What will be the effects of the COVID-19 economic slowdown on complex transactions that are currently taking place in Panama?  There is no simple answer to this question.  Those effects will largely depend on the type and stage of each specific transaction, for example M&A, construction or financing transactions

If the transaction consists of an acquisition that has already been signed, the economic slowdown will likely delay the closing until the effects on the overall economy become clearer; but if the transaction is at its early stages, unless the target’s industry is suffering a particularly adverse effect (e.g., the hotel/catering industry), the process of due diligence and document drafting will likely continue (albeit at a reduced pace) in the expectation that circumstances will go back to normal in the short run; and, if the transaction involves an industry that is suffering a particularly adverse effect, then most likely the transaction will be stopped until the aggregate effect on the specific target can be quantified.

Construction contracts (EPCs, infrastructure, etc.) may be affected by a force majeure event.  The economic slowdown may affect providers and subcontractors in their ability to supply materials or comply with their construction obligations.  That, in turn, would affect contractors.  The exact effects of any non-compliance or delay on each specific construction contract will depend on the specific terms of the contract.  However, it is to be expected that, in light of the type of force majeure event (i.e., the coronavirus, which is a health emergency that affects everyone) the parties will be in a mindset to come quickly to acceptable agreements.

Financings that have already closed and are in effect will not be affected by this slowdown, unless as a consequence of the slowdown the borrower loses its ability to comply with its payment obligations.  If the financing provides for multiple draws, it is possible that, depending on the circumstances of the particular borrower, a lender will refuse a disbursement on the basis of the occurrence of a material adverse effect; however, we believe that the likelihood of such refusal is generally low, especially if the borrower is not otherwise in default.v

We are optimistic that normality will return soon.  That will occur either because treatment for the coronavirus is developed or because society as a whole learns to live with the coronavirus as an unwelcome guest.  In the meantime, although the COVID-19 crisis will certainly have some effects on complex transactions in Panama, our expectation is that those effects will be less significant than the importance of the crisis that could foreshadow.