Panama: Canal Revenues Could Pay Sovereign Debt

A fund will be created to use part of the proceeds collected after 2015 to address government debt

Thursday, September 1, 2011

The Minister of Economy and Finance announced that the measure must be accompanied by a tight fiscal policy, in order to keep the balance of the debt under control.

Although the proposal is still in its initial phase of creation and analysis, it is expected that the fund could also reduce the debt / GDP ratio, as the implementation of the fund would go hand in hand with greater expenditure control measures.

An article in Prensa.com notes that "with the creation of a sovereign fund, the role of the Trust Fund for Development (FFD in Spanish) would have to be defined, according to the Minister Alberto Vallarino, who argued that the FFD could be used to develop underprivileged areas and raise the value of the land, raising the performance of resources. As the government is committed to the development of other infrastructure projects and social projects, it would not have capacity to invest in underprivileged areas.

For the Government, the fund will have positive consequences for the country's rating. However, some think that a new instrument would be unnecessary seeing as the FFD already exists."

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More on this topic

YES to Panama Savings Fund

May 2012

The Panamanian Chamber of Commerce supports the creation of a sovereign fund and recommends separate discussion of matters relating to limiting the fiscal deficit.

A statement from the Chamber of Commerce, Industries and Agriculture in Panama (CCIAP) reads:

The Chamber of Commerce, Industries and Agriculture of Panama, agrees with the establishment of a Savings Fund for Panama and recommends that the National Assembly have a separate debate over matters relating to the amendment to limit the fiscal deficit, which was incorporated into the bill creating the Fund.

The Lesson of Sovereign Funds

May 2012

Governments should act as good parents, thinking about the welfare of future generations, not just about the next election.

Governments should act as good parents, thinking about the welfare of future generations, not just about the next election.

In his article in Martes Financiero, Oscar Castaño Llorente discusses the rationale of the proposed creation of the Panama Savings Fund (FAP in Spanish), not only in its philosophical scope, but also from a practical point of view, present and future.

Sovereign Fund Approved in Panama

April 2012

The Fondo de Ahorro de Panamá (Panama Savings Fund) aims to be a mechanism for economic stabilization and savings for natural disasters or economic crises.

"The Cabinet has approved a bill proposing the creation of a sovereign fund called the ‘Fondo de Ahorro de Panamá ‘(FAP), which according to a statement from the presidency will have two parallel objectives: National savings for future generations and economic stabilization in case of predetermined situations such as natural disasters or economic crises," reported Capital.com.pa.

Panama to Repatriate Capital from the Development Trust Fund

December 2011

The government wants to reform the law so that it can use the $1,300 million for infrastructure and strategic projects within the country.

98% of assets in the Trust Fund for Development (FDD), are held outside of Panama, giving low yields: 6.02% in 2010, and 4.19% in 2011.

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