Fast-growing Panama moves up investment-grade ladder


News from Panama / Friday, June 10th, 2011

climbing-ladder

Now after two consecutive reviews we see that Fitch is raising the investment grade debt rating of Panama further up ladder.  This in from Reuters.

PANAMA CITY/NEW YORK, June 2 (Reuters) – Fitch Ratings raised its investment-grade debt rating for Panama another notch on Thursday, praising government policies to boost economic growth and keep debt in check.

Fitch raised the Central American country’s rating to “BBB” — one of the highest in Latin America and on par with Fitch’s rating for Mexico.

Panama rocketed through the ranks after several years of rapid economic growth and trim budgets, receiving its first investment grade rating last year from Fitch. Moody’s and Standard & Poor’s soon followed.

The economy grew 7.5 percent last year and is expected to grow at a similar rate this year.

“Panama’s growth momentum has outshined that of most of its rating peers and this trend is expected to continue,” said Shelly Shetty, who heads sovereign ratings at Fitch for Latin America.

The upgrade, a victory for conservative President Ricardo Martinelli, comes as countries like Greece deal with rating downgrades and could attract more investment to Panama.

Frank De Lima, Panama’s vice minister for economy, told Reuters the upgrade was a “stamp of approval” for the country’s fiscal reforms. Government revenue could grow 23 percent this year, he said.

Fitch cited two tax reforms pushed by Martinelli through Congress over the last year as important supports for the country’s fiscal outlook.

The yield on Panama’s global bond due in January 2036 698299AW4= fell 2 basis points to 5.44 percent.

Panama, which uses the U.S. dollar as its currency and straddles a narrow strip between the Atlantic and Pacific Oceans, has emerged as a big winner from the growth in global trade.

Panama’s fast growth, underpinned by public investment in the country’s canal that handles a significant slice of global commerce, has brought the country’s debt-to-GDP ratio down to 43 percent, Fitch said.

Fitch said that was about in line with the median level for BBB-rated countries. In a statement, the agency said its outlook for Panama’s rating was stable.

About 4 percent of international commerce flows through the Panama Canal, and the country also ships goods by rail from ports on one coast to another.

The country’s fast growth has its risks, however.

“Panama’s near-term challenges include managing … potential risks associated with overheating, especially as investment expansion goes into high gear,” said Shetty. (Writing by Jason Lange; Editing by Kenneth Barry)