Identifier
Created
Classification
Origin
06PANAMA2287
2006-11-30 13:56:00
UNCLASSIFIED
Embassy Panama
Cable title:  

PANAMA HINTS AT FUTURE PRIVATIZATIONS

Tags:  ECON ETRD 
pdf how-to read a cable
VZCZCXYZ0009
RR RUEHWEB

DE RUEHZP #2287 3341356
ZNR UUUUU ZZH
R 301356Z NOV 06
FM AMEMBASSY PANAMA
TO RUEKJCS/SECDEF WASHDC
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS PANAMA 002287 

SIPDIS

SIPDIS

STATE FOR WHA/CEN TELLO

E.O. 12958: N/A
TAGS: ECON ETRD
SUBJECT: PANAMA HINTS AT FUTURE PRIVATIZATIONS


UNCLAS PANAMA 002287

SIPDIS

SIPDIS

STATE FOR WHA/CEN TELLO

E.O. 12958: N/A
TAGS: ECON ETRD
SUBJECT: PANAMA HINTS AT FUTURE PRIVATIZATIONS



1. (U) SUMMARY. The GoP has hinted through a letter to the
World Bank that it may seek to privatize certain government
assets in order to reduce public debt levels. However, the
GoP has no current plans or agreements to further privatize
any public assets. Private sector credit analysts believe
the proceeds from any privatizations will not be significant.
With the upcoming $5.25 billion canal expansion and the need
for $2.3 billion in debt financing, the GoP appears to be
trying to improve, or at least maintain, its credit rating in
order to obtain the best possible terms on such financing.
END SUMMARY.


2. (U) The GoP has hinted through a letter to the World Bank,
dated September 8, 2006, that it is evaluating various
alternatives to lower it public debt. Included in these
alternatives is the sale or concession of various public
assets to the private sector. Notwithstanding, Economics
Minister Carlos Vallarino maintains that the GoP has no
current plans or agreements to privatize any public assets.
As of August 31, 2006, Panama's public debt was $10.48
billion or approximately 62% of estimated 2006 GDP.


3. (U) The media have speculated that the list of possible
GoP assets which could be privatized include the Social
Security System, the National Savings Bank, the National Bank
of Panama, the Bank for Agribusiness Development, the
Insurance Institute for Agribusiness, the National Casinos,
the Convention Center ATLAPA, the National Institute of Water
and Sewage, Tocumen International and Albrook Airports, and
the Postal Service. Also included is the possible sale of
the GoP's equity interest in the telecommunications and cable
company, Cable & Wireless.


4. (SBU) Credit analysts from a leading Wall Street credit
rating agency told EconOff they believe any privatization of
the Social Security System is problematic given its financial
situation and the political controversy which would accompany
any such privatization. The analysts also told EconOff they
believe proceeds from other GoP assets would not be
significant.


5. (U) Panama had a wave of privatizations beginning in 1997
which included the state-run energy utilities. The GoP
collected a total of $1.27 billion from such privatizations.
The money was deposited into the Development Trust Fund.
Under law the only the income on the underlying principal can
be used for development projects. To date, approximately 80%
of the fund is invested in GoP debt obligations.


6. (U) COMMENT. With October 22, 2006 voter approval of the
$5.25 billion Panama Canal expansion project, the GoP is
seeking to improve its credit rating before approaching the
public debt markets or banks for the estimated $2.3 billion
in financing budgeted for the project. Any lowering of the
public debt, along with reduction in government payrolls and
increased private sector participation, would be beneficial
in attracting better financing terms. While any financing of
the canal expansion would be a debt of the Panama Canal
Authority (ACP),some credit rating agencies link the ACP's
rating to that of the GoP. Accordingly, maintaining or
improving the GoP's current BBB rating is crucial in keeping
the expansion costs within budget. END COMMENT.
EATON