The risk rating agency Standard & Poor’s Financial Services LLC (S&P) maintained the investment grade risk rating for Panama at “BBB”, but adjusted the outlook from “stable” to “negative”, as a result of the recent protests and closures. of streets against Law 406, the Ministry of Economy and Finance (MEF) reported this Wednesday, November 8.
In its writing, the MEF said that although the rating agency maintained the investment grade for Panama in the month of August and raised its outlook to stable, the protests and street closures against the mining contract have resulted in a moratorium. on new mining concessions and have created uncertainty about the fate of the contract and mining activity in the country.
According to the MEF, uncertainty represents risks to favorable projections of the Gross Domestic Product, which could negatively affect economic resilience.
According to S&P, the negative outlook reflects the risk of potential damage to investor confidence and future private investments, derived from the current contract dispute with Minera Panamá, which operates a large copper mining project, which is being developed in Donoso, province of Colón.
According to the MEF, strong political opposition to the government contract with Minera Panamá has generated uncertainty about the fate of the project. It has also led to a recent moratorium on new mining projects. This development could weaken private investment and hamper the country’s long-term growth prospects, leading to Panama’s downgrade in the next 12 months.
However, the rating agency still expects an average economic growth of 4.4% in the coming years for Panama, higher than that of comparable countries, thanks to a diversified economy and a good portfolio of projects from the public and private sectors. Factors such as its geographical position as a logistics center and possible nearshoring opportunities support this growth. S&P highlights the relationship with the United States as part of the “chips” program to explore the possibility of expanding the semiconductor manufacturing sector.
S&P’s projections incorporate the risk of decreased income to the State due to a possible cancellation of the contract with Minera Panamá, in addition to the possible reduction of dividends from the Panama Canal Authority due to the impact that it could have on its income.