Press Release
The Fondo de Ahorro de Panama and the Declaration of a State of Emergency due to the Coronavirus Pandemic
Panama | March 14, 2020
The President of the Republic of Panama – through Cabinet Decree No. 11 of March 13, 2020 – declared a state of national emergency due to the global coronavirus pandemic.
The Fondo de Ahorro de Panama (hereinafter, “FAP” or “Fund”) announces that, given this declaration, it is prepared to work jointly with the National Government and its institutions (especially with the Ministry of Economy and Finance, trustee of the FAP) in the measures and actions deemed necessary to meet the needs of the Panamanian people in the face of this crisis.
The Fund’s Board of Directors and its executive team stand in solidarity with the statement issued and have immediately proceeded to evaluate the relevant financial, accounting and legal aspects in order to provide all possible support to the country.
The Purpose of the Fund Under the Law
Law 38 of June 5, 2012 (the “FAP Law”), creates the Fund as a stabilization mechanism mainly in the event of the following:
A state of emergency declared by the Cabinet Council; and
An economic slowdown.
The FAP Law also establishes that the cost associated with a state of emergency must first be defined before withdrawing any funds from the Fund. The cost of this emergency must be equal to or greater than 0.5% of the country’s Gross Domestic Product (“GDP”). This 0.5% of GDP threshold is the starting point for determining the amount of possible withdrawals from the Fund due to the declared emergency’s costs.
Notwithstanding the foregoing, the use of the FAP due to a state of emergency and/or economic slowdown (points #1 and #2 above) is conditioned on the Fund's assets not being less than 2.0% of the nominal GDP of the previous year.
The Fund’s Resources and Investments
At third quarter end 2019 (audited), the FAP had net equity (assets less liabilities) of approximately B/. 1,379.9 million.* This amount is expressed through a Global Portfolio, invested in developed financial markets, which are characterized by their high liquidity, depth and availability. The Global Portfolio currently includes the following asset classes: 1) cash (25%); 2) global fixed income (60%); and 3) equities (15%). The initial capital (known as the “Foundational Capital”) of the FAP was B/. 1,234.0 million, established in 2012, when it was created.
FAP's investment strategy is prudent and long-term, with the aim of seeking a balance between the preservation of its Foundational Capital, moderate returns and sufficient liquidity availability.
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The Fund’s Board of Directors and its executive team stand ready to assist in the decisions of the Cabinet Council in the face of this crisis in a responsible and transparent manner, and are committed to continue safeguarding this important resource for future generations of Panamanians.
*The official currency of the Republic of Panama is Balboas (B/.), which is at par and freely exchangeable with the United States dollar (USD); The Republic of Panama does not issue its own currency, and instead, the USD is used as legal tender and is considered the Fund´s functional currency.
About the Fondo de Ahorro de Panama
The Fund was created by Law 38 of June 5, 2012, whose main objectives are:
Establish a long-term savings mechanism for the Panamanian State; and
Establish a stabilization mechanism in case of a state of emergency (declared by the Cabinet’s Council) and economic slowdowns.
Contact: Administration, +507-394-5776/5706, administrador@fondoahorropanama.com
For additional information visit www.fondoahorropanama.com
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