What Obama missed by skipping Panama in Latin America tour

Panama is investing $20 billion to boost itself as a global hub. President Ricardo Martinelli's vision provides a glimpse of the US's newest trade partner as a bilateral free trade agreement works its way through Washington.

President Martinelli has grand ambitions for Panama, including relocating traditional fishermen away from the Terraplen pier in Panama City in order to modernize it.
Rich Clabaugh/Staff
Map detail of Panama Canal
Eric Piermont/AFP/Newscom/File
Panama's President Ricardo Martinelli listens during the session "The role of Business in Development" on the first day of the World Economic Forum in Davos on January 26, 2011.

Ricardo Martinelli is a supermarket tycoon. And as president of Panama, he is unapologetic about managing this nation as if it were another franchise in his Super 99 grocery chain.

President Martinelli wants Panama to be known as the next Miami as a shopping and airline hub; the next Chile for copper exports; the next Dubai as a business and real estate capital; the next Rotterdam as a shipping hub; and the next Singapore as a global logistics center.

"We are seeking our own path in the world, but we have to copy the good things that other countries have done, for example what Singapore has done and what the Dominican Republic has done in tourism," Martinelli told the Monitor following the recent investors conference, "Panama: Where the World Meets."

Martinelli's vision provides a glimpse of America's newest trade partner as a bilateral free trade agreement works its way through Washington – even if US political relations with Panama are not as cozy as they used to be. The choice of President Obama, during his first visit to Central America, to visit of El Salvador instead of other right-wing allies on the isthmus could be viewed as a snub to Panama, especially after leaked US cables labeled Martinelli a "threat to Panamanian democracy" for his "lack of commitment to the rule of law" and "his exaggerated presidentialism."

Indeed, the supermarket tycoon aims to turn Panama into a "one-stop shop" to the world.

Though it sounds like a tall order, Panama, which enjoyed 7.5 percent economic growth last year – more than double the Central American average – seems up to the challenge. According to projections from the United Nations and the International Monetary Fund, Panama will lead the region in economic growth over the next five years, thanks in large part to a five-year, $20 billion public-investment plan highlighted by a $5.25 billion expansion of the Panama Canal, to finish in 2014.

Too much growth, too soon?

While analysts doubt Martinelli can succeed in creating aisles here for every global taste, years of sustained and impressive growth have already helped Panama rise above the tropical ranks of banana-republic status. Donald Trump's decision to build the world's first Trump tower outside the US – and the tallest building south of theUS-Mexican border – in Panama City itself showed "we are world class," says Tourism Minister Salomon Shamah.

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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