Welcome to the Panama Weekly News Roundup! A shot across the banker’s bows from Panama’s civil banking watchdog, an extended deadline to help resolve the Panama Canal expansion troubles, financial upset in Venezuela causing a ripple, and more, all in this week’s Panama Weekly News Roundup!
Warning to Panama Banks on Free Zone Loans
The banking authority of Panama, the SBP, has released a statement warning banks about their loans to companies in Colon’s Free Zone. Tariff protection has increased the level of risk for Panamanian banks, with the Free Trade Zone having a high concentration of South American investors. While this may sound like a blow to trade, there are a statistically low number of bad loans in the Free Zone.
“”The contingency measure requested of the banks brings to the forefront the risk that is probably anticipated by the regulator on loans granted to companies in the free zone.
The tariff protection in Colombia and Venezuelan currency restrictions have caused an imbalance for many of the companies with which they are linked reports La Prensa.
“… The SBP should identify which banks have negative exposures or bad loans in the FTA, as the measure means sacrificing profit for all of the banking entities, even though their customers are not at risk,” say sources close to the industry.
“Not all Venezuelan customers are behind in payments. Not all banks that lend to the free zone have reported bad loans.””
Source: Newsroom Panama
Deadline to Resolve Canal Expansion Receives Extension to February
An expected halt on the Panama Canal expansion has been postponed until the beginning of February, with contractors and the Canal Authority desperately seeking to avoid further delays. Work on a third set of locks will continue under the expanded timeline, with construction continuing as normal while the two parties settle a contract related to an estimated $1.6 billion dollars of extra work.
“Work on expanding the Panama Canal will continue through at least next week after the construction consortium officially extended the deadline until Feb. 1 to resolve a dispute over $1.6 billion in cost overruns. The deadline had been set for this past Monday. However, the Panama Canal Authority and the consortium threatening to shut down the project have kept negotiations going.
Panama officials said a proposal presented this week by the consortium Grupos Unidos por el Canal (GUPC) could resolve the dispute.”
Source: TicoTimes
Venezuela Slashes Allowance for People Visiting Florida, Panama, Costa Rica
The government of Venezuela has dramatically slashed foreign spending allowances in a number of destinations and countries, with an upper limit in Florida, U.S. being the hardest hit. Travelling Venezuelan citizens will now have to get by on a credit card allowance of just $700 dollars in the U.S. state, down from $2,500 in 2013. Travellers to Panama and other Caribbean and Central American destinations have seen their internet purchases cut as well, with a drop of almost 50% from the prior limit of $500. This comes in the wake of Venezuela’s savaged currency experiencing a number of devaluations, with the socialist country trading at 11.36 bolivars per dollar – a huge gain for the dollar compared to the previous figure set by the Venezuelan government of 6.3 bolivars to the dollar.
“Travelers to the Dutch Antilles, Colombia, Costa Rica and Panama also had their allowances reduced to the same amount, according to a statement in the Official Gazette today. The allowance for Internet purchases was cut to $300 from $500.
Florida has been Venezuelans’ holiday destination of choice for decades, with airlines offering 10 direct flights between Caracas and Miami every day, according to data compiled by Bloomberg. Still, tickets have been increasingly hard to get as airlines reduce bolivar sales because of currency controls imposed by the government.
Today’s measures come after Economy Vice President Rafael Ramirez announced a partial devaluation on Jan. 22. Venezuelans traveling abroad, airlines and foreigners sending remittances home must use a secondary exchange rate determined at weekly auctions, he said. The rate set at the latest auction was 11.36 bolivars per dollar, compared with the official rate of 6.3.”
Source: Bloomberg
Storm Clouds Gather Over Hong Kong-backed Canal Slicing Through Nicaragua
The far reaching plans of Chinese developers and Nicaraguan politicians look set to push ahead, despite turmoil in the political arena regarding environmental, economic, and social damage from a new 290km-long Canal project. Built as a rival to Panama’s expanded canal, the new Nicaraguan mega-project is expected to cost a vast chunk of Nicaragua’s treasure, with the price tag weighing in at 3 times the value of the country’s entire economy. Currently, opposition parties and local rights groups are demanding a rethink of the government’s potentially overreaching plan, with many seeing it as a damaging rather than restorative addition to the economy.
““The stakes are high: if the transoceanic canal gets the go-ahead, it might take a decade to build, gobble US$60 billion and slice through vast stretches of tropical forest. At 290 kilometres, it would be more than three times the length of the US-built Panama Canal. Plans indicate it would accommodate supertankers and giant container ships that are far bigger than those the Panama waterway will accept when its expansion is complete next year.
For Nicaragua, the project may launch this nation of five million people from poverty, creating jobs and prosperity.
For China, the plan would mean easier access to crude oil from Venezuela and a greater foothold in the western hemisphere. Such geopolitical considerations may mean more for China than the price tag.“In the initial scenarios we looked at, you can see that up to a million people could be employed within the 10-year span of construction,” says Manuel Coronel Kautz, an engineer who heads the Transoceanic Grand Canal Authority of Nicaragua.”
Source: South China Morning Post
3 of our Most Read Articles in 2014
This month we’ve had a large amount of interest in a number of articles addressing the present, clearing up the past, and discussing the future. The first article we’ll take a look at focuses on a decision overturned, as Panama’s National Assembly removed an international taxation clause which would see corporate bodies and offshore corporations subject to more than just Panama’s low “local” taxation. Read more about the repealed Panama tax law
Our second article centered on the benefits of opening a business in a tax haven such as Panama, with access to excellent banking facilities, secrecy laws, and simplified steps to establishing foundations and more. Continue reading about the benefits of opening a business in a tax haven
Panama’s Economic Outlook was our vision of the future, taking in the upcoming fiscal year for the republic as well as examining commentator’s views on reasons to invest over the upcoming year. 6 years of strong growth consistently have led to an unshakeable faith in the country’s potential – we break this sentiment down and get to the facts of the matter. Read our perspective on Panama’s economic outlook for 2014.
