US sanctions leave Panama businessmen with mixed sentiments
Panama City — Once the gleaming financial capital of Latin America, Panama in six weeks of economic and political turmoil has been reduced to a comparative economic Stone Age. Checks and credit cards won't buy anything, while a cinder block might produce a bartered bottle of milk. A load of mangoes is good for, say, spare auto parts.
``A lot of people I have dealt with for years are going to be out of business in a few weeks,'' says grocer Nick Psychoyos. ``Right now, everyone feels cornered.''
Caught between economic sanctions imposed by the United States and Panama's collapsed banking system and political crisis, Mr. Psychoyos exemplifies what it takes for a businessman to survive.
Like many in the nation's middle and upper classes who have been struggling to oust Gen. Manuel Antonio Noriega, and who are suffering stiff economic consequences as a result, he harbors bitterly mixed emotions.
``Everyone here is saying the sacrifice is worth it, because in the end there will be a safety net for banking and the private sector,'' says Psychoyos, referring to the general expectation that Panama will eventually have a new government. Panamanians hope the US will then send financial aid to help rebuild the country's devastated economy.
But Psychoyos worries that may be too late. He criticizes US economic sanctions, which were newly strengthened April 8 when President Reagan invoked the International Emergency Powers Act of 1977. The law bans Americans and US companies from making tax and other payments to the Panamanian government.
Since he holds dual US-Panamanian citizenship, Psychoyos went to the extreme last Saturday of ``resigning'' from the Tagaropulos Corporation, which includes his chain of eight modern Rey Supermarkets, food distribution, and processing businesses. His resignation allows the company to pay taxes and continue operating. Psychoyos says he doesn't think he will suffer any reprisals from the new sanctions.
The annual $150 million, 80-year-old family business must pay $500,000 a month in social security and income taxes to the Panama government. It is this kind of money that the US hopes to keep out of Noriega's hands in order to bankrupt his rule. But Psychoyos explains the business will be expropriated if it doesn't pay taxes.
While the service industry sits idle, the Rey Supermarket warehouse headquarters is a hive of activity. It is a testament to the fact that despite the turmoil here, people still must eat.
When the nation's banks closed March 3, savings and checking accounts were frozen. And no one can get more cash locally.
At the Rey Supermarket check-out stands, cash registers are full of government payroll and social security checks of $20 to $50 each. Rey will accept government checks, which are basically worthless except to hand back to the government as tax payment or to pay suppliers who, in turn, use them to pay what they owe the government.
``We've created our own parallel currency because the name of the game is survival,'' explains the grocer.
Rey also pays its creditors and employees with grocery gift certificates. Psychoyos estimates that cash transactions are only about 40 percent of his business.
``We've been paid in mangoes, rice, liquor, sand, cement. We'll take anything with value. ... We even got two doors and a window,'' Psychoyos says.
The supermarket owner sees a certain twist of optimism in an otherwise humbling financial situation. ``It has made our company a lot more efficient and creative. No way could you learn this in college.''
For the near future he foresees more hardship for the average Panamanian consumer.
His store managers are only able to stock shelves one row deep with certain items like paper products and candles (a growing need with frequent power outages here). Dusty flour shelves are empty.
Psychoyos anticipates there will be shortages soon because imported goods - amounting to 50 percent of the grocery stock and most of the fresh produce - take 45 days to arrive.
His last order was about 45 days ago when the banks closed. Without a letter of credit to purchase imports, he cannot order more.
After this week, inventories will start to drop.
Local foods can be substituted, he says. But it will mean developing a new diet for Panamanians ``with middle class tastes.''