Under Odebrecht Headlines, Watch for Fiscal Issues
Preliminary figures for 2016 show that the “adjusted” deficit of the NFPS was 1.5% of nominal GDP, at the ratio approved by the Fiscal Responsibility Law of 2007, as amended in 2012. (The revised deficit figure for 2015 was 2%). But the “true” deficit for 2016 was $1,350 million, or 2.5% of GDP, slightly higher than the “true” deficit of 2015 (or 2.3% of GDP).
The ACP has two important effects on fiscal policy: direct monetary transfers to the central government, and the accounting transfer below the line, which produces the difference between the real and adjusted deficits, the latter the number used to determine whether the NFPS complies with the Fiscal Responsibility Law. This two-way effect is due to ACP not consolidating its accounting practices with other agencies wholly owned by the state.
Recent economic indicators show mixed performance: Most manufacturing activity and consumption indicators were positive. In trade, Panama Canal toll revenue, exports of traditional goods, Colon Free Zone reexports, the number of occupied hotel rooms and container movement in ports fell, while net Panama Canal tonnage increased. Last month, the Panama Canal set a new monthly tonnage record of 36.1 million Panama Canal tons, and registered its highest inter-annual monthly growth rate since 2011 (18.5%). Inflation rose to 1.6% in November, the highest rate since October 2014.
Attorney General Kenia Porcell signed an agreement in Brazil with 10 other Odebrecht prosecutors from various countries, to exchange information in investigations into the sweeping corruption allegations involving the company and public officials from around Latin America. Mossack Fonseca founders Ramón Fonseca and Jürgen Mossack, and several other MF employees, were arrested February 9th by Panamanian prosecutors. Fonseca, a friend and political partner of President Juan Carlos Varela, accused Varela of taking funds from Odebrecht for his 2014 political campaign. Varela reacted by releasing the list of campaign contributors (which did not include Odebrecht), and encouraged past presidential candidates to do the same.
After four years of trade conflict, and a WTO rule that declared Colombia’s mixed tariffs illegal, the Panama-Colombia trade dispute over restrictions on footwear and textile exports from the Colon Free Zone remains unresolved.
The National Assembly approved the Multilateral Convention on Mutual Administrative Assistance in Tax Maters (MAC) on February 14th. This agreement is an international tool that facilitates collaboration among signing nations in the battle against tax evasion. By approving the MAC, Panamá continues to demonstrate its commitment to fiscal transparency.
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