business & economy

Also in this section:
Who's coming to Panama?
Work begins on canal expansion
US ratification of free trade pact up in the air

Costa Ricans square off over CAFTA
Rate increases spur campaign to renationalize utilities

The building boom at a glance
Business & Economy Briefs

Campaign to renationalize the utilities

Have you noticed about your electric bill?

by Eric Jackson

Since July Panama's electricity customers have been noticing sharp increases in their electric bills and often wondering how their usage has gone up so much in so short a time. Some business customers have been getting bills as high as 2000% more than before, and it's not uncommon for residential customers to have seen their bills double.

It is not, however, that people have gone on an energy wasting binge. It's that the Torrijos administration has approved the electric companies' petition to raise rates for "fuel cost adjustments." Of course, most of the electricity that Panama uses comes from hydroelectric generators, but rates here are set according to theories rather than realities, and the theory is that if all our power were generated by oil-fueled plants the costs would be much higher so customers should pay according to these more expensive theoretical costs.

It has many Panamanians and resident foreigners, across the political spectrum and from all social classes, very annoyed. There are lawsuits and protest resolutions from the upper classes and the people who are wont to block the roads for the cause ju jour have added high electric rates to their lists of non-negotiable demands.

In the Interior, where the economy tends to operate on a closer margin, the protests have gathered force. In late August a group of farmer, business, labor, professional and civic groups, predominantly middle class, met in Penonome, formed the Civic Committee and issued the Declaration of Penonome. The declaration calls for the re-nationalization of the electric and phone utilities that were privatized during the Pérez Balladares administration.

When one considers the terms of those privatizations, what the committee seeks is not as radical as it might at first seem. The government already owns the power lines and 49 percent stakes in the retail power distribution and most of the power generation companies. With respect to the Cable & Wireless phone concession, there, too, the government owns 49 percent. Where the government is 49 percent shareholder, the private companies own 49 percent and the utility workers two percent, but contractually the private companies have the right to manage and have moreover appropriated the two percent that company employees are supposed to own, purporting to manage these shares on their workers' behalf.

The high utility rates could be seen as a back-door tax hike, but for the low and sometimes non-existent dividends that the government gets for its shares, even though Panama has some of the world's highest electricity rates and telephone services cost more here than in neighboring countries.

The high rates and low payments to the government are so unpopular that they have become an issue in the power struggle within the ruling Democratic Revolutionary Party (PRD), with former President Toro Pérez Balladares complaining that his privatization plan wasn't really carried out because the utilities were supposed to be regulated in the public interest but the Moscoso and Torrijos administrations let the privatized companies dictate terms to the public. Torrijos, for his part, lays the blame for high utility rates at the feet of Pérez Balladares, even if this administration has no plan to change the basic plan.

Meanwhile, the Civic Committee is starting a grassroots campaign which is strongest in the Interior. So far, pickets have appeared in front of electric and phone company offices in Penonome, Las Tablas and Chitre, with further protests planned for Panama City. The demonstrations have been small and neither violent nor disruptive, aimed at spreading word of what is intended to be a protracted campaign.

Costa Ricans square off over CAFTA
Rate increases spur campaign to renationalize utilities

The building boom at a glance
Business & Economy Briefs