Relationship between panamanian sovereign bonds and banking profit in the context of country risk.

Abstract

This study analyzes the relationship between Panamanian sovereign bonds and the banking profit rate in the context of country risk during the period 2010-2021. Through both quantitative and qualitative analysis, the research examines how risk ratings influence Panama's economic stability and the profits of the banking sector. The results indicate that a downgrade in the risk rating increases financing costs and reduces foreign investment, negatively impacting the country's economy. Comparisons are drawn with other countries that have experienced similar situations, and strategic measures are proposed to mitigate risks and strengthen economic stability. The study highlights the importance of maintaining a favorable risk rating, as it directly influences investor confidence and access conditions to global financial markets. A high rating reduces debt costs and facilitates the inflow of foreign direct investment, crucial for sustained economic growth. On the other hand, a downgrade can trigger adverse effects such as capital flight, depreciation of the local currency, and rising inflation. The research is based on expert interviews and a comprehensive review of relevant literature. Methodologies included the statistical analysis of financial data and comparative case studies. Interviews with economists and financiers provided in-depth insights into the factors that influence risk ratings and effective strategies for maintaining them. Among the main conclusions, the study underscores the need for prudent fiscal policies, economic diversification, and improvements in government transparency. The experiences of other countries emphasize the importance of these strategies to ensure a stable and resilient economy in the face of potential financial crises.