Panama's Finance Minister Optimistic On Economy

Mike Godfrey, Tax-news.com, New York

07 November 2000

Panama's Economy and Finance Minister Norberto Delgado is reported in local newspaper the Panama News as having seen a sea change in the country's economy, and has said that better times lie ahead, predicting four per cent economic growth in 2001, based on what he termed a number of positive indicators.

Among those indicators, Mr Delgado cited a 12.4 per cent rise in Colon Free Zone transactions, a 14 per cent increase in the number of tourists coming to Panama and an 11.9 per cent increase in cargo handled by the country's ports. These numbers come from the Finance Ministry's figures for the first four months of 2000 — a time when business was in general decline — but Mr Delgado sees a gradual turnaround and says that the government will continue its role as a facilitator for both the public and private sectors of the national economy.

Mr Delgado said that on the public sector side there would be continuing emphasis on health, education, agricultural assistance and public safety. He also pointed out that adjustments are being made to reduce the government's budget deficit to zero. Whilst all of the goals set in talks with the International Monetary Fund have not been met this year, the Finance Minister said that in April 2001 the Moscoso administration will send a tax reform package that meets the IMF's conditions to the Legislative Assembly. He also noted that this year the government has done better at collecting taxes owed to it under the existing system.

Mr Delgado's predictions have been supported by the Inter-American Development Bank's representative in Panama, John Hastings, who is also optimistic about Panama's fortunes. He said that when all of the figures are in for this year, Panama's Gross Domestic Product will have increased by two to three percent. He stated: 'Economic policy is taking a relatively orthodox course, with investment projects in the private sector. Of course, they have to stick to the budget.' Mr Hastings added that there are still things to review on the economic policy front: 'It's important to assess the budget to make sure that it's working well, but you have to look at the whole fiscal policy to make it more efficient. Panama has promised to reduce its budget deficit for this year to about one percent, and to zero percent in 2001," he said.

However, there are others in the business community who do not share the same optimism. Felipe Rodríguez, the former president of the Panamanian Business Executives Association (APEDE), said that despite positive signs in tourism and the Colon Free Zone, Panama remains on the Financial Action Task Force (FATF) and other blacklists, and that will reduce foreign investment in Panama. He has praised the government's moves to tighten money laundering laws but is aware Panama has yet to be taken off the FATF list. He commented: 'We don't want to say that we're negative about the growth of our economy. As business owners we hope that Norberto Delgado is totally successful, but we're waiting to see if such hopeful and optimistic announcements will become a reality that benefits Panamanians.'

Economist Dr Raúl Lachman, a partner with the Intracorp consulting firm, has said that some further changes in laws and regulations are needed in order to free the economy. He said: 'We were stuck, and now we're going to have to make up for lost time and accomplish more.....in any case, I wish the economy minister success. We hope that his optimism crystallizes into something that's good for the country's development.'

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