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Panama's Economy Bounded Ahead In 2006

by Mike Godfrey, for, New York

07 March 2007

Panama’s economy grew by 8.1% last year as against 6.4% in 2005, and the government clocked up a fiscal surplus of Balboas 576m (0.5% of GNP), according to official figures released this week.

Growth was higher than had been expected; and the surplus is the first since 1996. The government says that it results from its prudent handling of the public finances.

The construction sector grew by 17.4%, reflecting a continuing property boom, which also perhaps assisted growth of 12.8% in the banking sector. Improving tourism lifted the hotel and restaurant sector by 12.5%. External trade grew by 11.3%.

The government says that its receipts from the all-important canal rose by Balboas 200m by comparison with the previous year. It also received a one-off payment of B100m from the Panama Ports Company, and additional dividends from the National Bank of Panama and the privatized telephone and electricity utilities totalling B90m

Panama's finances will be dominated for years to come by the proposed expansion of the canal, expected to cost US$5.25 billion, with construction expected to be completed in 2014.

The Panama Canal Authority recently appointed Japan's Mizuho Corporate Bank as its financial adviser during the financing process for the expansion plan. Mizuho's contract includes a review of the Authority's Master Plan and expansion proposal, the provision of strategic counsel on financing structures and strategies, and the creation and implementation of an integrated financial model.

Under the expansion plans, two 3-chamber locks will be constructed at both ends of the canal. This will create a third lane of traffic wide enough to handle the largest of modern container ships and tankers. New approach channels will also be prepared, whilst existing channels will be dredged to ensure large craft can enter the system.

Canal users were shocked earlier in the year when the Authority announced swingeing toll increases, which will be debated at a public hearing on 14th March.

However, the canal continues to be wildly successful according to figures released last week by The Panama Canal Authority for Q1 of the fiscal year 2007, showing increases in net tonnage, total transits and transits of supers (vessels 91 feet or more in beam). Tonnage increased 11.7% – to 79.9 million PC/UMS tons from 71.5 million PC/UMS tons. Total canal transits increased 8% – to 3,568 transits from 3,299. Moreover, transits of supers, or larger ships that require greater time and navigation skills to transit the Canal, increased 14.6% – to 1,968 transits from 1,718.

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