business

On January 13 the Legislative Assembly convened for a special session called by the president to take up some business that was left undone at the end of the 2003 regular session. The main surprise was the item that was left off the agenda --- the proposal to turn the former Howard Air Force Base into a “special economic zone” with various tax breaks and subsidies. The four items that were addressed were a change in the tax on international telephone calls, a partial amnesty for people with debts to Seguro Social, special measures to combat a banana and plantain blight and a subsidy package for some of Panama’s manufacturers.

The international phone call tax, which was $1 per call, will now be 12 percent of the charge for the call. The tax will be extended to calls made over the Internet. Altogether it seems that the legislation, which was billed by the Moscoso administration as a tax cut, may result in a net tax increase. The legislation was backed by the long-distance phone service providers, while those who provide or use Internet phone services are not well organized and were hardly heard in the debate.

Those who at the end of 2003 owed arrears to Seguro Social --- some 39,000 people and businesses in all --- will have until the end of April to make arrangements to pay what they owe and thus avoid interest and penalties. Some $128 million in arrears are owed to the Social Security Fund, about $80 million of this by the government. However, the provision i the original proposal that a debtor could get the amnesty by putting 10 percent of the underlying debt down was made negotiable and those fewer than 200 people and businesses who are facing criminal prosecution for their debts to Seguro will not be eligible if their cases have reached the stage of a preliminary hearing. The labor unions and former Social Security director Juan Jované protested against the measure and opposition legislators criticized it, but in the end the Mireyista legislative coalition had the votes to pass it.

The bill authorizing the Ministry of Agricultural Development to take various measures to prevent the spread of the sigatoka negra blight, which has affected some banana and plantain farms around Puerto Armuelles, passed without significant controversy.

The most hotly debated item was a package of subsidies, estimated at more than $300 million, to promote Panamanian manufacturing. This sector accounts for less than 10 percent of the national economy, and critics allege that almost all of the subsidies will go to a few families allied to Mireya Moscoso. Supporters of the legislation pointed out that in last year’s tax reforms manufacturers lost many of their previous tax breaks and predicted --- rather wildly --- that with the subsidies the manufacturing sector will grow to overtake the Panama Canal, the Colon Free Zone, the Panama City financial district and the nation’s agricultural export sector in relative importance to the Panamanian economy. This, too, was approved without opposition support --- if one doesn’t count the PRD dissidents who vote with the Mireyistas as part of the opposition anymore.

The sessions were poorly attended by legislators who were paid $80 per day --- rather than the $250 as erroneously reported in the last issue of The Panama News --- if they bothered to show up.

Possibly the biggest story of the special session was what didn’t happen. The Howard special economic zone is being promoted by the World Bank and the Interoceanic Regional Authority, but the Colon Free Zone merchants fear that the competition will ruin them and it’s hard to identify any specific business or individual who would surely gain by the tax breaks and infrastructure subsidies envisioned in the proposal that died with the end of the 2003 session. Moreover, several Arnulfista deputies have jumped from the Mireyista camp to the Guillermo Endara camp, and with Endara fiercely critical of the proposal it was possible that these deputies, who still generally vote with the pro-administration faction, would join the opposition and deprive the president of the votes needed to pass the measure.





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Business & Economy Briefs
The biggest part of Panama's gambling industry
Special legislative session focuses on economic proposals

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