Panama To Sell as Much as $500 Million of Bonds

This story by Eric Sabo (November 13) (Panama May Sell as much as $500M of bonds) from Bloomberg reports on Panama and a proposed sale of $500 million of bonds for financing subway and other infrastructure projects. This potentially forecasts a positive future for investment in Panama when it comes to considering purchasing real estate in Panama. Panama is investing in its infrastructure and the expansion of the Panama Canal. This is all positive news because Panama is stable politically and, where there is political stability, there is growth and prosperity.

"Panama may sell as much as $500 million of bonds to finance construction of a subway and other infrastructure projects, Finance Minister Alberto Vallarino said. “We have enough money for the budget now,” Vallarino said in an interview today in Panama City. “But if the timing is right, we will take advantage of it.”

Panama is preparing to return to overseas credit markets after Standard & Poor’s boosted the outlook on its BB+ credit rating to positive on Nov. 9, putting the Central American country on the cusp of investment grade. The ratings company said faster economic growth, boosted by the $5.25 billion expansion of the Panama Canal, and tax increases are helping keep the budget deficit in check. Panama last sold bonds in international markets in March, when it issued $323 million in a reopening of 7.25 percent securities due in 2015. Latin American governments and companies are selling debt abroad as the global economic recovery fuels demand for the securities. Panama is rated Ba1 by Moody’s Investors Service and BB+ by Standard & Poor’s. Both ratings are one level below investment grade. Vallarino said that he expects Panama to win an investment grade rating next year after President Ricardo Martinelli, in power since July, pushes through additional tax reforms to offset budget deficits. Economic Outlook - The economy will probably expand 3 percent in 2009, before reaching as high as 5 percent growth in 2010, Vallarino said. Credit-default swaps, contracts investors use to protect against non-payment, show Panama trading as investment grade. The cost of protecting Panama’s debt against default for five years is 1.37 percentage points, according to data compiled by CMA Datavision. By comparison, it costs 1.41 points to protect securities issued by South Africa and 1.49 points to protect bonds sold by Greece, countries that S&P rates at least three levels above Panama. A basis point equals $1,000 on a swap protecting $10 million of debt against default. Credit-default swaps, conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. Panama filed a form with the U.S. Securities and Exchange Commission yesterday saying it may sell up to $2.5 billion of bonds and warrants overseas."

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Los Faros de Panama Project Halted

The following is a Panama real estate news story from La Prensa newspaper entitled "Los Faros de Panama" Project Paralyzed in Punta Pacifica." World wide real estate developments were effected by the economic downturn and Panama, too, did not escape the slow down or halting of projects either. Los Faros de Panama, a real estate property complex of three towers with the highest being 84 floors, featuring luxury apartments was to be completed in 2010.

"The scene is revealing. The ambitious real estate project "Los Faros de Panama" (The Lighthouses of Panama), valued at more than $600 million dollars what was to be built in Punta Pacifica, is paralyzed. On the site the only thing there is a large concrete foundation with weeds growing. The project, promoted by Grupo Mall, was supposed to include apartments, a "condo-hotel ', casino, hotel, gym, offices and a shopping mall.

Apparently the project was hit by the international financial crisis and poor sales. La Prensa attempted to obtain a comment from the representatives of the project but they did not return our calls. (Editor's Comment: This was going to be a huge, ambitious project that would have dominated the skyline of Panama City in the area of Punta Pacifica. It was probably too large and too ambitious. No word on what the future holds for this project, the lot where it was going to be built, or the fate of the money invested in this project. I don't know if they were taking preconstruction contracts on the apartments, but they probably were, and is so then there are people out there holding paper with an uncertain future. The biggest and most ambitious projects got hit the hardest by the economic downturn.)"

News source La Prensa

Business Owners Foot Pensionado Discount Bill in Panama

If you thought that the government of Panama refunds business owners for the discounts to foreigners living in Panama with pensionado status, think again. It is actually the business owners that are giving the discount with no reimbursement from the Panamanian government, which is rather unfortunate and affects the income of the individual business owners. Pensionado status is given to retirees who immigrate to Panama and open up businesses or buy Panama real estate. It is a government program to encourage investment and pensioners to consider Panama as their future home. Read further this story from Business Panama.com.

"Panamanians and foreigners who have pensionado status in Panama are entitled to numerous discounts on everything from entertainment to medications. This visa option has lured thousands of retirees to Panama from countries around the world. This program is great for those taking advantage of the discounts, but it’s not such an ideal situation for those giving the discounts.

Under Panamanian law those in possession of a pensionado visa are eligible for a 50% discount on movies and sporting events, 30% off transportation and 25% off restaurant meals. This includes Panamanians and foreigners alike, and businesses are obligated by law to honor these discounts.

Many Panamanians are trying to survive on a meagre pension, and in comparison, foreigners have much larger disposable incomes. The main downside to these discounts is that it’s the business owners – not the government – that are responsible for taking the loss from those discounts.

If you receive 25% off your meal, the government does not compensate the restaurant owner. The 25% comes out of their profits. For many restaurateurs this can have a pretty big impact on their bottom line. Since this is a government incentive, it would only make sense that the government is responsible for covering the difference. Unfortunately, that is not the case.

Is it fair for the small business owner to have to cover the cost of these discounts, or should the government reimburse them? Since the government is not helping to offset this expense, should foreigners be able to take advantage of these discounts or should they be available only to Panamanians? What is your opinion?"

Source: Business Panama