Press Release

First Ever Capitalization from Pending Contributions for Years 2020-2023 

Panama | June 13, 2024

  • The National Government issues promissory notes in favor of the Fondo de Ahorro de Panama (“FAP” or “Fund”) for pending contributions.

  • The promissory notes total USD 1,272.4 million, which, once accounted for, would reflect a potential increase in the FAP's fiduciary assets to around USD 2,688.5 million, or 90% more compared to the end of 2023.

  • The FAP will strengthen its role as a national savings fund for the current and future generations of Panamanians.

We are pleased to announce that we have received four (4) promissory notes from the Ministry of Economy and Finance (“MEF”), totaling an amount of USD 1,272,367,000.00. These promissory notes correspond to the pending contributions to be transferred to the FAP from the contributions to the National Treasury (MEF) made by the Panama Canal Authority (“PCA”) during the period 2020-2023.  This amount is consistent with the provisions of Law 38 of 2012, which establishes the FAP (the “FAP Law”), regarding the accumulation and funding rule for the FAP.

The President of the Republic of Panama – through Cabinet Decree No. 29 of June 4, 2024 (the “Decree No. 29”) – authorized the MEF to subscribe one or more promissory notes in favor of the FAP, for the aforementioned pending contributions (see here: https://www.gacetaoficial.gob.pa/pdfTemp/30046/105214.pdf).

“This is a historic milestone for the FAP. We firmly believe that receiving these promissory notes not only ensures compliance with legal obligations, but also represents a firm step towards capitalizing the Fund in line with our shared objectives of maintaining financial and fiduciary stability,” expressed José N. Abbo, Chair of the FAP’s Board of Directors. Abdiel A. Santiago M., Secretariat of the FAP, commented that “we appreciate the MEF's commitment, cooperation and conviction in making sure these contributions materialized; they represent significant steps toward strengthening the Fund's founding objectives.”

The FAP Law, as amended by Law 51 of October 10, 2018, establishes the accumulation rule and the main sources of financing (contributions) for the Fund.

For years 2018 – 2019:  The FAP Law stipulates that contributions equivalent to 50% of the amount of the contributions made by the PCA to the National Treasury, exceeding 2.5% of the country's Nominal Gross Domestic Product (“GDP”) for the current year, will be allocated to the FAP.  The amount corresponding to the years 2018 and 2019 is estimated at USD 31.9 million. The MEF is in the process of transferring this amount to the FAP in the second or third quarter of 2024.

For 2020 onwards: The contributions to the FAP are calculated at 50% of the amount of the contributions made by the PCA to the National Treasury that exceeds 2.25% of GDP. The accumulated amount corresponding to the years 2020 – 2023 is estimated at USD 1,272,367,000.00.

About the Promissory Notes
Through Decree No. 29, the MEF was authorized to subscribe four (4) promissory notes corresponding to each year (2020, 2021, 2022, and 2023) of accumulated pending contributions to the FAP for an accumulated amount of USD 1,272,367,000.00, with a term or maturity of 10 years, semi-annual payments with a grace period of three (3) years, and a nominal interest rate of 7.45% per annum. The interest accrued during the grace period ending in June 2026 will be added to the principal, resulting in an effective rate of also 7.45%

The mentioned promissory notes will be held in custody as part of the fiduciary assets in the vaults of the National Bank of Panama (“BNP”), in accordance with the Trust Agreement signed between the MEF, as settlor, and the BNP as trustee of the FAP Trust.

Accounting Treatment
Although the value of the promissory notes almost doubles the value of the FAP’s equity, that value must be recognized as a contra account within the fiduciary assets of the FAP. The value of these promissory notes will be amortized, and the corresponding capital contributions will be recognized as principal and/or interest payments begin to be received, after June 2026, when the grace period ends.

This accounting treatment will ensure the transparency of this transaction, the long-term financial stability of the Fund, and align with our objectives of maintaining a solid national savings mechanism.

About the Fondo de Ahorro de Panama
The Fund was created by Law 38 of June 5, 2012, whose main objectives are:

  1. Establish a long-term savings mechanism for the Panamanian State; and

  2. 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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