Previous issues can be selected by viewing our Letter from Panama index page

In conjunction with our newsletter, Offshore Pilot Quarterly,
this regional roundup of economic developments appears regularly in SA Banker,
the official journal of the Institute of Bankers in South Africa,
under the title “Panama Passport”.

 

Volume 3

Number 1

Panama´s Year

In December of last year I watched the annual Christmas parade from my apartment high above the city of Panama.  It was a wonderful affair.  The afternoon was very clear and the sun was shining with the temperature – unlike in northern climes – hovering in the high 80s.  The colourful and imaginative floats and the several bands entertained the crowds lining the street during the next few hours; the strident drumming and brass instruments could be heard across the city.  Now, as you read this in the first issue of S A Banker in 2001, Christmas is but a distant memory.  Still, as my gaze went beyond the parade that day, to the sparkling Pacific and then away towards the hills which surround the city, I thought how much had happened in Panama during 2000, a year which began with the hype and threat of possible technical hazards of a new millennium and ended with the US Presidential elections which, unlike the start of the millennium, was indeed fraught with the hazards of technology. 

At the start of 2000, the Americans handed over the Canal Zone to the people of Panama amid fears expressed by US conservatives that the removal of American soldiers could affect both the stability of the country and the running of the canal.  Neither has proved to be the case.  It is true that Panama shares a 270 kilometre border with Colombia, whose government is fighting an escalating war with various guerrilla factions – mainly the Revolutionary Armed Forces of Colombia – and, predictably, some of the troubles have spilled over into Panama, but it is the other countries bordering Colombia (such as Ecuador and Peru) with very large frontiers to patrol that are really in the firing line.  Panama has no army and it has publicly declared its intention to remain neutral in the conflict, steadfastly refusing outside help for fear of compromising its neutrality.  Rather than guerrilla intrusions, Panama has become a refuge for Colombians fleeing the fighting.   Perversely, the strife in Colombia has given economic benefits to Panama because well-heeled Colombians are moving their families and their substantial resources to Panama.  The guerrillas, anyway, have little interest in drawing Panama into the conflict which is geographically well away from their main camps and see the almost-impenetrable jungles of the Darien Gap, where Panama’s border with Colombia lies, as an ideal place to rest and hide.  Gunrunning most likely poses the biggest problem for Panama’s police:  one arms cache found last year contained 271 AK-47 assault rifles as well as high-calibre machine guns and grenades.

The first year of Panamanian control of the canal has been positive and has not suffered from the U.S. withdrawal.  Maersk Sealand, the world’s largest container line, has exerted its considerable economic influence in trying to make Panama the focus of hemispheric trade.  The waterway lies on 144 global shipping routes and the government is looking for investors to turn Fort Howard, the former US air force base near the canal, into a logistics centre with rail, air and road links.  The first trans-American railway was built in 1855 in Panama and is being reopened which will provide freight operators with more options.  But the most exciting project would be the widening of the canal – although at the time of writing no firm decision has yet been made.  However, around 60 per cent of the container ships ordered to be built since January 1999 cannot pass through the canal locks, so there is a very strong incentive.  If the project goes through, it is estimated that the cost would amount to US$4 billion.  

Panama had its share of controversial visitors last year also:  the Cuban President, Fidel Castro, and Vladimiro Montesinos, the ex-Peruvian intelligence chief of disgraced former Peruvian President Alberto Fujimori.  Judged on general local sentiment, Montesinos was no more welcome than Colombian rebels.  His is a story of treachery, thievery and torture, all of which he either condoned or instigated, and his entry into Panama was only permitted after persuasive intervention from Latin American presidents and the United States who were trying to calm things down in Peru.  Fortunately his stay in Panama was brief.  Fidel Castro’s stay was also brief and occurred when he attended the tenth annual Ibero-American Summit.  It is clear that Ibero-American unity has strengthened since the previous summit when 5 Latin American countries boycotted the event because it was held in Havana.  This cohesion could be of concern to the US whose dominance of the region is being tested and which is already hampered by the difficulties of doing business in not only a foreign language, but in a style that is very different to its own.  In fact, Portugal and Spain (whose King also attended the summit) were able to achieve an encouraging degree of unity with their former colonies.    Spain, incidentally, was the biggest investor in Latin America in 1999, with investments of some US$2.5 billion particularly in the energy, telecommunications, banking and tourism sectors.  Besides the prestige of the event, Panama basked in the congratulations which it received from the visiting presidents on gaining its full sovereignty 97 years after the US assisted in the country’s independence from Colombia.

Not surprisingly, Fidel Castro did ruffle some feathers at the summit by making contentious remarks concerning his support of revolutionary causes, but fortunately the Venezuelan president, Hugo Chavez, was able to cool things down – which brings us back to the Christmas parade.  It was cooling down as the last float disappeared from view and the lights went on all over the city, including on the ships anchored at sea waiting to pass through the canal.  A breeze picked up as the last streaks of pink in the sky faded and it is fair to say that it had been an eventful day, as well as year, in Panama.

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