Panama will be the richest country in Latin America in 2021, according to Moody’s rating agency

La calificadora de riesgo Moody’s evaluó a Panamá calificó el grado de inversión del país en baa1 con una expectativa estable y un fuerte crecimiento a mediano plazo aunque en porcentajes más bajos que en la última década.

Dicha calificación está sujeta a factores muy puntuales que la firma confía se implementarán en el país como: una política fiscal estricta con respecto al pago de la deuda, la fortaleza de ciertas instituciones gubernamentales y la capacidad del gobierno en el cobro de impuestos, lo que dará mayor credibilidad al país a nivel internacional en cuanto al compromiso de repago de la deuda. Una de las grandes fortalezas que actúan a favor de Panamá al momento de ser evaluado por este tipo de firmas, es el flujo continuo de aportes que realiza la Autoridad del Canal de Panamá (ACP) al gobierno central, el rol logístico del país en la región y la capacidad de expansión, lo que perfila al país en el 2021 como el más rico de América Latina, según la calificadora de riesgo. Lo que deja muy bien parado al Istmo en comparación a otras economías del mundo azotadas por el covid-19.

El crecimiento medio anual del PIB real fue de 6,2% entre 2010-19, respaldado por altos niveles de inversión que hoy están golpeados severamente por el virus que contraerá la economía 1% del PIB real. Aunado a esto, las perspectivas de crecimiento a mediano plazo serán moderadas en relación a los últimos 10 años, pero seguirán respaldadas por los aportes del Canal y la inversión continua en el país. En general, Panamá continuará mejorando su posición como punto logístico y está en camino a convertirse el país más rico de América Latina en términos de poder adquisitivo per cápita en 2021.

En el caso de Panamá la calificadora analiza que el país tenia un record sostenido como una economía en crecimiento por los altos niveles de inversión y el rol global del Canal de Panamá. Estima que la pandemia afectará severamente el crecimiento que se tenía proyectado para 2020 y conducirá a medidas fiscales más estrictas en el futuro debido a las restricciones de su moneda, el dólar. Según la firma esto es clave para apoyar la planificación del pago de deuda y el perfil crediticio soberano.

Cuatro factores determinan el perfil crediticio de Panamá

A strong economy (baa1), strong institutions (baa3), fiscal policy (a2), and the ability to recover from a risky event (baa). When analyzing these factors, Moody’s maintained the risk rating at A3-Baa2 based on Panama’s credit strengths. Namely: a service economy that maintained a positive growth trajectory, a favorable credit history with low refinancing without the risk rate changing, and a constant flow of income associated with Canal contributions.

Among the credit challenges, they identify that the Isthmus has a relatively small income base that weighs on the affordability of the debt, a moderate debt load that has deteriorated in recent years and limitations in the management of economic policy due to the dollarization.

Despite the pandemic that is plaguing the large European and American economies, the firm hopes that economic growth will be able to support the credit portfolio, leading the Isthmus over other countries. Internal factors, related to investment in the mining sector, will provide a strong base for growth. But they note that the country is exposed to external risks derived from the global slowdown. However, they observe that the same, for the growth prospects of Panama, are balanced.

The rating agency provides a stable outlook for the country, incorporating its expectation that debt ratios will stabilize in the coming years as the government builds a plan to comply with the new fiscal rules. Similarly, they expect the authorities to take measures to increase government revenue to maintain social spending and investment while complying with fiscal rules.

Among the factors that Moody’s details to obtain a rating upgrade, it stands out the possibility of the government developing a solid compliance with the new fiscal rules with discipline, which will support the credibility of the policies and would lead to a substantial decrease in the indexes of debt. In this same line, he observes that the government must make continuous efforts to strengthen its collection capacity, which would speak in favor of its credit profile. Another upward push would occur if the authorities proactively address potential contingent liabilities related to the social security system.

Despite the positive outlook issued by the Panama rating agency, it warns that it could lower the rating if they see insufficient fiscal consolidation that leads to a continuous deterioration in debt payment. As a second point, it establishes the possibility that the government cannot comply with the deficit limits of the non-financial public sector in the fiscal rule, and the third alarm is based on the assumption that government revenues or the materialization of contingent liabilities lead to wider fiscal deficits and debt build up.

Impact of covid-19 – The Pandemic – Quarantine

In this line, the rating agency analyzed the prevention measures adopted by the government to reduce infections and the announced tax payment moratoriums, in addition to the suspension of public service payments for those with a salary of less than $2,000 per month. He reviewed the flexibility of banks by granting grace periods and softening the terms of loans to their clients.

However, he warns that mobility restrictions will have a negative effect on consumption while the confinement lasts. Several key activities have stopped their operations for a long time, such as construction that accounts for 20% of GDP, which halted all activities for a month from March 25. Copa Airlines did the same since March 23, transportation services represent 4% of GDP. In addition to this, it foresees a decrease in the cargo that crosses through the Panama Canal due to the slowdown in growth in the United States and Asian countries. Taking into account that Canal transfers to the central government represent 121.2% of total government revenue, it would be a weak point to consider in the State’s finances.

Moodys recharges the growth of the country in the operations of the year recorded by Cobre Panamá, which began its production phase in 2019. However, the price of copper worldwide may limit the production of the mineral this year. In general, the rating agency expects the economy to contract sharply during the second quarter of the year and gradually recover, leading to a year of contraction of 1%. They expect growth to return to 4% in the medium term and forecast a rebound to 3.7% in 2021.

Institutions rating

Panama’s government institutions and strength received a baa3 rating. This balances their relative governance scores and the effective performance of the Panama Canal Authority which was assessed an A1 as stable.

It is clear that the dollarized economy causes the importation of inflation from the United States, however, they have taken into consideration the government’s record regarding the Fiscal Responsibility Act. They observed the changes in 2018 to this law but they highlight a lack of transparency in the delays of the reports on the modifications to the law in the framework of the fiscal policy that provides the credit profile of Panama.