PANAMA CURRENT EVENTS

GDP Outlook 2008: Venezuela Worst, Panama Best


WORST & BEST: Presidents Hugo Chavez of Venezuela and Martin Torrijos of Panama lead the worst- and best-performing economies next year, the IMF forecasts. (Photo: Panama President's Office)

Venezuela's oil boom is coming to an end after several years of strong economic growth, the IMF predicts.

BY CHRONICLE STAFF
Venezuela, Latin America's fourth-largest economy, will have the lowest economic growth rate anywhere in Latin America next year, while Panama will have the highest growth, the International Monetary Fund predicts.

Venezuela's GDP will only expand by a mere 2.0 percent in 2008, the IMF says in its latest World Economic Outlook, released last week. That follows four strong years with average economic growth of 11.3 percent, according to a Latin Business Chronicle analysis of IMF data for the 2004-07 period.

That is the worst performance since the 2003 (when the economy declined by 7.8 percent). The slowdown comes as Venezuela also is expected to post the highest inflation rate in Latin America next year.
Venezuela's growth rate next year is also less than half of the forecast for Latin America as whole - 4.2 percent, according to the IMF.
REDUCED REVENUES
The forecast of a Venezuelan slowdown comes two weeks after PDVSA, the country's state oil giant, announced that its net income fell by 26 percent last year. PDVSA accounts for nearly 45 percent of the government's revenues and 78 percent of Venezuela's total exports, according to the Associated Press.
Venezuelan economist Pedro Palma, who heads up MetroEconomica consultancy in Caracas, has repeatedly warned against a slowdown in the economy.
Brazil and Mexico, Latin America's largest and second-largest economies, are expected to expand by 4.2 percent and 3.5 percent, respectively.

Ecuador, Latin America's eight-largest economy, is expected to post the second-worst result in 2008. Its economy will expand by 2.9 percent, the IMF predicts.
Venezuela and Ecuador are both advocating populist economic policies, which the IMF warns against.
"Policy slippages that undermine investor confidence are [a] concern, particularly against the backdrop of pressures for populist fiscal measures in some countries," the fund says. "In Ecuador, concerns about a possible external debt restructuring saw spreads on external debt widen sharply earlier this year, although they have narrowed more recently."

PANAMA BEST
On the opposite end is Panama, which will likely expand its GDP by 6.8 percent next year, which is higher than any other economy in Latin America. That follows four years of solid growth, averaging 7.3 percent per year, according to our analysis. And in contrast to Venezuela, Panama will post low inflation next year - only 2.4 percent, the IMF forecasts. That's the second-lowest rate in Latin America.

Argentina and Peru follow Panama in terms of the highest GDP growth next year. They will each post GDP growth of 5.5 percent. In the case of Argentina, the 2008 rate is a marked slowdown compared to the high growth seen in the five year period 2002-07, when GDP expanded by an average of 8.6 percent per year. Peru's 2008 growth comes on the heels of four years of growth averaging 6.4 percent.

All in all, 11 countries will see reduced growth rates next year compared to 2007, while seven will see increases and one (El Salvador) will repeat the same growth rate, the IMF predicts.
Among other noticeable changes:
" Bolivia's GDP is expected to grow by 5.3 percent - its highest level since 1991.
" Haiti's GDP will grow by 4.0 percent - its best performance since 1996.
" Paraguay's GDP will grow by 4.5 percent - the best result since 1995.
Measured by trade pacts, the Andean Community will perform best, growing by an average of 4.6 percent next year. The CAFTA countries follow, with an average growth of 4.3 percent, while Mercosur will see the lowest growth rate: 3.9 percent, according to a Latin Business Chronicle analysis of IMF forecasts.
2007 ESTIMATE

This year, the IMF estimates Latin America will grow by 4.9 percent, which is slower than the 5.5 percent registered last year. That is higher than the growth expected in the United States, the European Union and Asia, but lower than Africa and the Middle East, according to a Latin Business Chronicle analysis of IMF data.
"The external environment is expected to become somewhat less favorable as global growth moderates and oil and metals prices decline from the record levels of 2006," the IMF says. "A sharper-than-expected slowing in the United States would hit Latin America harder than other regions."

Countries and regions that have particularly close trade links with the United States (such as Mexico, Central America, and the Caribbean) or are significant exporters of oil and metals (Chile, Ecuador, Peru, and Venezuela) will be most affected, the IMF warns. On the other hand, lower oil prices will benefit countries that are not significant exporters of commodities (including many in Central America and the Caribbean). And the strength of grain prices will help exporters of agricultural products such as Argentina and Brazil, the fund says.

Argentina will see Latin America's strongest growth this year (7.5 percent), followed by Panama (6.6 percent) and Venezuela (6.2 percent). Ecuador, will see the lowest growth (2.7 percent), followed by Mexico (3.4 percent) and Haiti (3.5 percent). Brazil should grow by 4.4 percent, the IMF estimates.
All in all, 13 countries will see reduced growth rates this year compared to 2006, while only four will see increases and two will repeat the same growth rate, the IMF predicts.

Measured by trade pacts, Mercosur will perform best, growing by an average of 5.4 percent this year. The CAFTA countries follow, with an average growth of 4.9 percent, while the Andean Community will see the lowest growth rate: 4.7 percent, according to the Latin Business Chronicle analysis.
The 2006 growth marked the third consecutive year of strong growth. "2004-06 was the strongest three-year period of growth in Latin America since the late 1970s, although growth still lagged that in other emerging market and developing country regions," the IMF points out.
© Copyright Latin Business Chronicle

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From The Times
February 08, 2007

UK developer wins $700m Panama contract
James Rossiter

London & Regional Properties, a privately owned British developer, has won the right to build a new mini-city on the banks of the Panama Canal, The Times has learnt.

The London-based firm, founded and run by the brothers Ian and Richard Livingstone, beat competition from 16 other international firms to be selected as preferred bidder this week.

The $700 million (£355 million) project promises to be one of the largest development projects in the world, covering 2,750 acres, and it could transform the trading fortunes of Panama.

The plan is the most ambitious scheme to be taken on by London & Regional, probably best known in Britain as the firm that bought the old Marks & Spencer headquarters on Baker Street.

The area in Panama, just half a mile from Panama City and right on the canal, covers an area the size of London stretching from Regent's Park in the north to the Oval cricket ground in the south and from Sloane Square in the west to London Bridge in the East.

At the heart of the 40-year building programme for the "Howard Project" is the proximity to the world's busiest trade canal and an air-strip built by the Americans stretching 2.75km but which has been largely derelict since US forces pulled out of the country eight years ago.

The site is earmarked for a massive new trading hub, known as a "multimodal port" which will take in both the air-strip, the canal and build vast depots to store all manner of goods that pass through the canal.

Jason Mills, development director at London & Regional, said: "This underlines the attractiveness of Panama as a global investment destination." About 60 per cent of the trade in and out of the United States passes through the Panama Canal, while the land-site sits on the Pan American highway, a motorway that runs from South America right up to California, accounting for more US trade.
Singapore Airlines has already struck a deal to refurbish its Asian fleet of aircraft on the site.

The area is also earmarked for thousands of new homes, hotels, a golf course and science park, all generating at least 20,000 jobs. London & Regional have teamed up with Isaac and Jaime Gilinski, the father and son Panamanian developers who carry considerable influence in Central America.

Sources close to the deal said that London & Regional did not need any further debt or equity partners for the project. The Panamanian Government invited the World Bank two years ago to run an international auction to select a developer of the site.

London & Regional beat off competition in the final round from the Miami-based property firm Easton Group. Other bidders included the Codina Group, from Florida, and Cabi Control, from Mexico.

Mr Mills said: "The Panamanian Government has been forward-looking in hiring the World Bank in a transparent tender process." The Panamanian Cabinet is due to ratify the decision to appoint L&R next week, with completion expected next month. A formal master planning application will be submitted three months later.

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The Sovereign Society Offshore
Thursday, March 1, 2007
Vol. 9 No. 52

As if there wasn't already enough great news flowing out of Panama...
During 2006, Panama received more than US$2.4 billion from direct foreign investment. That's more than twice that of 2005, according to the Panamanian Ministry of Trade and Industry.

No doubt this will contribute to the growth of Panama's GDP which may exceed 6% this year. The financial gains were made from expanded tourism, transportation, logistics, agriculture and fisheries resources.

Factor in the proposed US$6 billion expansion of the Panama Canal and you can bet countries like the U.S., Japan, China and some European nations will be increasing their foreign investments in our favorite tax haven.

Also good economic news came after a White House meeting in Washington last week between Panama's president, Martin Torrijos and U.S. President George Bush. "I am committed to a Panamanian free trade agreement because I believe it's in the interest of the United States that we have a free trade agreement with your vital country," Bush told Torrijos during the visit.

The free trade deal aims to eliminate nearly 90% of Panama's tariffs on industrial goods. Immediately, with remaining tariffs phased out over 10 years. The main opposition to the deal comes from U.S. labor unions and their Democratic party allies now in control of the U.S. Congress. The Democrats say they want to force better working standards for Panama workers before any trade deal. But in fact some argue that the true reason for U.S. union opposition is an unfounded fear of losing American jobs, although Panama is not a major manufacturing country.

BOB BAUMAN, Legal Counsel

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