Panamanians Seek Economic Boost at the Polls AS/COA Online 4/30/09

Panamanians choose a new president May 3. (AP Photo)

Updated May 4: Around 2.2 million Panamanians  registered to vote in the presidential and legislative elections on May 3. They chose businessman Ricardo Martinelli from the Partido Cambio Democrático (CD) over the candidate of the ruling party Partido Revolucionario Democrático (PRD) Balbina Herrera, a former housing minister. A sagging economy, rising crime, and corruption allegations weakened popular support for the PRD and bolstered Martinelli’s popularity ahead of Sunday’s election. As the clear winner, Martinelli will oversee the country as it faces economic challenges and a multi-billion dollar expansion of the canal.

His rival was the first female presidential candidate chosen by the PRD. She hoped to get a boost from the popularity of President Martín Torrijos, who enjoys a 57 percent approval rate. Torrijos won the 2004 presidential election with 47.4 percent of the votes. He also managed to win approval for a $5.25 billion expansion of the Panama Canal via referendum in 2006. Despite being more than 10 points behind Martinelli, Herrera assured in an interview with radio personality Dorita de Reyna that in the last month her campaign was better organized after a muddled start. But, as the Nica Times put it, Herrera’s “previous ties to incarcerated former Panamanian strongman General Manuel Noriega has raised more than a few eyebrows.”

On the other hand, Martinelli, a business tycoon who owns Panama’s largest supermarket chain Super99, is viewed as a more pro-U.S. candidate. In an interview with Miami Herald’s Andres Oppenheimer, Martinelli lays out some of his foreign policy proposals, from plans to press for U.S. Congress’ approval of the U.S.-Panama Free trade Agreement to aligning with Washington on Cuba and Middle East policy at the United Nations to strengthening ties with Colombia. Martinelli, who lost against Torrijos in the 2004 election, would seek approval of a flat tax rate, which would fall between 12 and 17 percent for individuals and between 18 and 22 percent for companies.

“Some observers have made the case that the population is growing restless for a return to economic growth and that, obviously, has political implications, including that the opposition candidate could win a decisive victory on Sunday,” says COA Vice President Eric Farnsworth, whose prior work with the State Department focused on Panama’s return to democracy. Echoing Farnsworth’s statement, Senior Brookings Institution Fellow Kevin Casas-Zamora writes that “the level of political discussion seen throughout this campaign simply does not befit a country with bright development prospects. More seriously, the [PRD] campaign has evinced the lack of institutionalization of political parties, the fickleness of political alliances, the chronic nature of corruption, and the disturbing, and mostly unchecked, role of money in the electoral process.”

Torrijos’ administration has overseen stellar economic growth rates with 11.5 and 9.2 percent in 2007 and 2008 respectively. But the UN Economic Commission for Latin American and the Caribbean forecasts that economic growth will only hit 4 percent this year. Still, that projection makes Panama the hottest prospect in the entire region.

The key for the country’s economic recovery remains tied to the future of the Panama Canal. In the first three months of 2009, total Canal transit declined by 1.4 percent while tonnage movement dropped by 3.3 percent compared to the same period a year ago. The waterway’s income represents 19 percent of Panama’s GDP and 28 percent of the government’s tax revenue. As the former Chair of the Panama Canal Authority, Martinelli is also seen as a safe bet to steer direction of the canal’s continued development.

More than 50 international observers have arrived in Panama to monitor the transparency of the vote. Panamanian newspaper La Prensa provides complete coverage of the election. Angus Reid Global Monitor offers a backgrounder of the vote.

COA’s Eric Farnsworth guest blogged about the Panamanian elections for Americas Quarterly. Read his analysis of what the election could mean for that country’s trade policy prospects.

Read the article as originally published at the AS/COA website.

Interview: COA’s Eric Farnsworth on Panama’s Presidential Election AS/COA Online 04/29/09

“Some observers have made the case that the population is growing restless for a return to economic growth and that, obviously, has political implications, including that the opposition candidate could win a decisive victory on Sunday.”

In an interview with AS/COA Online’s Carlos Macias, Council of the Americas’ Eric Farnsworth lays out what the results of Panama’s May 3 presidential election could mean for the country’s economy and for bilateral relations with Washington. He explains that Ricardo Martinelli, who leads in polls, “has always been able to navigate the very complicated relationship with the Unites States.” As an officer in the Department of State beginning in 1990, Farnsworth was involved with work focused on the reestablishment of democracy in Panama after Operation Just Cause.

AS/COA Online: Given the popularity that President Martin Torrijos enjoys as his term ends, why is the opposition candidate Ricardo Martinelli ahead in the polls over the candidate from Torrijos’ party, Housing Minister Balbina Herrera?

Farnsworth: I think for a couple reasons, not the least of which is that Panama’s growth has stalled dramatically. Over the past several years Panama enjoyed growth at 8, 9, or 10 percent annually, which was at times the highest in all of Latin America. Panama’s population enjoyed that and began to get a little bit used to it. But now with the economic crisis that’s impacting the entire world and Panama’s reliance on international trade for its own well being, growth figures for Panama have decreased quite a lot. Some observers have made the case that the population is growing restless for a return to economic growth and that, obviously, has political implications, including that the opposition candidate could win a decisive victory on Sunday.

AS/COA Online: If Martinelli wins on Sunday, what does it mean for the future of the U.S.-Panama Free Trade Agreement?

Farnsworth: It’s a promising sign because Martinelli has said publicly that he wants good relations with the United States and his record bears that up. He was a former government minister, he was a former chairman of the Panama Canal, and so he’s worked with the United States quite closely in the past. He understands the historical relationship with the United States and he is somebody who is business-oriented and has always been able to navigate the very complicated relationship with the Unites States.

I’m optimistic. I think that he has the right vision for relations if, indeed, he is elected. If he’s elected, I think it’s a promising sign for the bilateral relationship.

AS/COA Online: What would a possible Martinelli administration mean for further Panama Canal development?

Farnsworth: Again, I think it’s a positive, and the reason why is Martinelli understands very clearly the needs of the Canal and the needs of global commerce because he has been so directly involved with Canal issues for a long time. He is sensitive to the needs of the Canal and sensitive to the entire expansion project that’s going forward. Of course, the Canal is the goose that lays Panama’s golden eggs. He understands that it really is a key to Panama’s future. I don’t have any hesitation to think that if he is elected president that the Canal project would continue to go forward and would be a big success.

AS/COA Online: Where does Panama stand in terms of its relations with other Central American countries?

Farnsworth: Well, it’s an evolving relationship. Panama remains unique in many ways. One is the historical relationship with the United States. And traditionally it’s been a crossroads. It’s a crossroads for Latin America and it’s also a crossroads from east to west. So you don’t have the same type of economy or the same type of history as the rest of Central America or, indeed, South America. Panama has not yet worked out its own self-identity to understand if it really is part of Central America yet or if it’s more of an independent actor in the Central American context.

And that issue has real implications, for example, in the context of Central American trade. If Panama saw itself more as a Central American country it would already have a free-trade agreement already with the Unites States through the DR-CAFTA. So these self-image issues have practical implications for Panama’s position in terms of not just global politics, but global economics.

AS/COA Online: And what about its relationship with South America?

Farnsworth: I think the relationship is generally good. The relationship with South America at this point tends to be almost purely economic. Ecuador, Peru, and Chile are sending their products through the Canal to get to Europe and vice versa. You don’t have the same sort of political issues that you used to have, for example, when the United States controlled the Panama Canal Zone, or Panama was seen as some sort of imperialistic extension of the United States. At that point, the South Americans were skeptical of Panama, let’s put it that way. But since the turnover of the Canal in the end of 1999 the relationship has been built on economics and built on Panama as a maturing democracy and the relations with the rest of South America are generally pretty good.

There is one other aspect that needs to be addressed and that’s the narcotics relationship and that goes directly to Panama’s relations with Colombia. There’s law enforcement cooperation between the two countries as Colombian guerrillas have at times been across the border and taken sanctuary in Panama. But cooperation between those two countries in particular continues, and I think it’s a very good sign.

AS/COA Online: On a different note, what kind of growth prospects do you see for the tourism industry in Panama?

Farnsworth: I think the prospects for tourism in Panama are really quite good. Obviously with the global downturn, tourism generally worldwide has decreased but Panama has something that will always be of interest to international tourists—the Canal. To the extent that you have a strong cruise ship and tourist industry based on global economic conditions, I think Panama will always have a special place in the tourist trade. I think the government has really taken steps to try to build Panama as a tourist destination, not just a pass through. That will allow for even greater tourist revenues and an even stronger position for Panama in the global services economy. That’s really what the basis of Panama economy is of services, and tourism is certainly a part of the overall strategy.

Read the interview originally posted at the AS/COA website.

Correa Wins Reelection Bid AS/COA Online 04/23/09

President Rafael Correa will likely win Sunday’s election. (AP Photo)

Updated April 27 – Ecuadorians headed to the polls on Sunday for presidential and legislative elections. President Rafael Correa easily won the bid for a second term. The win came as little suprise, as surveys placed him ahead with the 50 percent of the intended votes needed to avoid a runoff election. (Alternately, he needs a minimum of 40 percent of the votes and a 10-point difference after his most immediate opponent). A gloomy financial forecast may account for his decision to hold the election with two years left in his term. Less than a week before the election, Correa unveiled a buyback plan for defaulted sovereign bonds.

Correa’s presidency has represented a period of relative stability for Ecuador. “Seven presidents in the decade following 1997. Three leaders overthrown. A banking and currency collapse. This was Latin America’s basket case,” writes Henry Manse for World Politics Review. Correa won his first term in 2006 against entrepreneur Álvaro Noboa of the Partido Renovador Institución Acción Nacional. Noboa is running again, this time in a race for second place against former President Lucio Gutierrez of Sociedad Patriótica. Gutierrez was ousted from office by Ecuador’s Congress in April 2005 and barred from holding public post for two years by electoral authorities.

Ecuador has enjoyed booming economic times since the beginning of Correa’s presidency. The economy expanded continuously for the last nine years and Ecuadorians saw poverty levels drop from 52 percent in 1999 to 35 percent in 2008. Additionally, social spending went up by 71 percent under Correa’s watch.

Correa opted to run for reelection, despite the fact that two years remain in his term. A new constitution approved in September 2008 would allow him to seek the bid for a second term, whether now or then.

Forecasts by the International Monetary Fund (IMF) could offer a glimpse into why he chose to advance the election date. The IMF estimates that Ecuador’s GDP growth rate will run at negative 2 percent in 2009 and just 1 percent in 2010. This trend is consistent throughout the hemisphere, with only Peru, Uruguay, and Chile expected to post positive growth results this year. In March, Ecuador’s Central Bank reported an overall drop in exports, GDP, and remittances. Correa’s consistently high approval ratings are showing some signs of a downgrade as well. A CEDATOS poll from March 10 found that Correa’s approval rating fell 10 points down to 60 percent in the first three months of 2009.

One week before the election, Correa’s government announced a plan to buy back defaulted sovereign bonds 2012 and 2030. The government offered to pay 30 cents on the dollar, or roughly $900 million for bonds valued at roughly $3.2 billion  Finance Minister Diego Borja assured that the government has the money for the transaction using funds previously allocated to make interest payments. As Goldman Sachs analyst Alberto Ramos explains, Quito might have already repurchased some of the bonds on the sly in the secondary market by taking advantage of dropping bond prices after the default. Vistazo magazine also questioned the proposal, wondering where the money was coming from to pay for the bonds.

Correa believes investors will rally behind his government’s proposal. But the Wall Street Journal and Reuters report that some bondholders will refuse the offer and file lawsuits instead to get full compensation.

To ensure transparency in the elections, more than 200 international observers arrived in Ecuador this week. El Universo offers complete coverage. Angus Reid Global Monitor provides a backgrounder on the new constitution and the 2006 presidential election.

Read the article originally published at the AS/COA website.

Washington Weighs Cuba Travel Bans AS/COA Online 04/09/09

Cubans await family members arriving from Miami. (AP Photo)

Updated April 13 – A trip by seven members of the Congressional Black Caucus to Havana put U.S.-Cuban relations in the spotlight as hemispheric leaders prepared to meet at the Summit of the Americas. The delegation, led by U.S. Representative Barbara Lee (D-CA), met with the Castro brothers in separate meetings, marking the first official U.S. visits since President Raúl Castro took office last year and for former President Fidel Castro since 2006.

The visit came just before as President Barack Obama turned back restrictions (read a White House fact sheet) for Cuban Americans wishing to visit or send money to family back on the island. Fulfilling a presidential campaign promise, Obama took the action before the Summit of the Americas, which runs April 17 to 19 in Trinidad and Tobago and will serve as the new president’s introduction to many Latin American leaders and, thereby, the hemisphere. Relaxing the restrictions could affect an estimated 1.5 million Americans with family members in Cuba, calculates The Wall Street Journal. El País reports that Cubans hopes to experience an increased inflow of somewhere between $300 million and $500 million as a result of the change.

The changes will also allow U.S. telecommunications firms to bid for licenses on the island as well as for a freer flow of humanitarian goods.

American legislators have gone a step further. Bipartisan proposals making their way through both houses of U.S. Congress seek to lift the travel ban for all Americans. Senators Byron Dorgan (D-ND) and Michael Enzi (R-WY) introduced the Freedom to Travel to Cuba Act. A similar bill in the House drew 120 co-sponsors and calls for allowing Americans “to exercise their right to travel to Cuba.” Another House bill seeks to ease restrictions on selling agricultural products to Cuba.

Washington’s moves on Cuba could end up being a focal point at the Summit, much to the chagrin of the White House. “In a way, we believe it would be unfortunate if the principal theme of this meeting turned out to be Cuba,” says Ambassador Jeffrey Davidow, the White House advisor for the summit. Yet, as The Economist suggests in an article about the upcoming conference, the uninvited Cuba could end up being the 800-pound gorilla in the room.

Latin American leaders expressed their support to end the 47-year-old U.S. embargo in a December summit held in Brazil. “I am unable to understand the continued blockade of Cuba. It doesn’t make any sense,” said Brazilian President Luiz Inácio Lula da Silva. Reinstatement of Cuba into the Organization of American states (Havana was suspended in 1962) could be another proposal that comes up in Port of Spain. “It has turned out that we are the isolated country,” said Rep. Emanuel Cleaver (D-MO) after returning from Cuba on Tuesday.

Some of the warm steps from Washington have drawn optimism in Havana, including from Fidel. In his weekly column, the octogenarian former leader detailed his meeting with the U.S. lawmakers and hailed the visit, making reference to the historical nature of Obama’s electoral win.

But human rights on the island remains a thorny issue, prompting criticism of the congressional delegation to Cuba. A Washington Post editorial decries that fact that lawmakers didn’t meet with political dissidents in jail or visit their families. “The black U.S. lawmakers’ concerns weren’t for the 300-plus Cuban prisoners of conscience listed by Amnesty International or the hundreds of dissidents working from their homes under the watch of a totalitarian regime,” writes Miami Herald columnist Myriam Marquez.

With all the buzz about U.S.-Cuban ties and power shifts in Havana, are changes underfoot in Cuba? As one man interviewed in Havana put it to the New York Times, “Politics here is a sport whose spectators are all blind. Everyone knows things are happening. No one is sure what. So you stop trying to watch.”

Read AS/COA analysis of the recent reshuffling of Raúl Castro’s cabinet.

Read the article as originally published at the AS/COA website.

Round Five for the DREAM Act AS/COA Online 04/03/09

Enactment of the DREAM Act would allow some undocumented students to gain legal status. (AP Photo)

In a first step to bring immigration reform back to the front burner, Assistant Senate Majority Leader Dick Rubin (D-IL) and Senator Richard Lugar (R-IN) introduced the Development, Relief, and Education for Alien Minors Act (DREAM Act) in the Senate on March 26. A similar bill called the American Dream Act was submitted in the House of Representatives in a bipartisan effort. Yet, despite domestic debate over immigration in recent years, the controversial initiative has not reached the national spotlight. As an example, during President Barack Obama’s interactive town hall meeting held on March 26, none of the top ten questions voted on by more than 3.5 million people were related to immigration reform.

The DREAM Act offers a two-step legalization process for children described as “1.5ers.” As Washington Post columnist Marcela Sanchez explained in a 2007 article, “One-point-fivers are neither first-generation immigrants, adults who immigrated to the United States; nor are they second-generation, children born here of immigrant parents.” According to the National Immigration Law Center, students who came to the United States before turning 16 at least five years before the bill’s enactment could gain conditional permanent resident status if they have clean criminal records and attain high school graduation or college acceptance. To upgrade from conditional to permanent status, participants must then finish two years of college or serve a minimum of two years in the U.S. military.

How many people would benefit from the measure? Research from 2003 by the Pew Hispanic Center published in a Congressional Research Service report estimated that “each year 65,000 undocumented immigrants graduate high school who have lived in the country for more than five years.” In 2006, the Migration Policy Institute calculated that roughly 360,000 undocumented high school graduates would benefit from the measure that year alone. The Center for Immigration Studies reported in 2007 that 2.1 million could qualify for legal status under the DREAM Act.

The legislation was first introduced in 2001 and rejected four times. But the fifth round may be the charm. As the Orlando Sentinal’s “Hispanosphere” blog points out, “[N]ow Democrats have control of U.S. Congress with a president who has expressed support and voted in favor of this legislation in the last go-round.”

Whether consideration of the DREAM Act represents near-term action on comprehensive immigration reform remains unclear. In a recent visit to Mexico, Secretary of State Hillary Clinton said that immigration reform is “a high priority” for Obama’s administration. “We believe strongly that there have to be changes made, and we hope we will be able to pursue those in the coming months,” she said. In early March, House Speaker Nancy Pelosi told a San Francisco church crowd that “we cannot wait any longer for fair and just immigration reform.” However, during this week’s visit to Costa Rica, Vice President Joe Biden warned Central American leaders that the ailing economy hinders immediate action on U.S. immigration reform.

Read the article as originally published at the AS/COA website.