Growth outstrips consensus; new U.S. ambassador stirs the pot

PANAMA - Report 29 Dec 2022 by Marco Fernandez

The official figures for economic activity published last week beat the consensus by a wide margin. Real GDP may increase 9%, higher than the 7.5% forecasts of rating agencies, private analysts, and international organizations. The sectors that most contributed were the traditional ones: wholesale and retail commerce, transportation and communications, and construction. The higher-than-projected GDP real growth plus a 3% increase in prices, amounts to a nominal expansion close to 12% vis-à-vis MEF’s 7.3%. The good news for the Administration will be more room for complying with the FRL in 2022 (4% of GDP).

First Quantum announced that the company plans to present to the Inter American Convention of Commercial Arbitration a case against the Republic of Panama, arguing a breach of the contract law of 1997. The company also announced a parallel arbitrage based on the statute of investment protection under the FTA with Canada of May 2010. The possible inflexibility of a minimum annual payment to the Government (US 375 MM per the January communiqué) regardless of international copper prices seems to be the dispute's touchstone. We believe that there is more to it. Still, the lack of information remains an obstacle for analysts. The mine continues operations but are not allowed to export the mineral.

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