Panama eyes $1bn bond to meet 7% economic growth goal

Panamas finance minister tells Global Markets that his country can hit economic growth of 6%-7% a year as he sets out plans to use a $1bn international bond to improve infrastructure and revitalise sectors that are lagging behind

  • By Lucien Chauvin
  • 02 Apr 2017
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Panama plans to raise $1bn on the international bond market as part of an investment drive to underpin economic growth and shrug off the impact of recent financial scandals.

Dulcidio de la Guardia, the economy and finance minister, told Global Markets that Panama, which holds an investment grade rating, would place at least $1bn in new international bonds to cover part of its $2.7bn financing needs for this year. The remainder of the financing will come from local capital markets and multilateral banks.

The country’s financing will fund its push to improve infrastructure and keep the economy growing at one of the highest rates in the region.

The economy grew by 4.9% in 2016 and this year is forecast to expand by 5.8%, according to the ministry. This would make Panama the fastest growing economy in Latin America and the Caribbean. The World Bank has a slightly lower forecast at 5.4%.

The minister said the goal was not to return to the high rates of the early 2000s, but grow the economy at its potential to avoid overheating and inflation. “Economists disagree about the potential, but it is somewhere between 6% and 7%. That is our target,” he said.

Infrastructure investment is the most straightforward of the three strategies De la Guardia said were needed to accelerate growth. The Panama Canal, a symbol of its hub status, continues to provide important returns. The canal transferred $1.04bn to the treasury last year and revenues are forecast to increase to $1.6bn this year.

The country continues to expand the principal airport in the capital, Panama City, and is working on the second line of the metro and a new convention centre, also in the capital.

The second strategy is to focus on sectors the government sees as lagging behind, particularly agriculture and industries. President Juan Carlos Varela’s government plans to submit legislation to the National Assembly in the coming quarter to revitalise the manufacturing sector.


Corruption investigation

The final strategy is the most complex and goes to the heart of some of the largest scandals in the country’s recent history.

Panama, like many countries in Latin America, has been dragged into the Brazilian corruption investigation. It is one of 12 countries in which Brazilian construction company Odebrecht admitted to having paid bribes to obtain contracts.

The government has decided to allow Odebrecht to complete the airport expansion and the metro line, but with strict supervision of its schedules and spending. It cancelled Odebrecht’s contract to build a 223MW hydroelectric plant, because the company was not going to meet deadlines to raise an estimated $1bn needed for construction.

In the meantime, the attorney general’s office has been working on an agreement with Odebrecht that includes a fine, recovery of what was paid in bribes, and a list of people who benefited from those bribes.

The other big scandal reverberating around the region takes the country’s name. The Panama Papers involved the leak of more than 11m documents from Panama’s Mossack Fonseca law firm. The documents detailed more than 214,000 offshore entities, many allegedly set up so that the owners could launder assets.

While not technically linked to the government, the Panama Papers raised questions about the country’s legal and financial sectors, once key sources of revenue.

“We have to make sure that the legal and financial sectors in Panama are in line with gold standards in terms of fiscal transparency and anti-money laundering regulations,” said De la Guardia. “The actions we have take are paying off and hopefully we can soon leave this behind us and re-launch Panama’s financial sector.”

  • By Lucien Chauvin
  • 02 Apr 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 13 Mar 2017
1 JPMorgan 94,925.33 384 8.39%
2 Citi 87,531.58 331 7.74%
3 Bank of America Merrill Lynch 84,341.49 288 7.46%
4 Barclays 75,288.19 241 6.66%
5 Goldman Sachs 68,504.71 208 6.06%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 16 May 2017
1 Deutsche Bank 19,381.65 47 8.82%
2 Bank of America Merrill Lynch 18,968.25 36 8.63%
3 HSBC 18,103.95 50 8.24%
4 BNP Paribas 8,911.57 55 4.05%
5 SG Corporate & Investment Banking 8,885.00 54 4.04%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 23 May 2017
1 JPMorgan 8,714.26 35 8.36%
2 UBS 8,283.47 33 7.95%
3 Goldman Sachs 7,736.57 37 7.42%
4 Citi 6,897.11 46 6.62%
5 Bank of America Merrill Lynch 6,215.31 24 5.96%