Panama Investor Blog

Panama Debt Rating Raised to Positive by S&P

Panama’s credit-rating outlook was raised to positive by Standard & Poor’s, putting the Central American country on the cusp of an investment-grade rating, as tax increases and faster economic growth help keep the budget deficit in check.

Read the rest at Bloomberg;

Over 17,000 new business registered in Panama this year, but....

Considering the population of the country this seems like a large number of new businesses and it indicates a strong entrepreneurial spirit among the inhabitants. It includes every type of business from the small kiosk to the large conglomerates. As the article points out, the number of new businesses registered is greater, but their capital investment is 50% lower than in 2008, reflecting a slowing  economy. The portal for registering companies is seen as a major advantage in the registering of the companies, but the ministry of commerce says that it has canceled over 4000 permits due to lack of payment or false data provided during registration. I sounds like some folks in Panama are using the registry portal as they did the 911 emergency number just to agitate the state.

La Prensa

Ettrick light
lettrick@prensa.com lettrick@prensa.com

  Through the electronic portal PanamaEmprende this year there have been created 17 thousand 696 new companies with investment plans that reach a one billion 235 million dollars.

Panama is the province that is leading the charge in relation to the creation of new enterprises.  It is followed further back Chiriqui and Colon.

  The operating permits processed during the first nine months of 2009 are higher than those recorded last year, but the amount of reported investment fell 49%.

  Perhaps this answers the precautionary climate that prevailed in making business decisions during the past year due to the global crisis.

For William Gonzalez, director general of Internal Trade, Ministry of Commerce and Industry (Mici), an agency that administers PanamaEmprende, the drop in investment was declared last year as it processed the entry of larger companies with greater capital.

Gonzalez says the tourism sector is one of the most dynamic features. Several companies offer the service of tourist guides and tour operators have requested notice of operation to meet demand that is generated in the market.

  Some industries also have new members. "This shows that certain businesses are relocating," said first deputy chairman of Union of Industrialists, Ricardo Sotelo.

The employer believes the new industrial development bill currently being discussed in the National Assembly will help this sector to create new businesses and jobs.

 Cancellation

  While generating new business, Mici has also canceled operating permits.

  To date, the institution has canceled  4,335 operations for various reasons.  Among the most frequent violations is the registration of false information in the system.

 Cancellations are also related to clarification of the data, because sometimes there exist in the system business registrations which never began operations.

Steve Wynn on the U.S. economy

This video was sent to me by Sam K. and it is so good I wanted to share it with everyone. Steve Wynn is not happy with the way the current administration in the U.S. is doing things, but instead of just complaining about it, he has some good ideas on how to improve the situation. The beginning is more of an advertisement on his Vegas properties, but in a few minutes it gets into the meat of his ideas. Well worth the time to view.

Concrete production foretells construction activity

I like to review statistical data, especially those that are considered early in the supply chain because they help us to foresee the future, and after all, that is what we are all trying to do when gathering information. Just as the shipping industry is a good indicator of the overall world economy, concrete is an excellent indicator of what is going on in the construction industry. As this article points out we must take into consideration large infrastructure such as the Cinta Costera and canal expansion when looking at concrete use, with the road behind us and the canal ahead, we can get a good indication of what is going on. There is no doubt that construction is starting to slow and in the coming year we will see a greater slowing. As this article points out, even though there was a flurry of building permits issued this year, many have yet to break ground and may not considering the economy.

From La Presna

Ready-mixed concrete production in August fell 25.5% over the same month last year, according to the Comptroller General of the Republic.

  This is the fifth consecutive monthly decline this year in an index that reflects the status of constructive activity. La producción acumulada hasta agosto también es inferior (-3.1%) que en el mismo período de 2008. Cumulative production through August is also lower (-3.1%) than the same period in 2008.

  Jaime Jované, president of the Panamanian Chamber of Construction (CAPAC), explained that the decline is due to large infrastructure works are not at the level as in the first half, when, among others, were executed and the coastal strip Panama-Colon.

  Many received the building permit before the end of June when the term culminating benefit from the 20-year exemption from property taxes, which "triggered an avalanche" of approved permits, but does not necessarily mean that the construction has begun.

In August, the total value was 46.7% lower, falling mainly due to the residential sector (-66%). Los permisos no residenciales, protagonizaron en agosto una mejora de 70% sobre el mismo mes del año anterior. Non-residential permits, staged in August, an improvement of 70% over the same month last year.

Unemployment in Panama reaches 6.6 percent

I would like to know how they arrive at these statistics. A 6.6% unemployment rate is enviable for most first world countries these days.

La Prensa

The Comptroller General's Office announced on Thursday that unemployment in the Republic of Panama saw an increase of 1 percent between August 2008 and the same month this year.

According to this entity's detailed report, the "Household Survey" conducted by the National Institute of Statistics and Census revealed that the overall unemployment rate rose from 5.6 percent in August 2008 to 6.6 percent in August 2009.

The report also revealed that the urban areas of the country presented a total unemployment rate of 7.9 percent, whereas a 3.9 percent rate was recorded for rural areas.  Moreover, the ratio of unemployed women to unemployed men rose to 8.9 percent and 5.1 percent respectively.

Meanwhile, the economically-active population grew by 2.0 percent, according to the Comptroller.

More on the status of the Panama Economy

As many of us have been skeptical of the data put out by the various ministries regarding the state of the economy, Eric Jackson gives a good overview of the real situation. It is always to the benefit of those providing the data to fudge on the positive side especially when no one has access to the same data used in order to examine it more closely. Eric's Glass half empty article is a realistic look at the current situation.

Excerpt: Yes, you can go to the "now's the time to buy in Panama" real estate hype websites --- those that still exist --- and get the third-hand story about how the International Monetary Fund (IMF) economic prognosticators say that in the five-year period starting next year, Panama's economy will soar and Venezuela's will tank. Uh huh. But you always want to take future tense less seriously than past or present, and even more so the longer into the future it projects. Or you can go to a community gathering and talk to a real estate professional who says that it's very hard to sell homes in the Interior now and that the collapsed upscale Panama City condo market shows no signs of recovery. Drive out to the Interior on the Pan-American Highway and see all of the empty billboards. When in the supermarket, pay attention to what other people are putting in their baskets, and how much of which cuts of meat are in the cooler at the butcher's counter. Panama's hurting.

Read the rest on Eric's Panama News site...

Dramatic CBC Video of Shipping Collapse 2009

Thanks to Tomas for sending me this link to a must watch video. The American consumer is the drive behind shipping and the consumer is no longer consuming. When will it change? One statistic I read  is that from the year 2000 the amount of debt consumers piled on will take 19 years to pay off at there current 10% savings rate. Now that's scary.

How will Panama fare using the U.S. dollar in the future

I have received several email lately from readers who are concerned about Panama using the U.S. dollar as its currency in an inflationary climate. Panama actually  prices everything in Balboas, their official currency, although they do not print bills and use the U.S. dollar for their bank notes. But Panama does have its coins minted and they are in fractional of Balboas such as .05, .10, .25 and are the same size as the U.S. coins. Don't try and use them in the U.S. as I have. You get a strange look and their immediately given back. They do work in vending machines though.

As the article below points out, Panama will be minting $10 million Balboas worth of coins in each of the next 5 years. Where do all these coins go? I asked this very question to the Royal Canadian Mint who produces the Balboa coins.  They told me the coins end up in people drawers or jars or are lost or worn out. The coins are needed each year to replenish the supply.

But another interesting statement comes out of the article below. "This was raised by the Minister of Economy and Finance, Alberto Vallarino, after sustaining this project in the Committee on Finance, which guarantees a policy of not requiring import of coins from the U.S. Federal Reserve." I find that to be a rather interesting comment and I assume that it extends to notes as well. Certainly the banks are working with the feds for U.S. notes, but Panama has no central bank and therefore can't dilute the money supply any more than the coins at this time.

So, what would Panama do if the U.S. dollar is no longer the reserve currency of the world or the dollar goes into hyperinflation. Panama could either link the Balboa to the new reserve currency or it could print its own Balboa notes. I would prefer the first option unless the country decided to back the Balboa with gold or silver. Then they would have the most sought after currency on the planet! If Panama decided to just print their own fiat notes I would be greatly concerned about the stability of that currency. The temptation to print could be great in the future with the heavy debt the country is acquiring.

Here is the article from La Prensa;

Government will save $ 15 million after minting

XENIA DE LEÓN XENIA DE LEON
xdeleon@prensa.com xdeleon@prensa.com

  The government seeks to save $ 15 million over the next five years after the minting and issuing coins in circulation divided stream.

  This was raised by the Minister of Economy and Finance, Alberto Vallarino, after sustaining this project in the Committee on Finance, which guarantees a policy of not requiring import of coins from the U.S. Federal Reserve.

  The National Bank will require an inventory of $ 10 million for each period (2010-2014) in denominations of one hundredth, five hundredths and 25 hundredths to increase the circulation of local currency.

  Similarly, another project was presented for the minting of commemorative coins to Monumental Old Panama. Ambos fueron aprobados en primer debate. Both were approved at first reading.

Panama Predicted To Have Highest GDP Growth in Latin America

I believe they are being a bit overoptimistic about the worlds economy to make this kind of prediction in growth for Latin American countries, but I do believe Panama will lead the pack.

Excerpts from Latin Business Chronicles

Panama will have Latin America's highest GDP growth in the five-year period starting next year, while Venezuela will have the lowest, according to a Latin Business Chronicle analysis of new forecasts from the International Monetary Fund.

Panama will grow an average of 6.1 percent in the period 2010-14. Peru follows with 5.6 percent growth in the same period.

While Panama and Peru have been the growth stars in Latin America the past few years, the five-year outlook going forward also includes countries like the Dominican Republic and Chile. The Dominican economy – the largest in the CAFTA trade block -- should grow by an average of 5.2 percent, while that of Chile will likely expand by 4.9 percent in the five-year period through 2014.

Read the full story here...

Gold price climbs over $1040

So, is now the right time to buy gold? Is it headed to $2500 or more as many gold pundits have been predicting? I remember buying gold at $252 an ounce in late 1999  and it has increased over 400%. Since 2006 it has more than doubled. So is a doubling of tripling again unrealistic? Or, is this just a bump to be pulled back down below the $1000 level where it has been trading over the last few months. We can't be sure, but one thing is for certain, the trend is going to be up because the dollar trend is down. It may take a while for inflation to really set in, but if the rumblings in the market are true and a new currency is in the making, then the only real safe investment right now is precious metals. Panama is tied to the U.S. dollar so here is a way to protect your savings from the dollar depreciation that is sure to come.

If you haven't put gold in your investment portfolio now may be the right time and Bullion Vault is by far the best way I have found to do it. It is how I buy and store gold. Click on this banner to learn more.