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Minister Panama

MEXICO - Diplomacy

Héctor Alexander

Minister of Economy and Finance, Panama

Bio

Héctor Alexander holds a master’s degree and PhD candidate in economy from the University of Chicago in the US. Since 2019, he has held the position of Minister of Economy and Finance in the current administration of President Laurentino Cortizo Cohen. Between 2004 and 2007, he held the position of vice minister of economy and finance and was minister between 2007 and 2009. In 2008, he was chosen by The Banker Magazine of the Financial Times as Minister of Finance of the Americas. Between 1985 and 1988, he was minister of finance and treasury, and from 1982-1984, he was deputy minister and minister of planning and economic policy.

From September 2020 to April 2022, unemployment fell from 18.5% to 9.9%, and formal employment grew strongly by about 22%, and here we are talking approximately 10,000 people monthly.
The Panamanian Ministry of Economy and Finance has worked hard to implement a countercyclical fiscal policy to successfully mitigate the economic impacts of the pandemic by borrowing heavily to strengthen government expenditures and banking system liquidity, resulting in 5% growth in 2022.
How would you assess the performance of the Panamanian Ministry of Economy and Finance over the past year?

Due to our countercyclical fiscal policy, we had hoped that we would have been able to recover the GDP and employment levels seen in pre-COVID period. We had originally projected growth of no less than 8% or 9% for this year, but there is a slowdown of growth in Panama and worldwide. However, for June the IMAE, our monthly indicator of GDP growth rate, registered a 13.2% growth rate. In order to grow less than 5% in 2022, which is my goal, the IMAE would have to be negative until the end of the year, which I do not think will happen. Panama has also seen recovery in the formal employment. From September 2020 to April 2022, unemployment fell from 18.5% to 9.9%, and formal employment grew strongly by about 22%, and here we are talking approximately 10,000 people monthly. Panama has no Central Bank, and one of our important economic foundations since 1904 has been the US dollar, but unlike other nations we were unable to rely on monetary policy. That is why right now, part of that underlying inflation that exists in Europe and the US is due to the monetary policy originated during the pandemic, and not just due to food and gas availability. In our case, we have to rely on fiscal policy, which meant using a Keynesian-type countercyclical policy, to strengthen the demand that had been greatly weakened by the pandemic. In short, 2022 is seen as a year of significant growth of at least 5%. And despite the ongoing geopolitical tension and its global repercussions we believe that we will sustain our growth trajectory over the coming years, and this year could be that we recover both the production and employment level of 2019.

What does the countercyclical policy that Panamanian Ministry of Economy and Finance has been applying imply?

This policy was applied in 2020 and 2021 and remains a countercyclical one in nature. We had to borrow heavily to strengthen the demand from the government, at a time when aggregate demand had weakened. For us, it was crucial that there be no liquidity problems in the banking system. Our policy was to seek resources from abroad to channel directly through the banking system and the government expenditures. We also deposited liquid resources at the National Bank, in the form of a trust fund geared at strengthening the credit capacity of the banking system. We also obtained resources from abroad to lend directly to micro, small, and medium-sized enterprises and fortunately, we were successful on that front. So, really, this anti-cyclical strategy helped us create the conditions that facilitate the strong recovery of production and employment that we are experiencing, while talking care of the safety and health of the population and making important transfers to families in need that were adversely affected by the pandemic.

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