business & economy

Panama's Bolsa de Valores stock and bond exchange has adopted a set of uniform exchange rules with its counterparts in Costa Rica and El Salvador and will create a new corporation in which the three exchanges will become equal partners. The move, promoted by the Inter-American Development Bank (IADB), is seen as an intermediate step for a working merger between all of the securities exchanges in Panama and the Central American countries.

The announcement was made in a joint March 24 communique issued by Panama's Bolsa de Valores, El Salvador's Bolsa de Valores and Costa Rica's Mercado Nacional de Valores.

The details had been hashed out in a series of IADB-sponsored workshops that last December and continued until the agreement was announced. In a technical sense, the model for the merger came largely from a company called OMX, which provided the regulations, software and equipment standards that allowed the merger of nine stock markets in the Scandinavian and Baltic countries into NOREX. The European Union's moves toward a unified securities trading industry also served as one of the examples on which this region's exchanges drew.

There is and has been for about two decades a move to merge the economies of Panama and the Central American countries. The process has been slow but in recent years has been expressed in a series of free trade deals between Panama and several of the Central American countries, the CAFTA treaty that not only provides for free trade between individual Central American countries and the Dominican Republic but among those Latin nations as well, and progress on the interconnection of the various countries' electrical grids.

In Panama there is a long-standing economic and political orientation toward northern South America rather than Central America that has sometimes worked against integration with our neighbors to the northwest, but the shambles of the Andean Bloc that's largely a function of Colombian warfare and instability in most of the other countries in northern South America has tended to make Central America a more tempting set of trade partners. However, except for a bit of a maquiladora industry in Honduras and some high tech businesses in Costa Rica, the Central American countries have agricultural economies much like Panama's Interior, without the advanced commercial and service sectors that we have in our metro area in Panama and Colon provinces, and this has been an impediment toward integration. More recently, uncertainties about the intentions of Nicaragua's Sandinista government have also slowed economic integration.

Panama's Bolsa de Valores in practice lacks many of the attributes of a modern stock exchange, most notably the transparent disclosure of relevant information about companies whose shares are traded on it, and thus fluctuations on the Bolsa often have little to do with the market value of shares on these companies. The institution might not exist at all in an economy dominated by family-owned or family-controlled businesses, except for the tax breaks available for companies that arrange their financing through it. Costa Rica may have a somewhat more open corporate sector and El Salvador an even more family-dominated one than Panama's, but all three countries' exchanges tend to have similar problems.

If the three-country agreement works well, then it will likely become a template for an arrangement that brings in institutions from the Central American countries that are not now participating.