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.

Funes Calls for Unity after Win AS/COA Online 03/17/09

Byline shared with Carin Zissis.

Salvadoran President-Elect Mauricio Funes addresses supporters. (AP Photo)

Salvadorans chose leftist candidate Mauricio Funes as their new president in the heavily contested March 15 election. Funes put his first foot forward as president-elect with a call for national unity, vows to jump-start the ailing economy, and a pledge for moderation over radicalism. “There will be no confiscation, we will not reverse any privatizations. We will not jeopardize private property. There is no reason at this moment for fear,” said Funes, who pulled in just over 51 percent of the vote.

The former CNN journalist’s victory could be considered a major milestone in El Salvador’s history as it marks the end of 20 years of presidents from the Nationalist Republican Alliance (ARENA). Seventeen years after the end of the country’s civil war, the Farabundo Marti National Liberation (FMLN), once a Marxist guerilla group, comes to hold executive power. The Economist reposted a 1992 article online marking the end of the 12-year civil war that claimed 75,000 lives and turned the country into “a pawn on a great board whose far corners were in Angola and Afghanistan.” A GlobalVoices post logs positive reactions to Funes’ win from across the Salvadoran blogosphere. An editorial in the Los Angeles Times says the “peaceful change of power is gratifying.” It also describes the country as “supremely divided and impoverished” and commends Funes for his calls for unity following a deeply discordant campaign.

Despite Funes’ pledges to take a more centrist path—along the lines of Brazilian President Inácio Luiz Lula da Silva—some suggest he could be pulled to the left by members of his party. He has said he does not plan for his country to exit from membership of the Central American Free Trade Agreement. But some suspect that other members of his party, including his vice president Salvador Sanchez Ceren, will seek to reverse market friendly reforms. Wall Street Journal explains that, while El Salvador’s economy has one of the most dynamic private sectors in the region, some business owners worry about Funes’ capacity to govern in tune with some of the more radical members: “Many here fear that the FMLN bloc in the National Assembly, with whom Funes has never had to work on legislation, may not share the new president’s willingness to compromise with private enterprise.” Still, even if Funes finds himself pressured to turn leftward, he will also have to find a way to work with ARENA, which holds a large number of seats in El Salvador’s legislature and could block legislation.

During the election cycle, Arena candidate Rodrigo Ávila brought up concerns about Funes and the FMLN, comparing his rival to Venezuelan leader Hugo Chávez or neighboring Nicaragua’s Daniel Ortega. Indeed, as a Foreign Policy web exclusive noted, a great deal of the language used by both campaigns “focused on the situation outside the country’s borders.” The article suggests that, although some raised concern about U.S. intervention in the Salvadoran election, Barack Obama’s victory likely helped boost the FMLN as Funes modeled his campaign rhetoric after the U.S. president’s “change” message.

The impact of events beyond the Central American country’s borders could play a role in economic policy charted by Funes. As financial crisis grips the United States, concerns rise over the dependability of remittance flows from Salvadoran immigrants working abroad. Last year, Salvadoran immigrants living in the United States sent $3.2 billion home and 22.3 percent of families in El Salvador receive remittances. The Inter-American Development Bank this week predicted a drop in remittances to Latin America in 2009. Funes himself raised concerns about remittances in an interview with Los Angeles-based La Opinión. He pointed out that these funds represent 18 percent of El Salvador’s GDP, making close relations with the United States crucial.

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

ARENA, FMLN Face Off in El Salvador AS/COA Online 03/10/09

Rotating campaign ads show the faces of ARENA’s Ávila (L) and the FMLN’s Funes. (AP Photo)

Update: FMLN candidate Mauricio Funes has been elected as the next president in El Salvador after winning with approximately 51 percent of the vote, ending the 20-year rule of the ARENA party.

Salvadorans head to the polls on March 15 to elect their next president. Voters will choose between the governing Alianza Republicana Nacionalista (ARENA) party candidate Rodrigo Ávila and the opposition’s Farabundo Martí National Liberation Front (FMLN) candidate Mauricio Funes. Recent polls and international media forecast that the leftist FMLN candidate appears poised to unseat ARENA, which has held power since 1989. Ávila says that a Funes victory would bring in a government similar to that of Venezuelan President Hugo Chávez.

A poll conducted by Central America-based CID-Gallup released two weeks before the elections shows Funes leading the race by more than five percent over his opponent. But the election is not won yet; President Antonio Saca noted that the key to win the election remains in the hands of undecided voters, who make up as much as 20 percent of the electorate.

Funes, a former television journalist, has long been outspoken critic of the government. The FMLN nominated him in September of 2007. Since then he has attempted to calm critics who point to the leftist roots of his party. In an interview with the Honduran newspaper La Prensa, Funes said his political platform uses Brazilian President Luiz Inácio Lula da Silva as point of reference rather than Chávez. He also said that, as president, he would not join regional agencies such as the Bolivarian Alternative for the Americas if doing so would threaten bilateral relations with the United States.

Ávila, a former chief of the national police, closed his campaign with a massive rally at the Cuscatlán Stadium in San Salvador shouting the slogan “Country yes, Communism No.” In an interview with Univision’s Jorge Ramos, Ávila extolled the economic improvements gained under two decades of ARENA rule. He also defended his record as a police chief in the 1990s. Ramos also interviewed Funes a week earlier.

The state of the economy and security stand as priority issues in the election. El Salvador has the second-highest homicide rate in the world after Iraq, reports the Miami Herald in an article about Salvadoran gangs. The Economist Intelligence Unit predicts a marked slowdown in the country’s GDP growth through 2010 and warns that, “regardless of the final outcome in the presidential election, no party will have an outright majority in Congress, complicating policy implementation in the next four-year term.”

The National Democratic Institute prepared a report on January legislative elections as well as the March 15 presidential elections. According to their data, ARENA had outspent the FMLN through January 18, with the former accounting for 65 percent of campaign spending and the latter just 19 percent. In the January election, the FMLN won a plurality of votes in the Legislative Assembly by winning 35 out of 84 seats. However, ARENA won the mayoralty of San Salvador, ending over a decade of FMLN control of the capital.

Some have wondered what role Washington will play in this election, given past U.S. involvement in Salvadoran politics. A Boston Globe op-ed recalls the country’s 2004 election, when the Bush administration drummed up fears by implying that an FMLN victory could result in a change in migratory status for Salvadorans living in the United States. According to the U.S. State Department, Salvadorans working in the United States sent $3.8 billion in remittances in 2008, benefiting more than 22 percent of the population. As expected, in December the U.S. Citizenship and Immigration Services bureau extended the Temporary Protected Status for Salvadorans until September 2010. Still, over 200 American academics wrote to Secretary of State Hillary Clinton asking for a U.S. government statement of impartiality.

Angus Reid Global Monitor offers a timeline and background information on the election.

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