Business & Economy Briefs

Moscoso assures watershed-area campesinos
The Moscoso administration hasn't made a formal announcement yet, but it is in many other ways saying that it intends to go ahead with plans to modernize the Panama Canal by expanding the watershed to the west with a series of new dams that will create another lake that's two-thirds the size of Gatun Lake and building a third set of locks big enough to serve post-Panamax-sized vessels. The three main objections to surmount are fears that the cost of the improvements could not be paid off by canal revenues, that the environmental damages caused by the project would be unacceptably severe, and that many small farmers whose lands would be flooded would be dispossessed without proper compensation. The latter fears have been the cause of much political agitation, and have been exacerbated by Panama Canal Authority ads promising families, some of whom have squatted on and worked the same remote farms for decades, that they would have to pay for land titles. At a November 6 presentation of a report on canal expansion options by a multi-partisan group of political activsts, Moscoso sought to alleviate the campesinos' fears. "Whatever the final decision is," the president said, "in the event that in my administration the decision to expand the watershed is made, the rights of the campesinos will be respected and thus they will be compensated accordingly."

Canal toll receipts up
The Panama Canal Authority says that in the fiscal year that recently ended, it took in $579.5 million in ship tolls, which represents a $5.3 million increase over the previous year. The increase was below expectations, however. This past fiscal year saw an increase in the transit of Panamax-sized ships, but a slight decline in other vessels. The types of cargoes that saw the biggest increases were petroleum, refrigerated foodstuffs and machinery, while non-containerized cargoes declined.

Banistmo to buy into biggest Honduran bank
Alberto Vallarino's Primer Banco del Istmo (Banistmo), the largest bank that's based upon Panamanian capital, has signed an agreement to buy a dominant interest in the Grupo Financiero del Ahorro Hondureqo. The group owns the biggest banking chain in Honduras and also that country's principal insurance firm.

Banking superintendent, CNV intervene in Banco DISA
The nation's Superintendent of Banks and the National Securities Commission (CNV) have taken control of the Banco DISA and DISA Securities, respectively. DISA Securities is the holding company that owns the shares of Banco DISA, with businessman and former Panama Canal Commissioner J. J. Vallarino the main shareholder. The actions were taken after a lawsuit was filed by Curacao Eximport Enterprises Company, which is owned by businessman Haralambos Tzanetatos, against the bank. Banco DISA was briefly the subject of an intervention last August, which was related to lawsuits filed by participants in The Providence Corporation and Estrella Mar high-return investment schemes, whose assets were seized as collateral by the bank. The August intervention was ended when the bank promised to obtain $20 million in additional assets to cover any possible losses in that dispute, but since then less than $9 million has been raised. Curacao Eximport's suit increased the risk of insolvency and provided the impetus for the Banking Superintendent's action, which was quickly followed by the CNV's intevention in the holding company.
The interventions are a blow to one of Panama's great financial fortunes and political operations. J. J. Vallarino has managed to stay at the head of the line for US government largesse and Panamanian government political patronage for many years, through many changes of government. In Noriega times, he was one of the important figures in PALA, the party founded by the dictator's brother-in-law, and after the invasion he was the principal owner of the MORENA party, which supported Mireya Moscoso for president but lost its ballot status due to a poor showing in 1999. Among the Banco DISA's assets are at leasst $92 million in deposits from the state-owned Banco Nacional de Panama, which were first put there during the Perez Balladares administration and then renewed by the Moscoso government. Those particular assets, unlike those of other depositors, are insured by the Inter-American Development Bank.

Banking superintendent liquidates Filanbanco
The Banking Superintendent has ordered the liquidation of Filabanco Trust and Banking's operation in Panama. The bank, a branch of a troubled Ecuadoran concern, was the subject of an intervention last August. Bank regulators here found that Filabanco operated without many of the legally required controls and accounting procedures, and ultimately concluded that its assets were insufficient to cover its liabilities.

Sears Panama in trouble
Sears Panama is in financial and legal trouble, by all accounts prompted by the country's weak economy that has hurt its sales. Businessman Haralambos Tzanetatos, who also figures in the Banco Disa controversy, has resigned as Sears Panama's board chairman --- along with most of the company's directors --- while the National Securities Commission is investigating IDS Holding Corporation, which owns Sears Panama, for failing to file required reports on the company's financial status. According to some reports, Sears has debts that are about three times the value of its assets.

RP goes into debt to pay debt
Panama has successfully sold $250 million in bonds, which will pay 8 1/4 percent interest and expire in 2008, through Morgan Stanley in New York. According to Minister of Economy and Finance Norberto Delgado, the bond sale was to raise money to pay off bonds that will come due in 2002. Delgado said that Panama's success in selling the bonds was a sign of the financial world's confidence in Panama.

Electric rates going down
Union Fenosa and Elektra Noreste have announced electricity rate cuts that will go into effect on January 1 and affect most of the country's electricity users, with those in Chiriqui and the Darien the principal exceptions. Union Fenosa's rates will go down 2.5 percent, while Elektra Noreste is lowering its bills by 5.3 percent. Figuring in all the added charges and discounts, the two companies' price moves will for the first time lower Panamanian electricity bills below the average 11.45" per kilowatt hour that was charged by the old IRHE electric utility before it was privatized in 1998. Many business observers say that Panamanian electricity rates are still high, and still an impediment to the nation's economic development.

Consortium withstands challenge, gets IPAT contract
A US-Panamanian consortium that includes Campagnani BBDO and Panama's affiliate of Ketcham International, Sanchiz, Siebrasse & Asociados, has won the bidding for a $10 million IPAT publicity campaign to promote Panama's tourist attractions abroad. The BBDO/Ketcham consortium's winning bid was challenged by two of the other bidders, who complained that an affiliate of part of the winning consortium has a conflict of interest because it does publicity to promote Costa Rican tourism. Those arguments were brushed aside by the National Economic Council and the Panamanian Tourism Institute (IPAT) board of directors, so people in more northerly latitudes may soon be seeing advertisements that promote Panama as "the path less traveled."

Raw material tariffs lowered
On November 8 the Cabinet Council approved a decree reducing import duties and sales taxes on a long list of manufacturing raw materials and laboratory supplies. In most cases, import duties that had been three percent will now be one percent. Under Panamanian tax laws passed at the time that the country joined the World Trade Organization, the cabinet decree does not have to be approved by the Legislative Assembly to go into effect. Panama's manufacturers have welcomed the tax break.

City treasurer re-elected
Panama City's representantes have re-elected Ventura Vega as the city's treasurer by an 11 to 8 vote. Mayor Juan Carlos Navarro, who would have preferred the PRD's candidate, Alberto Salazar, offered Vega his lukewarm congratulations. Since the treasurer is elected by the city council but performs key administrative functions, there is an institutionalized tendency for mayors and treasurers to come into conflicts. In recent weeks Vega and Navarro have made contradictory statements about the severity of the effects that the nation's economic crisis is having upon municipal finances, but there has been none of the open warfare that characterized the relationship between the mayor and treasurer in the previous city administration and that is evident in some of Panama's other cities now. Basically Vega says that there are serious budget problems that require severe measures, while Navarro says that the city will need to cut spending due to reduced tax revenues, but won't have to order the massive layoffs that many fear.

Comptroller orders university audit
One of the consequences of the University of Panama's arrears in its electric bills --- others included a power cut to the Chiriqui campus and several days of student rioting --- is that Comptroller General Alvin Weeden has ordered a complete audit of the university's finances. The fundamental problem appears to be that when the national government cut its appropriations, the university did not make corresponding cuts. However, the University of Panama is a vast bureaucracy that hasn't had a thorough financial review in many years. "We're going to investigate this exhaustively," Weeden vowed.

$240 million loan for regional power grid
The Inter-American Development Bank has approved a $240 million loan to link the electrical systems of Panama, Costa Rica, Nicaragua, Honduras, El Salvador and Guatemala. The loan would cover 75 percent of the cost of the 2000-kilometer power line development, which would carry 300 megawatts of electricity. Over the long term, Panama could be a net exporter of electricty, and if the Central American system is linked to North American ones, California and other energy-short parts of the United States could buy Mexican power, while Mexico could make up the slack with energy generated in northern Central America, which in turn could get electricity from farther down the isthmus. The transmission of electricity directly from Panama and Central America to the United States would not be practical, because a certain amount of electricity is lost to the resistance within power lines and that makes long-distance transmission inefficient.

COPA may get help
Panama's COPA airlines, whose main owners are the Motta family and Continental Airlines, says that it has suffered a 15 percent drop in passengers since the events of September 11, and has also incurred extra security costs and much higher insurance premiums due to the crisis. It is also now competing with US-based airlines that have received big subsidies from the American government. Thus COPA has asked the Panamanian government for help, and may receive it. Panama's government is itself in financial crisis and would not likely be in a position to pay any money to COPA, but certain fees at Tocumen Airport might be waived or reduced.

BellSouth hits back at Tricom
Atlanta-based BellSouth has gotten down to gringo-baiting in its war of words against Dominican-based TRICOM, which has a concession to install a trunk-system mobile phone system that would compete with BellSouth's and Cable & Wireless's cell phone systems. BellSouth has sued in Panamanian courts to void TRICOM's concession, while TRICOM has filed a complaint about BellSouth before the Panamanian Public Services Regulating Entity. In advertising and press releases BellSouth is accusing TRICOM of attacking "judicial security" by complaining to the utility board, and in other ads BellSouth is pointing out that TRICOM isn't really Panamamanian because its president is Dominican and its vice-president is American and it does business in New York.

Brinks strike settled
After a strike that began the day before a long holiday weekend and ended two days afterwards, Brinks armored car company and its 150 employees reached an agreement over a number of grievances and the union called off its walkout. The main economic issue was overtime pay, with the dispute coming to a head with the firing of two employees.

Regional agreement to give IPAT new powers
Government tourism bureaus in Panama and the Central American countries have agreed to raise standards by certifying hotels, tour operators and other tourism-sector businesses. The certifications will be to preserve natural, historical and cultural resources. Some in the tourism industry fear that they will be used as a means for government officials to extort payments from businesses, or to impose gag laws on what tour guides may say or restrict which historic and cultural attractions they may show to tourists. On the other hand, the agreement could also regulate the use of the buzz-word "eco-tourist," which by general agreement of those in the industry is often inappropriately used.

Tobacco company assets seized
The Directorate of Patrimonial Responsibility (DRP) has seized vehicles and bank accounts belonging to G&R International, a Panamanian tobacco company. The G&R International has a relationship with Pana American Cigar Company, SA, which is accused of falsifying applications for tax exemptions, and the government found money transfers between the owners of the two companies suspicious.