| BUSINESSWEEK ONLINE : DECEMBER 27, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- LATIN AMERICAN BUSINESS
And Panama Goes Wild--Well, Sort of (int'l edition) National pride at the takeover is tinged with apprehension ''The canal is ours, thank you Omar!'' proclaim posters around Panama City. As the U.S. hands over control of the 80-kilometer waterway to Panama, this nation of 2.8 million people is acknowledging its debt to the man who made it possible: General Omar Torrijos. But not all Panamanians are saying gracias to the deceased strongman who worked out a deal with U.S. President Jimmy Carter to usher the Yankees out by Dec. 31, 1999. Wayne Baxter, a 36-year-old Panamanian chauffeur pines for his old job as a supply clerk at the Howard Air Force Base. ''I'm not going to fight for them to leave when they're the ones who fed me,'' he says in accentless English. Indeed, many Panamanians are greeting the historic turnover with mixed feelings. National pride is tinged with apprehension over the loss of the $350 million annual boost for the local economy--and some 4,000 jobs--that the U.S. military presence provided. The canal generates 7% of Panama's gross domestic product. A smooth transfer of power will be critical to preserving that share, as well as attracting private investment to keep the economy growing at this year's robust rate of 4% or better. It is no secret that in these days of supersized ships, which cannot navigate the canal, the waterway's importance is on the wane. The canal now handles 14,000 ships a year, or 4% of the world's trade by weight. It would not take much to accelerate the decline. The main threat to the canal is political. Shippers are worried that Panama's President Mireya Moscoso will use the waterway as a cash cow, despite laws designed to protect its financial autonomy. Elected in May on a pledge to reduce the country's 38% poverty rate, the 53-year-old widow of a three-time President has reversed some of her predecessor's free-market reforms and halted others. ''The canal is going to be a big temptation for whoever is in government,'' says Guillermo O. Chapman Jr., a former Economy & Planning Minister. Citing Moscoso's ambivalence toward reforms, Standard & Poor's Corp. has downgraded the country's rating outlook from stable to negative. Moscoso already may be meddling in the canal's affairs. Shortly after her inauguration in September, the President appointed Ricardo Martinelli, the owner of a supermarket chain and a key political backer, as chairman of the canal's board of directors. And in a move that also smacks of political payback, she has pushed for the removal of Nicolas Ardito-Barletta, head of the Interoceanic Regional Authority (ARI), the agency charged with privatizing the $2.9 billion worth of U.S. military installations going to Panama. Ardito-Barletta defeated Moscoso's husband, Arnulfo Arias, in a 1984 vote she charges was rigged. Such maneuvering is likely to have one goal--a bigger say in the canal's operations. While the U.S. was in charge, Panama received a 15% cut of more than $500 million in annual toll revenues, plus a $20 million yearly fee. The country was also entitled to all profits, but these never amounted to much. ''One of the most important changes is that the canal has to be run for profit,'' says canal administrator Alberto Aleman. Moscoso may want profits to go to social welfare programs. BACKLASH? Meanwhile, shippers worry that as pressure for profits mount, so will tolls. Customers say a hike could backfire. ''Panama does not have a captive audience,'' says Jurgen Dorfmeier, president of the Panama Shipping Chamber. ''The canal is more important to Panama than to the shipping world.'' What may be a bigger moneymaker for Panama are plans to transform the nine military bases it inherited from the U.S. into tourist resorts, a high-tech village, and container terminals. The ARI is promising generous tax breaks--and claims to have signed $1.5 billion in contracts. ''This is a unique opportunity,'' says Swedish entrepreneur Nils Petterson, who is plowing $25 million into an Internet data traffic center. Panama needs such new investments to ease the pain of separation. By Christina Hoag in Panama City _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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