CENTRAL AMERICA

CENTRAL AMERICAN ROUNDUP 

Panama Launches Mega Bond Issue

(LATIN.NET) -- Panama launched a successful $500 million five-year global bond issue through lead manager Bank of Boston Trust Company.

In addition to marking the return of the Republic of Panama to the global capital markets, the transaction establishes several benchmarks in emerging markets finance, including: the lowest spread for any non-investment grade inaugural note issue from any emerging market country since these countries returned to the global capital markets; and the largest inaugural public sector note issue from a Latin American country since the return of Latin America to the global capital markets.

"Panama's rapid and unprecedented rise to the top tier of emerging market credits is a strong vote of confidence in the country's future," said Brad Warner, executive vice president and group executive of Bank of Boston's Global Capital Markets Unit.

"The assignment of a BAA1 sovereign ceiling should allow other Panamanian issuers to tap the capital markets at rates that would be among the lowest in Latin America," added Warner.

The five-year notes were issued at a spread of 175 basis points over the 6.25 percent U.S. Treasury bond due 2002. Notes issued by the Republic of Panama are rated BA1 by Moody's Investor Services and BB+ by Standard & Poors.

Panama's economic growth is likely to reach 4 percent this year and will be even higher in 1998, predicted President Perez Balladares during a recent visit to London. The economy grew just 1.9 percent last year.

C.A. beef dispute deepens

(LATIN.NET) -- Nicaragua has closed its borders to Salvadoran beef imports in response to El Salvador's blockage of Nicaraguan beef imports. The move came after Nicaragua protested that El Salvador had been blocking Nicaraguan beef at its borders since last week.

El Salvador is Nicaragua's largest market for beef, accounting for 30 percent of its total exports worth $20 million a year.

Nicaragua has accused El Salvador of breaking market liberalization measures agreed to in the C-4 Treaty, an economic integration agreement signed by Nicaragua, El Salvador, Guatemala and Honduras.

The above articles appeared in Latin.Net, a weekly newsletter published by Dr. Chris Brogan that provides an analysis of key event's in Latin America.

More information about the newsletter can be obtained at http://ourworld.compuserve.com/homepages/LatinNet/

CENTRAL AMERICAN ROUNDUP 

Panama wins BB+ rating from S&P

LATIN.NET) -- Standard & Poor's has assigned its double-B-plus long-term foreign currency credit rating to the Republic of Panama. A further boost to Panamanian debt prices came a few days later when Moody's Investors Service Inc assigned the Brady debt instruments a BA1 rating.

A number of factors restricted Panama's ratings, notably: the high net public sector debt burden which, at 57 percent of GDP in 1996, is substantially above the average for double-B-plus rated sovereigns; low domestic savings and investment rates; an inefficient tax system, characterized by a narrow tax base, poor compliance, and the exclusion of the service economy from the value-added tax; and a 16 percent unemployment rate.

A decline in Panama's high net public debt burden, which would be key to improving creditworthiness, hinges on the pace of privatization of Canal Zone assets with an estimated value of $4-5 billion, or half the 1996 GDP.

Conversely, S&P note Panama's 92-year track record of full dollarization, which should continue to support low inflation -- 2.3 percent in 1996 -- balance of payments equilibrium, and ample domestic credit availability; and deepening economic reforms, including the recent relaxation of the labor code, ongoing trade liberalization, the reduction of tax-based distortions, and the dismantling of extensive price controls.

According to independent estimates, the reforms will boost domestic investment and result in GDP growth rates of 4-5 percent through the year 2000, up from the modest 2.3 percent expansion registered in 1996.

Effective management of the Canal Zone assets should attract substantial foreign direct investment and strengthen Panama's economic prospects in the medium term. Further tax and labor reforms in the medium-term will also provide a boost to investment and savings.

Panama to accept bids on dam project

(LATIN.NET) -- Bids will be sought on Feb. 28 for the construction of Panama's second largest hydro-electric power station. The project, involving a 132 MW dam in western Chiriqui province, is expected to cost $300 million.

Four international consortiums headed by Swedish, Italian, Mexican and German firms, were prequalified at the end of last year.

Guatemala wins $1.9 billion from donors

(LATIN.NET) -- The international community has pledged over $1.9 billion over the next four years to help Guatemala rebuild after three decades of civil war. Donors have stressed the need for Guatemala to adopt strict measures to swiftly bring about macro-economic stability and particular emphasis was placed on broadening the tax base.

Guatemala has said it is committed to increasing revenue from taxes by 50 percent from 1995 levels by 2000 and has already raised value added tax (VAT) to 10 percent as a first step. According to the World Bank, real GDP will increase from 3.1 percent in 1996 to 6 percent in 1999-2000 with total investment projected to rise from 15 percent to 20 percent.

During the 1990s, the economy grew by an annual average of 4 percent. The fiscal deficit decreased to 0.7 percent of GDP in 1996 compared to 1 percent in 1995.

The external debt service ratio (as a percentage of exports of goods and services) is low, at around 11 percent. However, 58 percent of Guatemalans are classified as "poor" with nearly half "extremely poor."

The outlook, following the December 29, 1996 peace settlement, is deemed positive. According to a recent market report by LatinVest, "peace is expected to unleash new economic activity particularly in construction, tourism, oil and asphalt production, natural resources and commerce and manufacturing."

The above articles appeared in Latin.Net, a weekly newsletter published by Dr. Chris Brogan that provides an analysis of key event's in Latin America.

More information about the newsletter can be obtained at http://ourworld.compuserve.com/homepages/LatinNet/

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