Although it is believed that regional banks are "solid, liquid and stable," the recommendation for Latin America to avoid or at least mitigate the inevitable effects of the economic crisis in Europe and the slow recovery of the U.S., is to keep a lid on fiscal deficit.
An article in Prensa.com reports that the president of the Latin American Banking Federation (FELABAN), Oscar Rivera, has recommended that countries in the region comply with the rules governing the economy and containing the fiscal deficit. These are be some recipes to avoid crisis being suffered by Europe. "The logical thing is for governments not to have budget deficits. Not having deficits and making any long tern debts shortened as much as possible. "
China, which is seen as the locomotive of the global economy, "in the second quarter posted its lowest growth rate in the last three years (7.6%)", meaning that it may not be the solution to the crisis in Europe which is one of the major markets for Latin American exports.
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The annual imbalance between government expenditures and revenues grew by 0.3%. Expenses grew by 10.6% in 2012, 1.7% more than the increase in 2011.
A statement from the Ministry of Finance reads:
The financial deficit of the Central Government at the end of 2012 was 4.4% of GDP, equivalent to ¢1,003,098 million. This deficit is lower than that projected earlier this year (4.8%).
Fitch Ratings highlighted as a recurrent weakness of the Panamanian fiscal policy the inability to limit the growth of debt as a percentage of GDP.
From the statement by Fitch Ratings:
Fitch Ratings-London-03 October 2014: The Panamanian government's request to raise the 2014 non-financial public sector deficit ceiling highlights the persistent use of waivers of the country's Social and Fiscal Responsibility Law (LRSF), Fitch Ratings says. This is a recurring weakness in the country's fiscal framework as fiscal consolidation becomes more important in maintaining favourable debt dynamics. However, Panama's ratings continue to be supported by the country's relatively healthy growth rates and macroeconomic stability, its growing economic diversification and the decline in government indebtedness over recent years.
In a context of increasing physical investment by the state, the fiscal deficit of 2011 was 2.3% of GDP, far from the 3% limit set by law.
Panama's fiscal deficit in 2011 was 2.3% of GDP, or $703.1 million, a figure that is within the scope of the goal to not go over 3% of GDP.
The private sector demands limits on the government's ability to borrow, through means of a Fiscal Responsibility Law.
From a press release issued by the Chamber of Commerce and Industry of El Salvador (Camarasal):
The Camarasal has expressed dissatisfaction with the fact that the Legislature has authorized the government to issue a new bond debt for $1.156 million, without having first limited the state's debt capacity through the adoption of a Fiscal Responsibility Law.