“THE PANAMA NIAN SECURITIES MARKET ”

1. “THE PANAMANIAN SECURITIES MARKET” Carlos A. Barsallo P. Chairman Panamanian Securities Commission (CNV) Chairman Iberoamerican Securities Markets Institute ACSDA X General Assembly Panama, February 22, 2008

2. PLAN • Statistics • CNV`s vision: Following best international standards • Integration: The Future • Institution Building: Key piece • Conclusion

3. PANAMANIAN SECURITIES MARKET IN NUMBERS 2007

4. THE MAIN MOTIVATOR TO PARTICIPATE:TAX PURPOSES

5. PANAMANIAN SECURITIES MARKET IN NUMBERS 2007

6. IOSCO principles for securities regulation Ensuring that markets are fair, efficient and transparent. Reducing systemic risk Investor protection CNV`s vision To promote and strengthen the favorable conditions for the development of the securities market in Panama. Modernization of the market “Regionalization” of the Panamanian securities center. CNV`s VISIONIOSCO PRINCIPLES FOR SECURITIES REGULATION

7. IMF 2006 ASSESSMENT PANAMA COMPLIANCE WITH IOSCO PRINCIPLES

8. REGULATION AND SUPERVISION Importance for integration An equitable, transparent and efficient regulatory and supervisory framework Regulation and Supervision are not ends, they are means An efficient securities market Better assignment of savings Option for financing the enterprises • Promotes competition • Promotes investments • Economic growth

9. Good regulation and supervision open doors for integration. Weak regulation and supervision and a regulator without powers produce social ad financial alienation and limit economic development. Regulation is a necessary precondition, however it is not enough. REGULATION AND SUPERVISIONIMPORTANCE FOR INTEGRATION THE REGULATORY AND SUPERVISORY FRAMEWORK ARE CRITICAL FACTORS IT IS NECESSARY TO WORK WITH THE REGULATORS

10. TO INTEGRATE IT IS NECESSARY TO COMMUNICATE • Memorándum of Understanding (MOU) in negotiation with Ukraine • Not succesful with China • IOSCO MMOU. Panamá Appendix B since 2005. • Need for international cooperation. • Current weakness of the Panamanian regime. NO compliance with principles 11 and 13 of IOSCO.

11. ACKNOWLEDGED JURISDICTION CONCEPT Every jurisdiction which the CNV acknowledges as having laws and regulations which, though not equal to the national ones, generally offer, in the judgment of the CNV, a level of protection as a whole substantially equal or better than that offered by the national legislation and which has a regulatory entity which, to the satisfaction of the CNV, supervises appropriately the compliance with said statutes and regulations

12. ACKNOWLEDGED JURISDICTIONSTHE LIST • The CNV can recognize the validity of securities registered in acknowledged jurisdictions and allow the public offering of said securities in the stock exchange in Panama • Additionally the CNV has declared exempted from registration the securities issued by a State or jurisdiction that have been declared acknowledged jurisdictions • In public consultation: BRITISH COLUMBIA • In study: COLOMBIA.

13. ACKNOWLEDGED JURISDICTIONIMPLICATIONS • It is not mutual recognition nor it is necessarily reciprocal. • It generates obligations for the issuers such as reporting and press releases • It is an initial stage. It is based on the securities/issuer. In next stages it will have to deal with intermediaries and their services.

14. ACKNOWLEDGED JURISDICTION IN PRACTICE

15. Small size of regional businesses, pervasive family ownership, and aversion to minority investors, tax avoidance, and the loss of confidence caused by past financial crises, and weak development of institutional investors. Basic securities laws and regulation have significant gaps in many countries. International Monetary Fund (IMF) Working Paper: Equity and Private Debt Markets in Central America, Panama, and the Dominican Republic prepared by Hemant Shah, Ana Carvajal, Geoffrey Bannister, Jorge Chan-lau, and Ivan Guerra ( July 2007) THE MAIN CHALLANGE FOR INTEGRATION: CURRENT REGIONAL SITUATION OF THE SECURITIES MARKETS

16. INSTITUTION BUILDING • Problems encountered with regulators and supervisors of securities markets (not developped markets) Panama was, and is not, an exception,despite the important improvements. • Institutional weakness • No real and practical autonomy • Lack of resources • Lack of public and private support • “Panama’s Comisión Nacional de Valores has evolved into a credible securities supervisory authority with a better degree of independence from the Ministry of Finance. • The CNV is now an active participant in the international struggle against money laundering in that country’s offshore banking center. • The CNV has achieved sustainability.” • Interamerican Development Bank (IDB) evaluation.

17. “In law and in practice, this is one of the most politically independent organizations. Consequently, it enjoys a high level of trust by Panamanians and foreigners interested in the national financial industry.” “The CNV is known for active supervision of stock broker activity in Panama.” PANAMAINTEGRITY ASSESSMENT 2005 Assessments: International Monetary Fund (IMF) evaluation using IOSCO and Financial Action Task Force FATF methodologies. World Bank Report on observance of standards and codes ROSC (Corporate Governance) Awards and recognitions: One of the 5 public agencies awarded for its integrity and transparency. Commissioner: Public figure 2006. Elected by regional financial press. Presidency of the Iberoamerican Securities Market Institute. Regulators from Latinamerica, Spain and Portugal. INSTITUTION BUILDINGASSESSMENTS AND RECOGNITIONS

18. 1999 Securities firms: 0 Market cap (equity):US$ 2,974 billions 29% of GDP Anual trading at the stock exchange: US$842 millions Transactions conducted by securities firms: US$7,283 billions (year 2004) Number of affiliates to private pension funds: 12,000 2007 Securities firms: 40 (4 licenses pending 2008) Market cap (equity): US$6,819 billions 45% of GDP Anual trading at the stock exchange: US$2,284.1 billions Transactions conducted by securities firms: US$27,894.698.342.27 Number of affiliates to private pension funds: 25,000 PANAMANIAN CASE IN NUMBERS8 YEARS OF INSTITUTION BUILDING

19. CONCLUSION • In some emerging markets, and Panama is no exception, there is a significant and influential group that has vested interest in mantaining the status quo, even though the majority participants agree that it is imperative to adopt new and revised approaches to improve the efficency and the development of the capital market. • The securities markets in an emerging market such as Panama, can be the driving force for change. • Securities market principles such as transparency, free market competition, investor protection, free and proper setting of prices, adoption of high accounting and auditing standards, good governanc are important and its necessary that they are embedded in the Panamanian financial system.

20. “WORKING FOR AN EFFICIENT AND MODERN SECURITIES MARKET” barsallo@conaval.gob.pa ADDRESS: BALBOA AVENUE, BAY MALL BUILDING, 2ND FLOOR COMISIÓN NACIONAL DE VALORESWWW.CONAVAL.GOB.PAPHONE (507) 501-1700 FAX:(507) 501-1709 P.O. BOX: 0832-2281 WTC PANAMA, PANAMA