The metro project will generate more jobs than any other project, save the ongoing Panama Canal expansion

Taking office on July 1, 2009, Panama President Ricardo Martinelli hit the ground running. The president won the May 2009 election with over 60% of the vote—that’s more than any other Panamanian president. A self-made multi-millionaire, he made it clear that he was not in it for the money; he won’t take a salary and he takes his own private plane on government business. Perhaps because of his wealth, he isn’t afraid to step on toes…even if they’re attached to Panama’s most powerful paws.

From day one, the new administration said it would make major improvements, even if it meant exposing inefficiencies in the system or even prosecuting former officials guilty of wrongdoing. A host of irregularities came to light in the first months of Martinelli’s rule.

Among other scandals, some data suggested that the outgoing administration was lax about improving poverty statistics (a major issue of the previous president’s platform). Said new officials, $20 billion was designated for social spending during the 2004 to 2009 period, but over 76% went to payroll and operations, leaving precious little to actually invest in social security, employment, health, education, and other under-funded areas.

Ambitious Infrastructure Plans

In addition to exposing irregularities, the new administration is taking a hard line on government spending. Martinelli said he would reign in spending and graft so as to have the funds he needs to make good on his campaign promises. The new president has, among other things, promised to build a metro system and improve Panama City’s inadequate transportation system.

The metro project, he said, will generate more jobs than any other project in the nation, save the ongoing Panama Canal expansion. Financial institutions from the World Bank to the Inter-American Development Bank have already expressed an interest in financing the metro project. Martinelli isn’t wasting any time—a new secretariat has already been created to oversee the design of the new system. Construction will begin at the end of this year, Martinelli says.

Other plans include an ambitious overhaul of Panama’s already excellent infrastructure. The plans call for new roads and buses to complement the new metro, but perhaps most exciting is the new international airport, which authorities say will facilitate tourism in the Pacific Coast beach area known as the Arco Seco.

What has generated the most positive publicity for the new president? Probably his strong-arm tactics with concessions and other debtors to the state. The previous administration allowed concession holders to go months without making payments, building up tabs in the millions. Now, those in arrears must pay up or lose their concession rights.

Concessions in the exclusive Amador area have been among the worst offenders, owing approximately $30 million in arrears. Not only did Martinelli order immediate action, but he actually accompanied his staff to Amador to seize lots whose owners were in non-compliance.

Panama Makes the Grade

Many are crediting Martinelli’s government with achieving what they call “the big three” in investment grade ratings. In March of this year, for the first time ever, Panama earned an investment-grade credit rating from Fitch Ratings.

The international ratings agency upgraded Panama’s long-term foreign currency and local currency Issuer Default Ratings (IDRs) to ‘BBB-’ from ‘BB+’. The new rating is the lowest investment-grade level rating with a positive outlook. Fitch also raised Panama’s short-term foreign currency IDR from a ‘B’ rating to ‘F3′ and the country ceiling from from ‘BBB+’ to ‘A-’.

Two months later, Standard & Poors followed suit. Rewarding Panama for rapid economic growth and tax overhauls, S&P upgraded Panama one notch to BBB- from BB+, saying that Panama’s outlook for the credit rating was stable.

Just days ago, Moody’s Investors Service upgraded Panama’s sovereign ratings to investment grade of BAA3 from BA1, also citing improvement in the country’s fiscal and debt positions. The move was expected as experts predicted up to 5% growth for Panama’s economy this year, with the Panama Canal expansion project promising to fuel growth into the future.