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Panama on track for investment grade

Central American country’s economy robust despite global downturn.

Despite the market downturn, larger nations such as Brazil have attained investment-grade status. And now a smaller Latin American state, Panama, is finally on track to join the investment-grade club in 2010.

In late 2007 Citigroup took a positive stance on the country. Its bullish statement that Panama would reach investment grade by late 2009 was based on improving fiscal accounts, a unique growth trajectory and plans to expand the Panama Canal’s capacity. These growth rates would drive a sharp decline in debt-to-GDP ratios.

Although Citi’s predictions were made quite a long time ago, when politicians were claiming there would be no more boom and bust, the facts behind the bank’s prediction remain basically valid.

On July 1 2009 president Ricardo Martinelli took office in Panama. His centre-right administration has now used its legislative majority to implement much-needed changes including tax reforms, the streamlining of social assistance programmes to ease fiscal pressures and broad infrastructural improvements. Panama City will soon have a rail system to link it to the international airport. This rail route will provide the basis of a railroad backbone for the country. But even though there are infrastructure deficiencies, people from Colombia, Venezuela and the US continue to arrive.

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