | | 200,771 | | | | 117,927 | | | | 122,029 | | | | 59,916 | |
ASIA | | | 588,482 | | | | 591,679 | | | | (354,138 | ) | | | 372,464 | |
Middle and Near East | | | 6,475 | | | | 1,889 | | | | (23,669 | ) | | | 1,397 | |
Israel | | | 4,921 | | | | 2,752 | | | | (22,491 | ) | | | 1,321 | |
Lebanon | | | 1,554 | | | | 863 | | | | (1,178 | ) | | | 76 | |
Central Asia, southern and other Persian Gulf countries | | | 67,362 | | | | (8,859 | ) | | | 23,550 | | | | 29,767 | |
India | | | 1,677 | | | | (157 | ) | | | (1,260 | ) | | | 1,085 | |
Singapore | | | 63,651 | | | | (9,970 | ) | | | 25,001 | | | | 26,581 | |
Other countries (1): Philippines, Pakistan, Saudi Arabia and Indonesia | | | 2,034 | | | | 1,268 | | | | (190 | ) | | | 2,101 | |
East Asia | | | 514,645 | | | | 598,650 | | | | (354,019 | ) | | | 341,299 | |
China, Hong Kong | | | 2,150 | | | | 135 | | | | (4,308 | ) | | | 3,441 | |
China, Democratic People’s Republic of Korea (North Korea) | | | 76,798 | | | | 15,836 | | | | 43,467 | | | | 31,602 | |
Republic of Korea (South of Korea) | | | 422,510 | | | | 337,222 | | | | (281,896 | ) | | | 38,950 | |
Japan | | | 998 | | | | (66,052 | ) | | | (41,813 | ) | | | 11,294 | |
Republic of China (Taiwan) | | | 12,189 | | | | 311,510 | | | | (69,469 | ) | | | 256,013 | |
OTHER COUNTRIES: (1) Angola, Uruguay, Australia and North Korea | | | 7,568 | | | | (2,269 | ) | | | 4,971 | | | | 3,873 | |
Note: Totals may differ due to rounding.
| | (1) | Due to statistical confidentiality, countries with up to two companies of direct investment have been included in this line. |
Source: Office of the Comptroller General.
The following table sets forth the foreign direct investment in Panama by economic activity for the years 2012 through 2015.
TABLE NO. 24
Foreign Direct Investment in Panama by Category of Economic Activity
| | | | | | | | | | | | | | | | |
| | | Foreign Direct Investment | |
| Category of Economic Activity | | | | | | | | | | | | |
| | | (in thousands of U.S.$) | |
| | | 2012 (R) | | | 2013 (R) | | | 2014 (P) | | | 2015 (P) | |
TOTAL | | | 3,210,533 | | | | 3,567,175 | | | | 4,458,666 | | | | 4,494,234 | |
Agriculture, cattle, hunting and forestry | | | 14,274 | | | | 33,555 | | | | (24,623 | ) | | | 5,480 | |
Mining and quarrying | | | 1,149,420 | | | | 434,629 | | | | 6,189 | | | | 5,860 | |
Manufacturing industries | | | 520,404 | | | | 141,747 | | | | 181,265 | | | | 238,036 | |
Electricity, gas and water supplies | | | (122,648 | ) | | | (244,621 | ) | | | (54,031 | ) | | | 84,616 | |
Construction | | | 117,198 | | | | 44,522 | | | | 81,765 | | | | 250,175 | |
Wholesale and retail | | | 954,586 | | | | 1,417,241 | | | | 521,061 | | | | 1,606,910 | |
Transport, storage and mail | | | 463,498 | | | | 307,373 | | | | 2,243,235 | | | | 462,001 | |
Hotels and restaurants | | | 623 | | | | 131,474 | | | | 18,822 | | | | 55,762 | |
Information and communication | | | (333,039 | ) | | | 760,460 | | | | (65,736 | ) | | | 578,866 | |
Finance and insurance activities | | | 408,939 | | | | 491,245 | | | | 1,318,141 | | | | 949,168 | |
Real estate activities | | | 28,514 | | | | (53,362 | ) | | | 102,440 | | | | 69,780 | |
Professional, scientific and technical activities | | | 27,061 | | | | 37,809 | | | | 41,312 | | | | 46,598 | |
Administrative activities and support services | | | (51,000 | ) | | | 4,930 | | | | 34,208 | | | | 53,717 | |
Education | | | 11,338 | | | | 7,444 | | | | 7,798 | | | | 26,793 | |
Social and health related services | | | (359 | ) | | | 2,169 | | | | 5,471 | | | | 10,504 | |
Arts, entertainment and related activities | | | 23,150 | | | | 45,752 | | | | 10,447 | | | | 28,852 | |
Other services activities | | | (1,426 | ) | | | 4,808 | | | | 30,902 | | | | 21,116 | |
| | Note: | Totals may differ due to rounding. |
Source: Office of the Comptroller General.
