PANAMA ANNOUNCES ENERGY SUBSIDIES TO CAP INFLATION

Fri Jun 20, 2008 8:25pm BST

REUTERS UK

PANAMA CITY, June 20 (Reuters) - Panamanian President Martin Torrijos said on Friday he would boost subsidies on gasoline and electricity in a bid to prevent further price increases and stem inflation.

Panama will spend at least $40 million in the next six months to blunt the impact of further international price increases, protecting consumers who have seen retail fuel costs rise more than 24 percent in the last 12 months, Torrijos said.

With presidential elections scheduled for May next year, the government has been keen to underline the global causes of the crisis and keep demonstrations by students, transport workers and unions from leading to widespread unrest.

Like many import-dependent countries Panama has been hit hard by high global prices for oil and food, but consumers have also seen living costs rise as a result of the country's economic boom.

With 12-month inflation running at a historically high rate of 8.8 percent, the rising cost of living has become a major election issue.

This week, Panama City was paralyzed by transport strikes, with bus drivers blocking roads and setting vehicles alight in protest against the rising cost of fuel and reforms to the public transport system.

Torrijos' announcement follows a decision on Wednesday to spend an additional $10 million to subsidize the price of diesel for bus owners from now until September.

NEW TRADE AGREEMENTS

Panama opens way to new trade agreements

Three new agreements come into force this year: Honduras, Costa Rica and Guatemala. On 7 and July 8 will take place the second exploratory meeting for an FTA with Canada.

Rafael E. Berrocal R.

rberrocal@prensa.com

Panama continues forward with its strategy of opening trade. Before the end of 2008 will enter into force three new free trade treaty, signed with Honduras, Guatemala and Costa Rica. In addition, the country could be launching negotiations with Canada this year.

Leroy Sheffer, head of trade negotiations in Panama, indicated that negotiated agreements with Honduras, Guatemala and Costa Rica are already in the process of ratifying the respective congresses and national assembly.

"These three countries together make up a market of 26 million and exports to Panama exceeding $ 100 million, ie about 10% of the total country's exports to the world," said Sheffer. The agreement with Nicaragua is a little more behind in their ratification process.

The culmination of negotiations with all Central American countries means that nearly 80% of all trade in Panama with the region would be integrated when entering into free trade agreements in full, according to a report by the Ministry of Commerce and Industries.

Another process that is under evaluation is negotiating a free trade agreement (FTA) with Canada. This has confirmed the second exploratory meeting between the two countries the next 7 and July 8 in Panama.

The aim is to define the scope and degree of ambition that both partners can achieve in the context of negotiating a trade agreement.

"In our case, as part of the dynamics that we have charted, and we are working with the productive sectors in the possible strategy to pursue, which must be very attached to the opportunities that Panama could benefit from a strategic alliance with this trading partner ,"said Sheffer.

Panama has four treaties in force currently trading: El Salvador, Taiwan, Singapore and Chile.