Panama Business & Economy Briefs

Business & Economy Briefs

But have they noticed the price of butter?

The Panamanian government measures the cost of living by the Canasta Basica, a collection of household staples said to be sufficient for a family of four to live a frugal life for a month. It reports that as of the end of January this measure was up to $239.05, or about 75 percent of the minimum wage. In the supermarkets people who shop for groceries find the increases in food prices shocking, and pollsters are now finding that inflation is in second place among public concerns, just a little behind unemployment and ahead of crime.

World Bank warns that US woes may hurt us

In an interview published in the Colombian business journal Portafolio, World Bank vice president Pamela Cox warned that the Latin American economy is not immune from the economic problems that are currently arising in the United States. Although she was generally upbeat about the region's economic prospects she said that Central America and the Caribbean in particular were vulnerable to problems starting in the US economy, and that countries that import much of their food or fuel are particularly at risk. South America is in general not so closely tied to the United States as a trading partner and is thus to that extent less exposed.

Banking Superintendent warns of over-extended banks

Banking superintendent Olegario Barrelier, in a report covering the national banking industry in 2007, said that there is an excess in liquidity in Panamanian banks and that some of them are making too many risky consumer loans. It might make for some deals on slightly used repossessed cars, given a recent increase in defaulted auto loans. Whether it will be as severe a situation as we saw from 1998 through the middle of 2002, when the economy was in free fall and bank parking lots were full of repossessed automobiles is debatable. The US economic recession is likely to affect us to a certain extent, but Panama's economy grew at an impressive rate last year and is expected to grow, albeit at a slower clip, in 2008.

Rating agencies warn of high debt

A few weeks ago Bear Stearns issued a glowing report about Panama's economic prospects, saying that our public debt might get up to investment grade but advising that the government needs to do a bit more to control public spending. But then, we now know about Bear Stearns's own economic prospects at the time and we need not concern ourselves too much with that defunct organization's opinions --- but maybe the people who are promoting the Trump tower ought to worry, as it was Bear Stearns that was behind largely behind the $200 million bond issue they are using for financing. Meanwhile, La Prensa reports that Standard & Poors, Moody's and Fitch have all issued warnings that Panama's public debt of 54 percent of annual Gross Domestic Product is unacceptably high.

Prosecutors probing wave of beach land grabs

Throughout the Moscoso administration and accelerating under the Torrijos administration there has been an upsurge in land grabbing, often accompanied by forgery of land records, in coastal areas with tourism development potential. Now the Public Ministry says that prosecutors are investigating at least a dozen such cases, in several of which land that was grabbed was sold to foreigners or transferred to corporations whose owners are unknown under Panama's corporate secrecy laws. Most of these investigations involve cases in Los Santos or Bocas del Toro.

Row over university land grabs

The University of Panama, a top heavy political patronage operation with constant financial woes is going through a big argument about money, or more precisely, real estate with monetary value. Some years ago the university received 1000 hectares of land along Gatun Lake, which by law, were not transferable by any other public entity or alienable by adverse possession. But university administrations over many years paid no attention, and meanwhile lakefront land has become much more valuable. Now it seems that more than one-quarter of the land has been occupied by squatters, some for more than 14 years. Moreover, the Agrarian Reform office has improperly issued titles to some of the squatters and local politicians have promised titles to others. Faculty members, led by former Supreme Court magistrate Edgardo Molino Mola, are insisting that the university act to evict the squatters but the rector, Mr. García de Paredes is resisting, arguing that the university can't do anything about its own land without permission from the Comptroller General and the Ministry of Economy and Finance. (Interesting defense of university autonomy by the rector with a fake doctorate, isn't it?) The problem is complicated in that squatters have purported to sell titled land or or rights of possession to others, some of them foreigners seeking to develop tourist facilities.

Court voids bid that gave Playa Bonita property to Bern

The Supreme Court has held that the bidding process by which the Bern group obtained four lots at the former Fort Kobbe on which the upscale Playa Bonita resort were built was conducted in an illegal manner by the now defunct Interoceanic Regional Authority (ARI). It was held that the process was designed to steer the process to the Berns and cheat another company, Desarrollo Urbanistico del Atlantico SA (DUASA), of its chance to compete for the property. Now there is something akin to weeping and wailing and gnashing of teeth, and observations by the likes of La Prensa, which gets a fair amount of advertising business from the Berns, that DUASA stands to obtain some economic benefit from Bern's project even though it "hasn't put one stone in place." It's unlikely that Playa Bonita will be torn down or transferred to DUASA, but fairly likely that the Berns will in the end have to pay some damages to DUASA.

Rice riot in Divisa

On March 5 about 2000 rice farmers from around the central provinces did battle with police around the agricultural quarantine station in Divisa. The farmers converged on that point to block the Pan-American Highway to protests against the government's decision to import 1.5 million quintals of rice in order to bring prices down. A riot squad from the National Police used copious amounts of tear gas to break the farmers' blockade. Just before the farmers took their protest to the highway in Divisa, Minister of Agricultural Development Guillermo Salazar announced that the government had suspended the decision to import the rice.

CADE 2008 to be about tourism

The Panamanian Business Executives Association's (APEDE's) annual CADE business summit this year will be on the subject of tourism. There will be presentations from national and international authorities on the subject. The CADE summits are generally the most intellectually serious of all business forums in Panama because they are oriented toward the practical issues confronting those who manage businesses rather than the aspirations, economic theories or political ideologies of those who may own businesses.

Government to buy 50,000 laptops for kids

The Torrijos administration is set to buy 50,000 laptop computers from the One Laptop per Child foundation, to be distributed among needy youngsters to help with their education. The purchase will be for $14 million.

Rembrandt show coming to Panama

On April 17 48 engravings and two original plates by the 17th century Dutch master Rembrandt van Rijn will go on display at the Museo del Canal Interoceanico in the Casco Viejo. The works will be on display until June 8 before returning to the Netherlands. It promises to be the biggest museum event in Panama for at least a decade.

Deadline to paint cabs yellow pushed back

Is there any good reason to require that all taxis be yellow? That is, other than that it brings regimentation of the sort that a military dictator's kid likes, and that some US cities have a rule like that and the Panamanian political class likes to imitate the most senseless things that gringos do? Well, yellow taxis have been the law for a few years now, but for the third time the deadline to get them all painted has been postponed. This time it was put back from this coming July 30 to March 15, 2009.

Ferrer quits

Alejandro Ferrer, the Minister of Commerce and Industry who led much of Panama's side of the negotiation process for the US-Panama Trade Promotion Agreement that's now stalled before the US Congress, has submitted his resignation. He said that he needed to get back to the world of private business. Odds are that the United States will not ratify the agreement this year, although depending on the results of the November elections it could happen in a November and December lame duck session. Both remaining candidates for the Democratic presidential nomination have said that they'd like to review all free trade processes and have implied --- not very specifically --- that they'd want to make certain changes. With the reduced chance of this trophy for his mantle, Ferrer becomes the first of what will likely be many cabinet resignations this year. Those ministers and vice ministers who plan to run for office in the May 2009 elections will have to resign before the end of October in accordance with the election laws.

Chamber drops lobbying effort

Because leading congressional Democrats have said that the US-Panama Trade Promotion Agreement won't be considered for ratification before the end of this year, Panama's Chamber of Commerce has suspended its Washington lobbying efforts for that treaty. The Torrijos administration still has Capitol Hill lobbyists on the job.

Megaport project moribund

There are hardly any more life signs of the proposed Farfan - Palo Seco "megaport" project, a massive Pacific seaport to be adjacent to the special development zone around the old Howard Air Force Base. On March 13 the Panama Maritime Authority called off the bidding for the project, after several of the companies that had expressed interest withdrew their participation. Under the Torrijos administration the Maritime Authority has been a fiefdom of the Partido Popular, a junior partner with the PRD in the governing coalition, and that has likely been a factor in the demise of the project, which the president announced with great fanfare in 2005. The lack of a good connection to move containers to the ports and railroad on the other bank of the canal was a practical obstacle, and there were various legal challenges to the project as well. This proposed development may, however, reappear under a future administration.

Assembly accepts partial veto, extends new building tax break

The National Assembly has given up its attempt to add things to the president's legislation to extend the 20-year property tax exemption for new construction. Theoretically this tax break has been on the chopping block for years, but each time it was scheduled to expire or diminish, the government has bowed to construction and real estate interests and extended it. However, President Torrijos didn't like the idea of the legislature amending the bill he sent to it, in a way that could cut government revenues and throw the budget out of whack. The partial veto was also a convenient way to snub National Assembly president Pedro Miguel González for appearances in Washington, where González isn't particularly popular.

Panama City building permits up

It may be more a function of the size of the projects than of the number of projects, but in any case Panama City's income from the sale of building permits in January and February was some $1.023 million, up 72.3 percent from the same months in 2007. People in the real estate and construction industries told La Prensa that this is a sign that the sector is generally in good health, and the cranes one sees all around the capital would tend to corroborate this. There are, however, nay sayers who warn of overproduction of high-end condos for which there is little market demand.

ICA landfill to fulfill park promise

Around Punta Pacifica developers have seized public park lands and despite protests by municipal and national government authorities they are not giving them back. Meanwhile, the Mexican ICA construction firm that got the land at the former Paitilla Airport as part of its compensation for the Corredor Sur project has an unmet provision in its 1996 contract to set aside a percentage of the land for public parks. So now that it's all high-rise residential towers and shopping malls and such, what's ICA to do? They're building a four-hectare landfill into Panama Bay to make a public park between the Boca la Caja neighborhood and the Corredor Sur.

Trouble for lower-end construction company

La Prensa reports that Econoplade SA, a 27-year-old construction company linked to the Cardoze family and dedicated mainly to the construction of downscale tract housing for working and lower middle class families, is in a process of forced restructuring. High debts and a sales slowdown last year have forced the company and its creditors and shareholders to make changes, but CEO Javier Cardoze told the daily that he thinks that the company will get through the crisis. The problems in Panama's construction and real estate sector have been most evident in the failures of several upper-end projects in Panama City and a string of frauds, which have driven many of the speculators out of the market. There is still a huge demand for lower-end housing and a lot of construction is ongoing in that sector. Econoplade's problems are a sign that the failure of some ill-conceived and high priced skyscrapers may not be the beginning and end of the local real estate industry's woes.

Luxury tower project scaled back

The highly touted Los Faros residential towers project is being scaled back. Instead of three residential towers, the plan now is to build only two, and instead of residential condominiums, the new plan is to build two luxury hotels on the lower floors of towers and turn the upper floors into time share units. Grupo Mall, the Spanish promoters, told La Prensa that they didn't yet have a deal with any hotel companies for the new plan, but they're working on it. There is a demand for hotel rooms in Panama City, but buyers for upscale condos are hard to come by.

Two construction workers die in 24 hours

On March 12 38-year-old Guillermo Barsallo, who was working on the 13th floor of the Galeria 1 building under construction in Obarrio fell to his death. He had a safety harness but apparently did not attach it to the building. The following day Jolly Sobalbarro was applying grease to the pulleys of an elevator in the H20 building on Avenida Balboa when someone on another floor pressed a button. The elevator, which should have been shut off, was activated and crushed 22-year-old Sobalbarro to death. In the latter incident the SUNTRACS construction workers' union is blaming the elevator contractor's negligence for the death. In both incidents government inspectors stopped work on the projects pending their investigations.

Company loses Pacora sand concession

The Ministry of Commerce and Industry has canceled Compu Internacional SA's 132-hectare concession to extract sand in Pacora. The reason given in the resolution published in the Gaceta Oficial was non-payment of the fees owed to the government.

Free trade with Chile

A free trade agreement between Panama and Chile is now in effect, with the overwhelming majority of each country's products now being exchanged duty-free. Panama exports mainly tropical agricultural products, above all coffee, to Chile; while we import mainly temperate zone agricultural products like apples, pears, grapes and wine from Chile. There are hopes that Panama's service sectors, including insurance and financial services, will find more customers in Chile, while Chile has more of a manufacturing sector than Panama does and hopes to gain in that sector.

Ecuador blacklists Panama

Complaining that Panama allows its citizens to evade taxes and launder the proceeds of criminal activities, the government of Ecuador has put Panama on a blacklist that requires Panamanian companies doing business in Ecuador to file monthly financial reports and slaps a half-percent duty on business transactions with Panama. Ecuador is perhaps the single country that was most seriously affected by the Panama Canal Authority's toll increases, so relations have long been strained.

World's most expensive coffee to go in-house for auctions

At international coffee auctions in recent years, the geisha coffee grown at the 14-hectare Hacienda La Esmeralda on the slopes of Volcan Baru above Boquete has repeatedly broken world price records, most recently getting $120 per pound last year. Now, according to a report by the Reuters news service, the farm is doubling its area under cultivation and planning to sell its coffee at private auctions. The quality and price of the farm's coffee varies both with the conditions of the particular spot where it is grown and with the date on which it is picked, so the small farm will be auctioning all of its products in small lots.

Cocle city dump wars

The Penonome municipal dump in Las Lomas has been used for 30 years and now it's full. The neighbors had been warning that if the city didn't close the facility down, they would. On February 29 a couple of dozen community activists did that, putting up barriers to keep people from getting to the dump. So what's Penonome to do? Talk to the mayor of Anton and get that neighboring municipality's dump to take Penonome's refuse at Anton's dump in Rio Hato. The deal was struck --- whatever it was --- with Anton mayor Roger Ríos. When the people of Rio Hato found Penonome garbage trucks rolling through town en route to the dump a crowd gathered on March 6 to block the trucks' access to the dump. Ríos said it was only a temporary agreement to let Penonome use the dump for a few days but his constituents didn't want to hear it.

Foreign doctors for remote areas

The government is finding it hard to get physicians to work at public health care system facilities in the outer boonies for $1,137.80 a month. Thus the Ministry of Health is recruiting foreign doctors --- particularly surgeons, anesthesiologists and obstetrician/gynecologists --- to work on one-year contracts in Kuna Yala, the Ngobe-Bugle Comarca and parts of Veraguas and Herrera. COMENENAL, the alliance of public sector doctors' unions, is not protesting the move but is pointing out that it's a sign of poor public health care planning that fails to train sufficient numbers of specialized physicians.

COPA increases air service to the Caribbean

COPA Airlines is now offering four flights to and from Port of Spain, Trinidad every week. The flights, in 94-passenger Brazilian-made Embraer 1190 AR jets, are on Mondays, Thursdays, Fridays and Saturdays. For many years Panama shunned most ties with the English-speaking Caribbean but lately has joined the Association of Caribbean States and increased its economic and cultural ties with the region. We import mainly petroleum products and natural gas from Trinidad-Tobago and have more tourists from third countries who are taking in the sights of both that country and Panama in the course of an excursion through the region.

Free Zone business closed after Mexican money laundering bust

In the Mexican port of Manzanillo three men were arrested after authorities discovered $11.9 million in cash hidden in a shipping container. The money is believed to be the proceeds of drug trafficking, and the container was directed toward a Colon Free Zone import/export company, M. Silva Int - Panama. That led Panama's National Police and anti-drug prosecutors to swoop down on that company's premises, arrest two merchants and a customs courier and close the business while a money laundering investigation proceeds.

Venezuelan Free Zone customers robbed

The Colon Free Zone continues to be the target of uncontrolled highway robbers. On the afternoon of March 16 two Venezuelan men driving in a rental car were forced off of the Transistmica and robbed by a gang of armed men. The victims were abducted to the Quebrada Ancha neighborhood and released there. About $24,000 was taken in the robbery.

School dropout rate up

In 2007 14,799 students dropped out of the public schools, compared to 12,053 in 2006. The Ministry of Education's statistical director Néstor Aguirre told El Panama America that while there has been no study about the reasons why these kids dropped out, regional studies and other data suggest that it had to do with the poverty of their families. The statistics indicate a failure for the stated purpose of President Torrijos's Red de Oportunidades program, wherein he goes to impoverished communities and hands out envelopes containing $35 in exchange for parents' promises to keep their kids in school. Generally listening to one of the president's political speeches is also a part of that bargain, and when viewed as a campaign tactic rather than as an effort to reduce the school dropout rate there might be a different verdict on the program's success.

These briefs were compiled on March 21

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