Panama's Promise - Amid a massive canal expansion, a pro-American supermarket tycoon is poised to be elected president

Panama's Promise, by Jaime Daremblum
Amid a massive canal expansion, a pro-American supermarket tycoon is poised to be elected president.
The Weekly Standard, Apr 28, 2009

In a 2006 national referendum, Panamanian voters approved a $5.2 billion project to expand the Panama Canal. As the Panama Star reports, "Percentage wise, the canal expansion dwarfs any stimulus project the United States is planning. The project represents nearly a quarter of Panama's $23 billion gross domestic product."

President Martín Torrijos, a member of the center-left Democratic Revolutionary Party (PRD), eagerly championed the canal expansion, but it won't be completed on his watch. This coming Sunday (May 3), Panamanians will elect his successor. PRD presidential candidate Balbina Herrera is trailing opposition candidate Ricardo Martinelli by double digits. It is hard to see how Herrera can make up so much ground in so little time. All signs point to a Martinelli victory.

Compared to a Herrera regime, a Martinelli administration "would be a much more pro-American government." At least that's what Martinelli told a Miami Herald columnist last month, saying he would push aggressively for the U.S. Congress to approve a bilateral free trade pact with Panama, which was signed in June 2007. Founder of the center-right Democratic Change party, the 57-year-old Martinelli is representing a multiparty coalition in the May 3 election. He is a supermarket tycoon with a range of other business interests and a record of government service. Martinelli has worked in two different Panamanian presidential administrations. When the government officially assumed control of the Panama Canal at the end of 1999, Martinelli was serving as both board chairman of the Panama Canal Authority and minister of canal affairs.

The scandal-plagued Herrera, meanwhile, has a background in radical left-wing politics. A former National Assembly deputy and mayor of San Miguelito, she was a close confidant of Manuel Noriega, the drug-trafficking Panamanian dictator who was toppled by U.S. military forces in December 1989. In fact, Herrera was a leader of the thuggish Dignity Battalions, Noriega's paramilitary units, and Noriega hid in her home during the American invasion. Under the Torrijos administration, Herrera served as housing minister.

In a global economic environment characterized by recession and financial upheaval, Panama stands out as a relative bright spot. The United Nations Economic Commission for Latin America and the Caribbean projects that Panama's economy will expand by 4 percent in 2009 while the regional economy as a whole will contract by 0.3 percent. But 4 percent annual GDP growth represents a major drop from 9.2 percent growth in 2008 and 11.5 percent growth in 2007. In those years, Panama benefited from robust global trade and a massive housing boom. Its unemployment rate plummeted. Now international trade is shrinking rapidly and, as Jeremy Schwartz notes in the Austin-American Statesman, the Panamanian real-estate sector "might be heading for a sharp downturn."

Panama's economic slowdown has been deep and abrupt, and Panamanians seem increasingly unhappy with the incumbent Torrijos government, which has been in power since 2004. Torrijos, the son of former Panamanian military ruler Omar Torrijos, has pursued a range social programs but only managed to achieve a small drop in the national poverty rate, which fell from 32 percent in 2003 to 28 percent in 2008. Given Panama's strong economic growth over that period, the public expected more progress on poverty reduction. Living costs have increased sharply due to inflation, and Panamanians remain widely dissatisfied with their public services (namely health care and education). The country has also been dealing with a spike in crime.

For all these reasons and more, the Panamanian electorate is restless, and many voters appear to be taking out their frustrations on the PRD. However, the party currently holds a majority of seats in Panama's National Assembly, so even if Martinelli wins the presidential election, his agenda may be constrained by legislative opposition.

Twenty years after the U.S. operation that overthrew Noriega, Americans don't pay much attention to Panama. But it is a strategically important country that is playing a growing role in global trade. Indeed, it is estimated that 5 percent of all international trade-and a much higher percentage of U.S. trade-goes through the Panama Canal. Torrijos has successfully promoted Panama as a tourist hotspot and commercial hub. It is an increasingly popular retirement destination for Americans; indeed, U.S. expatriates helped fuel the recent Panamanian housing boom.

Now more than ever, responsible management of the Panama Canal is deeply important to the global economy in general and the U.S. economy in particular. Efficient canal management depends on political stability and sound governance. Torrijos has provided such governance. Let's hope his successor does too.

Jaime Daremblum, who served as Costa Rica's ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.