Lawmakers in Panama approved the government’s plan to create the country’s first sovereign wealth fund with revenue from an expanded Panama Canal to help buffer Latin America’s fastest-growing economy in a downturn.
Lawmakers voted 41-19 today to approve the creation of the fund, which would take effect after the canal’s $5.25 billion expansion is completed in 2014. With at least $300 million to start, the government estimates savings will grow by about $1.5 billion per year from taxes on the canal, Finance Minister Frank De Lima told lawmakers before voting took place.
Panama joins countries including Chile and Trinidad & Tobago in managing wealth funds from surplus revenue, usually from commodity exports. Panama’s fund will allow it to improve control of canal resources and cover future debts, the International Monetary Fund said in an April report.
The fund would only be tapped during a recession or following natural disasters, De Lima said.
Panama’s fund was approved over objections from opposition lawmakers, who warned that President Ricardo Martinelli will increase spending because the legislation also raises the debt ceiling in 2012 from 2.0 to 2.9 percent of gross domestic product.
Panama’s $33 billion economy grew 10.6 percent last year, the most in Latin America, and will reach 10 percent again this year, De Lima said. Revenue from the 80 kilometer (50-mile) waterway was $3 billion last year and that’s expected to double by 2025, according to Panama’s canal authority.
The canal expansion, started in 2007, will accommodate larger vessels carrying about 12,600 containers and may generate cargo growth of about 5 percent a year when completed, the authority said. Currently, ships loading fewer than 5,000 20-foot boxes can use the waterway.