PANAMA: An Introduction to Capital Markets

Capital markets public offerings are going from strength to strength in Panama as one the financial system’s preferred source of financing for several types of company, whether holding companies, operational, or special purpose vehicles. This is done by issuing securities (such as bonds, commercial paper or shares) registered with the Superintendence of Capital Markets (SMV) and placed through Latin American Stock Exchange (“Latinex”). A range of factors underly this market strength, including modern and transparent legislation, updates to technological processes, juridical stability, business know-how, and close collaboration with the main participants in the Panamanian capital markets.

As of 2024 the Panamanian capital markets have witnessing remarkable developments, propelled by regulatory reforms, technological advancements, and a surge in investor interest.

Recent Developments

Regulatory reforms

In 2023 and early 2024, Panama enacted several regulatory reforms to enhance market transparency, protect investors, and align with international standards. These reforms include:

• strengthening anti-money laundering (AML) and counter-terrorism financing (CTF) measures;
• enhancing corporate governance requirements; and
• simplifying the process for listing securities.

Technological advancements

The adoption of technology in trading and market operations has increased efficiency and accessibility. Notable advancements include enhanced cybersecurity measures.

Sustainable finance initiatives

Panama is committed to sustainable finance. The introduction of green bonds and sustainability-linked financial instruments aims to attract environmentally conscious investors. The government is also encouraging ESG (environmental, social and governance) disclosures among listed companies.

International collaborations

Strategic partnerships with international financial institutions and stock exchanges are fostering knowledge transfer and best practices. These collaborations are expected to enhance market liquidity and broaden the investor base.

Internationalisation of Securities with Euroclear Bank

The Panamanian capital markets were granted access to Euroclear Bank, on 1 February 2024, to internationalise corporate debt issuances and those of multilateral and/or supranational organisations. This initiative, made possible by the link between Euroclear Bank and Latinclear, called iLink (International Link), represents a milestone in the evolution of the country’s financial market.

Since 2014, Panama has maintained a connection with Euroclear Bank to internationalise local debt issuances, starting with phase 1 of the iLink aimed at issuances from the Republic of Panama and quasi-governments. With the implementation of phase 2 of the iLink, the door is opened for corporate debt issuances and multilateral and/or supranational organisations, as they are “Euroclearable”, to become available to international investors, thus strengthening Panama’s position as an international stock market hub.

Among the outstanding benefits of this initiative are the following.

• Convertibility of securities to Euroclearables – this facilitates international investment by allowing securities to be recognised on the Euroclear Bank platform.
• Direct access to international investors – the connection to Euroclear Bank expands access to a wider base of global investors.
• Broadening and diversifying the range of Investors – opening up to international investors helps to diversify the investor base, thereby increasing market stability.
• Increased liquidity and market growth –  by opening up to a global audience, an increase in liquidity and sustained growth of the Panamanian stock market is expected.

Conclusion

In summary, Panama’s capital markets are on a positive trajectory, bolstered by regulatory improvements, technological integration, and a commitment to sustainable finance. While challenges remain, the ongoing efforts to diversify and modernise the market bode well for its future. As Panama positions itself as a regional financial hub, its capital markets are set to play a crucial role in its economic development.