What happened to the 12 priority actions for Economic and Social Recovery of the national government of Panama? Part 2

 

We continue with the analysis of the actions that the President of the Republic of Panama announced last June 2020 for the Economic and Social Recovery of the country. These actions are constituted as one of the pillars of the economic reactivation of the country to counteract the effects of the CoVid-19 pandemic.

•       Temporary jobs will be generated in the neighborhoods through the rehabilitation and renovation of buildings and public infrastructure, the acquisition of homes will also be facilitated with funds from the Panama Savings Fund and others.

Neither the Municipality of Panama nor the Municipality of David, the largest in the republic, show any type of news regarding this point, which is an excellent idea. We search the MOP, and we only see its arrangements of streets and roads in the city, as well as roads in remote and rural places, but that has nothing to do with this activity, but rather the MOP initiative that we will see later.

The US$10,000 Housing Solidarity Bond maintains its amount, but now it can be obtained if the amount of the home is up to US$70,000, per family for their first home. This change is significant since slightly larger houses can now be purchased for low-income families.

•       US$500 million will be allocated to guarantee the soundness of the Panamanian financial system and another US$500 million to facilitate financing for the most affected sectors.

The US$500 million to guarantee the liquidity of the Banking System, for the moment, are unnecessary, our banks have a history, where they have never needed the government to get out of any problem, the most recent being the crisis of 2008, where the president at the moment, Martin Torrijos, had about US$700 million sets aside for the same purpose, and no one used them.

Now, if the issue of clients (personal and commercial) is not really resolved, and not necessarily continuing to give moratoriums is the best solution, since debts, despite not being paid, continue to grow since banks, as they should be, they continue to charge interest and the debt increases. Here, what we need is to restructure as many debts as possible, to the clients who can pay, and so we can know the final amount of what the pandemic is going to cost the national banking system. And once we go past the moratorium on June 20221 and we have calculated this amount, we will be able to know if the US$500 million for the liquidity of the banking system will work or not, and if it will be used or not by the banks.

And concerning the other US$500 million, I have not seen anything in any bank that indicates that they are offering this type of loan for the most affected sectors. There is no type of promotion in this regard, so we infer that this action is not working either, at least for the moment

•       They will start the construction of roads and schools.

In the summer of 2021, work will begin for the construction of Metro Line 3, which will generate more than 5,000 direct and indirect jobs. But at the same time, it is already known that the construction of the fourth bridge over the Canal was frozen at this time, as well as a series of somewhat advanced infrastructure projects and that translate into employment.

What is seen in the MOP portal is the activation of arrangements for rural and inland roads, as well as roads and streets in Panama City using MOP personnel (what is not clear is whether it has been hired additional staff for these projects).

This action should have immediate results on employment but implies an investment of money that the government is not getting from taxes, and more debt is not the way to go unless the government controls spending.

•       EMMA Law has already been approved

The recently passed EMMA law, which creates a special regime for the establishment and operation of multinational companies for the provision of services related to manufacturing has generated many expectations. This law is very similar to that of SEM (HQ of multinational companies), even though it focuses on manufacturing companies, with the purpose, not only of attracting foreign investment but also of increasing employment in the country as quickly as possible, since it will allow companies to multinationals establish factories and production plants in Panama to take their merchandise to countries in the region.

Something interesting about the EMMA law is that "companies that request a license to operate under this special regime must assume the commitment to transfer technology and develop capacities, either through the creation of a technical education center by multinationals in its set or the adoption of training programs with universities or educational centers, for the training of national personnel, to integrate the Panamanian workforce required by companies. "

EMMA will be able to give relief to the Special Economic Areas, as in the case of Panama Pacifico and even in the Colon Free Zone to give a stimulus to the economic areas that already contribute enough to the national economy but with this new Law can be further leveraged to attract more players, more wealth, more investment, and more employment. This action is extremely positive, but it requires the mass attraction of foreign investment and "know-how" so that it translates into benefits for the country in the short term.

•       AMPYME Law for the program "Improving my Business"

We found on the AMPYME (Authority on Small and Medium businesses) website that this program is being promoted and running (even though they do not provide statistics of the program). "It consists of reinforcing in the participants the competences in business management and facilitating administration, marketing, finance, logistics tools for a micro-enterprise, so that they can professionalize and improve their businesses, seeking to position themselves within the field and in the generation of networks of support, through the formulation of an Improvement Plan for your business. "

It is an accomplished action, however, its result in improving economic and social recovery is minimal since it is an action that only involves the training of entrepreneurs and that does not translate into any direct financial relief (only indirect and in the longer term for those who put into practice what they have learned in the courses).

•       Law for the equalization of the Colon Free Zone with the Panama Pacifico area

Since June, work began on this Law, which has many entrepreneurs from the Colon Free Zone and the logistics sector hopeful for the future of the enclave in Colon. My opinion regarding this initiative is also positive, however, the initiative is stagnant and now it must wait until another year so that the law can be seen in the next legislature, as long as the executive has it ready to present it. Until the bill is finished, it is presented to Congress and then it is approved in a correct way, we will not see results for the country.

•       Law to encourage the development of Agroparks

This bill is presented in the month of September in the National Assembly, and what this law seeks is to promote the development of agro-industrial parks in the country, an initiative that would benefit two sectors of the economy that may have a great future right now - agriculture and manufacturing, and that translates to a huge number of jobs.

The draft of the law makes the National Agribusiness Directorate dependent on MIDA (Minister of Agriculture), and in my opinion, this is more of a manufacturing business rather than agriculture (at the most co-dependent of each other), and the MICI (minister of Commerce and Industries) should be responsible for it. There should be a separate part for Agribusiness in this law, which are the ones that can give life to this project (you need agribusiness to fill the Agroparks), with good incentives as well, on the one hand, and not giving so much agricultural focus to the law, but rather a manufacturing focus.

The bill has not yet been approved, and its effects will be positive, but it needs to add the same agroindustries so that the action has positive and short-term results.

•       Tax Relief Law for MIPEMES with a reduced Income Tax

This law was already approved in the National Assembly, together with the new MIPEMES (micro, small and medium business) law, and that could give some relief to entrepreneurs. This action has been completed, is in operation, and with results for both citizens and the DGI in their revenue collection.

•       Prompt Payment Law - 10% discount on tax payments to improve collection

This initiative is already working in the DGI and what is being aimed to increase revenues. The action is already completed, in the operation, and with results for both citizens and the DGI in their revenue collection.

In the end, and like everything in politics, bureaucracy, inefficiency, lack of commitment, are fundamental parts so that these 12 actions are not giving the appropriate results and we continue to ramble in this pandemic, even though the actions, in essence, are very good. The problem with any government is going from planning to action.

These actions, except for those linked to the banking sector, and which we analyze in the first installment, are the ones that do not cost money. They are easier to implement without a lot of budgets. We are still in time to put the actions into motion concretely and obtain the appropriate results both for the executive's work and for the economic relief of the citizens. We just have to run!