Founded during the worst political and economic crisis in Panama's history, the Panamanian Stock Market (BVP) will soon complete its first ten years in operation, throughout which time it has clearly shown itself to be a valuable and positive instrument through its participation in the competitive intermediate financial markets. It is important to note, as well, that this self-regulated institution is supervised by the National Stock Market Commission.
The country's first Stock Market emerged in response to, and during a time in which alternative avenues of financing were required. In order to satify this demand, a group of businessmen invited of different sectors that best represented the local business community to participate,and thus raise the necessary financial capital. In addition, the National Bank of Panama was asked to partake, since it funtions as the State Bank and assumes many of the duties characteristic of a Central Bank. Contained within the bylaws stipulated by the corporate deed, one can find the codes of conduct which limits any one shareholder to a maximum of 5% of such capital, which hopes to assure and maintain the institution's independence; currently, no other restriction exists pertaining to the possesion of capital. However, due to the level of automation associated with stock market activity one can say that the goal of independence has been preserved.
With very modest levels of activity during the first few years of operation, the BVP focused on the consolidation of its intermediate financial assets. Amid a positive atmosphere, this advance was favored and was characterized with the return of political stability accompanied by profound economic reforms, in addition to an agressive stance towards privatization. Outstanding might be the word best used to describe the successful and transparent privatizations that resulted through the efforts of the BVP, most noteably those of an agriculural and cement company.
Since 1997, it counts with a company dedicated to the custody of stocks, known as the Central Latinamerican of Stocks, which enjoys very high levels of operating eficiency and financial security, which has been a very important ingredient in the development of the local stock market. Due to the fact that the BVP needs the existence of a custody bank, it assisted in the development of this institution, but now, that business has consolidated its position and the BVP has decided to lower its participation.
In August of 1999, an electronic trading system was introduced, through which the stock market exchanges finds themselves integraded by means of a modern fiber optic system. This allows negotiations and trades to be effected from an individual's office. This trading system, which until now has functioned in the secondary market, has increased the trading volume, as well as added greater liquidity to the market.
Currently, there are more than 150 companies listed on the stock market exchange, of which 31 negociate their stocks with a market capital greater than $3,500 MM. Among those listed, there exists some foreign companeis, which negotiate stocks as well as bonds. The stock values are negociated through the 18 stock market exchanges authorized by the BVP.
In retrospect, the volume of negociation reached in 1999 ($1,125 MM) is proof that this institution has complied with the objective of developing a local stock market. However, not all of those achievements during the first few years are measurable from a cuantitative point of view, but among those that we can measure we can mention: the increase in transparency of the information; the utilization of an electronic trading system and the strengthening of the business of the stock market. More than the increase in volume of the BVP in constitutes the imagine of credibility that is is constructing before the eyes of the the local investors and foreign as well, without leaving out the fact that the institution has helped create a stock market culture in the country that until 10 years ago did not have a stock market.
On the other hand, since 1999, the stock market adheres to a new legal framework(Decree Law 1 of 8th July,1999) which is based on international regulations and standards. This regulation demands more strict handling of information on the Issuer's part, as a way of further protecting Investors' interests. Furthermore, it regulates the dematerialization of value titles as well as Investment funds.
Consolidating its position in the local market, and with the assistance of a modern legal framework, the BVP, in the medium term, hopes to transform itself into a stock market with international coverage. Panama benefits tremendously from the existence of several elements, all of which will help it achieve that ambitious goal. Among them: a completely dollarized economy, the non existence of a Central Bank issuer has permited an economy free of inflation, with stable interest rates at levels similar to those of the international community. It has the posibility to issue in dollars, widening the possibilities of capturing more resources in the international markets more so than if they were done in local currency. Also, in Panama there are restrictions regarding the international movement of capital.
On the other had, issuing in Panama allows businesses to have access to a modern platform of complementary services, such as legal services of international quality, and the presence of world's most highly recognized and respected auditing and consulting firms, among others. Equally important, the presence of one the the region's most important international financial centers, which includes the most recognized banks, insurance and reinsurance companies.
The registering of issues in Panama is done through relatively simple procedures. Besides, the issuer benefits from liberal fiscal treatment that is also territorial in nature. That is, income derived from foreign transactions is not taxed.
The BVP offers the investor the opportunity to aquire stocks, short term corporate debt, corporate bonds and mortgages, government documents, closed end mutual funds, among other instruments. Upon acquiring these titles, the investors have access and fiscal incentives and financial assetsvalued in dollars.
Within the BVP one finds represented dynamic sectors such as banks, insurance companies and financial services, telecommunications and, industry and agriculture, cement, concrete and construction, commerce, real estate, tourism, entertainment, among other activities. In other words, the investor can diversify his risk while taking advantage of a wide variety of instruments in which to invest his capital.
Finally, 10 years later, the goal of establishing a stock market in Panama is a tangible reality. The presence of the BVP, without a doubt, has been a fundamental piece in the creation of the Stock Market. The commitment of this organization, along with the issuers, investors and market participants is to continue promoting a more efficient, modern and transparent market, as well as create favorable conditions in order to transform itself into an important regional stock market. These are our goals for the next 10 years.
Material supplied by the Panama Stock Market
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