Panama: The Monkey Dressed in Silk

Presenting a fiscal balance as a success while continuing to increase public debt is to disguise the fact that the government is still spending more than it collects.

Friday, June 23, 2017

"Even if a monkey dresses in silk, it is still a monkey"

EDITORIAL

The habit of the governments to spend more than what they earn is as old as the Spanish saying about the monkey dressed in silk. Fiscal indiscipline is a cancer that corrodes the foundations of economies, and in Latin America it has become a habit that even has defenders within the Academy.

In order not to press the topic too much, it should be enough to point out that the fiscal rule which should be complied with -and is complied with by the states of European developed economies- is zero deficit.

Of course serious economists know this, and put to work in the governments of these countries, feel the need to demonstrate that fiscal numbers are going well. 

This is the case of the Panamanian Minister of Economy and Finance, who presented the state income and expenditure figures as a success, as they show a decrease in the fiscal deficit of 2016 compared to the deficit generated in previous years, without making it clear that while it continues to be the case that more is spent than is earned, indebtedness keeps growing. The fact that the deficit this year is smaller than last year's is not a good thing, but just something less bad.

For entrepreneurs who have to deal with, on a daily basis, the harsh reality of the continuous loss of competitiveness resulting from the fiscal indiscipline of governments, it is clear that even if the monkey wears silk, it is still a monkey.

See press release from the Ministry of Economy and Finance in Panama, entitled "Non-Financial Public Sector Deficit Decreases" (In Spanish).

¿Busca soluciones de inteligencia comercial para su empresa?



More on this topic

The Other Side of the Fiscal Crisis

August 2018

The cost of not making decisions about the serious fiscal problem affecting Costa Rica "is incommensurable and has the potential to affect not only the economic but also the social and democratic order of the country."

This is the emphatic and clear position of the Comptroller General of the Republic of Costa Rica regarding the serious and risky situation in which the public finances of the country find themselves. Furthermore, as is well mentioned in the report "Fiscal and Budgetary Evolution I semester 2018", published recently by the institution, if decisions related to solving problems of short-term liquidity and modifying the structure of public expenditure to the medium and long term continue to be delayed, the cost to the country will be much more than just economic.

Growing Fiscal Risks in Central America

August 2016

The countries facing the greatest risk of fiscal unsustainability within three years are El Salvador and Honduras, followed by Costa Rica and with less risk, Nicaragua and Panama.

From the  "Economic Outlook" section of the V Report on the State of the Region 2016:

A Cry in the Fiscal Night for Costa Rica

October 2014

"The defense and strengthening of the rule of law requires, as a starting point, enabling sound public finances. The rest is verbal pyrotechnics." Otton Solis.

EDITORIAL

Costa Rica is subject to a rare political situation, where the founder of the party in power and his first deputy, defends rationality as a tool of governance and for managing public finances, in the face of voluntarism in the matter on the part of the Executive, which adds more risk to the serious threat of the fiscal deficit inherited from previous governments, presenting a budget that increases state expenditures by 14%.

Financial Sustainability of the State in Guatemala

October 2014

"Net contributors are providing less and less taxes in relation to the services they receive, while net receivers are demanding more and more benefits compared to what they provide."

Despite the relatively small size of government relative to the economy, a factor which some international analysts point to as a factor which undermines a country's development, "...

ok