PRIVATE INVESTMENT

Panama 2018 | FINANCE | B2B

Panama's adherence to strict regulations has ensured the continued flow of private investment, overcoming the shadows casted by the Panama Papers saga.

Jorge E. Morgan
JORGE E. MORGAN
Executive President
MMG Bank
César Cañedo-Argüelles
CÉSAR CAÑEDO-ARGÜELLES
CEO
Corporación Interamericana para el Financiamiento de Infraestructura, S.A. (CIFI)

How would you evaluate 2017?

JORGE E. MORGAN 2017 was a challenging year for us due to the regulatory changes in the country, the region, and the world. Most banks had to adjust operating processes to comply with the regulations, most of which are taking effect in 2018. The regulations are about the exchange of information and getting client data ready. The Panama Papers was one of the drivers for the regulations. What happened with Panama's bad publicity was unfortunate but not really a Panama issue; most of the banks and companies that were exposed were in Europe. However, as a result the country took many steps to prove that it is reputable and transparent.

CÉSAR CAÑEDO-ARGÜELLES 2017 was an excellent year for CIFI and its subsidiaries (CIFI Group) in the region. We had some challenges in 2016 with the move from Washington, DC to Panama, but 2017 was a year of consolidation for us. We have continued to grow our team, and we anticipate that by the end of 2018, CIFI Group will have close to 40 professionals on its staff.

How would you rate the stock market in Panama, and what are its challenges?

JEM One of the core points of our organization is to help Panama develop. We participate in many different initiatives and discussion groups on how to improve the capital markets, as well as the banking sector. The capital markets in the country are still illiquid, but improving. We seek to attract companies from the region to list them in Panama and offer a mechanism whereby people from different countries can buy and sell their securities on the Panama Stock Exchange. We are supportive of the agreement between the Panamanian and Salvadorian exchanges. We also have arrangements with Costa Rica; however, it is not as integrated as the one with El Salvador. The stock exchange here is well regulated, though the tools the regulator needs to regulate effectively are challenging. Moreover, the registrations of securities tend to take a while given the extensive due diligence that the regulator performs with limited resources. However, we see an improvement, as the regulators acquire better knowledge of the industry.

How have CIFI's goals progressed since 2017?

CCA We adhere to Equator Principles, which are among the highest environmental and social governance standards used for debt financing. Our main line of business consists of investing in middle-market infrastructure rather than billion-dollar ticket projects. CIFI Group provides advisory and structuring services as well as financing to companies that look for debt to develop, construct, or operate their projects. In certain cases, we also act as a financial intermediary, by bringing other banks or development financing institutions (DFIs), as we borrow money from the market and lend it to projects and companies that pass our credit process. Along this line, CIFI Group targets a new profile of investor that is not active today, namely institutional investors interested in middle market and infrastructure with a strong component of ESG. These institutional investors include pension funds, insurance companies, family offices, and endowments looking for long-term investments with low volatility and good returns. Such investors have not been well serviced because they do not tend to find solid alternative investments in emerging markets. This is where we will play a role.

What are your CSR initiatives?

JEM We are fully a part of FundaMorgan, which along with Morgan & Morgan develops programs to prevent and help victims of domestic violence. We also have CSR programs designed to improve education and the social environment, and protect the ecosystem. Most of our employees volunteer in these programs. For example, recently we participated in the creation of a center for blood donations and helped to draft the law. We seek to align our purpose of helping the country through helping the community with our diversified CSR portfolio, and our employees are proud to participate in them.

What are the main comparative advantages of CIFI?

CCA We have 17 years of experience and an excellent track record. We are not new to these markets; infrastructure as an asset class can be a relatively new market for institutional investors, but not for us. Second, we have an excellent group of shareholders. We were formed by a group of eight shareholders. Some of our shareholders include IFC, Norfund, Finnfund, BCIE, Caixa, and Itau; this is a worldwide, well-known, and reputable group of shareholders. Third, we possess and implement a corporate governance model that follows best international practices. Fourth, CIFI offers a skill set that has had 17 years of evolution and a team that is committed to its clients and the development of middle-market infrastructure in Panama and the region.