Panama Targets Local Debt Curve

Despite recently clinching investment-grade, Panama plans to focus on its domestic debt curve this year, its director of public credit says. The sovereign does not foresee the need to issue externally in 2010. “Ideally, we’d develop the 0-10 year portion of our sovereign curve in the local market, and the 10-30 year portion of the curve outside,” Mahesh Khemlani, director of public credit, tells LatinFinance. Panama is authorized to sell up to $600m this year. It recently sold $43m in 3.50% of 2013 paper to yield 3.13%. Panama’s debt has dropped from 70% of GDP in 2004 to 45% in 2009, Khemlani explains. He adds that 90% is fixed and almost all is dollarized. About $6.7bn of the republic’s $10.9bn in domestic and external debt profile is due 2020 or later, according to documents provided by the government. The only upcoming spike in maturities is $1.47bn for 2015. “We will have to do a liability management operation for that,” says Khemlani, adding that the hump does not cause great concern. Whenever Panama returns to international issuance, it will be boosted by last month’s bump up to investment grade by Fitch. Moody’s has it on review for a possible upgrade to BBB minus, and Khemlani says he expects at least 1 more high grade endorsement this year. He says the government is acting across several areas to achieve this. Panama has seen real GDP growth averaging 9.7% between 2005-2008. It expects to receive $2bn a year from the canal by 2015, and $5bn per year by 2025, up from $778m in 2009. Increased canal contributions could lead to the creation of a sovereign wealth fund, Khemlani says. The government plans to monetize government-owned land, particularly areas adjacent to the canal unused in the expansion. It is also contemplating privatizations, and plans to award this year a concession for a $1.5bn metro project. Panama is also boosting revenue by closing taxation loopholes and strengthening enforcement.