What Obama missed by skipping Panama in Latin America tour

But there are signs that this pro-business government can't have everything it wants all at once.

On March 3, Martinelli reluctantly announced his government was repealing its controversial Reforms to the Mining Code (Law 8) – an initiative that his administration had hoped would bring in billions of dollars in revenue and convert Panama into one of the largest mining nations in Latin America within 20 to 30 years.

"A government always has to be responsible and listen to what the citizens say," Martinelli admitted, noting that polls show 3 out of 4 Panamanians are against mining. His reversal on the mining initiative was hailed as a victory for Panama's environmentalists and the Ngäbé Buglé indigenous community, who spearheaded protests against the reforms.

It may also be a sign of maturity for Martinelli, whose style of government has been decried by critics as authoritarian and undemocratic. Last July, a series of violent labor protests over Martinelli's attempt to pass the "Sausage Law" (dubbed so because it was stuffed with six unrelated reforms to civil aviation, the penal code, environmental regulations, police conduct, judicial codes, and labor laws) led to a brutal display of state repression that left two workers dead and hundreds injured. After 10 days of violent clashes, the government backed down and scrapped the law.

Backpedaling on it and the mining law are indications, he insists, that his government is listening to the people. Analysts, however, claim the reversals are more a symptom of his government's failure to consult civil society on projects that don't necessarily jibe with Panama's culture or traditional development model. And it's giving some the impression of an erratic government that is shooting out in all directions.

"This government needs to relax a little bit and not try to do so much," says Heather Berkman, a political risk analyst for the US-based Eurasia Group.The problem, she says, is that Martinelli's government wants Panama to "be a jack of all trades, and [it's] not suited for that."

Signs of Panama's maturity

José Domingo Arias, vice minister of foreign trade, points instead to the government's canal expansion – perhaps the largest remodeling job in history – and additional investments in new airports, seaports, railways, and roadways. What the government is doing today, he says, is simply modernizing its traditional industry niche to make Panama a more complete global player as a value-added logistics hub for the Americas. And the push to expand in new directions, he adds, is not erratic behavior, but rather a sign that Panama is grown up and ready to diversify.

"During the colonial era," says Mr. Arias, "Panama [then part of the Spanish Empire] was a transshipment route to move gold safely from Peru to Spain. And that implied a business of logistics – moving merchandise from the ships to pack mules, then organizing the security of its transport across land, then repacking another ship that would leave for Spain. That was the beginning of our logistics and shipping industry."

But those 500 years of history suggest that Panama is best suited to be a financial, trade, and logistics center, and risk analyst Ms. Berkman agrees. If the president can stay focused on that, without getting too distracted by other development models along the way, it might yet be enough to turn Panama into Latin America's only first-world nation.

"Trial and error might work when selling different products in a supermarket," says Berkman, "but it doesn't work so well when you are running a country."

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