Envío Digital
Central American University - UCA  
  Number 265 | Agosto 2003



More Than Just a Canal

In the first six months of this year, a social security crisis, serious and unpunished corruption cases, the rising cost of living and an insipid political contest have been just some of the smoldering focal points of crisis in a country that is more than just a canal.

The Fe y Alegría Collective

Panama has always been “sold” as a tax haven, a place where you can get a good price for domestic appliances and, of course, the country with the canal. Until three years ago, it was also known as the country where the US Army had established its bridgehead from which to engage in covert and not so covert invasions. A while back, one Panamanian government launched a campaign under the slogan, “Panama: more than just a canal,” to demonstrate that this country has much more to offer. It was dead right, there are many more things, places and situations to see, experience and admire
in Panama. But in 2003, all of this was eclipsed by an issue that has caught the attention of all Panamanians: social security, and more specifically the official institution responsible for it.

For several years now, there has been talk of the crisis affecting the country’s Social Security Fund (CSS). But in 2003, a conflict broke out around this institution that some see as a juicy source of booty and others as their only salvation after many years of work. In addition to this serious issue, the generalized problem of corruption, a severe economic crisis, major increases in the cost of living, the insipid and vacuous political race and all of the problems that have been dragging us down for so many years sketched out a none-too-encouraging panorama in the first half of this year.

Insecure social security

Although the idea of “social security” implies more than just the institution responsible for providing a certain degree of security to part of the population, this institution is vitally important for the development of any country, despite its limitations.
Panama has a population of 2.8 million people, 70% of whom are protected by CSS insurance coverage, retirement pensions and/or other benefits, which is a much larger percentage than other Central American countries. Of that number, whose contributions account for 70% of the institution’s income, 62% have salaries below the $400 mark.

Retirement age in Panama is 57 for women and 62 for men, and to receive retirement benefits, a person must have paid social security contributions for a minimum of 15 years. Although the pension is based on the last five highest wages, 42% receive the minimum monthly pension of $175, which is two-thirds of the US$258 minimum monthly wage for urban areas in June 2003. In comparison, the cost of the official basic basket of essential goods is $155 a month and of basic services another $500 (the dollar has been Panama’s currency since 1904).

Why is there talk of a “fatal crisis” in social security? It is said that the institution has just five years of life left, that many will be unable to receive retirement benefits, that the only solution is to privatize the CSS... In June, the CSS had a surplus of only $24.8 million. The reality is that politicians have plundered this institution for years and it has had to weather the political maneuvers of successive governments.

Evasion, arrears, lack of political will

In this context, it was surprising when Professor Juan Jované de Puy, an economist renowned for his honesty and closeness to the workers, was named director of the CSS at the beginning of the current government. He began by trying to depoliticize the institution and seek solutions to a crisis that had been widely anticipated for some time. His performance has been pretty good and aboveboard, but the problems persist. He has been the subject of all kinds of attacks from inside the government and out, but in the almost four years he has been in charge not a single accusation against him has been proved. In the last national opinion poll (July 2003), 65% of those surveyed expressed their satisfaction with Jované’s work. So why are powerful groups calling for his dismissal?
Jované has rightly stated that evasion is one of the institution’s most serious problems. Many companies avoid paying in their social security contributions, resulting in $355 million in losses over the last five years. One example: only 43 hotels and restaurants out of a total of 143 investigated were found to be complying with their social security payments.

On top of evasion, many companies and even the government itself are in arrears on their payments, for a total shortfall of another $109 million. Of the 13 ministers in the current government, 12 have companies on the list of those that do not make social security payments on time. So it’s no surprise they want to get rid of Professor Jované; he’s a very annoying stone in their shoe.

In addition to evasion and arrears, the CSS is financially subsidizing the National Bank to the tune of some $19 million a year. The CSS only receives 1.5% interest on its deposits in the National Bank, although the interest rates in the rest of the banking system are around 3%. According to the law, the CSS should receive no less than the banking average.

The CSS’ very serious financial problems could be resolved by dealing with all of these irregularities. The laws exist, but there is no willingness to apply them. Of the 37 social security payment evasion cases presented to the courts so far in 2003, not one company has been penalized.

Five years on a downward slide

Although the situation in the CSS has been the main news during the first six months of 2003, there is a general impression that this is not the country’s main problem. The most serious one, which people are feeling the pinch from and increasingly complaining about, is the overall economic situation.

Panama has maintained an average annual economic growth rate of 3.5% over the past 22 years. While this average has suffered the usual ups and downs, growth has been below this rate steadily for the last four years, dropping as low as 0.2% in 2002. There is talk that it will not climb above 1.5% this year, which if it turns out to be true will mean five consecutive years below the historical average for the first time in 22 years. The factors contributing to this include drops in exports, which fell 7.3% in 2002, and construction, which fell 24.1% in the same year. The only real growth has been in the sectors that depend on foreign activities: the ports and companies that transfer their profits to their headquarters abroad, such as the telecommunications and electricity companies, all of which are private or privatized public companies.

The open unemployment rate for 2002 was 13.8%, but although employment rose by 5.8%, there was a 1.7% drop in social security contributors. This means either that the rise in employment was in the informal sector or that evasion of social security payments is on the rise. Close to half of Panama’s total population (42%) and a scandalous 95% of its indigenous population currently live below the poverty line. Although it is seldom mentioned publicly, we also know that Panama has the second most unequal income distribution in

Latin America following Brazil

It is calculated that the downturn in the national economy has cost the CSS $125 million. But even if the CSS problem could be solved with the obvious political will that would imply, the country’s much more serious economic problems appear to have no short-term solutions.

Of corruption and impunity

The situation has been further aggravated this year by continuous corruption cases. In the National Assembly, for example, one legislator publicly declared that he and other parliamentary representatives had received payments of $60,000 to pass a law. But he hasn’t been thrown into jail. Protected by his parliamentary immunity, he will probably continue to live in impunity, and everything suggests that he plans to run for the National Assembly again. Another case of impunity involves a Supreme Court magistrate—simultaneously a parliamentary legislator—who says the President named him to the court in response to pressure and deals between the executive branch and the National Assembly. What kind of “justice” might we expect from a court in which this magistrate is presiding?
Other important cases include a number of companies—a bank among them—that fraudulently went bankrupt; a political hack implicated in a gigantic rice smuggling scam; the hushed-up scandal of hundreds of thousands of dollars embezzled from public high schools; the strange case of $50,000 found in the refrigerator of a top-level Ministry of Presidency official’s home; the embezzlement of thousands of dollars orchestrated over the last decade by an organized band operating inside the National Bank of Panama; and the curious purchase of an “official” residence by the President’s brother, who turned around and gave it to her.

These new cases, which like the older ones have not been punished or even pursued, bode ill for our political and social future. The fact that so much corruption can revel in impunity represents what León Gieco, in his song Sólo le pido a Dios, described as “a large monster that tramples on the poor innocence of the people.”

More taxes…and a very minimum wage rise

Four months ago, a number of tax reforms were implemented that most people seriously questioned. While burdening the population with extra taxes, they retained the fiscal exonerations certain companies enjoyed. The government argued that it was eliminating income tax for the working population earning under $800 a month, but the reform actually only eliminates it for those earning between $300 and $800; those under $300 were already exempt. Furthermore, the amount exonerated is bound to be less than the burden that wage earners will be saddled with by the new taxes.

Meanwhile, after a great deal of demanding, requesting, beseeching, protesting and fighting, the government caved in to a minimum wage hike, then announced it with great fanfare, claiming that it was fair and needed. But in the event, the wage increase was indeed minimum: just four cents. In the last month alone, the value of the basic basket of essential goods has risen by 92 cents.

The electoral race is already under way
The electoral contest got underway in the first half of the year although the elections will not take place until May 2004. Four candidates have registered: ex-President Guillermo Endara, a key figure in the 1989 US invasion of Panama, for the opposition Solidarity Party; former foreign relations minister José Miguel Alemán for the ruling Arnulfista Party, in power since 1999; powerful businessman Ricardo Martinelli, for the Democratic Change Party; and Martín Torrijos, son of former President Omar Torrijos, for the Democratic Revolutionary Party (PRD). According to the surveys, Torrijos is out in front with 42%, followed by Endara with 24%. Everything suggests a return to power for the PRD, which last governed between 1994 and 1999.

We should be concerned about not only the style of the parties involved and their questionable candidates, but also the characteristics of our very political model. It discourages any real participation from the social movements, reinforces a two-party system, makes it nearly impossible for independent candidates to run and countenances the influence of big business on politics and the buying of political loyalties maintained by the current economic crisis.

While the country’s churches have promoted a movement to ensure that the political campaign is free of personal attacks and slander and somewhat reluctantly accepted by the political parties, there has been no real questioning of the political model itself and its effects on most of the population. This initiative is more palliative than anything, as if saying, “Let’s vote for the same negative realities, but without insulting each other too much…”

The Panamanian face of Plan Colombia

History and physical proximity have always linked Panama to Colombia’s fate. After decades of civil war in that country, the war has been spreading to all its bordering countries, Panama included, thanks to the US government and its Plan Colombia. Thousands of Colombians displaced by the conflict, sometimes intentionally by either the leftwing guerrilla or rightwing paramilitary forces, have come overland to our country in the last four years, arriving in abject poverty and suffering all kinds of humiliations.

Basing itself on the Geneva Convention of 1951, which defines “refugees” as people specifically fleeing from the political persecution of their country’s government, the Panamanian government does not accept these people as refugees. It has refused to sign the Cartegena Convention (1980), which does recognize those fleeing civil conflict in their country as refugees, considering it “outmoded.” This legal limbo has left the uprooted Colombians facing many restrictions and suffering greatly. One shameful example, to use the most generous term for it, is the case of 109 displaced people in Punusa, Darién, who were repatriated on Good Friday this year by the Panamanian police with excess force and subjected to humiliation and even torture.

Another dangerous consequence of this war has been the incursion onto Panamanian territory of the paramilitary Colombian Self-Defense Units (AUC), which appear to enjoy the sympathy of Colombian President Alvaro Uribe. So far, the most violent incident against Panama’s population took place in January, when AUC members arrived at the Kuna indigenous towns of Paya and Púcuru and murdered four leaders. All populations located near the border with Colombia live constantly under this new threat.

And what has Panama’s government done in response? Deny the denunciations, as in the Punusa case; hold bilateral meetings; deploy a few border guards and help the victims, but without protesting about the assassinations, as in the Paya and Púcuro cases. Worst of all, it openly and formally took sides in Colombia’s civil war. On February 11, Central America’s Presidents, together with Colombia’s President Uribe, signed the Panama Declaration, which calls the Colombian insurgents “terrorists” and condemns the January 7 attack in Bogotá while failing to condemn the attacks by paramilitary groups in Panama during the very same month. It should be recalled here that the Canal Neutrality Treaty impedes signing this kind of declaration.

What the future holds: water for sale

At carnival time people can be heard shouting “Water! Water!” to get water thrown over them and cool off a little, and maybe even give free reign to those atavistic desires for regeneration through water, emerging from chaos. Panama has plenty of water, a fact that certainly hasn’t escaped the notice of big businesses that have already made calculations based on future water-related global wars.

For many years now attempts have been made to build dams on Panama’s main rivers. Omar Torrijos’ military government managed to do so on the Bayano River in eastern Panama 25 years ago. Then as always, those affected were indigenous peoples; they are still awaiting compensation for their lands, flooded by the project. No further dams have been constructed, but an offensive is currently underway to develop the pending projects. The official reason is to power hydroelectric generators to break the country’s dependence on petroleum, which appears to be a laudable aim. But the hidden reason is to sell water.

The Panama Canal Authority, a kind of super-ministry responsible for managing the canal that enjoys juicy profits, special legislation, very high salaries and quite a lot of freedom of action, is playing a part in this offensive. The reason it is publicly proclaiming is also laudable: to maintain the good service provided by the canal
and ensure enough water for it to function properly. The project includes building various reservoirs that will flood lands where thousands of peasants currently live and work. This burning issue will be subject to a national consultation. It remains to be seen what happens...

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