EM LATAM CREDIT: Economy and Finance Minister Comments on Fiscal: Negative Take
Republic of Panama (PANAMA; Baa3 neg / BBB- / BB+)
• Economy and Finance Minister Felipe Chapman affirmed the government’s commitment to reduce the budget deficit but said it would be done gradually, according to La Prensa Panama.
• The government is responding to social demands for water, healthcare, medicine, education and other public investments but meanwhile revenue collections are disappointing.
• He projected a fiscal deficit of 3.88% of GDP for 2025 and a goal of reducing that to 1.5% by 2030. Current revenues are lagging 6.6% below budget YTD. Meanwhile, expenditures rose 10.8% YoY, according to a Ministry of Economy and Finance (MEF) report cited by La Prensa.
• The finance ministry said the public debt was USD56.3bn as of April 2025 and that it went up 3% from the previous month, according to La Prensa. USD45.8bn was external debt or 81.4%.
• The finance minister was quoted as saying interest on the debt was USD3.1bn for 2025 and would rise USD200mn next year if nothing else was done.
• The IMF shows gross debt to GDP of 58.1% projected for 2025, up from 56.6% last year and 51.5% in 2023. Prior to the pandemic in 2019 it was 40%.
• President Jose Mulino has pledged to reopen the copper mine that a few years ago contributed 5% to the GDP and that is a major positive if it were to happen but meanwhile the country’s finances are on a worrisome trend.
• Panama 10-year bonds were last quoted T+281bps, 21bps tighter QTD and 33 bps tighter YTD. Panama’s quoted spread is much wider than other ‘BBB’ rated Latam sovereign bonds like United Mexican States (MEX; Baa2neg / BBB / BBB-) 10-year notes quoted T+197bps and Republic of Peru (Baa1 / BBB- / BBB) at T+120bps.
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OPTIONS: Larger FX Option Pipeline
- EUR/USD: Apr25 $1.1390-00(E1.0bln)
- USD/JPY: Apr25 Y145.00($1.3bln); Apr28 Y140.00($1.5bln); Apr29 Y144.00($2.2bln)
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US STOCKS: Consolidating Early Gains, Tariff Related Sentiment Cools
- Stocks continued climb off Monday's lows in Wednesday's first half - consolidating ahead of midday as Treasury Sec Bessent clarified earlier China trade comments. While stocks surged on early WSJ sources story over slashing China tariffs, stocks ratcheted lower as Bessent states that there is no unilateral offer from Trump to cut China tariffs, and that a full China trade deal could take two-to-three years.
- Currently, the DJIA trades up 563.93 points (1.44%) at 39753.15 (40,376 high), S&P E-Minis up 101.5 points (1.91%) at 5416.75 (5499.75 high), Nasdaq up 451.4 points (2.8%) at 16753.37 (17029.86 high).
- Consumer Discretionary and Information Technology sectors outperformed in the first half, leading gainers included Amphenol Corp +10.75%, Super Micro Computer +10.73%, Palantir Technologies +8.13%, Tesla +7.90%, Warner Bros Discovery +7.80% and Vistra Corp +7.72%.
- Conversely, a mix of Consumer Staples, Energy and Real Estate sector shares underperformed: Enphase Energy -12.41%, Lennox International -5.78%, Baker Hughes -4.69% (with Crude -1.80 at 61.87), American Tower -4.32%, SBA Communications -4.22%, Kimberly-Clark -4.06% and Bristol-Myers Squibb -3.35%.
- Meanwhile, a heavy earnings docket resumes after the close with the following reporting: Whirlpool Corp, Chipotle Mexican Grill, O'Reilly Automotive, Raymond James Financial, Molina Healthcare Alaska Air, Discover Financial Services, Rollins Inc, Newmont Corp, ServiceNow Inc, FirstEnergy Corp, Lam Research Corp, Texas Instruments Inc, Community Health Systems, IBM, United Rentals, Edwards Lifesciences, Viiking Therapeutics and Las Vegas Sands.
TARIFFS: Trump Appears To Hint That Talks Between US And China Are 'Active'
Additional detail on recent comment reported by newswires from President Donald Trump on China: “[We’re] going to have a fair deal with China. It's going to be fair.”
- Trump's remarks, delivered to reporters in an ad hoc gaggle at the White House, track relatively closely with recent remarks but may be read more dovishly considering the conciliatory tone shift from Treasury Secretary Scott Bessent yesterday and today at IMF events.
- Asked by a reporter, “are you going to be talking to [China] actively?” Trump appears to respond in the affirmative, saying: “actively… everything’s active. Everybody wants to be a part of what we’re doing.”
- While not a full confirmation, Trump's comments could suggest that high-level trade talks with China could get underway shortly, after a weeks-long standoff.
- Charles Gasparino at Fox Business cautioned a short time ago: "CEOs who deal with the Chinese government say don’t count on [Chinese President Xi Jinping] jumping at the first offer of a trade truce from Trump & Co. They believe Xi will play a long game..."
- Trump adds: “[China] know they can’t get away with it any longer but they’re still going to do fine.”
- Trump digresses into talking about tariffs replacing income tax: “[In 1913] We had no income tax and we were the wealthiest country… We’re going to be able to substantially lower income tax when this is finished”
