Panama: discipline or die trying.

Despite a high government deficit, in December 2003. U.S. ratings agency Fitch Ratings moved the country's risk from negative to stable. "We did it because we gave them credit for their efforts to carry out fiscal reforms," says Fitch Analyst Thereza Paiz Fredel. "Also, there has been an increase in tax collection while the ports and tourism sectors have reported significant growth."

Despite this rosy outlook, analysts agree that the administration of president-elect Omar Torrijos Jr., which begins Sept, 1, 2004, will inherit a public deficit beyond the maximum taxing authority of the government's own fiscal-responsibility legislation. U.S. consultancy LatinSource reports that the new president mad his team will have three choices: Procrastinate, cut spending, or renegotiate, as losing presidential candidate Guillermo Endara had proposed.

The Economist Intelligence Unit expects the new government to slow spending in the final months of 2004, although the economy grew an astounding 6.8% in the first quarter.

Panama seems to have made the right choice for a new leader, "We have the impression that Torrijos is going to be a president who can calm markets," says Paiz Fredel.