(Bloomberg) — A row between newly elected President Donald Trump and Panama over one of the world’s most important waterways is affecting the country’s assets.
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Panama bonds fell across the curve on Monday morning, most in emerging markets after Trump threatened to reassert US control of the Panama Canal if the country did not reduce transit costs. President José Raúl Mulino quickly dismissed the threat, but the developing row only increased traders’ concerns about Panama’s prospects.
Notes maturing in 2036 fell 0.7 cent against the dollar and the cost of insurance against a sovereign default rose to the highest level since February at the close amid thin trading, according to prices compiled by Bloomberg.
The waterway, built more than a century ago by the US Army Corps of Engineers, is one of the biggest sources of money for the government, which is already under pressure after a major copper mine suddenly closed last year. Moreover, the country is on the verge of losing its investment-grade credit rating after several downgrades recently.
“It is extra attention that Panama does not need at the moment,” said Nathalie Marshik, director of HSBC in New York.
According to a Bloomberg index, bonds were the worst choice among emerging markets this quarter, losing 8.5% over the period.
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