Panama would be subject to a deep and negative impact on its medium-term growth prospects and thus its fiscal outlook, JP Morgan warned after learning of the ruling on the unconstitutionality of the mining deal.
Through the publication entitled: “Panama, the plot gets complicated”a leading financial services company believes that after a contract is completely canceled, it is increasingly difficult to assess whether or not there can be a renegotiation between the two parties.
However, JP Morgan does not rule out that the parties are likely to engage in dialogue over the next three months, trying to avoid arbitration.
According to the company, while there will be a ton of uncertainty ahead, potentially lingering until the May election, it seems safe to indicate that the damage has already been done.
In this sense, it is pointed out that investors are likely to question the country’s institutional framework, which harms investments, which are an important component of growth.
JP Morgan predicts that GDP will decrease this quarter and this dynamic will be accentuated in 2024. They project GDP growth in 2024 of 3.5% year-on-year.
“Our main concern is that the country could suffer continued decline, medium-term growth and erosion of its public finances. Panama has had poor fiscal performance in recent years,” he says.
It is also emphasized that in the event that there is no possibility of renegotiating the contract, this would mean a significant risk of Panama losing its investment grade.
JP Morgan also warns that if First Quantum enters arbitration, Panama could end up paying millions in damages.
Although he admits that this would depend on whether the contract was concluded with an appropriate legal basis and in favor of the public interest.
On Tuesday, the Supreme Court of Justice declared the mining contract unconstitutional, violating 25 articles of the Constitution.
Source: Panama America
I am Jason Root, author with 24 Instant News. I specialize in the Economy section, and have been writing for this sector for the past three years. My work focuses on the latest economic developments around the world and how these developments impact businesses and people’s lives. I also write about current trends in economics, business strategies and investments.
