Here is an excellent article that I read that was written by Santiago Fernández Castro who is president and CEO of CFS Investments.

The right financial conditions would allow the country to become the Singapore of Latin America.

Source: americaeconomia.com

Analysis & Opinion

Please excuse the google translation.

Panama is in fashion these days. The increase in GDP per capita is among the highest in Latin America, has investment grade with a positive outlook, and it has gotten out of the OECD’s gray list and it has a solid banking system. But that’s not all: the canal passing through its territory will be expanded from 2014, and Panama not only has the second largest Free Trade Zone, but also has a huge investment plan in infrastructure. It is estimated that by 2020 Panama will double its population and GDP. These are just some of the good news that has generated this small country of less than 100,000 km2 and 3.5 million people, and explain why a growing number of multinationals and foreign professionals have chosen it as an investment destination and business.

However, for now, the Panamanian stock market is very underdeveloped. For now.

Panama has a tremendous opportunity to become the Singapore of the Americas. But this has to overcome a big question, a big if. If you can complement everything that has successfully differentiated services in the rest of Latin America and in many areas directly compete with Miami. If it can be  incorporated into a modern efficient banking system and stock market to build a strong financial system. The aces that are there in Panama to achieve this are a modern legislation (1999) which includes indirect ownership, the territorial tax system for income tax and the U.S. dollar as its functional currency, which coincides with that of the remaining savings Latin Americans.

This differential stock market could come from the public offering of debt securities and equity of small and medium Latin American companies are encouraged to list its shares on the Bolsa de Valores de Panama, assuming a lower cost than on Wall Street, and recorded in Panama’s dollar-denominated bonds already authorized in their respective countries of origin.

The Panamanian market could raise debt and equity issues of small and medium-sized multinationals.

This last point in the supply of debt securities would meet the demand created by the liquidity of the local banking system idle, lack of investment vehicles for institutional clients, corporate and retail Panama, and the fate of dollar savings Latin Americans out of their countries in bank accounts are not reversed. These could be the main buyers of debt securities and equity of companies in their own countries to come to invest in a home called Panama that offers legal security, confidentiality and tax advantages.

Today the Panamanian market is small, shallow and is concentrated in a few local holders, mostly banks, which hinder the development of a securities market. In part this is because there is no greater supply, and emissions from private companies are structured and underwritten by the banks until maturity, but not allowing the democratization of capital. Its atomization benefits only the small and medium investors, but the issuers.

Part of the challenge then is to get an overview of all stock market participants, including the regulator, issuers, brokers and investment advisers to make the Securities Hub of the Americas a reality. This is a great opportunity and a cure for myopia that today does not allow us envision what would the massive participation of local and foreign customers who buy securities in USD or even in their home currencies.

It would mean that foreigners who acquire securities in Panama not only more dynamic financial system, but also banking. This means more business for more than 70 securities firms licensed to operate in Panama.

This means that the most important houses in Mexico City, São Paulo, Bogota, Lima, Santiago, Buenos Aires and even open up branches or correspondents of Panama, thereby generating in Panama on Latin American stock markets in dollars. For now, however,this is only a personal view.