The Panama Securities Market

Presentation to the X General Assembly ACSDA

Panamá, February 22

Roberto Brenes P.

Executive VP Panama Stock Exchange.

Agenda:

– The Market and the PSE.

– The PSE and the region.

– Growth Strategy.

The domestic securities market

• Most of the local market is originated and executed trough the Exchange.

• The market development strategy, local and regional , is mostly concibed and propelled by the Exchange.

The PSE in bulllets

• Demutualized exchange.• Publicly traded corporation.• Self-regulated organization (SRO).• In business for 17 years. • Full Electronic Trading.• Integrated C &S.• A “business” exchange.

A success Story

Growing volume

Amount traded

1,434.0 1,343.4

1,681.3

2,256.32,284.0

2003 2004 2005 2006 2007

in U

S$ m

illi

on

s

Share trading: More Market Capand better returns.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2003 2004 2005 2006 2007

inU

S$

mil

lio

ns

0

50

100

150

200

250

300

Pts

(d

ic 0

2 =

100

)

Market capt BVPSI (index)

Still… a primary issues market.

Volumen trading in secundary market and total market

0

500

1,000

1,500

2,000

2,500

1995 1997 1999 2001 2003 2005 2007

in U

S$

mill

ion

s

Total Volumen Secundary market

Solid numbers…

2003 2004 2005 2006 2007Resultados (en US$)Ingreso netos 920,876 999,393 1,152,103 1,616,498 1,546,716 EBITDA 219,415 310,212 329,732 732,198 718,075 Depreciación y Amortización 16,009 73,642 80,641 103,419 112,147 EBIT 203,406 236,570 249,091 628,779 605,928 Intereses Financieros 15,209 - - - Utilidad Neta 353,862 333,393 329,643 622,861 617,787

Balance (en US$)Activos totales 3,616,736 3,834,244 3,399,659 3,835,291 3,993,623 Deuda financiera a corto plazo - - - - - Deuda financiera a largo plazo - - - - - Deuda financiera total - - - - - Total de pasivos 160,410 174,401 203,880 501,718 341,973 Patrimonio 3,456,326 3,659,843 3,195,779 3,333,573 3,651,650

Indicadores Margen EBITDA 23.8% 31.0% 28.6% 45.3% 46.4%Margen neto 38.4% 33.4% 28.6% 38.5% 39.9%Rotación de activos 26.0% 26.8% 31.9% 44.7% 39.5%Retorno sobre activo promedio 10.0% 8.9% 9.1% 17.2% 15.8%Retorno sobre patrimonio promedio 10.6% 9.4% 9.6% 19.1% 17.7%

The regional market

The regional market:Facts and opportunities.

• Same as Panama, all markets in CA are mostly exchange-driven and small.

• But:• Countries are integrating within and outside region.• Economic integration requires financial integration.

– Domestic companies requiere long term capital to deal with integration.

– Local markets do not have critical mass by themselves.– Domestic investors percibe local risks better but unseasy

with local liquidity.

Small local markets (2007 traded volumen on each exchange US $)

Source: Exchanges

BNV (Costa Rica) BVES (El Salvador) BVP (Panamá)Deuda corporativa 907.3 354.0 849.1 Acciones 69.2 236.7 450.2 Acciones de fondo 224.9 - 339.1 Valores del estado 7,904.8 907.0 461.1 Recompras 28,341.6 3,940.7 184.5

Total 37,447.9 5,438.5 2,284.0

(Sin recompras ni valores del estado) 1,201.5 590.7 1,638.4

Bolsa:Instrumento

BNV (Costa Rica) BVES (El Salvador) BVP (Panamá)Deuda corporativa 907.3 354.0 849.1 Acciones 69.2 236.7 450.2 Acciones de fondo 224.9 - 339.1 Valores del estado 7,904.8 907.0 461.1 Recompras 28,341.6 3,940.7 184.5

Total 37,447.9 5,438.5 2,284.0

(Sin recompras ni valores del estado) 1,201.5 590.7 1,638.4

Bolsa:Instrumento

The growth strategiesThe rationale.

• Small domestic markets.

• Positive integration efforts.

• Panama has competitive advantages.

Concentration

Racionalización

Demanda tradicional.

Liquidez

Penetration

Regional integration

Regional products

North/ South FIAB

Expansion

Pension funds

Privatizations

Infrastructure

Diversification

High School Exchange

Financial Futures

The Strategies MatrixMarkets

Present New

Pro

du

cts P

rese

nt

New

Regional Alliances: The FIAB Model

– Co-listing of securities.– Dependent of correspondent broker dealers.– Then requiring:

• Harmonization of requirements of market and issuers information.

• Develop strategies to boost and promote jurisdictions that comply.

The PCE Alliance:The Norex template:

– Based on Cross membership.

– Members share• Same platform• Same architecture.

– Liquidity remains local.

– Second stage implies consolidation of regional C & S.

Exchanges

C & S

Non owners

Owners

Other regional alliances.

• Neighboring posibilites– Andean Markets

• Inter Institucional Markets.– Regional public debt.– Regional Pension funds.

• Supra-regional players ( remote operators).

Regional Strategy Requierements..• Reduce market barriers.

– Improve regulatory quality.– Promote investor education.– Promote critical mass projects..

• ““Cooperations” instead of Competition..– Focus on market expansion (KODAK)– Honor alliances and agreements.– Facilitate regional action..

• Emphasize financial and tech requierements.– Mitigate counterparty risk.– Promote liquidity providers or market makers.– Open architecture and open systems.

Our competitive position

Global changes / local opportunities

• Changes in the “business” .– Globalization kills distances – Annuities vs. fee business.– Emphasis on private banking.

• Changes in the regional markets.– Politcal factors– Regulatory changes

• Panama Strenghts.– Economci and fiscal structure.– Business and regulatory environment.

The opportunities

• Two complementary forces.

– The eroding political situation in LA.

• Promotes capital flight

– US regulatary environment of terror

• Repels capital flight into US

• Promotes repatriation of capital away from US.

• An enabling condition.

– Technology allows to be anywhere.

Our Business Environment • The Traditional: 

-  Business-friendly framework and legal advisory

-  Tax Regime

- Commercial Banking• The Innovative:

– New business units– Brokerage houses and Investment Advisors– Stock exchanges with SEC authorization– Banks with private banking and investment banking

units• The Revamped

– Insurance and Reinsurance Framework

Our advantages

• No taxes; no fiat money.

• New hot spot for latinos to live.

• Important business and financial center.

• Private banking hub.

• “Designated Offshore Exchange” .

¿Questions?