By Marc Jones
LONDON (Reuters) – Panama’s investment grade credit rating is safe for now, Fitch’s top analyst on the country has told Reuters, despite a bitter row over a lucrative but controversial copper mining contract approved by the government last month.
Concerns about Panama’s finances have intensified this week after protests spurred President Laurentino Cortizo to call for a binding public referendum on a $375 million-a-year deal with a Canadian firm to run its giant Cobre Panama mine.
The mine is the country’s second-largest revenue source after the Panama Canal and supports more than 49,000 jobs, analysts estimate, so any hold-up in its revenue stream could mean further deterioration of the government’s finances.
“We are not necessarily in a rush,” Fitch’s primary Panama analyst Carlos Morales said when asked whether the fresh uncertainty around the mine could impact the country’s BBB- rating.
The score was put on a “negative outlook” – effectively a downgrade warning – only back in September and major agencies like Fitch often give themselves between one and two years to make their next move.
“We would have to take a broader view of the government’s capacity to improve its fiscal deficit”, Morales added, saying negative outlook already encapsulated the kind of “noise” now being generated by the mine issue.
The comments are likely to come as a something of relief to Panama after Moody’s downgraded its Panama rating earlier this week.
That move, though, only brought it into line with Fitch. Moody’s also put a stable outlook on its rating which means Fitch remains the closest to ‘junk’ grade threshold that usually equates to higher government borrowing costs.
“The main concern we have in Panama is the fiscal position,” Morales said.
“We see a large expansion of the budget spend in 2024,” when a presidential election is due that Cortizo looks set to lose according to the polls. “And now we have this very controversial topic of the mining”.
(Reporting by Marc Jones; editing by Jonathan Oatis)