Business & Economy Briefs

Agreement on privatization fund use
The administration and opposition political parties, supported by most of the country's business groups, have reached an agreement about how to use the Fiduciary Fund for Development created by the proceeds of the privatizations of state-owned enterprises during the Perez Balladares administration. There is more than $3 billion in the fund, and the compromise is to use about $1.2 billion to pay down the national debt and the rest to carry out five major public works projects: the installation of a sewer and sewage treatment system to clean up Panama Bay, the completion of the Panama-Colon autopista, the widening of the Pan-American Highway all the way to David, the construction of the Government City office complex, and low-income housing developments. The labor representatives in the National Dialogue on Economic Reactivization did not agree to the compromise, because they said that it dedicates too much for debt payment and not enough to public works.

S&P lowers RP rating
The Standard & Poors bond rating company has reduced the rating on Panama's long-term government bonds from BB+ to BB. The change means tha Panama will have to pay four to five percent more interest on the long-term loans it obtains. S&P cited the nation's present budget deficit and the legislature's rejection of the president's 2002 budget as factors in its decision to lower Panama's rating.

Canal Authority defends nuke cargoes with circular argument
The Panama Canal Authority is opposing legislation to change the law in order to ban the transit of highly radioactive wastes because, its legal assistant Alvaro Cabal argues, present law allows such shipments. Cabal also argued before a Legislative Assembly committee that international treaties prohibit the canal's regulation of ships that other countries deem safe. However, the Panama Canal does require ships that transit the canal to be properly insured, but makes an exception for nuclear waste carriers, which no insurance company will fully insure because of the possibility of enormous losses in case of an accident or terrorist attack. Environmental activists reject the authority's reasoning, and the matter remains before the legislature. It does seem, however, that the chances of the proposed ban's passage are not good this year.

Bus loan funds diverted
In the agreement that ended a week of civil disturbances when the Moscoso administration raised urban bus fares from 15" to a quarter earlier this year, the government created a $30 million fund for loans to improve the urban bus fleet, bus syndicates promised to make improvements, and if all went as promised the fares were to go back up on December 15. It now appears that the fares won't be raised, because by and large the bus fleet has not been improved. Meanwhile, however, it has been revealed that the National Bank of Panama, which was managing the $30 million fund, has broken the rules requiring the loans to be made only for owner-operated buses and for the purchase of new buses. One company has been lent more than $600,000 to buy nine new buses, while in other instances used buses have been sold as new ones and the financing has come from the special fund. The National Bank of Panama, which is headed by former Arnulfista legislator Bolivar Pariente, admits that it "changed the guidelines" for the fund's use, without telling the public about it. It appears that there will be no investigation of the matter and that Pariente will retain his job.

Long lines to withdraw pension funds
There have been long lines inside and around the Comptroller General's building as some 80,000 current and former public employees have obtained the "Certificates of Negotiable Participation" that allow them to withdraw some of their retirement savings. On November 12, the first day that the certificates were available, the line stretched more than three blocks before the Comptroller's office opened for business.

Ex-cops and former firefighter may also be able to withdraw funds
The Social Security Fund and Administrative Prosecutor Alma Montenegro de Fletcher say that, despite the limitations in the law that allows current and former public workers to withdraw money from the retirement fund, public workers who had special retirement systems, most notably police and firefighters, are legally entitled to the same right. This might in turn open new questions about the pension rights of police officers and soldiers who served during the dictatorship.

C&W joins fight against TRICOM
The Cable & Wireless telephone company has joined the effort to block Dominican-based TRICOM from offering radio-trunk mobile phone services in Panama. C&W is refusing to allow any connection between its system and the one that TRICOM is attempting to install, and has sued for a court order to halt all TRICOM activities. The other cell phone company, BellSouth, which doesn't compete with Cable & Wireless on the basis of price, has been fighting a ferocious legal and publicity battle with TRICOM, attempting to keep the new service off the market and cell phone rates high.

Across-the-board insurance rate hikes?
Panama's business leaders are warning that in the first few months of next year, our economy will be hammered by history's worst-ever insured disaster, the September 11 attack on the World Trade Center. Airlines' insurance bills have already quadrupled, but now similar increases are expected in all types of insurance, all around the world. Panamanians who insure their cars, homes or businesses may not just be paying for the claims arising from the September 11 attacks, however. When insurance companies seek to raise their premiums, they justify it to developed countries' regulators by comparing the income they bring in from premiums and the payments they make on claims. A major part of insurance companies' income, that made on investments of the premiums, is left out of the equation because it's considered a "business secret." Thus Panamanians, who were denied insurance coverage when this country was invaded in 1989, are likely to be paying for insurance companies' gambling losses on the "new economy" dot-com investment bubble as well as for Al Qaeda's attack on the United States.

Caribbean-American insurance firm pulls out
Caribbean-American, an insurance firm that's part of the Netherlands-based Fortis Group, has decided to terminate its operations in Panama at the end of this year. The company says that the decision is part of a strategic move to pull out of smaller markets.

Colon multimodal concession in trouble with the legislature
Deputies from both the Arnulfista-led pro-adminstration faction and the controlling PRD-led alliance concur that the proposed 80-year tax-free contract that would allow the Consocio San Lorenzo to expand the France Field Airport, install container-handling interfaces among the railroad, ports, airport and Colon Free Zone and build develop commercial and residential facilities will be sent back to the president for renegotiation. Critics are comparing the proposal to the Hay-Buanu-Varilla Treaty that created the Canal Zone, and Colon Free Zone merchants are especially upset about the prospect of new competition. The consortium is conducting an ad campaign in favor of the project, and his enlisted the support of some labor leaders and community activists who argue that it would create jobs that Colon needs.

Government has big unpaid phone bill
According to a report in El Panama America that was apparently based upon a source within Cable & Wireless, the government had an overdue phone bill that amounted to some $7.3 million as of the end of September. The governmental institution with the biggest arrears was the National Police, which was some $1.1 million behind on payments.

More than 200,000 behind on taxes
The nation's top taxwoman, the Ministry of Economy and Finance's revenue director Estelabel Piad, says that more than 200,000 Panamanian individuals or enterprises owe the government overdue taxes. Only about 2,000 of these have been approached by tax officials in connection with the debts, and that only a little more than one-third of these have signed agreements to pay off the arrears before the end of the year in order to avoid interest and penalties. The fundamental problem is that many people and businesses are broke and, whether they are inclined to do so or not, lack the resources to pay their taxes. The government's tax collections this year have been more than $100 million less than was projected in the 2001 national budget.

Penonome tax penalty moratorium
Penonome has followed the lead of the national government and Panama City's local government and offered to waive penalties and interest on past-due taxes that are paid up before December 31. The city, like other governmental units and many private businesses, has been having a hard time collecting money that's owed to it in these times of economic crisis.

Jovane: economy won't get better next year
In a report on the national economy by Social Security director Juan Jovane, Panama's economic growth for 2001 is estimated at 1.2 percent of the Gross Domestic Product, and Jovane says that the situation won't improve in 2002. Jovane's estimate of Panama's economic situation is a little worse than the Comptroller General's, but significantly better than those of most Panamanian business groups.

New RP-CR power grid connection
Panama's private ETESA electricity distribution company and the state-owned Costa Rican Electricity Insitute (ICE) have signed a pact to build a 65-kilometer power line to connect the two nations' power grids on the Atlantic side, between Sixaola and Cahuita. The 120-megawatt connection will cost $20 to $25 million, and should be completely installed before the end of next year. There is already a Costa Rica-Panama power grid link on the Pacific side. The project is part of a much larger move to connect Panama and all of the Central American countries into one power-sharing grid, and in turn connect that with Mexico's system, which in turn is already linked to others in the United States, which are linked with the Canadian system.

Gamboa Resort seeks to restructure debt
Tropical Resorts International, the holding company that owns controlling interest in the Gamboa Rainforest Resort, is attempting to restructure some $15 million of its debt by changing the conditions on payments of corporate bonds that were issued in October of 1998. The hotel, which until now has steadfastly denied that it had any economic troubles, is plagued by a low occupancy rate and affected by Panama's general economic weakness.

Hotel Bristol seeks to restructure debt
Panama City's most expensive hotel, the Bristol, is asking its bondholders to approve a debt restructuring, because low occupancy is making interest payments due on November 30 difficult to pay. The restructuring requires the approval of all bondholders, and it appears that several of them object and will probably block the move.

Teachers and diplomats to be excluded from Faundes Law
In 1998, after septuagenarian Supreme Court magistrate Jose Manuel Faundes was heard on taped phone calls negotiating bribes yet had enough support from Arnulfista and allied legislators to avoid the two-thirds Legislative Assembly vote to be removed from office, the legislature passed the so-called "Faundes Law," which sought to prohibit public employment of those aged 75 or older. The law was struck down by the courts as it purported to apply to the courts, and Faundes is still on the high court. However, it provided the excuse for a purge of the University of Panama's older professors that was supported by many junior faculty members hoping for improved chances to advance in their departments, and students at the university's school of foreign relations agitated for a similar wave of firings in the nation's diplomatic corps. Now, however, it is realized that some of Panama's most talented individuals were sidelined because of their age, and nobody seriously argues that the younger replacements have improved either the university faculty or the foreign service. Thus the Legislative Assembly has modified the Faundes Law to exclude educators and diplomats from its provisions. President Moscoso has not announced whether she'll sign the law.