Central America Briefing - The Caribbean Council

Panama may need to Borrow US$3BN to Pay Obligations

26 July 2024

26 July 2024

According to Citibank experts, Panama may need to borrow up to US$3bn to pay off obligations from previous administrations. However, the appointment of Felipe Chapman as Minister of Economy and Finance has been viewed positively in financial markets. This, despite a deficit of US$521mn compared to the budget. Hence, Citi believes that a figure of around US$3bn will be required in the second half of 2024 and US$6bn in 2024. One option would be eliminating subsidies as energy, food and fuel subsidies have added to the country’s debt since 2022. From 2018-2022 Panama spent US$9.78bn on subsidies.

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Panama Canal Pushing Ahead with $1.6bn Reservoir

12 July 2024

12 July 2024

The Panama Canal Authority (ACP) has accelerated plans to construct a new reservoir to guarantee water supply at a cost of US$1.6bn. With the aim of ensuring the canal’s operation going forward, a dam on the Indio River will be put to tender. This follows a difficult 2023, when daily passages were cut in half from the usual 38-40 and October was the driest on record. The dam, which will be put out to public tender, is expected to take six years to complete. More than 2,000 people are expected to be affected by construction and will need to be relocated. The Panama Supreme Court ruled in early July that the Indio River could be used by the ACP. ACP directors warned that the basin water would be exhausted within 10 years without new infrastructure.

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Castro Looking to Reactivate SICA

28 June 2024

28th June 2024

Attempts to reactivate the Central American Integration System (SICA) will be made with a presidential summit. Led by Honduran leader Xiomara Castro, Costa Rica and Guatemala have lent their support. Castro highlighted the common challenges the countries faced including climate change, drug trafficking, organised crime, security issues and migration. Nicaragua will take over the pro tempore presidency and have expressed a wish for Russia to be integrated as an observer.

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Photo via www.elpais.cr

Bukele inauguration likens El Salvador to “Sick Person”

14 June 2024

14th May 2024

El Salvador President Nayib Bukele has pledged to improve the country’s economy and asked the population “not to complain”. Comparing the nation to a sick person, Bukele said there was a long list of issues including health, education, infrastructure, employment, housing and the economy. National critics complained about the illegality of Bukele’s re-election as international observers opted for cautious optimism. The debt to the country’s pension scheme stands at over US$10bn and by 2027, El Salvador will have to find US$800mn annually to fund it according to economist Mauricio Choussy.

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Walmart Promises Billions of Central American Investment

31 May 2024

31st May 2024

Walmart has announced investment worth at least US$1.3bn over the next five years in Central America. Of this, US$700mn has been promised to Guatemala, another US$600mn has been earmarked for Costa Rica. Cristina Ronski, Senior Vice President and General Director for Walmart Central America announced the news in which she promised to double the amount of stores across the region by 2029. The stores are expected to create 6,500 direct jobs between the two countries. It also includes a distribution centre in Coyol, Costa Rica, for perishable goods. In Guatemala, Walmart makes an estimated US$2bn worth of annual purchases through its supply chain.

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Mulino wins Panama Presidency; Faces Significant Challenges

17 May 2024

5th May 2024

José Raúl Mulino is the new President-elect of Panama with 34.23% of the popular vote. With 78% turnout, the highest since the end of military rule in 1989, Mulino triumphed over nearest rival Ricardo Lombana who polled 24.6%. Mulino, who needed a majority decision by Panama’s Supreme Court the day before the election to continue his campaign, has promised to close the Darién Gap with almost 150,000 migrants having passed through so far in 2024. Mulino has also promised to “help” former running mate Ricardo Martinelli who has applied for political asylum in the Nicaragua embassy. Facing a US$20bn+ claim on the Minera Panama copper mine, Mulino has also called for a halt to the three arbitration demands. Critics have pointed out that the proposed cabinet of 17 only has three women in it after the first 14 positions were confirmed.

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Panama Election Favourite Facing Judicial Decision

3 May 2024

3rd May 2024

The favourite for Panama’s election, José Raúl Mulino, faces a Supreme Court decision on the validity of his candidacy. Mulino’s running mate, former President Ricardo Martinelli was found guilty of money laundering and sentenced to over 10 years in jail and fined more than US$17mn for the New Business case. Martinelli claimed he was in fear of his life because of Laurentino Cortizo and is currently in the Nicaragua embassy in Panama City claiming political asylum. Panamanians go to the polls on 5 May with employment, public services and the country’s financial future as leading concerns. Mulino has made it clear to the OAS he intends to remain in the election through Sunday no matter what the CSJ says. A ruling is expected Friday after over three days of deliberation.

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Photo: www.elinformador.com.co

Amid IMF Impasse, El Salvador Returns to Bond Market

19 April 2024

19th April 2024

El Salvador returned to the bond market after four years with a US$1bn issuance at 12% that will mature in 2030. This is the largest debt in the country’s history and only four nations have issued sovereign debt above 10% since 2019. The rate could increase to 16% if El Salvador fails to reach an agreement with the IMF by October 2025 or get two of three risk agencies to raise their country grade. The IMF has said addressing Bitcoin risks is key to any agreement with El Salvador as well as fiscal consolidation, liquidity buffers and improved transparency. Analysts point out the new issuance suggests an urgent need for liquidity. Part of the new debt will be used to buy back old bonds with President Nayib Bukele committing to purchasing US$486.7mn of the US$1.75bn bond debt that matures between 2025 and 2029.

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US Commits Further US$1bn to Central America

5 April 2024

5th April 2024

During a regional visit focusing on the Northern Triangle, US Vice President Kamala Harris earmarked a further US$1bn to the region. The funds will be used for projects that slow irregular migration northwards. This includes US$170mn to Guatemala for development, economic, health and security assistance to Guatemala. US$135mn of this will be distributed by USAID and used to conserve biodiversity, scale agricultural technology and improve health access to indigenous communities. Harris is looking to commit US$5.2bn in public-private partnerships to the region through the Central America Forward project.

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