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Wednesday, October 18 2017 @ 02:12 PM EDT

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Ministry of Commerce and Industry Reports On Progress

Money MattersThe excellence in processing the products that have entered Panama from the United States since the bilateral Free Trade Agreement with that country came into effect is one of the major achievements of the Ministry of Commerce and Industries for 2012. At a press conference, Minister Ricardo Quijano made ​an ​accountability presentation of the entity for the year.

Quijano said shipments from the United States have been entering Panama since 31 October 2012, when the Free Trade Agreement took effect, and they have not had any problems, which is an important milestone. Quijano said they are already negotiating other treaties. Regarding the FTA with Colombia, he said he hoped the resumption of negotiations will take place later this year or in early 2013.

Another achievement of the Ministry of Commerce and Industry has been to detect companies that are not in compliance. A total of 2,300 have been been inspected, and 86 have been fined, for a total of $180,000. (Telemetro)

Editor's Comment: Quijano always looks so ... happy.

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Panama Is Spending More Than $2 Billion Per Year To Service Debt

Money MattersServicing Panama's accumulated public debt during the first nine months of 2012 amounted to $2.147 billion, an amount which, at this time of year, has already surpassed previous completed payments. For all of 2011, the debt service was $2.186 billion and in 2010 it was $2.034 billion. The debt service costs are growing, as is the the total outstanding balance. In October, the total public debt reached $14.449 billion, according to the Directorate of Public Credit.

In the last year, the government of Ricardo Martinelli increased the State's commitments by $1.483 billion, a figure comparable to the contract with the Line One Consortium, to build the new Panama Metro subway system. During the more than three years that Martinelli has been in office, the Government has increased the debt balance by $3.647 billion, an amount that far exceeds the cost of the design and construction of the third set of locks of the Panama Canal.

And this comes when the government is collecting more money than ever. Between January and October, the state's current revenues were $4.741 billion, or $733 million (18.3%) more than during the same period last year. To this debt balance already on the government's books, one should add some of the "turn key" projects that have already been let on contract, which exceed another $3.4 billion dollars in total.

The Government justifies this increase in debt with the infrastructure plan they are executing in the country, with the promise of increased productivity. They also argue that, in relative terms, the total Panamanian debt is being reduced due to the growth of the economy. (Prensa)

Editor's Comment: The administration of Ricardo Martinelli has borrowed more money, and the cost of "debt service" (interest) is higher than ever, that's true. It's also true that the government of Panama is held back by strictly enforced debt ceilings, which are keyed to the total GDP and limited to about 41% of GDP or so. The government of Ricardo Martinelli has operated below those debt ceilings.

They have also done some debt restructuring over the years to refinance at lower interest rates, to reduce the costs of debt servicing. They have been able to do this because Panama achieved "investor grade" status under Martinelli, and also interest rates have dropped to historic lows since the global financial crisis started in 2008.

What's more, it's also true that Martinelli has been using this "turn key" or "key in hand" approach more frequently as their time in office slowly draws to a close. With these types of contracts, the builder has to obtain their own financing, and they only get paid when the project is built and delivered to the government. This means Martinelli can sign contacts now, and commit the Panamanian government to projects that will be built during the administration of the next president - whoever that turns out to be.

Opposition politicians will be trying to use these sorts of issues against the Cambio Democratico candidate between now and the 2014 elections - raising specters of "big, bad, scary debt" to instill fear in the electorate. Martinelli's crew will have to handle the task of explaining themselves, and educating the public on these issues of public debt policy. If handled correctly, they can make it a positive.

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Inflation in Panama at 4.1% Through October

Money MattersThe Consumer Price Index in Panama grew by 0.1% in October, bringing the total accumulated increase during the first ten months of the year to 4.1%, reported on Monday the National Institute of Statistics and Census. Annual inflation, measured from October 2011 to October 2012 stood at 5.3%, driven by increases in the prices of food and beverages (7.2%), transport (6.3%), furniture and household equipment (4.7%), among others, according the the INEC report. Last October, the areas showing increases in the CPI were transport (0.8%), health and goods and services, both with a rise of 0.5%, and furniture, household equipment and routine maintenance of the house (0.2%). These increases were "partially offset" by the behavior of the sectors of food and beverages, clothing and footwear, with declines of 0.1% in prices, according to official information. The Panamanian government has estimated that inflation this year will be about 6%, similar to 2011. (Telemetro)
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Martinelli Defends Pay Increases For Highest Ranking Police Officers

Money MattersThe president, Ricardo Martinelli, defended today, Monday, November 12, pay increases for the police officers who have the rank of commissioner and deputy commissioner, recently announced by the Security Minister, Jose Raul Mulino.

The President said the increase is necessary because of the nature of their work, and he said 25 years ago lieutenant colonels and colonels were earning more than a commissioner earns today. "... we must pay all of the levels of security well," said the president. Martinelli said it is not necessary for the pay increase to go through the Cabinet, it only needs his signature and that of the Security Minister.

With these increases, which have been questioned by various sectors, the salary of the commissioners and deputy commissioners from now on will be the same as that currently being paid to ministers and deputy ministers, respectively.

The president made his statements at an event to release $100,000 to the National Baseball team in Veraguas. (Estrella)

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Norway Panama tax haven users lose anonymity

Money Mattersby Michael Sandelson - Rich Norwegians with money in Panama will now have to eat their hat. The Ministry of Finance unveils a new trans-Nordic-Panama tax reporting agreement.

“It’s been a hard nut to crack, but the Nordic Countries have managed it following considerable pressure,” Deputy Finance Minister Roger Schjerv told Aftenposten, calling it “a major breakthrough.”

“The US is the only country that has previously reached this type of agreement with Panama, but it certainly has bigger muscles than us,” he acknowledged.

Norway’s tax inspectors have been doggedly sniffing for peoples’ stashed cash for years.

A 100-strong team was established in 2010 to try to find a believed hidden NOK 200 billion.

It included countries or places such as Jersey, the Cayman Islands, Gibraltar, and Anguilla.

While oil-abundant Norway’s Sovereign Wealth Fund has also been enjoying buying property out of tax haven Luxembourg, the march to track down the money in problematic paradise-based refuges continues.

"Tax authorities can now obtain information on money transfers, information we have not had access to earlier,” said the Deputy Finance Minister, declaring Panama has many Norwegians established there.

Roger Schjerv admitted that officials still face a challenging task, as the money will probably be transferred out of Panama to other places.

He warned, however, people may run but they will not be able to hide. “It’ll become harder for those who refuse access as we enter into agreements with more countries.” (theforeigner.no)

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Supreme Court Suspends Reorganization of Financial Pacific, Inc. in Panama

Money MattersThe reorganization process followed by the Superintendency of Securities against the brokerage firm Financial Pacific, Inc. was suspended yesterday by an official letter issued by the President of the Supreme Court, Alejandro Moncada. The resolution that decreed the suspension was issued as part of a process of of guarantee protection presented by the brokerage firm through its president, West Valdés. The process is pending its final resolution.

Yesterday, the Superintendency of Securities sent a report to the Supreme Court maintaining its position on the decision to reorganize the brokerage firm. The process was initiated by a resolution issued by the Superintendency of Securities on 16 October 2012, in which they named the attorney Maruquel Pabon Ramirez as the person responsible for the reorganization of the company.

Iván Clare Arias, the Director of Financial Pacific, Inc. agreed with the ruling (by the Supreme Court.) "We are excited with the resolution in our favor, and we are working to restore calm to the industry," he said.

Alejandro Abood, the Director of the Superintendency of Securities, said once they learned about the Supreme Court's decision, on 7 November 2012 they suspended the license (of Financial Pacific, Inc.), which precludes their participation in transactions. (Prensa)

Editor's Comment: In these cases there's almost always more going on behind the scenes than what meets the eye. So far, no one has come forward to explain it all to me. Sooner or later (probably today) I expect I'll get a phone call. I'd like to know the "real" reasons behind all of these maneuvers. And to be honest, I haven't cared enough to dig it out myself.

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Government of Panama Tax Revenues Increase By 18.3% In First Ten Months of 2012

Money MattersThe government of Panama collected more than $4.7 billion in current tax revenues through the first ten months of 2012, representing an increase of 18.3% compared to the same period of last year, and a surplus of 5.5% in terms of the budgeted amount, officials said.

The Director of Revenue of the Ministry of Economy and Finance (MEF), Luis Cucalón, said in a statement that both comparative results are "the product of extraordinary performance in tax collection", which generated an increase of $775 million and a budget surplus of $318.2 million.

Cucalón said in less than four years they have collected more taxes than that accumulated during the previous eight years.

Between 2001 and 2008 the government of Panama collected a total of just over $13.2 billion dollars.

In comparison, from 2009 through October 2012 the administration of Ricardo Martinelli has already collected more than $13.7 billion, an increase of $554.5 million.

He said the growth in current revenue was driven primarily by the proceeds from income taxes from the legal segment, the implementation of the new tax equipment as a means of controlling billing, the development of specialized techniques, and the implementation of unit dedicated to controlling and monitoring the compliance of large taxpayers.

Between January and October 2012, tax collection was $3.871.6 billion, of which $2.041 billion was in direct taxes, and $1.83 billion was in indirect taxes.

Also in this period the government received non-tax revenues totaling $816.6 million, including $314.3 million dollars in annuities, tolls and services from the Panama Canal, plus profits from the participation in the mixed capital companies (the power and telecommunications companies that had been privatized), as well as contributions from other government entities.

As for the month of October this year, the current revenues totaled 417.9 million dollars, exceeding by $25.6 million (8.3%) what was obtained in October 2011, and $11 million or 3.4% more than what was budgeted for the month. (Panama America)

Editor's Comment: When you combine a quickly expanding economy with improved tax collection methods, the end result is greatly increased revenues for the government. And there you have an explanation as to why the government of Ricardo Martinelli has been able to do so much more than the past administrations of Mireya Moscoso (1999 - 2004) and Martin Torrijos (2004 - 2009). He's had twice as much money to spend to build "stuff" - like highways and bridges and schools and hospitals. Most importantly, there's nothing on the near or intermediate horizon indicating a slowdown, anytime soon. Every year the economists predict growth of about 8.5%, and it normally comes in at about 10%. This year is no different, and the same will continue for 2013. The 10% growth of the economy accounts for most of the increases in revenue, and the rest is made up by improved collection methods. These are the kinds of things that happen when you have a smart businessman running the country. Ahem...

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Panama Will End 2012 With 10% Growth - De Lima

Money MattersThe Minister of Economy and Finance, Frank De Lima, predicted that Panama's economy will close this year with a growth rate above 10%. He also said the year will close with a fiscal deficit of 2.6%, below the 2.9% level mandated by law. The official said during 2013, Panama's economy could grow by 8.5% or more, conservatively speaking. (Critica)

Editor's Comment: According to the World Bank, the Gross Domestic Product per Capita (PPP) in Panama has now reached $15,695 which puts the country at 57th in the world. This means only Chile and Argentina are ranked higher than Panama by this measure in all of Latin America.

GDP per Capita (PPP) is one of the best ways to compare the relative strengths of the economy of one country against another. In short, it's sort of a reflection of how much money each person in that country has flowing through their fingers every year. On this scale the United States is ranked 8th at $48,442 and that's pretty close to the current median household income levels. And before you econ geeks out there jump my ass, this is a very "simplified" explanation of a relatively complex and technical issue.

In Panama this number has been quickly and steadily improving since 2004. The GDP per Capita (PPP) in Panama has been growing much faster than practically any other country in Latin America. Before too long Panamanians will be - comparatively speaking - the "richest" citizens in Latin America. Only two countries are richer, Chile and Argentina. Panama has recently passed Mexico and Uruguay according to World Bank Data. Right now Panama is in the $15,000 range while Chile and Argentina are in the $17,000 range. To get an idea of how long it might take for Panama to catch and pass Chile and Argentina, take a look at this older chart, reflecting Panama's GDP per Capita (PPP) data from 1980 to 2008. You can see how growth was basically flat, dropped in the last two years of the military dictatorship, rose slightly leading up to the implementation of the Panama Canal Treaty, and then took off like a bat out of hell starting in about 2004. Now, plot 2011 and $15,695 on this chart to see where we are today. The bottom line remains the same. The good economic news for Panama just keeps pouring in, as it has practically non-stop since 2004.

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Want To Know Why HSBC Has Been Closing Accounts Held By US Citizens in Panama Recently? It Might Have Something To Do With This

Money MattersBy DON WINNER for Panama-Guide.com - Over the past few months I've been hearing more and more reports that HSBC Bank in Panama has been arbitrarily closing bank accounts held by citizens of the United States. When the now former customers asked why their accounts were closed, bank officials usually cite new rules and regulations being applied by the government of the United States and the IRS on their citizens, and former customers were told the bank doesn't want to have to have to deal with those issues. In a possibly related issue, it is now being reported HSBC, particularly in Mexico, has allowed the laundering of drug money that was sent to accounts in the United States. HSBC Panama is not mentioned in this report. See:

HSBC fears U.S. money laundering fines to top $1.5 billion

By Steve Slater and Matt Scuffham and Aruna Viswanatha | LONDON/WASHINGTON (Reuters) - A U.S. fine for violating federal anti-money laundering laws could cost HSBC Holdings significantly more than $1.5 billion and is likely to lead to criminal charges as well, Europe's biggest bank said on Monday.

HSBC said the U.S. investigation had damaged the bank's reputation and forced it to set aside a further $800 million to cover a potential fine for breaches in anti-money laundering controls in Mexico and other violations. The provision was on top of $700 million it put aside in July.

"It could be significantly higher," Chief Executive Stuart Gulliver told reporters on a conference call, saying the latest provision was based on discussions with the various U.S. authorities involved in the probe. (more)

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U.S.-Panama trade pact brings hope, controversy

Money MattersBy Julian Aguilar - The Texas Tribune - The final component of a trade pact between the U.S. and three non-border countries is set to launch on Wednesday, with proponents promising that the agreement with Panama will create thousands of jobs and domestic revenue in an economy that can desperately use both.

Opponents of the U.S-Panama trade pact say the agreement — which will gradually eliminate current tariffs on a range of goods — will slash and outsource American jobs, and create tax loopholes for companies looking to pay fewer taxes.

The trade agreement, first negotiated by President George W. Bush, was approved by the U.S. and Panama governments in 2007 and signed into law by President Obama in October 2011. It was negotiated along with the free-trade agreements with Colombia and South Korea, which took effect earlier this year.

Under the agreement, about 90 percent of exports of consumer and industrial goods will become duty-free immediately. The remaining tariffs will be gradually eliminated over 10 years. The pact has the backing of U.S. Sens. John Cornyn and Kay Bailey Hutchison, Agriculture Commissioner Todd Staples and several members of the Texas congressional delegation. (more)

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