S&P Downgrades Panama's Public Bond Rating

by Philip Morton, Investors Offshore.com

19 March 2003

Despite the best efforts of the Panamanian authorities, the Standard & Poor's ratings agency has downgraded Panama's public bond rating from BB with a stable outlook to BB with a negative outlook, according to the latest edition of the Panama News.

In February, the local media revealed that government moves to include the revenues and expenditures of the Panama Canal Authority (PCA) with those of the national government in order to - seemingly - reduce a 4% deficit to a legally acceptable 2% had been greeted with outrage, not least from the PCA's board of directors.

International observers such as the IMF and various credit rating agencies expressed bafflement at the time, and announced that the accounting changes would not affect their assessment of the country's economic situation.

According to the Panama News report:

'S&P says that whatever the merits of the government's new way of figuring the deficit, the bottom line is that the deficit is up and that makes Panama less credit-worthy.'

The reaction from within the government to the announcement has been mixed, the local news service also revealed.

The Ministry of Economy and Finance has reportedly dismissed the move as 'insignificant', whilst Government and Justice Minister, Arnulfo Escalona has alleged that it is part of a conspiracy to destabilize Panama.

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