Panama business & economy briefs

Business & Economy Briefs

Cost of living jumped 1.5% in August

Panama officially measures its cost of living by way of the “canasta basica,” the average price of a selection of household staples. There are ways of manipulating this but they tend to be pretty obvious (like when Mireya Moscoso changed the items in the selection and attempted to compare the numbers for the old selection with the new ones) and generally are not done. Thus, even though there are imperfections, these statistics are generally taken as meaningful. The Ministry of Economy and Finance, which compiles and keeps the statistics, has reported that in August the canasta basica cost $263.01, as compared to $259.22 in July. That's a rise of about one and one-half percent in one month, and 16.6 percent more than in August of 2007. It's a cause of much social discontent, especially among women (who shop for groceries a bit more frequently than men), but possibly because the leading opposition presidential candidate (Ricardo Martinelli) is a supermarket chain owner polls indicate that although people are concerned about the situation they are not especially blaming the ruling Democratic Revolutionary Party (PRD) or its standard bearer (Balbina Herrera).

Fuel price stabilization move

On September 22 the Torrijos administration decreed a 15-day plan to pay gas station owners a $6 million subsidy and stabilize gasoline and diesel prices. Under the plan, prices that consumers pay will still go up by up to a dime a gallon, depending on the type and grade of fuel, but the government argues not as much as they would have risen.

$100 fee to take photos in Parque Omar

It's said to be an interpretation of an old decree designed to recoup the costs of cordoning off parts of Parque Omar for professional photo shoots, generally for advertising purposes. The purpose now is to keep photojournalists from taking pictures of the scene of the crime, in which hoodlums within the Torrijos administration stole 35 tons of bronze sculptures from the park with the connivance of the SPI presidential guards. The park administration pulled that “regulation” on photojournalists for El Panama America.

Lame duck free trade attempt shaping up

It probably still depends on what happens in the November election, but the White House is moving to jam through congressional approval of a free trade deal with Colombia during the post-election lame duck session, and right on the heels of that push the Panama deal through as well. If McCain wins it will happen that way, but if Obama wins it may or may not. Either a huge shift of congressional seats to the Democrats or an Obama victory and his subsequent recommendation not to ratify those deals would likely deny the agreement the Democratic votes it needs to pass. Two wild card factors that may be important are a tax scandal involving House Ways and Means Committee chairman Charles Rangel (D - New York), who is a supporter of the Panama treaty and may be persuaded to back the Colombia pact; and the cascading US and world financial crisis, the political ramifications of which are not entirely predictable.

“We're number 85! We're number 85!”

According to Transparency International's rankings by international businesspeople about the levels of corruption in 180 different countries, Panama's still in the top half of places where one can do business without being shaken down too badly --- we're tied for 85th place with India and Senegal, with a rating of 3.4 out of 10 (the latter number representing a complete lack of corruption). That's worse than Panama's rating in previous years and well below Latin American leader Chile (6.9) and our neighbors in Costa Rica (5.1).

Non-compliance with indemnity pact

When the old Panama Railroad was privatized during the Pérez Balladares administration, the old National Ports Authority was supposed to indemnify the employees. But the workers were never paid, with the government telling the former workers to sue the company and the company saying that payment was the government's responsibility. About a decade later, this past May, the old ports authority's successor, the Maritime Authority of Panama (AMP), agreed to pay the indemnity in installments --- 40 percent at the beginning of September 2008 and the rest in equal installments in March of 2009, 2010 and 2011. But the first of the month came and went and there was no payday, nor was there any payment on the regular payday for Panamanian workers, September 15.

Odebrecht contract is “different”

The Panamanian Society of Engineers and Architects (SPIA) claims that the government is being overcharged on the Panama-Colon Autopista project in the amount of some $15 million by the Brazilian-based Odebrecht construction company. The method, SPIA says, is an irregular division of items that divides the charges that usually go in one line item into two or three, which then add up to more than is normally charged for the one combined job. Minister of Public Works Benjamín Colamarco says that the engineers and architects are wrong because Odebrecht is “different” and the special system gives the government more “control.” Well, Odebrecht is different --- after all, they had such control over Brazil's roadbuilding industry that they served as the clearinghouse in a bid rigging scandal that brought down a Brazilian president.

“Connect to Knowledge”

Ah, yes, the stuff of those government billboards about how President Torrijos is bridging the information gap. In theory, the “Conectate al Conocimiento” (connect to knowledge) program is supposed to install Internet centers in 720 public schools, improving the abysmal quality of Panamanian public education. The contracts were made with the right politically connected companies, and the centers are being set up, at a cost of $40,000 to $60,000 each. So what's the lesson? Mainly how adept Martín is at putting the taxpayers' money into other people's pockets. Anyone off the street can pay retail prices to buy and install the same stuff for between $25,000 and $30,000, and the government ought to be able to get a bulk discount that lowers the price yet more. Get the connection, kids?

“Land-side connection” the problem with North American ports

A Panama Canal expanded to allow its navigation by the larger “post-Panamax” ships doesn't immediately change the nature of shipping between Asia and North America. On each end of a canal transit voyage, port facilities have to be in place to deal with the larger ships and the greater cargo volumes they carry. That's a concern, American Association of Port Authorities president Kurt Nagle said at an industry gathering in the Canadian port of Halifax. In a subsequent interview with the Halifax Herald, Nagle explained that it's not just an expansion of ports to handle the bigger ships, but of the road and rail infrastructures to move all those containers from the ports to destinations inland. “Our biggest challenge from a ports’ perspective is the land-side connection,” Nagle told the Herald, adding that public and private investment in these infrastructures is lagging.

IDB commits “in principle” to canal expansion loan

Forget all the campaign propaganda about the canal expansion being “self financed” by the Panama Canal Authority (ACP). Now the glowing press releases coming from the Admin Building and entities that do business with it are about the wonderful loans that will be taken out to do the job. The latest in this series is the announcement that the Inter-American Development Bank (IDB) has reached an agreement “in principle” to extend a $400 million line of credit to the ACP for the canal expansion project, whose original stated price tag was $5.3 billion. (Although it has not been revised upwards in ACP publicity, the cost is already higher than that by now, if only for the steep inflation in world prices of cement and rebar.) The IDB hasn't been very picky about the loans it grants lately. It has to lend money to continue its existence, but with the “Pink Tide” political changes in Latin America fewer governments in the region want to do much business with the US-based international lender. But on the IDB website the bank's president, Luis Alberto Moreno, said that “I believe I’m not exaggerating when I say that you’ll not find a project that has been more studied and scrutinized than the Panama Canal expansion plan.”

The seamy side of foreign aid

In donor countries like the United States (which, contrary to widely held belief in sectors of US society, in neither per capita nor absolute terms is the leading source of foreign aid) there are politicians who like to bash assistance to other countries as both a waste of money and a diversion of resources from the needs of people at home. However, this conservative sounding argument doesn't get the support of key conservative business sectors because foreign aid is in large part a subsidy to companies in the donor countries. Quite often the money never leaves the donor country, but, for example, is spent buying computers or trucks or whatever that are manufactured in the donor country, which equipment is then sent to the receiving country. Not only do the companies profit from the sales, but quite frequently foreign aid is a way of introducing their products to foreign markets. That's the norm, but there are uglier versions too. For example, there was a $200 million line of credit from Spain, dating back to the Pérez Balladares administration but mostly spent during Mireya Moscoso's time, to build and equip the Luis "Chicho" Fábrega Hospital in Santiago, install a telephone switching center at the University of Panama and build or improve a number of farmers' markets around the country. But now, years after the fact, Panama is saddled with this debt but received obsolete or dysfunctional equipment and shoddy construction work from the Spanish companies that were subsidized. Yes, the University of Panama complained that the half-million-dollar phone center was no improvement over what it already had and never installed that equipment. Yes, health care professionals at the hospital in Santiago complained that the Spanish equipment was defective at best. However, nothing much was done and the problems flew under the radar of public discourse until El Panama America began to run a series of investigative reports about the loan and what Panama got for it. The current administrations of both Panama and Spain can point out that the abuses happened on their predecessors' shifts, so that might make it a bit easier for the two governments to make adjustments for what happened.

How does the University of Panama rank?

In one international ranking of the top 500 universities in Latin America and the Caribbean, El Panama America reported, the institution of higher learning that by law has control over all of the others didn't even get on the list. Well, it figures that the University of Panama, with its fake diploma scandals and a rector whose own doctorate is fake, wouldn't get much respect. The only Panamanian university that made the list was the Universidad Tecnologico de Panama (the product of the engineering department seceding from the University of Panama back in the 70s), which ranked number 86 in the region. The University of Panama has been slighted like this before, but the surprise was that the country's Catholic university, the Universidad Santa Maria la Antigua (USMA), wasn't listed.

Panamanian boat fined for illegal fishing in Tico waters

Usually the complaint is about Costa Ricans fishing without the proper licenses, in protected waters or using illegal methods or equipment in Panamanian waters. However, the Panamanian tuna boat Tiuna was caught fishing in protected waters off of Costa Rica's Isla Coco earlier this year, and has been handed a $668,000 fine for the offense. The boat's license to fish in Costa Rica has also been revoked.

Doing the graveyard whistle?

Is the US financial markets meltdown going to sink the Panamanian economy? That depends on whom you ask. In Panama's corporate mainstream media most of the voices may be safely discounted as sales hype. Thus one reads and hears a lot of talk about how Panama is not and will not be affected so now's the time to buy and so on. But others note that the United States is this country's biggest trading partner and are alarmed by developments up there. Meanwhile, in 2007 construction accounted for about one-quarter of the Panamanian economy, and despite the deflation of a Panama City luxury condo bubble that sector hasn't experienced a significant slowdown. We still have big housing shortages for middle class and working class Panamanians, and the canal construction project will be underway for the next seven years or so, so the construction industry is likely to remain strong. But what about foreigners, particularly retirees, moving here to live and buying houses? Several sources in the real estate and moving assistance businesses tell The Panama News that this boom continues, but with fewer Americans and more Canadians, Europeans, Colombians and Venezuelans coming here. Most Americans who own homes or who have investments in stocks have seen a decline in the value of their assets. Homeowners are having a hard time selling their homes in order to raise the cash for a move to Panama or anywhere else. But the Canadian dollar and the euro are strong against the US dollar that Panama uses and that makes prices here look like bargains to people whose assets are in those currencies. Consider as well that one facet of US foreign relations in the Bush years is that people around the world find that doing business with the United States is more difficult and have increasingly been taking their business elsewhere. Panama's upscale shopping venues that cater to Latin American foreigners and its increasing importance as an air hub for flights that don't go to the United States are two indications of this trend. So what we hear is a certain amount of concern, which falls well short of panic. The expectation is that there may be a little business slowdown, but in the near term there will be no collapse.