Panama: cleaning house.

One of the biggest heirlooms that Panama's former President Mireya Moscoso, the widow of three-time President Arnulfo Arias Madrid, left was a sizeable fiscal deficit. When she stepped down in 2004, the deficit had ballooned to 5.2% of gross domestic product (GDP). Critics say her administration was one of the most corrupt the country has ever had and were glad she was gone, but leaving government accounts in the red is not something anyone wants to inherit.

Current President Martin Torrijos has some fiscal housecleaning to do, and apparently, he's on the right track. "This administration has really done some good things in terms of fiscal reform," says Cem Karacadag, director of economic research for Venezuela, Ecuador and Panama at Credit Suisse First Boston (CSFB). "The primary result has been the fiscal deficit shrinking by more than half, and we expect a fiscal balance for 2007."

According to CSFB, during the first half of 2005, government revenue rose by 22% while spending grew by only 1.6%. Cutting the fiscal deficit has helped the government pay down debts, which represent 70% of GDP. Today, the economy is running smoothly, Karacadag says. "In 2005, we expect 6% growth and for 2006 and 2007 we're expecting around 5%."

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