Caribbean & Central America - December 2014 (ISSN 1741-4458)

Budget approved: At the end of November Panama’s national assembly approved the US$19.5bn budget for 2015. The budget for 2015 is around 7% higher than the budget for 2014. Around 46% of the budget, some US$9bn, is earmarked for public works projects. President Juan Carlos Varela said the approval of the budget would allow the government to fulfill its election campaign promises.

Among those works expected to begin in 2015 are the extension to the Panama City metro and the expansion of the Puente de las Américas-Arraiján highway. A further US$200m will go towards expanding drinking water facilities and improving the country’s basic healthcare.

The Varela government expects growth this year to come in at 6.5%, a disappointment given that over the past five years growth has averaged over 8%, the highest level in the region. Inflation is expected to be around 4.3% for 2015.

Some analysts expressed concern that the government did not seem to be doing enough to manage the public debt. Juan Jované, an economist and former presidential candidate, said that the budget forecast taking on an additional US$4bn in public debt. Jované argued that if the government’s growth forecast was not realized the public sector debt could rise significantly as a proportion of GDP with serious consequences for Panama’s future growth potential.

FTA with Mexico: Also at the end of November the free trade agreement between Panama and Mexico finally took effect. The deal included clauses on trade, investment, services, financial services, telecommunications, intellectual property, dispute settlement, and others. Bilateral trade between the two countries increased from US$339m in 2002 to US$1bn in 2013.