Corona virus in Panama / update 26 August 2020

In June I reported that the Panamanian government had started to lift the very strict corona rules in force since March. Now there seems to be light at the end of the long corona tunnel, as infection rates in Panama have been improving for several weeks and both the economy and private life are experiencing reopenings and relaxation. Travel to Panama is also becoming possible again. More about the positive news, but also about the negative influence of the Corona Virus on Panama in the following.

Health (figures as of 25.08.2020)

• There are currently 88,381 cases and 1,919 deaths.
• The R-value is 0.94 and has fallen continuously in recent weeks.
• The mortality rate is 2.2% (global average 3.5%).
• On the American continent, Panama continues to be one of the countries where most tests are performed per capita. This also explains the high number of Corona cases.
• While in the first half of August the percentage of positive tests was still between 30-40%, this figure has fallen to 16-20% in the last few days.
• The intensive care beds are not being fully occupied.
• The following chart shows the development of active Corona cases. The strong increase in June / July started with the opening of the first economic sectors.

Economy

• In the last few weeks, various economic sectors have already been allowed to reopen (real estate companies, various construction projects, wholesale trade, NGOs, car dealerships, hairdressers, etc.)
• Yesterday it was announced that the following sectors will be allowed to open in the next few weeks: Complete construction sector, free trade zones, marinas, tailor shops, etc. (all from 07 September) / Professional sports leagues without spectators (from 21 September) / Retail trade, restaurant visits, still closed services (all from 28 September) / Tourism, libraries (all from 12.October).
• No opening date defined yet: presence in schools and universities, gym, theatre, cinema, bars and discos.
• The construction of the metro line 3 should start at the beginning of the new year.
• This is an investment of more than 2.5 billion dollars, which will create more than five thousand jobs during its construction phase.
• Four other major public works investment projects worth $130 million will be tendered shortly.
• The Canal Authority has approved a $2 billion programme to secure water resources and boost the economy in Corona times.
• There are signs of a recovery in world trade along the Panama Canal. Container traffic between the USA and Asia, the canal’s main route, increased in August. In the worst-case scenarios, the COVID 19 pandemic is expected to cause a 20% drop in sales (in May and June it was about -10% / positive record figures were reported before). The budget for 2020-2021 provides for revenues of USD 3.3 billion and a transfer of USD 1.8 billion to the Panamanian government treasury.
• The Panamanian copper mine may now gradually resume full production after the corona-related closure. The mine is operated by the Canadian company “First Quantum Mining” and is one of the largest copper mines worldwide. Last year the mine went into operation for the first time (info link).
• The National Bank of Panama has issued a USD 1 billion bond at 2.5% over 10 years. The demand was 4.8 billion USD. In addition, Panama has received a loan of 400 million USD from the IDB (Inter-American Development Bank) to combat the consequences of the pandemic.
• The most important emergency aid is preferential loans for small and medium-sized enterprises guaranteed by the government.
• Panama’s USD economy has grown at an average rate of 6-8% p.a. since 2002. Similar growth is not found in the western world. However, the corona crisis will leave deep wounds in the economy, which is accustomed to success.
• The service sector accounts for about 70% of Panama’s economy. In this context, Panama is particularly hard hit by the lockdown in force since mid-March in two important sectors: tourism and aviation (no international passenger flights in the lockdown). And this as an air traffic hub of Latin America. The construction sector, which accounts for approx. 18% of Panama’s economic output, was completely closed for a long time, but is now open again and should be stimulated by the infrastructure projects mentioned above. According to a recent survey, about 40% of all businesses were temporarily or permanently closed. Given this background, the government expects a temporary unemployment rate of up to 20% for 2020 (in 2019 still 7%). This will lead to a decline in Panama’s economy of 9 – 10% in 2020. Analysts expect a significant recovery of the economy in 2021 – and therefore increasing revenues for the government.
• According to analysts the risk of government debt overload is low. One reason is that Panama has a low level of government debt (41.3% of GDP in 2019). Secondly, unlike many emerging markets, the country is not subject to exchange rate volatility as the USD is used as the national currency.

Life in Panama

• After the strict curfew for 8 of Panama’s 10 provinces (except for Panama City and the neighbouring province) were already relaxed in June, there is now a return to “new normality” nationwide. From 14 September, there will only be an exit restriction from 11 p.m. to 5 a.m. and on Sundays. From 12 October no restrictions at all.
• Like everywhere else in the world, people in Panama demonstrated against the hard lockdown measures and the resulting economic consequences in the last few weeks.
• In Panama there is not only prosperity and economic growth, but also areas with poorer populations. For these people the lockdown, also the “not being able to work” is especially hard, because they depend on their daily income. These population classes are supported by monthly corona benefits from the government.

Travel to Panama

• Nationals and residents have been allowed to enter and leave the country again by plane since 07 August.
• In addition, Copa Airline is now able to offer flights to 8 different countries (besides the USA there are other countries in Latin America).
• From 28 September domestic flights are possible again.
• On 12 October, international tourism is to be reopened and thus the international airport will be completely opened.

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Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.

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