FINANCIAL REPORT - PANAMA PAYING CLOSE ATTENTION TO THE US MORTGAGE CRISIS
The experts do not see major incidences in the performance of the economy and the local credit
The mortgage markets of the EU and Panama are very different, and for that reason there is little risk of this situation becoming contagious.
Panama follows closely the crisis of the American credit market. Although, analysts agree that the direct hit would be minimal, the risk is latent because if this situation persisted it would affect the projections of growth of this economy and therefore the local one.
Bankers, brokers, economists, financial analysts and authorities in general are aware of each detail. The week culminated with the encouraging news: with the intention of to calm the restlessness of the markets, Friday, surprise, the Federal Reserve announced the reduction of the rate of discount from the 6.25% to the 5.75%, after the injections of liquidity done by the central bank in the last days.
The Fed recognized that the conditions of the financial markets have been deteriorated and the restriction of the access of credit and the greater uncertainty could prevent economic growth to continue.
This point is indeed what troubles to the local market, like what will happen to the interest rates. Although the change is made, it would have to fall and it would benefit the consumers of credit, but not to the depositors.
ANTECEDENTS
Each one of the consulted sources insisted on the importance of understanding the origin of the problems of the mortgage market in the United States, to know clearly the differences with Panama.
The main reason of the crisis is the granted mortgage loans in the days of economic bonanza to borrowers with low credit qualification, with low interest rates.
When interest rates were increased and the economic conditions changed, the borrowers had problems to pay their mortgages and the quality of these credits deteriorated.
THE SUPERINTENDENCE
As much the Superintendence of Banks as the Banking Association of Panama (ABP) recognizes that in all the markets the contagious risk exists, they assure that Panama is quite isolated of the variations that occur in capital markets, considering that there are no emitters in common that can affect or create big risks.
(Bala Beach Resort - Maria Chiquita, Colon, Panama)
ECONOMIC PERFORMANCE
Everyone is on the lookout to how much uncertainty this volatility can cause, to such degree that hits in an adverse way the global economic growth.
The Superintendence of Banks bets that this will not happen. “The global economy has much impulse so that a bearish takes place considering the situation of the mortgage market of the US.
In the merely real estate part major problems are not foreseen, although the analysts advise to the banks to pay close attention to the market value of the properties which they are extending mortgages, since the prices of these have raised vertiginously in the last two years.
MEASURES AND EFFECTS
.RATES: The financial markets are convinced that soon the Federal Reserve will have to reduce the interest rates to contribute to restrain the world-wide crisis of liquidity.
.CUTS: The Fed has made four emergency cuts 1994, when it adopted a policy to only move the interest rates in the eight encounters of their monetary panel which are programmed every year.
.LOCAL .MARKET: If the Federal Reserve lowers the interest rates, this measurement would benefit to the consumers and the local companies because the cost of the money would be lower.