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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.

White House Nominates Heath Tarbert for CFTC Chairman

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The White House announced Heath P. Tarbert will be nominated to serve as Commissioner and Chairman of the Commodity Futures Trading Commission (CFTC). Tarbert currently serves as Assistant Secretary for International Markets at the U.S. Treasury Department. Before joining the U.S. Treasury, Tarbert was a Partner at law firm Allen & Overy. Tarbert was confirmed by the U.S. Senate for his current Treasury post at 87 (yes) to 8 (no).

Upon Senate confirmation, Tarbert’s CFTC term would start on April 14, 2019 and last for five years. Tarbert is taking over from J. Christopher Giancarlo whose term ends in April 2019. Tarbert will need a U.S. Senate confirmation to take the head CFTC post.

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KIA Could Sell Stake in North Sea Energy Business

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The Kuwait Investment Authority (KIA), through its unit Wren House Investment Management, is nearing a deal to sell a 40% stake in its North Sea energy business to JPMorgan Asset Management. In July 2018, KIA closed on a deal to acquire oil and gas pipeline firm North Sea Midstream Partners from ArcLight Capital.

More details to follow –

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Pensioenfonds PGB Hires BMO Global for Equity Protection Strategy

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Pensioenfonds PGB is a Dutch multi-sector pension fund. PGB awarded a mandate to implement a protection strategy for its €12 billion equity portfolio to BMO Global Asset Management. PGB is a €26.5 billion fund. PGB has been using BMO Global’s responsible engagement overlay since 2017.

The Chief Investment Officer of PGB is Harold Clijsen.

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