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Panama Gets Financed by the New York Stock Market

By Juan Carlos Martinez

On November 17th of 2009 the Republic of Panama placed 1 Billion USD in global bonds in the New York Stock Market. The bonds were successfully placed with a term of ten years a nominal interest rate of 5.2% and a return of 5.224%. This rate is the lowest rate Panama has ever obtained for this type of transaction. The bond's redemption date is on January 30, 2020. The decision to go out into the market to find financing was made based on the low interest rates and the positive image of the country in the international markets as evidenced by the recent positive classification issued to the country by Standard & Poor.

The money obtained from this public placement of debt will be used to pay debts that the State has with autonomous government institutions in Panama, which come from the time of the military dictatorship. There is a 932 million USD debt owed to the Banco Nacional of Panama (Panama's National Bank) and 397 million USD from the recent bond placement will be used to cover this debt. All non-negotiable commitments that the State has with Social Security (Caja de Seguro Social) will also be cancelled to the tune of 532 million USD stemming from unpaid employee/employer contributions which were not paid in cash to that entity during the whole military regime. Recognition bonds of the System for Savings and Capitalization of Pensions for Public Servants will also be canceled for an amount of 132 million USD.

This bond placement in international markets will not increase the country's public debt at all. In fact it is estimated that in 2010 it will generate budgetary savings of 20 million USD. The savings are due to the low interest rate found in the international markets versus the internal rate charged by autonomous entities owed money by the State.

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