Caribbean & Central America - December 2012 (ISSN 1741-4458)

More ruffles with the private sector. Economy Minister Frank De Lima recently called on the Panamanian association of business executives (Apede) to “set aside political posturing”. De Lima’s angry remarks follow a statement issued by the Apede in November, raising concern about the fiscal deficit projected in the record-breaking 2013 state budget for US$16.3bn which, promulgated on 18 October, is up nearly 13% on the current one. Apede’s statement – which attracted attention given the pro-business bent of President Ricardo Martinelli’s government - adds to existing concerns about excessive government spending.  Panama’s public debt reached US$13.8m in the first half of 2012, up from US$12.5bn in 2011, US$11bn in 2010 and US$10.8bn in 2009, the year Martinelli took office. These concerns, which were also echoed by the Panamanian chamber of commerce, emerged after Martinelli’s failed attempts at both selling off state lands in the Colón Free Trade Zone (FTZ) last month [RC-12-11] and selling shares in the energy and telecoms sectors in June last [EB-12-6/7], both of which he was forced to backtrack on.

“The need to keep fiscal deficits below the revised Social and Fiscal Responsibility Law (SFRL) ceilings” and “a more neutral fiscal stance” also featured among the recommendations made by the IMF following a recent visit to the country to conduct its annual Article IV consultation. Yet with Panama’s GDP averaging around 9% over the last five years – the highest in Latin America - the IMF remained positive, noting “Panama’s growth performance continues to exceed expectations, buoyed by the Panama Canal expansion and large public infrastructure projects”. The IMF described the near-term outlook as “favourable” with real GDP growth possibly exceeding 9.5% in 2012 and average inflation at about 5.5%-6% in 2012-2013.