Envío Digital
Central American University - UCA  
  Number 172 | Noviembre 1995



Gambling on a Dangerous Adventure

A gigantic commercial enclave in the Canal Zone territories that will be returned to Panama in the year 2000? And a “modernization” of the public sector in order to guarantee social control favorable to foreign investment? That’s what some are betting on.

José Raúl Aparicio

Panama in the 1990s is going through a broad transition process. With options for political transition seemingly closed, labor, economic, demographic and state transition are now being emphasized. The country's agenda was redefined after the May 1994 elections, and the following was proposed:
* Reorder the national economy through "re tertiarizing."
* Articulate areas reverted to the national economy through a multiple strategy that implies negotiating military bases and establishing export processing and storage zones and tourist installations.

* Integrate Panama multilaterally into the international trade organizations.

From the neoliberal perspective there is no other option, so this agenda should be accepted by any economic, social or political group that comes to power. The discourse of the Pérez Balladares government repeats it: economies should open up to a competitive world that seeks bilateral, subregional and regional integration to create economic, cultural and political blocs. This discourse leaves us with a closed universe in which the market rules, making autonomous and sometimes senseless decisions. The government is putting all its bets on foreign investment to resolve all national problems. But what kind of investments will be made, and who will benefit in a country where the 20% richest have 60% of the GDP estimated at $6 billion and the economy depends on the service (tertiary) sector?

Adventurist Strategy

In his first year in office, President Pérez Balladares put together a "priority policies package" that included modifying tax legislation, eliminating or reducing exonerations, reducing import duties, privatizing state businesses, making the Inter-oceanic Region Authority more flexible, implementing tourist incentives and reforming labor legislation.

This package part of the current government's neoliberal project attempts to generate capital by privatizing state companies and attracting foreign investment. The most serious criticism of this economic strategy holds that the project tries to totally finance itself with income from international capital and does not sufficiently emphasize efforts at domestic savings. In addition, it is based on Panama rapidly signing on to the Latin American Free Trade Agreement (LAFTA), which would assure the attraction of capital.

The adhesion to LAFTA is still not clear but the price of this adventure is already reflected in growth estimates: the rate for 1995 is predicted to be 1.7%, compared to 4.7% in 1994.

Failed Unity

Pérez Balladares initiated his strategy by trying to broaden his political legitimacy through uniting with political and economic groups. This implied both negotiating spaces with the Solidarity Party and the National Unity Movement to consolidate his legislative majority and naming "suitable" opposition figures to various public posts. Pérez Balladares selected the most representative opposition: Samuel L. Galindo from the Solidarity Party as Minister of Foreign Relations, Carlos Sossa Lennox from the Christian Democratic Party as Minister of Agrarian Development and José Antonio Sosa from the Arnulfist Party as Solicitor of the Nation.

All this was an attempt to line up allies to push through his political and economic reforms, presented to Panamanian society as the only solution to its social and economic problems. The mask began to fall from the presidential demagogy at that moment; he was uniting not with the grassroots and indigenous sectors, but with the political groups and economic families that would facilitate the neoliberal project in Panama.

It is now clear that his unity project sought neither national unity nor the strengthening of a national or popular project. It also did not defend Panamanian nationality or sovereignty, as Foreign Minister Samuel L. Galindo claims. On the contrary, the government is exploring the possibility of permanent US military bases beyond the year 2000 and a policy accentuating the tertiary nature of the economy by abandoning industry with national capital and agriculture.

The unity project designed as political mediation can be considered a failure. The accords were not fulfilled, the presidential sector's criteria were imposed and the participants' confidence was betrayed.

The Great Strike

Pérez Balladares' neoliberal project was promoted from the top down with a massive media campaign, and created clear resistance in society. The most notable opposition, a recent strike headed by 49 union and grassroots organizations, lasted 10 days.

The excuse for the labor reforms that motivated the strike was the need to make labor relations more flexible to permit greater foreign investment. But the Panamanian economy has always been open and the central cause of unemployment and lack of investments is found neither in wages nor in the labor security the labor code offered. The only thing that interests the big economic blocs is tariff reductions so their products can freely circulate within the Panamanian market. If they have not invested, it is simply because they do not want to.

The battle over the labor code reforms demonstrated that this is more a political than an economic problem. One sector of the union movement "the consensers" sat down to negotiate the reforms with business and the government, while another refused any kind of reform. The key to understanding the strike is the response to this question: why did negotiation and protest split within the union movement when the great victories of the past were based on the unity of these two strategies and forces? Although the two forces were isolated from each other, the situation allowed the consolidation of a front that, although not preventing the reforms, did allow them to be less anti grassroots than the government had hoped.

Another key question about the strike was the strategy of the anti riot squad. As an apparatus easily able to disperse the strikers, the squad allowed the demonstration and tolerated high levels of violence in the streets. Why did the police let themselves be hit? Could it be to have a good excuse for restructuring the public force in the new Panamanian context?
The government finally got the reforms approved due to its control over certain union groups linked to Pérez Balladares' Democratic Revolutionary Party (PRD) and its alliance with Christian Democratic sectors in the Labor Foundation and the General Workers' Confederation. Its strategy was simple: divide and conquer. It was helped by the fear of some leaders not linked to the PRD or the Christian Democrats of losing room for protest and negotiation. The option was either respond to the new order or be left out, with all that implies. The strike definitively demonstrated the failure of concertación as a method of conflict resolution.

Authoritarian Executive

There is a sort of unity of powers in Panama today, with the executive branch imposing on the legislative branch what it should approve or not. The legislature has lost its autonomy and decision making power in issues affecting the nation. This executive authoritarianism has negative effects in the social, economic and political spheres.

Executive intervention in the legislative branch has been evident in the reforms to the Interoceanic Authority law, the constitutional title over the Panama Canal and the law reforming the labor code. If the separation of state powers is a way to guarantee that none of them are distanced from the interests of the people, who will watch out for those interests if the executive branch dominates the legislature, to say nothing of the judicial branch?
All of this has triggered a drop in Pérez Balladares' popularity, though he, despite everything, knows how to sell himself to the press. That is why some polls reflect popular discontent over the way the economic measures are being implemented, but not over the measures themselves.

The Panamanian oligarchic sector's wager, assumed by the Pérez Balladares government, conflicts with fractions of the national capitalist class and its organizational representatives. But this bourgeoisie is becoming oligarchic itself and thus accepts the current transition as the only way to confront the economic globalization process.

Commercial Enclave and Social Control

The Panamanian President's international tours indicate his government's true intentions. Its commitment is not to the nation, but to the oligarchy, and its project will not only build an operations route from north to south the Canal's transit route but will try to extend this development mode throughout the country on the east west axis.

A combination of investments are projected in the canal zone that will deepen the economy's tertiary nature, converting those areas that will revert to Panama into a commercial enclave. All of the investments revolve around services and maritime development. The danger of this adventure is that the capital that invests in Panama is volatile, and requires impeccable social stability so that no interruptions affect investments.

Police operations have increased in both the cities and rural areas, during both day and night, and especially in all the poor neighborhoods of the capital. Most alarming is the structuring of a spy and social control network in alliance with taxi drivers, who now have a direct radio line to the police and carry out joint operations with them. The "wave of violence the country is experiencing" is the justification to camouflage this measure to institutionalize social control.


Japan is, together with the United States, the greatest user of the Panama canal. It is worried about the canal's future and wants its operational capacity increased. A primary objective of Pérez Balladares was to guarantee to Japan that Panama is taking all steps necessary to manage the canal after the year 2000. He also agreed to review the results of a study on canal alternatives done by a tripartite commission (Japan Panama United States), which recommended a third set of locks.

Japan promised to continue economic assistance programs and expressed interest in financing the modernization of Panamanian

Several Japanese businessmen spoke on the advantages of investing in Panama, given that a number of military installations will soon be returned to Panama, but no important agreement was reached.

Pérez Balladares signed a contract with the Evergreen Company to build a container port in Coco Solo. The first phase will cost US$80 million. It should begin in 1996, will generate some 500
temporary jobs during construction and another 500 permanent jobs when the port begins operations. The company donated 100 motorcycles to the National Police, adding to the 50 donated in July 1994.

An airline belonging to the Evergreen group initiated three flights weekly to Panama.

Taiwan conceded multimillion dollar low interest loans for the building of hospitals, health centers and equipment.

It also promised to increase the quota of agricultural and industrial products it imports from Panama (coffee, beef, leather, cookies). Taiwan exports US$150 million to Panama annually, while Panama only exports $250,000 to Taiwan.

The Philippines
The objective was to inspect the former US naval base at Subic Bay, to learn firsthand the steps the Philippine government took to make use of the returned installations of 18,000 hectares
(7,000 in buildings and 11,000 in green areas). When the US military forces left this base in 1992, 14,000 Philippines were put out of work. Today, 115 transnational and Philippine businesses operate in that area.



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