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Panama’s Sovereign Wealth Fund Story

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Panama may soon join the ranks of countries that have a sovereign wealth fund. While the rest of the world is experiencing a hard time, Panama’s economy expanded by over 10% in 2011. It is one of the fastest growing Latin American countries in the Western Hemisphere. Foreign direct investment remains resilient and revenues from the Panama Canal are greatly contributing to gross domestic product. Economic growth in 2012 is projected to be at about 7.5%, an indication of declining risks of overheating.

It is estimated that about 5% of world trade passes through the Panama Canal.

Enjoying economic prosperity, the Government of Panama publicly announced last month that they want to create a new sovereign wealth fund financed by the surplus revenue generated by the operation of the newly expanded Panama Canal to hedge against economic recessions and natural disasters. Panama is trying to create a mechanism to prevent or at least smooth anti-cyclical downturns. The proposal was officially submitted to representatives of the Panamanian Chamber of Construction by the Vice Minister of Finance Mahesh Khemlani. Currently, the government is formally defining the details of the Ministry of Finance proposal. According to the Martinelli administration, the Panama Canal receives gross income from all sources of about $3 billion dollars per annum. They spend about $2 billion out of it on operations and the remaining $1 billion is spent on education and healthcare. The newly expanded Panama Canal will create an additional $1 billion dollars every year. The expanded canal is expected to generate $5 billion in gross income and $3 billion operations costs.

The expansion of the Panama Canal will allow larger ships to pass through. It is dubbed the Third Set of Locks Project and it plans to double the capacity of the Panama Canal by 2014. Two main competitors that may affect the canal’s profitability include the Suez Canal and the United States intermodal system.

This is “a state project and not of one administration,” said Khemlani. The establishment of this new sovereign wealth fund would be a priority this year for the Government of Panama.

ADIA Seeks to Sell KIC Headquarters

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The Abu Dhabi Investment Authority (ADIA) is seeking to sell the building that houses the headquarters of the Korea Investment Corporation (KIC). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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BMO and OTPP Test Blockchain Canadian Dollar Debt Deal

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The Bank of Montreal (BMO) and the Ontario Teachers’ Pension Plan (OTPP) participated in a landmark blockchain Canadian-dollar debt transaction. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Just Group Acquires Corinthian Pension Consulting

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Just Group plc acquired a 75% ownership stake in the holding company of Corinthian Pension Consulting Limited (Corinthian Pension Consulting). Operating in the institutional world for over 12 years, Corinthian Pension Consulting provides advisory services to defined-benefit pension scheme trustees and scheme sponsors undertaking bulk scheme exercises. The remaining 25% will be retained by current shareholders of Corinthian Pension Consulting. Robert MacGregor will continue to lead Corinthian Pension Consulting, as its Chief Executive Officer. Furthermore, Corinthian Benefits Consulting Limited and Corinthian Affinity Solutions Limited will continue to operate as before, becoming part of a newly formed holding company, Corinthian Group Holdings Limited.

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