Trust business falls a 2% during 2015

The statements made by international organizations concerning the transparency of the financial platform of the country have negative implications on the trust business, which fell by 2% in 2015, i.e. about $476 million 431 thousand less than in 2014.

Coupled with these assertions, members of the trust sector point out that another situation that might affect them is the increase in rates or charges that they pay to the Public Registry, putting them on the same level of mortgage rates.

A trust is a tool used to manage assets in accordance with a specific purpose and can be used to construct a building, to cancel a debt (widely used by the State) or to meet obligations by securitization.

During 2015, the Panamanian trust sector registered administered estates for an amount of $20 million 858 thousand 407, less than the $21 million 334 thousand 838 recorded in 2014, according to the Superintendence of Banks (SBP), which shows a fall of 2%.

According to the SBP report, 2015 is the first year that the business trusts in Panama shows negative figures, since it had shown a positive growth in the past seven years prior to 2015, and for example in 2009 it was (32.5%), in 2011 it was (13.3%) and in 2014 it was (27%) which were also the fastest growing.

Meanwhile, by categories of trust companies, trusts through insurance companies, companies linked to law firms and foreign private banking, fell 99.5%, 5.3% and 7.6%, respectively.

Specifically, the trusts by insurance companies went from $24 million 450 thousand in 2014 to only $125 thousand in 2015, and those made through foreign private banks went from $3,227 million 823 thousand in 2014 to $2,981 million 581 in 2015.

Olmedo Estrada, President of the Association of Economists of Panama, stressed that all such attributions made by international bodies to the Panamanian financial system have long term negative effects on various sectors of the economy.

He added that trusts are assets of companies or individuals who want to have them secured in safe and stable economies.

He noted that if countries do not have these instruments, they will seek other scenarios where they do not have any concerns or are in danger as regards their assets.

He added that all the "scandals" that are taking place with the Panamanian financial system will continue to have repercussions on the trust business, which this year could continue falling due to this situation.

Estrada stressed that in addition to this situation, the most important countries of Latin America (Colombia, Venezuela, Argentina and Brazil) showed a negative growth, which has made investors in these nations not to invest in trusts in these country.

According to Banco Aliado S.A., entity that does trust business, something that could be affecting the growth of this type of business is the rise of the taxes by the Public Registry that are paid when using the figure of trusts.

According to this entity, in their case positive numbers were shown in connection with their income for trusts, but it may be that trust categories that fell the lowest in 2015 were those that were affected by this fact.

Ramón Jurado, Manager of Fiduciaria Action Trust, said that the decline which is being experienced is true, but it is the firms themselves that will experience the consequences depending on the type of trusts that do.