Panama, with 31 banks, again dominates this year’s compilation of the Top 100 banks in Central America. It is followed by Guatemala with 21 banks, Costa Rica with 15, Honduras with 13 and El Salvador with 11. The listing covers seven countries. The Dominican Republic was omitted this year because it is not strictly a part of Central America.
Six of the top 10 come from Panama. Banco Latinoamericano de Exportaciones (BLADEX) moves up from second place to head the list. The bank has a made a strong recovery following the problems of the previous year when large increases in loss provisioning, coupled with mediocre operating results, drove a large pre-tax loss. Banco Nacional de Panama drops to second place with Banco General at three and Primer Banco del Istmo at four. The highest placed non-Panamanian bank is Banco Agricola from El Salvador, which moves in to fifth place, with Banco de Costa Rica at eight, and two more Salvadorean banks, Banco Cuscatlán and Banco Salvadoreño, at nine and 10 respectively.
Total Tier 1 capital for the 100 was $5751m, total assets were $58,328m and total pre-tax profit was $1130m. For comparison Banco Bradesco from Brazil, which headed our Top 100 Latin American listing last August, had Tier 1 capital of $4695m, assets of $60,976m and pre-tax profit of $939m at year-end 2003. Panama’s 31 banks accounted for 53.0% of the aggregate Tier 1 capital, 41.3% of the aggregate assets and 54.9% of the aggregate pre-tax profit, a recovery from the 13.8% of aggregate pre-tax profit recorded last year.
Regional outlook
The region remains one of the poorest in the world, with Panama and Costa Rica perhaps the two strongest countries from an economic viewpoint. Panama has benefited from a sustained period of political stability allied to long-standing monetary stability anchored by the use of the US dollar. However growing fiscal imbalances, moderate gross domestic product (GDP) growth and limited foreign direct investment – along with the country’s dual economic structure – give cause for longer-term concern.
Costa Rica also benefits from political stability with relatively strong institutions, as well as a highly diversified economy with a per capita GDP of over $4300. Weaknesses are a largely unsupervised offshore banking sector, a high level of dollarisation and deteriorating external liquidity.
Elsewhere in the region Belize suffers from weak external liquidity and high public sector debt. It is also vulnerable to adverse external developments, such as rising oil prices and price cuts on commodity exports – although diversification away from traditional agricultural products (for example, sugar, bananas) has helped ameliorate the latter.
The final approval of the Central American Free Trade Agreement by the US Congress should benefit the five signatory countries – Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua – by attracting direct investment from the US and by removing the final tariff barriers on, for example, textiles and sugar.
