Republic of Panama Fiscal Performance Third Quarter 2016

Transcription

1 Republic of Panama Fiscal Performance Third Quarter 2016 Dulcidio De La Guardia Minister of Economy and Finance Iván Zarak Vice Minister of Economy Eyda Varela de Chinchilla Vice Minister of Finance January 2017

2 Contents: 1 Macroeconomic Overview 2 Fiscal Performance 3 Debt Profile 4 5 Future Prospects Final Remarks 2

3 Contents: 1 Macroeconomic Overview 2 Fiscal Performance 3 Debt Profile 4 5 Future Prospects Final Remarks 3

4 1 Macroeconomic Overview Economic Indicators Foreign Direct Investment Panama continues to be one of the top performers of the region with a forecasted GDP growth for 2016 of 5.2% according to the IMF. Diversified economy: no sector accounts for more than 20% of GDP. 5% 8% 8% 3% 3% 3% 4% 5% 12% 12% 20% 18% GDP by sector, as of September 2016 GDP Growth (%) Investment Ratings Agency Rating Outlook Moody s Baa2 Stable Fitch BBB Stable S&P BBB Stable Projected GDP growth for 2016 and 2017 remains positive despite global economic conditions. 8.5% 12.1% 8.6% 1.6% 5.8% 11.8% 9.2% 6.6% 6.1% 5.8% 5.2% 5.9% 3.1% 3.4% -1.1% 1.3% Trade Real Estate and Business Services Other Manufacturing Hotels and Restaurants Source: INEC Construction Communications and Transport Other Non Market Production Financial Intermediation Electricity and Water Source: IMF (F): forecasted Latam Panama World Inflation levels are slowly rising, but still remain low due to oil prices and the strength of the dollar. Inflation (%) 8.8 Other Strengths: Investment Grade and Dollarized Economy Logistics Hub and Tourism Industry Competitive Advantages: Panama Canal Steadily Growing Financial Sector Source: INEC 4

5 1 Macroeconomic Overview Economic Indicators Foreign Direct Investment The path to fiscal consolidation is supported by improvements in tax collection, focused government expenditures, a Social Fiscal Responsibility Law with well-established limits, and a declining current account deficit. The increase in government revenues is due in part to improvements in tax collection. The debt-to-gdp ratio shows the path of the Central Government deficit. Government Revenues (US$ million) Debt in US$ million and as a percentage of GDP 10,225 10,656 4,999 5,037 7,586 8,236 3,712 4,048 25,000 20,000 15,000 10,000 54% 47% 18,997 20,308 37% 16,945 36% 36% 13,022 14,450 9,317 9,344 8,999 9,611 10,404 11,602 34% 33% 32% 34% 36% 37% 60% 50% 40% 30% 20% 5,000 10% 0 0% Q Q-2016 NFPS Total Tax Revenues NFPS Cash Deficit is within the limits of the Social Fiscal Responsibility Law. Net Debt Net Debt/GDP The completion of large infrastructure projects contributed to a small increase in the open unemployment ratio, but will generate more growth in other sectors of the economy. NFPS Cash Deficit (% of GDP) 3.2 Open Unemployment (% of economically active population) Q-2016 Source: MEF, INEC, Office of Economic & Social Analysis. 5

6 1 Macroeconomic Overview Economic Indicators Foreign Direct Investment Foreign Direct Investment (FDI) was 17.8% higher in the third quarter of 2016 than in the third quarter of FDI in US$ million 3,943 4,458 4,494 3,576 : +17.8% 4,211 Supportive business policies have led to stronger and more diversified FDI inflows. FDI inflows by country (average ) Others, 26% Colombia, 29% Ecuador, 6% Mexico, 7% Switzerland, 7% United States, 25% Q Q-2016 The Current Account Deficit (CAD) declined 17.1% in Q compared to Q3-2015, in part due to the lower cost of imports due to global conditions. CAD in US$ million Over 70 international enterprises have established headquarters in Panama. 3Q Q Q-2016 Wrigley ADIDAS OTIS GRAINGER 3M UNILEVER PROCTER & GAMBLE HUAWEI TECHNOLOGIES -2,181 Source: MEF, INEC -1,544-1,280 Johnson & Johnson Baxter MARS GENERAL ELECTRIC PHILIPS TELEFÓNICA Western Union CATERPILLAR TETRA PAK EVERGREEN SAMSUNG GROUP SONY CORPORATION 6

7 Contents: 1 Macroeconomic Overview 2 Fiscal Performance 3 Debt Profile 4 5 Future Prospects Final Remarks 7

8 2 Fiscal Performance Central Government Non-Financial Public Sector As of September 2016, total revenues of the Central Government continue their positive trend, increasing by US$322 million in comparison to the same period of Central Government (In US$ million) Sept Preliminary Sept Revised Variation (YoY) % Total Revenues 5,076 4, % Current Revenues 5,051 4, % 1. Tax 4,048 3, % Direct 2,160 1, % Indirect 1,888 1, % 2. Non-Tax 1,003 1, % Capital Income % Donations % Total Expenditures 7,156 6, % Current Expenditures 4,741 4, % Personal services 1,776 1, % Goods and services % Transfers 1/ 1,498 1, % Interests % Others % Current Savings % Capital Expenditures 2,416 2, % Deficit -2,080-2, % % of GDP -3.9% -4.0% Source: CGR, SBP, BNP, CA, Decentralized Entities, MEF. Figures may vary due to rounding effect. Note: Total revenues and expenditures include fiscal documents (gas and preferential interest rate) for US$113.0 and US$139.0 million for 2016 and 2015 respectively. 1/ Includes US$138 million in 2016 and US$114 million in 2015 from the 120 at 65 program. Budgeted Nominal GDP 2016 = US$ 53,869 million Preliminary Nominal GDP 2015 = US$ 52,132 million The improved performance in total revenues is reflected in tax collection, which increased by 9.1% in September 2016, while in the same period of 2015 it grew by only 1.5%. This growth in tax collection comes, among other factors, collection of the legal entities tax, goods and services sales tax, and the fuel tax. Total expenditures grew by 4.9% explained mainly by an increase in capital expenditures of 5.1%. Current expenditures increased by US$219 million due to the increase by US$210 million of personal services and US$40 million in goods and services. As of September 2016, capital expenditures increased to US$2,416 million, representing a US$118 million increase compared to same period of 2015 and representing 4.5% of GDP. The deficit reached US$2,080 million or 3.9% of GDP. 8

9 2 Fiscal Performance Central Government Non-Financial Public Sector As of September 2016, capital expenditures reached US$2,599 million, increasing by US$271 million in comparison to the same period of Non-Financial Public Sector (In US$ million) Sept Preliminary Sept Revised Variation (YoY) % Total Revenues 8,236 7, % General Government Current Revenues 7,697 7, % Central Government 4,981 4, % CSS 2,566 2, % Consolidated Agencies % Public Enterprises Balance % Non-Consolidated Agencies and Others % Capital Income % Donations % Total Expenditures 9,146 8, % Current Expenditures 6,548 6, % Current Expenditures (excluding interest) 5,650 5, % Central Government 3,395 3, % CSS 2,071 1, % Consolidated Agencies % Interests % Capital Expenditures 2,599 2, % Current Savings of NFPS 1,668 1, % Primary Balance % Deficit , % The increase in total revenues of the NFPS as of September 2016 was US$650 million or 8.6%, as a result of improved tax collection from the Central Government and revenues from contributions of the CSS. Revenues from Non-Consolidated Agencies and Others reached US$425 million, increasing by US$59 million or 16.3% compared to the same period of2015. Indicators established in the SFRL: Current savings reached US$1,668 million and financed 64% of investments. Primary Balance deficit was only US$13 million. The total deficit of the NFPS was US$911 million, or 1.7% of GDP, improving its position by US$103 million. % of GDP -1.7% -1.9% Source: CGR, SBP, BNP, CA, Decentralized Entities, MEF. Figures may vary due to rounding effect. Budgeted Nominal GDP 2016 = US$ 53,869 million Preliminary Nominal GDP 2015 = US$ 52,132 million 9

10 Contents: 1 Macroeconomic Overview 2 Fiscal Performance 3 Debt Profile 4 5 Future Prospects Final Remarks 10

11 Yield (%) 3 Debt Profile Portfolio Composition Risk Profile Capital Markets Debt Profile as of September 2016 Since 2010, the Weighted Average Cost of Debt (WACD) has gradually decreased due to market conditions and the debt strategy of this administration External Debt Domestic Capital Market Other Internal Financing 22% 1% 77% 31% 69% Loans Bonds 104% 94% 84% 74% 64% 54% 44% 34% 24% 14% WACD ( ) 6.3% 5.8% 5.6% 3.7% 3.9% 5.3% 5.1% 4.7% 4.6% 4.8% 4.3% 4.8% 4.8% 6.6% 6.1% 5.9% 5.5% 5.2% 5.0% 4.9% 4.4% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Fixed Floating 85% 15% 4% Q-16 External Internal WACD which is led by medium-term issuances in the capital markets and similar interest rate movement as a 10-year UST. UST 10 year and 30 year comparison ( ) % US$ Other currencies 97% 2.8% EUR 0.03% KRW 0.05% Source: MEF - DFP JPY 2.68% UST 10 years UST 30 years 11

12 Interpolated G Spread (bps) EMBIG (bps) Basis points (BPS) Basis points (BPS) 3 Debt Profile Portfolio Composition Risk Profile Capital Markets Panama s EMBIG spread remains tight against regional peers with equal and better credit ratings. EMBIG spread peer comparison Panama Papers 1-3 April Waked Case 3 May Panama Papers 2-5 May FED Meeting 21 Sept BREXIT - 23 June Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 EMBIG EMBIG COLOMBIA EMBIG PERU EMBIG MEXICO EMBIG PANAMA Credit Default Swaps (CDS) evolution timeline Panama Papers 1-3 April Waked Case 3 May FED Meeting 21 Sept 250 Panama Papers 2-5 May 200 BREXIT - 23 June Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 PANAMA USD CDS 10Y PANAMA USD CDS 5Y PANAMA USD CDS 2Y Panamanian Bonds continue to perform well against Latin American peers. Interpolated Spread of the UST curve of Global Bonds vs comparable instruments URU URU 2036 MEX 2040 MEX PAN 2036 URU 2024 URU 2027 PAN MEX 2023 MEX 2026 PER 2037 PER 2050 URU 2022 PAN 2025 PAN PAN 2020 PER 2027 PERU MEX 2020 PER Panama 2020 Panama 2025 Panama 2028 Panama 2036 Panama 2053 Source: Bloomberg Comparable Sovereign Bonds Fitch s Emerging LATAM Markets Credit Ratings vs EMBIG 0 MEX PER COL PAN PHI URU ROU BRA 0 AA- 1 2A A- 3 BBB+ 4 BBB 5 BBB- 6 BB+ 7 BB 8 BB B+ 11 B 12 B- 12

13 Yield (%) 3 Debt Profile Portfolio Composition Risk Profile Capital Markets The trading volume in the secondary market continues increasing due to efforts to deepen the domestic capital market. Trading Volumes (in US$ million) 1, Internal Curve June 2016 Internal Curve September bps Q-15 3Q-16 Market Makers Market Makers Candidates 0.25 (US$ million) 2018 Note Duration (years) Local Financial Instruments as of Sept 30th 2016 Outstanding Price Yield Spread vs UST Note Note Bond 1, (As of Sept. 2016) 2024 Bond Source: MEF - DFP 13

14 1 Macroeconomic Overview 2 Fiscal Performance 3 Debt Profile 4 5 Future Prospects Final Remarks 14

15 4 Future Prospects Approved 2017 Budget Investment Opportunities Economic Projections used for the budget elaboration Indicator GDP Growth 6.3% 6.0% Inflation 1.9% 1.1% Nominal GDP 53,869 million 58,633 million Budget Sector Law N 69 (Budget 2016) Law N 63 (Budget 2017) Tax Revenues 5,459 million 5,875 million Panama Canal Authority Contributions 1,060 million 1,600 million Adjusted NFPS Fiscal Deficit 1.5% (808 million) 1.0% (585 million) NFPS CAPEX 4,538 million 5,063 million Source: MEF 15

16 4 Future Prospects Approved 2017 Budget Investment Opportunities Panama continues investing more than 17% of GDP in education, health, and justice. Source: MEF Budget Allocation by Area and Activity Sector (In US$ Million) Sector Social Services 9,406 9,026 Education and Culture 2,318 2,407 Health 3,622 3,864 Work Protection and Social Security 2,049 2,155 Housing and Development 1, Environment and Technology Environmental Development Biodiversity Conservation Technological Development Infrastructure 2,318 2,667 Transport and Communications 2,092 2,399 Energy Production Agricultural Industry, Commerce & Tourism Financial Services 2,640 3,721 Banking and Financing 2,637 3,717 Insurance 3 3 Government and Justice 3,260 3,443 General Public Administration 2,139 2,220 Public Order and Security Justice Others 1,823 2,112 Total Budget 20,126 21,676 US$3,864 million Health US$2,667 million Infrastructure US$3,721 million Financial Services Allocation by Sector (% of GDP) 56% 7% 56% 5% 6% US$2,407 million 4 Education & Culture US$3,443 million Government & Justice US$2,155 million Protection & Social Security 56% 4% 56% 56% 4% 16

17 4 Future Prospects Approved 2017 Budget Investment Opportunities Tourism Mining Energy Logistics TOURISM Daily flights to 81 cities in America and Europe. Tocumen will double traffic to 15 million passengers by Panama is becoming the shopping capital of South America. New beach resorts under construction. MINING Copper mine under construction by First Quantum: 50 billion pounds of copper; 12 million ounces of gold; and 250 tons of molybdenum expected Complete by 2017 $2.0 billion in exports by ENERGY HUB Chevron and Vopak are improving and enhancing a liquid energy terminal on the Atlantic end of Panama Canal Two LNG Terminals AES (Gas Natural Atlantic); $800 million investment, begins operations in Gas to Power Panama (GTPP); $900 million investment, begins operations in LOGISTICS New port in the Pacific is under construction by the Panama Canal. PSA (formerly known as Port of Singapore Authority) is investing $450 million to enhance the Pacific terminal. The expanded Canal will open new opportunities for valueadded logistics. Source: MEF - DFP 17

18 1 Macroeconomic Overview 2 Fiscal Performance 3 Debt Profile 4 5 Future Prospects Final Remarks 18

19 5 Final Remarks Panama s stable economic growth rate, supported by an environment of low inflation, unemployment and new opportunities for investments, exceeds the growth of the region with a GDP growth forecast for 2016 and 2017 of 5.2% and 5.9% respectively. As of September 2016, central government revenues increased by 6.8% compared to the same period in 2015, mainly due to a 9.1% increase in tax collection. The NFPS deficit decreased by 10.1% to US$911 million in September 2016 compared to the same period of 2015, reflecting the government s commitment to the Social Fiscal Responsibility Law. Current market conditions coupled with an efficient debt management strategy has led to a lower average cost of debt. 5. Panama s risk indicators continue to perform well against Latin American peers, reinforcing international investors trust in the country. 19

20

21 LEGAL DISCLAIMER This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to sell securities of the Republic of Panama ( Republic ), or the solicitation of an offer to subscribe for or purchase securities of the Republic, and nothing contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. Any decision to purchase any securities of the Republic should be made solely on the basis of conditions of the securities and the information to be contained in the prospectus, prospectus supplement or equivalent disclosure document produced in connection with the offering of such securities. Prospective investors are required to make their own independent investigations and appraisals of the business and financial condition of the Republic and the nature of any securities of the Republic before taking any investment decision with respect to securities of the Republic. The contents of this presentation should not be the basis for making investment decisions, nor should the presentation be construed as a recommendation to engage in investment transactions. This presentation is not related to the provision of advisory services regarding investment, tax, legal, financial, accounting, consulting or any other related services, nor is a recommendation being provided to buy, sell or purchase any good or product. This presentation contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words targets, believes, projects, estimates, expects, aims, intends, may, anticipates, would, could or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Republic's control that could cause the Republic s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements speak only as at the date of this presentation. The financial information in this presentation should be used for reference purposes only with the understanding that market conditions may change and past performance is not an indicator of future performance. The Republic expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based. However, the Republic reserves the right to update, amend or delete information contained in this presentation without prior notice. The Republic, the Ministry of Economy and Finance (MEF) and the Public Financing Directorate of MEF do not assume legal responsibility nor will they be liable for the way that this information may be interpreted, including any inaccuracies, assumptions, or projections related to this information. The Republic, MEF and the Public Credit Directorate of MEF will not be liable for any loss or damage that directly or indirectly arises with respect to the use of this information. 21