PANAMA: An Introduction to Capital Markets

In recent years, capital markets public offerings in Panama have become a very common source of financing for several types of companies, whether holding companies, operational, or special purpose vehicles. The breadth and sophistication of the Panamanian market makes issuing securities (such as bonds, commercial paper or shares) registered with the Superintendence of Capital Markets (SMV) and placed through the Panamanian stock exchange (“Latinex”) an appealing option. Further, Panamanian securities law provides for certain tax benefits for securities registered at the SMV and placed through Latinex, which makes it an attractive source of financing for Panamanian companies.

Amendment to Securities Issuance Terms and Conditions

As a result of the COVID-19 pandemic, of the transition from LIBOR as the reference rate of those public offerings to variable interest rates, and of worldwide monetary policies that have resulted in constant interest rate rises since late 2022 (and still ongoing in 2023), during the last year there have been a number of amendments to the terms and conditions of registered securities filed with the SMV.

Given the relevance and influx of such amendments to terms and conditions of registered issuances, the SMV has adopted regulations that allow critical matters to be addressed in a timely and efficient manner, ensuring the safety of the investors’ interests. Among several others, the issuance of Accord No 3-2022 and of Accord No 7-2022, both of which were modified by Accord No 4-2003 (on the proceeding for the registration of amendments to the terms and conditions of registered securities), are of interest.

The aforementioned Accords allowed the SMV to improve its regulations, which, in turn, leads to more transparent and efficient proceedings available to the markets. The core matters addressed by way of the Accords in connection with the registration proceedings of amendments to the terms and conditions of registered securities are:

• amendments to the amount and/or type of security of a registered issuance are not subject to being amended, since these are not proper characteristics of a public offering; and
• adoption of provisions in connection with certain information and documentation that must be filed by the issuer as part of the request to amend the terms and conditions of a public offering of registered securities, such as provisions related to (i) amending the identified securities’ holders, (ii) the remittance of the consent format proposed by the issuer, and (iii) the means for granting and receiving such consents (the foregoing with the main objective of strengthening the confidentiality of the information of the securities’ holders, as well as clarifying and simplifying certain requirements which the issue must comply with and speeding up the attention and response time of the SMV to the filed requests, therefore guaranteeing at all times the protection of securities holders).

In general terms, the SMV is very market and client-oriented and as such it is very much aware of the situations that require its attention and seeks to address these by issuing regulations such as the ones already mentioned, which benefit the capital markets of the Republic of Panama, not only from the regulator’s perspective, which ultimately procures a healthy and vibrant market, but also from the client’s perspective, by maintaining a stable market which remains at the forefront of the situations that may have an impact on it.

Latinex 

Moreover, working hand in hand with the SMV, Latinex also plays a vital role in the capital markets of the Republic of Panama, providing a completely developed, modern and regulated market for debt and equity securities.

Latinex (formerly known as the Panama Stock Exchange) is the new corporate face of Panama before national and international markets, reflecting its strategy of crossing borders and becoming an international capital markets hub, with the traditional focus of serving as an investment facilitator; not only in Panama but around the world, maintaining characteristics such as swiftness, reliable and timely information, as well as highly qualified personnel, supported by cutting-edge technology.

Considering the foregoing, in addition to the solid operational standards of Latinex, which makes it very straightforward for local and international trades to take place through it, Latinex has indicated that its medium-term plan is to become an international capital markets hub.

Latinex, among others, has been working and implementing the following building blocks to allow it to become an international capital markets hub:

• markets integration, mainly through remote operators, such as the one entered into between Central Latinoamericana de Valores S.A. (“Latinclear”) and CEDEVAL (El Salvador) and through correspondent agreements, such as those currently existing between Latinclear and Interclear (Costa Rica), Latinclear and Cenival (Nicaragua), Latinclear and CVN (Guatemala), and most recently, with DECEVAL (Colombia);
• sustainable development, which entails the launch of the first Sustainability Report pursuant to the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) standards, with the intention of positioning Latinex as a carbon neutral organisation by 2050;
• promotion of social, green and sustainable issuances (Latinex has already launched its Guide for the Reporting and Voluntary Release of Environmental, Social and Corporate Governance Factors, which is in line with values and standards recently updated at a global level); and
• providing assistance by developing the necessary regulatory structure and efficient processes, attracting and re-activating local and international issuers and continuing with the iLink and Euroclear links for corporate debt and equity.

In summary, in our view, the future looks bright for the continued development and sophistication of capital markets in Panama, provided that there is sufficient political and administrative will behind the project and that the key actors in the capital markets of the Republic of Panama continue working together to procure the continuous issuance of constructive regulations, to invest in technology and qualified human resources, and to focus on financial, social and environmental sustainability, as well as the promotion of Panama as an international capital markets hub.