Business & Economy Briefs

At the moment the rains are heavy and Panama’s hydroelectric generators are producing plenty of power. However, petroleum and natural gas prices are close to their record highs, there is no end in sight to the Iraq War which has diminished world supplies and dry season --- when much of this country’s electricity must be produced by fuel-fired generators --- will be here in a little more than a month’s time. Thus, in a statement to El Panama America José Galán Ponce, the president of the Public Services Regulating Board (Ente Regulador), warned that there is “definitely going to be an increase” in electric rates sometime in January. A previous set of rate hikes, which went into effect in the lame duck months of the Moscoso administration, was struck down by the courts because legal requirements of proper notification, public hearings and documentation were ignored.

Panama maintains diplomatic relations with Taiwan, and thus mainland China won’t allow normal relations with this country. With the recent change of administrations here there is a major campaign underway to change Panama’s China policy, dropping formal ties with the Republic of China (Taiwan) and establishing them with the Peoples Republic of China (mainland China). In addition to being one of the world’s great powers, China is a much larger user of the Panama Canal and the Colon Free Zone than is Taiwan. Now the Beijing government has made some carrot and stick offers to ratchet up the pressure for a change. First, China has matched Taiwan’s offer to help finance the Panama Canal’s modernization by way of a larger third set of locks and a system to capture the water need to run them. Then, at an industrial show in Honduras, the Chinese expressed an interest in a “dry canal” rail link through that country, which would be in competition with our canal. The Panama Canal has long had overland competition, most notably in North America’s highway and railroad networks. However, several Central American and Mexican dry canal proposals have failed to bear fruit in recent years due to the economic reality that for many of the goods that pass through the Panama Canal, a ship to rail to ship system would be more expensive to use.

A few weeks ago the European Union announced that it was dropping its banana import policy of favoring some of its members’ former colonies in Africa and Caribbean, which went a long way toward resolving a protracted dispute with Latin American banana producing countries and US-based fruit companies. Not, however, all the way. The EU proposed a $290 per ton duty on imported bananas top begin sometime next year, but the Latin American countries’ counter-proposal is $92. The differences are being negotiated at a series of meetings in Geneva.

An audit by the Comptroller General’s office and the Ministry of Labor of the SITRACHILCO banana workers union’s finances has found some $600,000 unaccounted for during the previous union leadership’s tenure. Attorneys for the union say that they have proof that most of the missing funds were paid to previous union counsel for unjustified legal expenses, then largely kicked back to erstwhile union officials. So far no criminal charges have been brought in the matter.

Sensibly, now that we know a bit about the theft that was going on in her administration, Mireya Moscoso never let the International Monetary Fund review Panama’s public finances during her administration. A previous accord between Panama and the IMF, reached after an audit during the Pérez Balladares administration, expired in 2000. Now, however, a team from the IMF has met with officials from the Ministry of Economy and Finance as a prelude to a review of the financial state of public entities. Probably the most critical issue to be examine will be the Social Security Fund. This examination may lead to a new agreement about Panama’s debts, current or prospective.

In another austerity move --- or, if you take the critics’ point of view, an attempt to open spaces for PRD hacks --- the government has given some 250 postal workers their walking papers. The Torrijos administration says that it will consider applications by the laid off workers, none of whom had been on the job long enough to get civil service protection, to be rehired. According to the FENASEP public employees’ union, more than 900 public sector workers have lost their jobs since Martín Torrijos took office. The Moscoso administration let about 12,000 public employees go, then increased the public payroll by hiring more than that number, many of them on the basis of partisan or family ties.

Four employees at Migracion who were fired on September 30, all of whom had more than 25 years’ seniority and one of whom was but four months to work before retirement, have been reinstated by Government and Justice Minister Héctor Alemán. The four relatively low-ranking women were accused of involvement in acts of corruption for which Panama’s immigration office is notorious, but on reviewing the case Alemán concluded that there was no proof that they had done anything wrong.

The Colombia-based Decameron hotel chain has abandoned its concession to convert Devil’s Beach, at the former Fort Sherman, into a tourist resort. The reasons are in dispute. According to a report in La Prensa, the big problem was the seasonal problem with swarms of sand fleas combined with infected tree sloths living in the surrounding forest acting as reservoirs for leishmaniasis, a debilitating and difficult to tread disease. However, Decameron denies this, claiming its environmental study showed that the waters of Devil’s Beach are occasionally polluted, which is unacceptable for the sort of tourist resort they intended. Over the years a number of people have drowned at Devil’s Beach, where currents and undertow can be severe, and on the surrounding reef, which has dangerous blue holes. The contemplated Devil’s Beach tourist project, which was first explored by the Barcelona-based Melia hotel chain, has always been controversial for two other reasons. First, it would represent an unconstitutional privatization of a public beach. Second, any large construction on the relatively small beach would entail substantial deforestation of what is supposed to be a protected area.

The perverse spending priorities and lack of concern about Colon that characterized the Moscoso administration manifested themselves again in the pre-dawn hours of November 10, when a lane of the Trans-Isthmian Highway near Chilibre caved in, leaving an enormous hole. The problem was caused when a 50-year-old metal sewer pipe gave way after having been undermined by heavy rains and a road drainage system that the previous government left unmaintained. The highway, whose first two lanes were built in 1943 and which connects Colon with the rest of the country, has collapsed or slid down the hill in several other places in recent years, and those gaps have only been temporarily patched. At least 20 people were killed during the past five years as the result of accidents caused by the highway’s crumbling condition, and the state of disrepair has been the subject of protests ranging from polite resolutions by Colon Free Zone merchants and public officials to pitched battles between enraged local residents and riot police.

Pazko SA, which was a Panamanian division of the Colombia-based multinational Amanco, has been bought by ACESCO, a Colombian steel products company. Pazko makes and sells pipes and plumbing supplies. According to La Prensa, the sale price was $30 million.

The Ministry of Health, as it usually does, sent out some 150 inspectors to monitor food sales along the patriotic holiday parade routes in Panama, San Miguelito and Colon. The ministry told El Panama America that it handed out 86 tickets, carrying fines of from $5 to $50, to food vendors who violated various sanitary regulations at those events.

The Central American Parliament (PARLACEN) has unanimously passed a resolution supporting the Republic of Panama’s bid to be the location of the headquarters of an eventual Free Trade Area of the Americas. Whether anyone listens to the scandal-tainted PARLACEN and whether negotiations for the FTAA will be fruitful in light of the polarization between Latin America and the United States are separate preliminary questions to be answered. The main contenders for the proposed hemispheric free trade zone’s headquarters are Miami, Trinidad-Tobago and Panama.

The Interoceanic Regional Authority (ARI) says that it’s going to court to evict people living in former Canal Zone housing who haven’t paid their rent. The first cases, the authority says, will be against 22 “intruders” on the Pacific side, who are living in reverted buildings without ever having had a lease. Since the 1977 Panama Canal Treaties went into effect, many of the houses, duplexes and apartments that came into Panama’s hands were apportioned by successive governments to people on the basis of political connections, and many of the people who received leases on these residences either stopped paying rent or never started. There are people who are years behind on rent, most of whom are not poor, and there so many in arrears with rent that it has long been thought politically impossible to evict people who have not paid. Threats of mass evictions have periodically been issued by previous governments, without much action. This time ARI is offering some alternatives. Previous administrations had posed only two options, to pay up or get out. Now the possibilities of payment agreements or purchasing their houses are being offered to the tenants in arrears. To put the problem into perspective, ARI says that past due rent on houses amounts to some $2.8 million, while the businesses that have concessions at Amador alone are more than $32 million behind on payments.

The Public Services Regulating Board (Ente Regulador) has passed a resolution ordering the operators of pay phones to program their devices to accept prepaid phone cards from all companies in the Panamanian telecommunications market. With very few exceptions, the pay phones in Panama are run by Cable & Wireless, which was supposed to lose its monopoly over fixed line telephony nearly two years ago but which has for the most part maintained its now-illegal monopoly because it had the support of the Moscoso administration in doing so.

Our heavy November rains have brought more flooding to the Prados del Este housing development, but this time not so many people have been affected. About two-thirds of the residents have moved to less flood prone houses under a deal that lets them transfer their mortgages from their old homes to their new ones. For the time being the $12 million or so loss is being eaten by the National Bank of Panama, while both criminal and civil legal actions against the developers and former bank officials are in the works.

Construction at the Brisas del Amador tourist development project at the former Fort Amador remains suspended, despite efforts to get permission to resume from the new management at the Interoceanic Regional Authority (ARI). The developers were making a landfill much in excess of the one authorized by the Mireyista management at ARI, and in any case that permission was improperly granted because there was no environmental impact study made (let alone approved by the National Environmental Authority), nor had necessary permits been obtained from the Ministry of Economy and Finance or the Housing Ministry. Many of the concessionaires at Amador had obtained such rights as they have by misrepresenting their financial status to ARI during the Pérez Balladares and Moscoso administrations, and even more of them have failed to make the required payments to the Panamanian government once they have moved in. It seems that some concessionaires gambled on their political connections immunizing them, and that there is also a widespread bet that the government won’t close down the businesses now operating but not paying their rent because all the vacancies would harm national tourism promotion efforts. It seems, however, that ARI’s past practices are under review and what was allowed before may not be permitted to continue.

Most of the Panama City metro area’s sewage does not get treated before being dumped into Panama Bay, the exception being that the IDAAN water and sewer utility does maintain some septic tanks in which some of the city’s sewage flows. The development of the former Fort Amador as a tourist and entertainment center was supposed to change that, as ARI built a secondary sewage treatment plant to serve the area. However, under the previous administration ARI maintained that it wasn’t its job to run a sewage plant and IDAAN refused to take the facility because it wasn’t included in their plans or budget. Now IDAAN has taken possession of the plant, and there is a reasonable expectation that in the near future Amador’s contribution to Panama Bay’s severe pollution problem will greatly diminish.

Caddell Construction Company Inc has won the contract to build a new US Embassy at the former Fort Clayton. The present embassy on Avenida Balboa, though its defenses have been strengthened since the September 11, 2001 al Qaeda attacks on the United States, remains vulnerable to truck bombs because it’s simply too close to the street. The new embassy will have an ample setback that will allow much better protection against this sort of attack. Since the 9/11 events the US government has reviewed security at all American diplomatic missions around the world and embarked on a program to replace the most vulnerable ones.

The Turismo Aereo y Mapiex Aero domestic airlines have formed an alliance that will operate under the name of the former and serve 22 destinations around Panama using the Albrook airport as its hub. The new company will be Panama’s second-largest airline, but still way behind number one COPA Airlines.

Starting in January US Airways will offer flights between Fort Lauderdale and Panama’s Tocumen Airport. The airline, which is currently in Chapter 11 bankruptcy, plans to concentrate on the tourist market, according to a report in La Prensa.

In a ruling written by magistrate Winston Spadafora, a $200,000 fine imposed by the National Securities Commission (CNV) against Carlos de la Guardia, one of the brothers who ran the defunct Grupo ADELAG, has been rescinded. When publicly listed and traded ADELAG went bankrupt it was discovered that the de la Guardia brothers had transferred many of its assets to other businesses that they owned and that the Arthur Andersen accounting firm had fictionalized the company records. Andersen was also fined in the case.

Also in this section:
No deal yet in US-RP free trade talks
Criminal case reopened in Banco DISA collapse
The Panama News shatters its old readership records
Business & Economy Briefs