New Panama President Challenges Latin American Left

By Bob Bauman for the Sovereign Society - Ricardo Martinelli, backed by an unprecedented 60% election victory, was sworn for a five-year term in Panama City on July 1st, becoming the 5th democratically elected president since the dictatorship of Manuel Noriega was ended by a U.S. military invasion in 1989. The new president, with a reputation as a fighting political conservative, wasted no time in letting his Latin American neighbors know where Panama now stands. Said he: “Panamá has to be a leader of freedom and justice, not only here in our home, but in our region and our continent. As president, I will do everything within my power to advance the ideals of a free economy, defying the ideological pendulum in Latin America." From Left to Right - This must have produced a mixed reaction from the many Latin American officials present, ranging from the far left vice president of Communist Cuba to president Alvaro Uribe of Colombia, a staunch ally of the U.S. Others dignitaries included the Prince of Asturias, Felipe de Borbón of Spain and the presidents of Mexico, Guatemala, the Dominican Republic, El Salvador, as well as ousted Honduran President Manuel Zelaya. (more)

The deposed leftist Zelaya, disciple of the radical leftist leader of Venezuela, Hugo Chavez (who was not present), has President Barack Obama's endorsement. But by insulting contrast, the Obama/Clinton State Department only managed to send as the official American representative at Martinelli's inauguration, Ken Salazar,(right) the U.S. Secretary of the Interior, (perhaps because Salazar speaks Spanish?).

To emphasize regional cooperation, Martinelli held a special meeting with president Alvaro Uribe of Colombia, and Felipe Calderon of Mexico, who jointly pledged to work together on security and anti-drug measures.

Hope & Change

As I reported earlier this year, Martinelli conducted a dynamic U.S. style presidential campaign with Obamaesque rhetoric of change and hope, two things Panamanians badly need and want. One of Panama's richest men, with interests in a major Panamanian bank, real estate, hydroelectric energy, plastics and sugar, Martinelli's wealth is estimated at hundreds of millions of dollars. The son of Italian immigrants, (he holds dual Panama/Italian citizenship), the U.S. educated business leader's fortune is self-made.

Cleaning House

In his inaugural address, Martinelli outlined his populist conservatism, emphasizing that his government would be provide new style government combining administrative experience from both private and public sectors. He said that he will end the tradition of elected leaders "arriving clean and leaving millionaires," one of his most popular campaign slogans.

Towards this end Martinelli announced an immediate reduction of $200 million in the budget of the National Assembly and an end to the “botellas” (staff sinecures with no work) in the legislative branch. Henceforth legislators will be paid only if they are present.

Martinelli's "Alliance for Change" coalition now controls both the executive and legislative branches with 44 seats in the National Assembly.

Tough Economy

Martinelli will have his hands full in guiding Panama through the current economic recession. In recent years Panama's GDP growth has averaged 8%, but that is expected to fall by half in 2009. Part of that spending will go for the $5 billion+ cost of the Panama Canal expansion.

Martinelli's new cabinet members were quick to follow the president's conservative policies in announcing their programs. Minister of Economy and Finance Alberto Vallarino (left) said that adoption of a flat tax, which was one of Martineli's major campaign promises will come after a thorough analysis.

Sharp Response

The new Minister of Commerce, Roberto Henriquez, (below right) gave a sharp response to Ecuadoran president, Rafael Correa, who recently won re-election vowing to push forward with a "socialist revolution." Correa, another Chavez backer, had threatened to ban companies with links to Panama from business relations with Ecuador because he claimed Panama is a tax haven. Henriquez said of if Correa imposes trade restrictions, Panama would file a formal complaint with the World Trade Organization (WTO). Henriquez said bluntly: "The Panamanian government will apply equal restrictions against Ecuador.”

Free Marketers Bullish

Local and foreign investors are bullish on the outlook for Panama and its new government. “I’m very positive on Martinelli,” says Kathryn Rooney, senior emerging markets strategist at Bulltick Capital Markets. “He’s extremely market friendly and will continue the positive trend of the economy.” She especially single out his plans to lower taxes and improve relations with the United States.

Robert McMillan, a former chairman of the Panama Canal Commission, is also upbeat: “Martinelli is pro business,” he says. “Not only is he a businessman, but he was also chairman of the Panama Canal Commission.”

Panama is a leader in the offshore financial world, and the leading banking center in Latin Americium south of Miami. Its financial privacy laws have played a major part in its success. One issue Martinelli's government is expected to defend strongly Panama’s traditional offshore financial and banking sectors.