RAISE COUNTRY RISK ON PANAMA

Martinelli announcing the suspension of the National Assembly Session

Panamanian President Ricardo Martinelli has now returned to Panama City from Europe, but today's events reflect a politically unstable Panama that will cause bank compliance officers charged with the calculation on country risk to raise it for the Republic of Panama.

Here's what happened today:

(1) President Martinelli signed Executive Decree 391, suspending the ongoing Extraordinary Session of the National Assembly. This Session, which was to run until 29 June, was the scene today of explosive charges of corruption, leveled by some of the Deputies, alleged to be occurring at the ministerial level.

(2) The President's action precipitated a major protest in the Plaza Cinco de Mayo, resulting in the intervention of armed National Police. Reports from local media state that at least 41 individuals were arrested, with more than half being minors, believed to be university students.

(3) The President suspended classes at the National Institute.

(4) Gary Lundgren, a close business partner of the President, filed criminal charges against Deputy José Blandón, who stated in a media interview yesterday that Lundgren was under criminal investigation.

(5) Vice President Varela again called for Martinelli to resign.

Students protesting today in Panama City

President Martinelli, who is reportedly under investigation in Italy, in connection with allegations of corruption, is also believed to be a target of a money laundering investigation in the United States, due to his association with imprisoned Colombian Ponzi schemer David Eduardo Helmut Mucia Guzmán.

Compliance officers at international banks whose clients have existing contracts, or financial exposure in Panama, or at banks who themselves have extended credit, should review the facts, and make an educated decision about raising country risk for Panama.

Opposition members protesting today