Caribbean & Central America - November 2011 (ISSN 1741-4458)

Following the dismissal of Vice-President Juan Carlos Varela and the subsequent unravelling of the Panamanian ruling alliance, Deputy Economy Minister Frank de Lima officially took over the economy portfolio on 30 September. De Lima thus took office exactly one month after his boss, Alberto Vallarino, a member of the opposition Partido Panameñista (PP), had quit his post in solidarity with Varela [RC-11-10]. The appointment of De Lima, a cardholder of President Ricardo Martinelli’s Cambio Democrático (CD), was in line with Vallarino’s recommendations and has assuaged fears that the political strife at the top would translate into economic instability.

Less than a week later (on 3 October) congress approved, with 49 votes in favour and nine against, the new 2012 state budget of a record-breaking US$14.45bn. This figure represents an increase of 7.5% (US$13bn) on the 2011 budget, which itself had been increased by 23% when compared with the 2010 budget (US$10.57bn). The final budget, which was US$17m less than the initial proposal, is based on a 7.5% GDP growth forecast for 2012 and expects the fiscal deficit to remain at 2% of GDP, in line with the law of fiscal responsibility.

FTA with US: On 21 October US President Barack Obama promulgated the long-pending Free Trade Agreement (FTA - officially known as Trade Promotion Agreement [TPA]) with Panama. It came nine days after the deal, - first inked in June 2007 and approved the following month by Panama’s congress - was ratified by the House of Representatives (by 300 votes in favour to 129 against) and the Senate (77 votes in favour, to 22 against). The US first gave the green light to the FTA, which had stalled in part over tax transparency concerns and diplomatic issues in April last following the entry into effect (on 18 April) of a bilateral Tax Exchange Information Agreement (TIEA) [RC-11-05].