This is Francisco’s week. The Argentinian Pope will arrive at Tocumen Airport on January 23 for a three-day visit to preside over the World Youth Day ("JMJ" in Spanish), an event that occurs every three years in a different city of the world; it was last held in Krakow, Poland in 2016 and drew thousands of visitors from several countries. According to the organizers, Panama expects around 200,000 pilgrims (Panama City itself has fewer than 1.5 million inhabitants) from Europe, South America, and especially Central America, the only part of the world by which Panama can be reached by land. However, our estimate of foreign visitors is lower than the government's, given the daily data from immigration officials.
The Ministry of Economics and Finance (MEF) continues its tug-of-war with the Legislative Assembly (Diputados) to enact a law that - under certain provisions - defines tax evasion as a crime, something badly needed to increase the possibility of Panama’s leaving the "grey list" of non-cooperating countries against money laundering, an exam that will take place in February when the GAFI mission evaluates the country. We consider that the government and the opposition will reach an agreement immediately after the Pope’s visit. It makes no sense for opposing parties to reject the MEF proposal now and wait until the new president takes over because the law needs to be approved, and the future administration will have its hands full with other, more politically-sensitive themes, which we discuss below.
The available economic indicators confirm the continuing deceleration of the economy. The Monthly Index of Economic Indicators (IMAE), just released on Monday, showed a 3.49% increase yoy in November, and 3.18% from January to November, the lowest level in recent years. The key engines of economic activity were the main sectors of the economy: transportation (including the Canal), communications, energy supply and commerce.
Two main issues are at the forefront: tax reform and pension reform. Our prediction regarding those two reforms is that whoever wins in May will have to deal with unpopular but necessary fiscal revamping, and will drag his or her feet on the Social Security issue, letting the 2024 administration bite the bullet at the edge of the cliff.
For the future of the economy, several key nominations are important to mention: 1) the two members of the Board of Directors of the Canal agency (ACP), who will end their terms in February 2019 and 2) the new CEO of the Panama Canal Authority (ACP) to replace Jorge Quijano, whose term ends in September 2019. The new Board of Directors - by itself alone, and with no political interference whatsoever, at least directly - will have to make this appointment.
A broken campaign promise from the past two presidential periods has been the attempt to amend or redraft the Constitution. So far, no politician has delivered on this promise. The most recent minor changes took place in 2004 but did not cover the basic foundations of the state governance. President Varela announced last week that he will send a proposal to the AL, one that was already approved by the Cabinet, to call for an additional ballot in the May elections to poll voters on two issues: if they want a change in the Constitution; and if they want this change to be made by a parallel constitutional board, which is how the current constitution of 1972 establishes the process to reform itself. It is unlikely that the “fifth” ballot for the May election will be approved by the current AL. However, Varela will announce that at least he tried, and that the opposition is the guilty party in this failure.
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