Panama Wins Prestigious
Investment Grade
Panama, after years of tremendous economic
growth, progressive tax reforms and healthy
budgets, has finally won a prestigious
investment grade rating. Fitch Ratings, the
international ratings agency, gave the
Republic of Panama an investment-grade
credit rating for the first time ever.
Panama had a long-term local currency and
foreign currency IDRs (Issuer Default
Ratings) of ‘BB+’. This has now been
upgraded to ‘BBB-‘, and places Panama in the
elite group of larger economies like Chile,
Mexico and Brazil. Further, Fitch has also
upgraded the short-term foreign currency
Issuer Default Ratings from ‘B’ to ‘F3’.
These new ratings reflect the growing
confidence of the international community in
the Republic of Panama’s ability to sustain
continuous improvement in public finances,
advance tax reforms and maintain low debt.
Amongst the many factors that compelled
Fitch to review their ratings for Panama,
the following are some of the major ones:
- The Panama Canal expansion project is one
of the many mega-projects lined up by the
Republic of Panama and will certainly aid
the economy.
- President Ricardo Martinelli of the
Republic of Panama, has pushed along major
tax reforms that will help increase revenue
which in turn will give the government
sufficient funds to boost investment.
At the same time, there has been substantial
increase in employment and hence in real
income, raising hopes that there will be a
boom in private consumption in Panama.
- The Republic of Panama’s economic growth
rate in 2007 and 2008 was between 8% and
11%, and counted to be one amongst the
world’s fastest.
In 2009, when the world was going through a
slowdown, Panama also suffered from some
deceleration but it was still one of the
very few economies of the world that
continued its economic growth. In fact,
amongst the Latin American countries, the
Republic of Panama had one of the strongest
growing economies.
In recent years, the economic growth of
Panama has been spurred by a continued
growth in investment, sustained foreign
direct investment and a steadily increasing
domestic savings.
Fitch has taken note of all these positives
while reviewing the ratings for the Republic
of Panama and upgrading it. A senior
official at Fitch Ratings pointed out the
recent reforms carried out on both the tax
and fiscal fronts indicate that the
government is committed to increasing fiscal
discipline and enhancing the quality as well
as flexibility of public finances.
This upgrade is also being seen as a major
victory for President Ricardo Martinelli of
the Republic of Panama, who took great
efforts to push through tax reforms that
were aimed at sustaining and increasing
economic growth. President Martinelli,
expressing great pleasure at the news of the
investment-grade ratings, reiterated his and
his government’s commitment to building an
economic climate that would not only attract
more foreign investment but also ensure a
better quality of life for the citizens of
the Republic of Panama.
With an investment grade ratings, the
Republic of Panama can now seek financing
for its major projects on more favorable
conditions and this will help strengthen its
position as one of the most attractive,
foreign direct investment destinations. |
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