Spanish version

CORRUPTION

Odebrecht scandal affects growth

Panama's growth will be 5.4 percent, according to forecasts.

Spanish version

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Moody's had downgraded Panama's growth projections for 2017. Moody's had downgraded Panama's growth projections for 2017.
Moody's had downgraded Panama's growth projections for 2017. Archivo

Riating agency Moody's Investors Service downgraded Panama's growth projection in 2017 from 5.9 percent to 5.4 percent because of the potential negative impact due to delays or cancellations of large projects. 

Moody's refers to the termination of the contract for the execution of the Chan 2 hydroelectric plant, which was awarded in the past administration to Odebrecht and involved an estimated investment of $1 billion. 

"Construction was scheduled to begin in 2015 and power generation was scheduled to begin in 2020 but there has been no further progress since last year," the agency notes, also warning that financial institutions have been investigated for links with money laundering, in reference to the intervention by the banking regulator of FPB Bank. 

The report also includes the cases of Peru and Colombia, where projects awarded to the Brazilian construction company have been canceled.

"The Odebrecht scandal will have negative implications for short-term growth in several Latin American countries...This is important in a region that has begun to recover from an impact on trade, but particularly in Peru, Colombia and Panama," it said. 

Escándalo Odebrecht afecta al crecimiento Expandir Imagen
Escándalo Odebrecht afecta al crecimiento

In addition to the cancellation or postponement of investment projects, the agency refers to other possible negative impacts that would be linked to "political noise", as happened in Brazil during the Lava Jato investigations, which could affect business confidence and investment climate. 

In the long run, however, the agency believes that this case may lead to institutional improvements.

"Increased social pressure and high profile investigations have opened the opportunity for governments to strengthen anti-corruption mechanisms and to make procurement procedures more transparent," it said.

The agency acknowledged improvements to Panama in terms of international cooperation, following the signing of the multilateral convention to combat tax evasion promoted by the Organization for Economic Cooperation and Development, as well as the commitment to adopt automatic exchange of information standards.

"These measures should help reduce the risk of future bank interventions and help mitigate the concerns of global correspondent banks," it said.

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