No more cheap credit

PANAMA. As developed countries suffer from credit crunches, the local banking industry is also seeing lower consumption loans.

Ernesto Bazan, manager of the risk consulting company Equilibrium, does not believe international markets are causing the deceleration because Panama has 58.2 percent liquidity.

Record utility results surpassed 2007 results between January and August 2008 with little dependence on foreign financing.

Bazan explains the prudence that currently characterizes the local credit market is a result of the accelerated growth in loans experienced in the last few years.

Until August 2008, the annual growth rate of local loans was 19 percent, the highest in the last few years.

This equals $20.9 billion in loans, of which $2.4 million correspond to personal consumption loans.

The rate is now returning to the January 2007 average of less than 10 percent.

Bazan argues that Panamanian families have exhausted their borrowing capacity, and thus the deceleration in loans should not be seen as a direct consequence of the international financial crisis.

At the same time, he claims banks are imposing higher interest rates and shorter maturities, decreasing incentives to get loans.