The big shoe drop is inching closer in Panama
The end of eviction and foreclosure moratoriums edge closer as struggling banks have already started attempting to collect
In an attempt to control the COVID-19 pandemic, Panama responded with some of the most heavy handed containment measures in the world:
- Months long total quarantines
- Strict social distancing requirements
- Closed borders for months
Panama’s containment measures achieved mediocre health results and came at an enormous economic cost.
Lacking a central bank, Panama was not able to engage in the extreme monetary support employed by countries like the US, Japan, and Eurozone nations. Most Panamanians received only monthly food boxes. Panama locked everything down without the ability to provide fiscal and monetary support. Panama’s GDP collapsed by 18% in 2020 and a further 8.5% in Q1 2021. Official unemployment is now running over 20%. A third of the nation’s hotel sector and nearly half of restaurants failed.
The few supports Panama did put in place were a moratorium on mortgage and rent payments, which remains in place to this day, and expires December, 31, 2021, though borrowers must come to a repayment arrangement with their lender by September 30, 2021. Additionally, a tax amnesty which had been in place expired on August, 31. I have already seen buildings in down town Panama City with “tax auction” signs just days after the tax amnesty expiration.
In 2020, bank profits dropped by 45%, with a further 32% drop in 2021. One of the country’s largest banks, Banco General, recently attempted (they later said by accident) to start collecting on debts. Customers with outstanding loan balances but money in their accounts were debited directly, without authorization, resulting in large protests in bank branches, and a quick step back by the company.
A few months ago, La Estrella reported that as many as 55% of debtors were currently not paying loans.
I’m not sure exactly what to expect, but what I can say is that I’ve never seen so many people sleeping on the streets in Panama City, or so many empty buildings. Given that collections have still not come into full force, and won’t until the end of the year, I’m expecting a lot of turmoil.
