Volume 14, Number 19
October 12, 2008

economy

Also in this section:
US economic crisis has consequences in Panama
Bitterly contested election in canal area US federal retirees' group
Martín's election splurge budget
Punta Pacifica building boom in two glances
Neighbors annoyed by auto shop in residential area
Business & Economy Briefs

Budget up 17 percent, with capital spending leading the way

An election year national budget
by Eric Jackson

It's not exactly a new game.

As elections approach, governments increase public spending to bolster the economy, reward their friends and create the general impression that the people in power are actually doing something. It's done that way in many places by many different types of ruling parties, and, even if there is scant evidence that it wins Panamanian elections, that's the way it's done here too.

What was unusual about the general budget presented to the Cabinet Council on September 29 was its magnitude.

The government's general budget excludes many items of public spending and revenue. The Panama Canal's books are kept separate, as are those of semi-autonomous public agencies like the IDAAN water and sewer utility and local governments. Thus some big-ticket items like the canal expansion project and the new metro area sewer system are not reflected.

And yes, given inflation it's hardly unusual to say that a national budget breaks all spending records.

However, all exclusions aside, the $9.763 billion budget breaks all records, tops the 2008 budget by 17 percent and adds about $50 million to the national government's payroll. This year's budget had the main capital improvement expenditures for the Cinta Costera, but next year's spending on capital improvements will be up about 25 percent.

Panama City drivers caught in the ever worse traffic jams can see the nature of some of this spending in the form of PRD activists in transito vests standing around and doing essentially nothing and opposition politicians are hoping to make a political issue of this. After all, Martinelli's a supermarket baron and Varela runs the nation's main distillery and they are both in positions to claim that as businessmen they'd have never survived if they had spent so wildly. Indeed, Martinelli and Varela have done just that in their own ways.

On the other side President Torrijos and PRD nominee Herrera can point to dirt moving, structures going up, young people with jobs and all of the connotations that go with such things. Moreover, a ruling party with an anti-labor record can and does plead that much of the payroll increase is for raises provided for in contracts with unionized public sector workers. Some of the increase, however, is to add new employees, generally hired on the basis of political patronage, to the public work force.

However, there are also increases in subsidies for small and medium-sized businesses and companies in the export sector --- no doubt those whose owners are affiliated with certain political parties --- to become “more competitive.” There will be more money for scholarships, including for study abroad, in the budget.

Businessman Alberto Vallarino, a Panameñista, warned in La Prensa that the budget is inflationary and would end up hurting most working Panamanians by driving up their living expenses. His fellow party member José Blandón Figueroa, a Panama City legislator, called it an “hidalgo” --- a Spanish contraction connoting someone influential's unproductive son --- budget. Vanguardia Moral deputy Mireya Lasso told El Siglo that the budget makes no sense, and that she's never seen anything like it.

For his part, the president ridiculed the opposition, saying that they had caught “an electoral virus” and arguing that his works trump their words.

The president's Democratic Revolutionary Party (PRD) holds an absolute majority in the National Assembly but even so, public budgets are long and tedious documents and hearings on them are even worse. Add some legislators' pet projects and ambitions to restore the deputies' discretionary circuit funds and the time it will take to deal with those things and it won't be until sometime in November that the legislature gets around to passing the budget. Panamanian presidents have a line item veto, so if his own party's legislative caucus adds a bit of its own pork to the mix, Martín Torrijos can remove those items if he chooses to do so.

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