If one reads La
Prensa or watches the MEDCOM television channels, you will
gather the impressions that the argument about Social Security
is over, that Dr. Juan Jované is a discredited Marxist-
Leninist crook, that the complaints he raised are red herrings
and that the protests against his ouster were a failure. You
will not be reminded that the people who run those media have a
different kind of financial stake in what happens to Seguro
than does the average Panamanian.
Now the cry
from Jované’s foes, usually made through business
groups or the civic organizations of the rich, is that the
protesters should shut up about privatization and all the rest
because, as the script goes, “it only serves to confuse
the people.”
And yet, in the
face of a wall of corporate censorship and a barrage of
vilification, the labor unions, civic organizations and leftist
groups that took to the streets when Jované was fired
persist, and there will be more marches and another strike in
October. It may or may not be a last hurrah for this social
movement. Most probably Jované will never get his job
back, but it’s also unlikely that the dispute over the
Social Security Fund (CSS) will go away anytime soon. We may
even see it come back to center stage in the national discourse
only a few weeks after we were assured that it was all over.
The following
are some of the factors that weigh for and against a resurgence
of this dispute:
• The
underlying economic problem isn’t going away anytime
soon.
Although the
pension fund won’t go broke tomorrow and long-term
projections based on the past few years of economic crisis may
be unduly pessimistic, there is a long-term problem that can
only be served by measures that will be against somebody’s
financial interests. If we want to take only a near-term
perspective of the situation, the entire Social Security system
is running at a deficit of nearly $3 million per month.
The most
frequently raised suggestions are to take a lot of people off
of the retirement rolls by raising the retirement age, doubling
the number of years of contributions to the CSS in order to
become eligible for a pension from 15 to 30 and increasing
workers’ deductions or employers’ contributions to
the fund. Meanwhile, is Mireya Moscoso, who took an entourage
of more than 100 friends and relatives with her on her junket
to Monaco --- which she defended as an effort to boost
Panamanian yucca exports --- going to arouse any public
sympathy if she calls for sacrifices to save the pension
system?
The path of
least resistance will be for the president to avoid any
solutions and leave the problem for the next administration.
However, she and her supporters are the ones who have sounded
the alarm and it will be difficult for them to now convincingly
tell people to never mind.
•
Criticisms of Jované for overspending won’t
wash.
It may be a
very convincing argument in the minds of people who get their
health care through the private system and make their living by
doing calculations on large sums of money to fault
Jované for increasing the CSS payroll, but that
accusation is much less powerful to someone who has had to wait
in line at one of Panama’s public health care facilities.
The turn of the century economic crisis slashed away much of
the demand for private health care services, but it didn’t
stop people from getting sick or injured. There has been a
surge in demand for health services provided by the Ministry of
Health and Seguro Social, and the opening of new facilities and
hiring of more staff under Jované actually didn’t
keep up with the increased demand.
That’s
why, for example, we read in the Catholic Church’s weekly
Panorama Catolico the opinion that the Social Security crisis
has not dissipated, that the bottom line from the medical
perspective is that “these days, to approach an urban
health center becomes a nightmare, and not for lack of service,
but for excessive demand.”
Any credibility
that the allegations that Jované overspent may have had
evaporated a few days after his dismissal, when the CSS board
of directors passed a budget that contemplated much higher
spending than Jované had proposed.
• If we
want to look at this dispute as a political poker game, Mireya
may hold some aces but she’s playing her hand most
ineptly.
Dr.
Jované went into this crisis more than three times as
popular as Mireya Moscoso, and though his public support has
surely fallen in the face of an intense campaign of
vilification by most of the major media, the Mireyista campaign
against him has been amazingly inept and petty, to the extent
that it’s likely to generate public sympathy for him and
open many a mind to the arguments he has been making.
Jované’s dismissal by way of a resolution
passed at a special meeting called for another purpose was a
clear violation of administrative law, according to
Panama’s bar association, the Colegio de Abogados. Of
course, the illegal procedure used to fire him will not nullify
his ouster, but at best give him a solid claim for back pay.
Then the
president gave Jované 30 days to file his objections to
the firing so that she can decide on his appeal, and less that
a week later complained that he hadn’t yet filed.
Jované, however, said that he can’t file a proper
response until he sees the charges against him. One of the new
Mireyista Seguro Social administrators blamed Jované for
not showing up on time to get the file, that the bureaucrat was
in his office for all of three hours one day when Jované
could have come in. When the new administration finally found
the time to deal with Jované’s demand, the former
director was given a box of some 4,500 unsorted pages, sans the
file on his firing, and told to go to the presidency.
At the
presidency Jované was met by Mireya’s sister-in-law
Ivonne Young, the Minister of the Presidency, and again denied
the right to a copy of the file with the charges against him
and the supporting documentation.
The pettiness
shown to Jované, as well as to a number of second-level
administrators who have also been fired and to many of the
strikers, has prompted Colon’s Catholic bishop, Monsignior
Carlos María Ariz, to complain about it.
The palpably
cynical way in which Jované has been attacked by the
Mireyistas antedates his ouster, and was one of the main
reasons why on the eve of his firing polls indicated that he
was by far the most popular official in the Moscoso
administration. For one example, when Comptroller General Alvin
Weeden blocked Seguro Social’s purchase of cyclosporin for
one year, until kidney patients took to the streets as a matter
of life or death, nobody believed the allegations that
Jované was responsible, and in order to restore traffic
flow Mireya finally had to order Weeden to sign the purchase
forms.
The October 9
protest march coincides with the deadline for Jované to
submit his written objections to his firing, and that
relationship is not happenstance. Mireya may have the power to
uphold Jované’s ouster, but he can make the
president look bad at a time when her political fortunes are
already imploding.
• Some
of Jované’s supporters are his political Achilles
heel.
The Panamanian
left, like its counterparts across much of Latin America, is
resurgent because the US model of globalization into which all
establishment parties have bought is a miserable failure and
economic disaster for this region. However, communism still
isn’t all that popular a cause either on the University of
Panama campus or among the Panamanian working class. Moreover,
the left here has to date been amazingly uncreative and its
invariable political tactic of street blockades is seen as an
annoyance by most people in this country.
Thus, to
portray Jované’s supporters by showing videos of
masked student militants doing battle with the police over
control of the street in front of the university, or by
pictures of that faction of his supporters who go around
carrying the red banners with the portraits of Marx and Lenin,
enhances the effect of the anti-Jované mantra that goes
“Seguro Social needs a competent administrator, not a
leftist ideologue.”
• The
truth of the matter is that Mireya is raiding the CSS cash
reserves for an election year spending binge.
In the days
before he was fired, Jované complained that the
government wanted to take hundreds of millions of dollars from
the CSS’s cash reserve of about $1 billion for election
year public spending. He was roundly denounced for this claim,
which was dismissed as absolutely false, a fabrication of the
whole cloth by a desperate man whose job was threatened.
Then, in the
post-Jované CSS budget, the revenue side included
inflated numbers that seemed to indicate that the Banco
Nacional de Panama, which pays less than two percent interest
on the fund’s deposits, would pay 6.5 percent. The bank
denied that it was raising interest rates, but a few days later
noted that it would take more than one-third of the CSS cash
reserves to buy government bonds that offer 6.5 percent
interest.
Et voila!
Mireya gets some $375 million of the CSS cash reserves to
finance a flurry of social programs and ribbon cuttings.
One leading
international financial analyst, First Boston Credit
Suisse’s Jan Dehn, sees Jované’s ouster in
terms of the president gaining the use of CSS cash for election
year spending and predicted that the infusion of money into the
economy will boost Mireyista presidential nominee José
Miguel Alemán ahead of Guillermo Endara as the principal
2004 alternative to PRD candidate Martín Torrijos. It
would appear that Dehn is a better financial analyst than
political prognosticator when it comes to Panama, but we shall
see soon enough.
• The
argument over “privatization” has become an arcane
semantic debate that most people can’t follow, but despite
all denials it’s a real issue.
The allegation
by Jované and his supporters that the central issue in
the CSS dispute is about privatization is bitterly denied by
their opponents. It is pointed out that Mireya’s late
husband, Dr. Arnulfo Arias, created Seguro Social in the first
place. It is pointed out that Seguro Social is enshrined in
Panama’s constitution, so as a matter of law can’t be
abolished. It is pointed out that if one looks at the assets
and liabilities of the entire system, it’s an economic
disaster that no private corporation dedicated to the
proposition of making money would buy. All of these points are
well taken.
However, there
are undeniable pressures both from within Panama and from
abroad to adopt large-scale de facto privatization of CSS
services.
For example,
around the Chamber of Commerce we hear Hospital San Miguel
Arcangel touted as a model for Seguro Social’s health
services. That sprawling new hospital in San Miguelito is
organized under a non-profit foundation controlled by the
Ministry of Health. Most of its medical services are provided
by private clinics by way of contracts with this foundation.
Because the foundation is nominally “private,” the
laughable transparency laws don’t apply to its contracts,
but there have been a number of complaints that these are
awarded, like most things of economic value under the Moscoso
administration, largely on the bases of political patronage,
nepotism and improper influence.
Then
there’s the state of the Panamanian insurance industry,
which has suffered major losses and considerable downsizing
during the past few years of economic crisis. The industry has
floated several trial balloons about schemes for government
assistance, none of them notably successful.
For example,
insurance is not required to drive in Panama and the industry
and many drivers would like to change that. But when tens of
thousands of Panamanian drivers, including those who run taxis
or buses for a living, can’t even afford to update their
license plates, the occasional suggestions that have been made
for mandatory car insurance have proven to be politically
explosive nonstarters.
Consider as
well what else the CSS list of more than 15,000 businesses in
arrears on their payments to the fund means. In virtually none
of these companies was it a matter of the owner or manager of a
profitable business waking up one morning and deciding to pad
revenues by ignoring Social Security payments. Almost always it
was a desperate survival move by a company in financial
straits, operating in a country that has nothing like the US
Chapter 11 bankruptcy reorganization possibilities. Almost
always these companies cut other important expenditures ---
like payments on their private liability insurance policies ---
before going into arrears with Seguro. The economic downturn
that began sometime in 1998 and now seems to be letting up just
a little has been devastating to the local insurance industry,
and suggestions of government subsidies to bail it out of its
hard times have foundered on the reality of reduced government
tax receipts.
But what if
some or all of the CSS’s business of covering the risk of
accident or illness was subcontracted out to private insurance
companies? Wouldn’t that go a long way toward relieving
the insurance industry’s distress?
True,
there’s no such specific plan on the table, but it’s
also true that President Moscoso has signed an agreement with
the International Monetary Fund that sets the privatization of
risk as one of the goals toward which Panama is committed to
working.
Jované
and his supporters in fact base most of their privatization
argument on international factors. They have, for example,
circulated a proposed CSS privatization law that was drafted
last year under the influence of international lenders, but
which was never seriously undertaken by the Legislative
Assembly. (Jované’s critics first called it a
forgery, then backtracked and said it was just another draft
proposal that went nowhere.) They have pointed to alarmist
World Bank pronouncements about the state of CSS reserves and
branded them as pressure for privatization. They have pointed
toward privatization trends fostered in other Latin American
countries by international financial institutions.
The
controversial “Singapore issues” that played a role
in the failure of the recent Cancun summit of the World Trade
Organization are relevant to this debate. That agenda, mainly
promoted by the United States and the European Union, calls for
free trade when it comes to government services. Aren’t
health care and retirement pensions government services in
Panama, and wouldn’t the concept of “free trade”
as practiced by the WTO and NAFTA imply that multinational
corporations would get an opportunity for a piece of the
action?
According to
Caritas-Panama, the privatization threat is not so flagrant as
the abolition of the Social Security Fund and its replacement
with a private company. The Catholic social ministry argues
rather that people should beware of a solution in which the CSS
is sectioned off into various parts, which would remain
nominally public but would be managed by private companies
under contracts with the Panamanian government.
All such talk
will fly over the heads of many of the uneducated, or whiz past
the intentionally closed eyes of some of the people who are
currently condemning the airing of “confusing”
privatization arguments. But the alternative, “TRUST
US,” whether advanced by our national political class or
by international financial institutions, will be understood by
many Panamanians to be a variety of snake oil pitch.
• The
dialogue process is moribund and discredited and won’t be
restarted except possibly as a farce, at least until
Panama’s government changes next year.
Mireya Moscoso
began a process of “national dialogue” that was held
among representatives of business, organized labor and the
government, under the auspices of the United Nations
Development Program. Labor made a proposal, the cornerstone of
which was to put most of the remaining land from the old Canal
Zone into the Social Security Fund, and this was rejected by
the business representatives. The business representatives have
never submitted a unified proposal, but that sector has floated
various proposed solutions calling for an increase in the
retirement age or similar cost-cutting measures. The national
dialogue broke down without anything approaching a
consensus.
In the wake of
that breakdown, some sort of influence was exerted on the CSS
board of directors which resulted in one of the teacher
unions’ delegates and the public employee representative
siding with business and government representatives to fire
Jované. One of the key demands of the protesters, both
of the government and within their unions, is the removal of
CSS board members whom they accuse of selling out the people
whom the represent.
A salient
feature of the Moscoso administration has been the elimination
of all institutional checks against bribery. It began with the
Arnulfistas mustering the needed votes to block the conviction
of Supreme Court magistrate José Manuel Faúndes,
who was heard on audiotape by all Panamanians who cared to
listen to news broadcasts negotiating a bribe to free an
alleged Colombian drug trafficker and faced impeachment by the
legislature. It continued in a series of legal maneuvers that
effectively blocked the PRD’s assertion of its
constitutional right to remove legislator Carlos Afú,
who switched his support to Mireya and thus gave the president
control over both the Legislative Assembly and the Supreme
Court. Thus it’s no surprise that labor’s demand for
the dismissal of erstwhile labor representatives who for
whatever reason broke ranks with their unions on the Seguro
Social issue is rejected out of hand as ridiculous by the
Mireyistas.
However, some
members of the CSS board still voted to keep Jované in
office, and opposed the post-Jované budget. Thus when
that budget was submitted to the Legislative Assembly, the
board of directors was invited to appear before the
legislature, EXCEPT FOR the labor and retiree representatives
who voted against Seguro’s new direction.
Sure, Mireya
can find some union member or some retiree with whom to have
some sort of sham dialogue. She might even be able to negotiate
some sort of compromise with the protest movement. However,
there is no basis of trust upon which the old national dialogue
might be restarted. The only reason why anybody might want to
revive the process would be to delay unpopular decisions until
after next May’s elections and none of the
president’s critics seem inclined to do her this
service.
Indeed, the
entire dialogue process as we have known it was derided by
Mireya’s former ambassador in Washington, Guillermo Ford,
on the morning that he announced his acceptance to be Guillermo
Endara’s running mate in a campaign against the Mireyista
ticket. “When you’re elected, it’s to
command,” Ford argued. “I’m for dialogues, but
for the executive to be informed before making decisions,”
he argued. "After two years Social Security hasn't been
fixed and this dialogue of the deaf is still going on."
That, from a man who rose to public prominence as an insurance
executive. Organized labor’s leaders would put the
argument in a different ideological construct and advocate
different solutions than Ford’s, but they’d surely
concur about the futility of the dialogue process that we have
seen.
• Look
for the present standoff to linger until at least next
May.
The rosy
scenario from the president’s perspective is an infusion
of cash into an ailing economy raising her popularity and her
anointed successor’s prospects ahead of next year’s
election. One quick and easy way to destroy any such hopes
would be to enact unpopular new Seguro Social policies like an
increase in the retirement age.
However,
Mireya’s paradigm is collapsing around her. It can be seen
in José Miguel Alemán’s single digit showing
in the polls, in her administration’s increasingly
strained relations with the United States over the corruption
issue, and in the defection of Billy Ford and a number of other
MOLIRENA leaders and members to the anti-Mireyista Endara
campaign. Well ahead of the election she theoretically might
conclude that all is lost and attempt some hard measures, but
in that case it would be difficult to keep her followers in
line to carry out her orders.
In the four
lame duck months between next year’s election and
inauguration, there will be a window of opportunity for this
administration to enact unpopular reforms with the tacit
blessing of its successor. Anything might happen, but be on the
lookout for a tumultuous special legislative session and major
street protests in July and August of next year.
Also in this
section:
Business & Economy
Briefs
Seguro Social after
Jované
The Panama News breaks
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