The Deal Is… (4): Smash and grab season ends soon, plans are short-term

We are into another El Niño year, which affects the water supply and thus not only people’s daily lives but the economy. Cattle are starting to die in the Azuero. The canal is under draft restrictions that limit the cargoes that ships can carry through it. Planning for the long term? That’s a problem. The IDAAN national water and sewer utility is a notorious political patronage dumping ground. Previous irrigation projects featured millions spent and nothing delivered. Politicians have a hard time sending volunteers carrying enough water to impress selected voters. Photo by Eric Jackson, looking into his water tank one day.

Just a bit easier for businesses
to plan than it is for politicians

by Eric Jackson

President Varela, whose party took millions from Odebrecht but who denies responsibility, canal and rail boss Roberto Roy (who has been accused by a purported witness in an Odebrecht bribery scheme via a partner of that Brazilian company but who denies is and isn’t going to be investigated very soon), and Panama – David train coordinator Óscar Ramírez are en route to buy $800 million worth of rails on no-bid contracts, for a train whose route was determined at the outset — although there are studies ongoing at great expense to demonstrate that the original decision was a work of genius. Smash and grab.

The larger banks that will finance all this and feed the vulture funds if anything collapses are in their quiet bankerish ways cheering, but some international financial analysts are concerned about Panama’s national debt. The too small to participate banks that operate here? Moody’s is predicting that soon many will be gone, sold off in a new round to mergers and acquisitions. One of the reasons being hyped at the moment, although it’s not all hype, is cybercrime. As in banking systems being hacked and money extracted, UNLESS, of course, they hire the self-proclaimed experts who are spreading the warnings and selling their services.

The elections are May 5 and the new government gets sworn in on July 1. There is a rush to impress the voters with gifts legal or illegal. There  is a more consequential rush to jam big government contracts through the system, which may or may not be a matter of collecting kickbacks while the getting is good.

It has happened before. Actually, it’s a monotonous cycle. Politicians play like there is no tomorrow because for many of them there is a chance that there won’t be. But businesses also have to plan for when the binge is over. As in, mostly waiting on the big investments to see what the new situation will be. As in, discounting their hopes and plans a bit in light of the uncertainties flowing from the elevated debt. As Moody’s puts it, the Panama banking center’s prospects are “moderate,” which means for its smaller members a good time to think about selling.

What calming news comes from the Palacio de Las Garzas? The Varela administration says it will move to enhance the “legal security” of the copper mine in Donoso. The government also announced that China has issued the paperwork to allow its inspectors to let some Panamanian beef into the Middle Kingdom. In the next month Varela will cut ribbons for the inauguration of some $3.5 billion in public works projects. Leave it to his successor to figure out how to pay.

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