LA Prensa reports that residential permits are way down while commercial permits have risen by 74% over the previous year. Wow! this is a huge increase at a time one would think they should be pulling back.
They also report that the Spanish insurance company Export Credit has approved the $400 million performance bond for Sacyr Vallehermosa, the Spanish company who won the bids to build the locks.
Surprisingly the number of companies registered in Panama actually increased according to an article from La Prensa last week. The amount of money invested also increased significantly.
Excerpts From LA Prensa: There were 761 more companies registered at the end of June 2009 than at the end of June 2008, according to statistics from the Ministry of Trade and Industry.
Between June 25, 2007 and June 25, 2008, there were 19,868 firms registered which reported a combined $687 million in investment. Between June 25, 2008 and June 25, 2009, that number grew to 20,629 businesses with investments totaling $717 million.
This is "extraordinary," said Delfín Aparicio, executive director of the Panamanian Microfinance Network, "especially in a year of crisis, when other companies in most countries are closing, merging or making strategic alliances to be sustainable."
The majority of the companies, 67.7 percent, are located in Panama City. There are 10.6 percent registered in Chiriquí, while the remaining 21.6 percent are located in the other provinces. Most of the companies are in the service and retail sectors.
Panama recently allowed businesses to register on the Internet through the site www.panamaemprende.gob.pa. According to government officials, this has cut red tape and costs, making it easier to start a company.
Officials with the National Union of Small and Medium Enterprises said that the new registration method is easier, and it has been one of the primary reasons that Panama's number of businesses has grown.
Governments and economist are typically over optimistic in times of financial trouble and my bet is Panama growth could go negative before the end of the year. After all, it had been revised down from over 7.5% to now 2.8%. Not much further to go to be in negative territory.
The Indesa consulting firm revised downward its forecast for the country's economic growth yesterday, bumping it from 3.2 percent to 2.8 percent.
Indesa economist Guillermo Chapman indicated that the .04 slide was not entirely a surprise to the firm and had much to do with the depressed economic state being felt the world over.
"The global crisis is having a severe impact on the growth of Panama, which we and other analysts had anticipated. The main mechanism of transmission has been the sharp fall in exports," he said.
Similar readjustments were made by other consulting groups as a consequence of the global recession. The IMF, for example, lopped off several points to its original 7.8 percent prediction for Panamanian growth this year, lowering it to about 3 percent.
Blame it on the world economy, but you can also blame it on the fact that 2008 was a banner year for our town and province. This article from La Prensa highlights some of the investments and tax revenues the province has seen over the last few years. Having lived here for 10 years I can say that David and the surrounding area has seen some spectacular investments in everything from shopping centers to office buildings. Maybe it was time for a breather, but all the construction has brought employment and prosperity that everyone would like to see continue. The article is in Spanish but I am posting some excerpts in English.
Excerpts: Sources at the Ministry of Commerce and Industry reported that in the first six months of 2009, a thousand 211 active companies made an investment of 11 million 28 thousand dollars, while in the same period of 2.008 million 162 companies invested 27 million 317 thousand U.S. dollars, reflecting a fall in investment of around 60%.
The new governor of the province, Enrique Fernandez, warned that the effects of the global economic crisis have affected to some extent on investment in Chiriquí. However, expressed confidence that the new government is capable of preventing the crisis from having big consequences.
While new investments in the first half is only 40% during the same period there was a growth in tax collection of the City of David.
The treasurer of the Municipality of David Ricardo Medical, said that for the fourth consecutive year of the first half revenues exceeded those obtained in the same period last year.
By June 12 this year, they have raised 2 million 206 thousand 227 U.S. dollars (See chart comparing tax collection).
The market for luxury cars is small in Panama but still reflect the consumer optimism in the number sold. As this article in the Panama Star points out, "
If you want to get a grasp on how the U.S. has lost jobs over the past year, here's a link to a website that has a great graph showing job formation and losses from 2004 to 2009 spread out over the country. To put the graph in motion, click on the arrow on the upper left hand side of the graph.
The number of jobs lost over the past year has been staggering but to see it unfold in this graph is truly stunning.
It is starting to look like China may be shying away from U.S. bonds and according to this article, increasing the gold reserves. One would wonder why they would not have done this a long time ago, but keeping the price low while buying lots of the golden metal may be the reason. Gold had been down about $60 this last week, but this news has brought it up considerably.
China reveals big rise in gold reserves
By Jamil Anderlini in Beijing and Javier Blas in London
Published: April 24 2009 09:31 | Last updated: April 24 2009 19:06
China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival of bullion after years of fading importance.
Gold rose to a three-week high of more than $910 an ounce after Hu Xiaolian, head of the secretive State Administration of Foreign Exchange, which manages the country’s $1,954bn in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.
The news could spark interest in gold among other central banks. “When the largest holder of foreign exchange reserves discloses an increase in gold holdings, other countries may decide to think more carefully about underweight gold positions,” said John Reade, a precious metals strategist at UBS.
The increase in China’s gold reserves has come primarily from domestic production and refining. However, the news raises questions about the future of Beijing’s foreign reserves policy.
Ahead of the G20 summit in London this month, China suggested global reliance on the US dollar as a reserve currency should be reduced.
China has been diversifying away from the dollar since 2005, when it broke the renminbi’s peg to the US currency and officially marked it to a basket of currencies, but it still holds more than two-thirds in US dollar-denominated assets by most estimates.
As its trade surplus and forex reserves ballooned in recent years, Beijing continued to buy huge amounts of US Treasury bonds while raising the proportion of purchases it allotted to other currencies and to gold.
China’s accumulation of gold has taken place as European central banks have gradually cut back back gold sales following a 1999 agreement to prevent the market from being flooded after prices were dragged sharply lower after the UK decided to sell part of its reserves.
“China’s announcement signals a broader shift in central banks’ attitude towards gold,” said Philip Klapwijk, chairman of GFMS, the precious metal consultancy.
Continue reading "Gold rises as China changes paper for metal " »
And that number represents only the first two months of the year. Panama's main exports are agricultural products and the world slowdown coupled with some government snafus have crippled the industry. The solution will be more government subsidies to help the farmers but the solution lays in producing more crops that are in demand on a local basis, which will lower the countries imports and deficits.
Economist Víctor Cruz noted that the decline is mainly due to the global financial crisis, but said the situation was further exacerbated by the lack of access to financing by the export sector. The loss of tariff preferences with the European Union also hurt the sector.
“We must take into account that the financial crisis has impacted Panama's major markets, the United States and Europe,” Cruz said.
The export of products such as coffee, shrimp, melon and watermelons have fallen more than 40 percent, according to official indicators. Only the exports of beef and fresh fish showed an increase.
When you really look at the worlds economic situation it is not all that complicated and really comes down to consumption and production. I use these two words a lot in the raising of my children. I point out to them that they are consumers until the time that they get out of college and get a job and start taking care of themselves. At that moment they become producers, but only to their ability to maintain their own lifestyles. Businesses need to produce beyond just maintenance. Business must have growth and profit. If they don't there is no point in the effort, unless of course you are a government entity pretending to produce something. All governments want to grow and bureaucratic growth is always done through this method of unprofitable production.
Which brings me to this article that very simply and elegantly explains the relationship between production and consumption and what happens when there are gross imbalances in either. Usually the imbalances are caused by government intervention or selectively enforcing the rules to the benefit of some at the expense of others, as has happened in this most recent economic malaise.
At the heart of America's economic Problems
A glance at some recent economic data shows significant declines in construction and transport, two key components of Panama economic well being. Couple this with recent reports of tourism declines, hotel occupancy drop offs, slow down at Colon free zone and you can clearly see that things are unwinding at a faster clip than expected in all sectore of the economy. And most of this data is for February with March and April's expected to be worse.
Canal reports a 14% decline in tonnage and a 7% decline in 20 foot containers.
An even more telling tale is that the Panama canal railway reports a 61% decline over February of last year with 263,000 cubic metric tons versus last years 634,000.
Construction has plummeted 18% over last year with with an even more dismal reduction in building permits of over 52%. One bright spot is permits for commercial buildings increased 4%.
I like this quote from our former deputy economic minister Domingo Latorraca. He is one of the few Panamanian economists who has been calling for a more austere government approach from the beginning.
“The statistics indicate that something is coming,” said Domingo Latorraca, former Deputy Economy Minister.
Latorraca, who also served as chairman of the Chamber of Commerce commented that the government’s “first priority should be to preserve jobs,” and suggested that the public sector model itself after the private sector in terms of better efficiency. “The government is called to be austere,” he added, referring to the need for stricter policies to regulate the economy.
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