Foreign investors bet Panama can shrug off social unrest and Trump threats

{"text":[[{"start":10.41,"text":"Foreign investors have been buying up Panama’s debt, betting that the Central American country can stage a remarkable recovery from a recent political and social crisis that threatened to badly damage its economy."}],[{"start":21.44,"text":"Despite mass protests that closed its largest foreign investment — a copper mine accounting for 5 per cent of GDP — and deterred other investors, followed by a threat by US President Donald Trump last year to “take back” the Panama Canal, Panama’s bonds have performed much better than many investors had expected."}],[{"start":39.397,"text":"The premium over US Treasuries it pays to borrow has dropped from as much as 3.5 percentage points in 2023 and 2024 to about 1.5 percentage points, in a sign of demand for the bonds."}],[{"start":52.203,"text":"Finance minister Felipe Chapman told the FT that, while it would take time for some policies to take effect, the government’s fiscal restraint had helped lure back investors."}],[{"start":61.44,"text":"“You have to first put the house in order, physically speaking, then you have to reconstruct or rebuild confidence and trust,” he said."}],[{"start":68.532,"text":"“The last time we went to the global market was in February and I was personally expecting a premium of about 160 [basis points, or 1.6 percentage points], now we closed at about 145,” he said. “So it was awesome, we’re very happy.”"}],[{"start":82.88,"text":"Panama’s long-dated dollar bonds currently trade at yields of 6 to 6.5 per cent, below the bonds of higher-rated US AI companies such as Meta, although countries such as Chile, Guatemala and Peru have smaller risk premiums over Treasuries."}],[{"start":97.398,"text":"Its economy has accelerated this year after a sharp slowdown, growing 6.4 per cent year on year in the second quarter after 4.8 per cent in the first quarter, ranking it as one of the fastest-growing in the region. A wide range of sectors have shared in the growth, including construction and tourism, as well as more activity around the country’s canal after the closure of the Strait of Hormuz."}],[{"start":120.406,"text":"“A few quarters ago a sort of abyss was at the nation’s doorstep,” said UBS analyst Alberto Rojas in a recent note. “That is no longer the case; now the good times are starting to roll in.”"}],[{"start":null,"text":"

"}],[{"start":136.16,"text":"For decades, Panama was considered the poster child of Latin America among investors, with high growth, relatively solid institutions and a business-friendly environment. In 2018, it became a high-income economy under World Bank definitions, joining a small club of just three other nations in Latin America, with aspirations to become the “Singapore of Latin America” as a prosperous finance and trading hub."}],[{"start":160.8,"text":"But social discontent over government corruption and huge inequality exploded into protests in 2023 that shut down the copper mine, which is owned by Canada’s First Quantum and which had been expected to add billions of dollars in royalties to the country’s coffers and boost economic growth. In 2025, separate protests over pension reform shut down banana plantations owned by Chiquita Brands."}],[{"start":185.535,"text":"That spooked investors and led to a sharp sell-off in government debt. Fitch downgraded the country’s bonds to junk territory in 2024, although S&P Global and Moody’s have kept Panama on the lowest rungs of investment grade."}],[{"start":203.12,"text":"However, President José Raúl Mulino’s government cut the deficit from more than 6 per cent in 2024 to 3.7 per cent last year, and it has since narrowed further. Officials also increased the proportion of government financing coming from bank loans and multilateral institutions, while a bond sale in February was more than four times oversubscribed."}],[{"start":223.662,"text":"“At the very beginning, I didn’t get a phone call,” Chapman said, referring to foreign interest in investing in the country. “Now, I don’t have time to receive all the people who want to come.”"}],[{"start":235.12,"text":"Concerns over further downgrades to Panama’s credit have faded, said Jeff Grills, a portfolio manager at Aegon Asset Management, which holds Panamanian bonds."}],[{"start":246.8,"text":"“With Panama’s spreads [to US Treasuries] now closer to about 100 basis points or so, pretty much all the positive outlook has been priced,” he said."}],[{"start":253.063,"text":"Investors said that lower fiscal deficits under Chapman, progress on reopening the mine and higher revenue from the Panama Canal this year should help stave off a ratings downgrade in the months ahead."}],[{"start":265.134,"text":"“It is a combination of very strong macro tailwinds and very strong governance from the administration,” said Jared Lou, portfolio manager at William Blair Investment Management. Panama is “a net beneficiary of the realignment of trade” since the Strait of Hormuz crisis, he said. “You should never underestimate the canal as a driver of the Panamanian economy.”"}],[{"start":null,"text":""}],[{"start":287.84,"text":"While the protests have died down, social discontent remains. The demonstrations were fuelled by a wide range of grievances, including the perception that foreigners and elites were benefiting most from Panama’s economic model, environmental worries and a lack of good jobs."}],[{"start":305.04,"text":"Chapman said the government’s economic policies would take time to filter through to the labour market."}],[{"start":309.2,"text":"“That translates slowly and painfully into jobs. But it doesn’t happen overnight,” he said. Unemployment reached 10 per cent last year."}],[{"start":318.844,"text":"Panama’s challenges mounted as Trump unexpectedly put the Central American nation near the top of his second-term priorities, threatening to take back the canal over Chinese influence in the waterway and further angering protesters, who saw their government as too close to the US."}],[{"start":334.677,"text":"The country now faces international arbitrations worth billions of dollars over the canal terminal concessions held by Hong Kong-based CK Hutchison that it cancelled."}],[{"start":344.616,"text":"Chapman said his priority next year would be going out to attract high-quality foreign investment, pitching a country that he said delivers what it promises."}],[{"start":354.56,"text":"“When they see that ‘what you see is what you get’, it’s priceless,” he said."}],[{"start":359.58,"text":"However, Mulino’s approval ratings are low and polls show most Panamanians are against a reopening of the mine. Chapman is part of a three-minister team that will make a recommendation to the president in the “very near future”."}],[{"start":371.84,"text":"“Panama is definitely a comeback story,” said Chris Mejia, emerging markets sovereign analyst at T Rowe Price, which holds Panamanian bonds. “[But it] . . . is not entirely out of the woods.”"}],[{"start":383.52,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1790575962_4993.mp3"}