Vol. 22, No. 5,514 - The American Reporter - September 7, 2016

by Mark Scheinbaum
American Reporter Correspondent
Panama City, Panama
July 18, 2006
Reporting: Panama

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PANAMA CITY, Panama, July 18, 2006 -- The National Assembly has set October 22 as referendum day for yea or nay on a $5.6 billion upgrade of the Panama Canal, but the outcome will determine lots more than ships sailing through Lake Gatun and a new set of locks.

The election date comes after nearly two years of contention in seminars, forums, and legislative debate, among duelling consulting firms, and amid public campaigns on radio, tv, and in newspapers. The interest groups represented are as diverse as bankers, construction workers and retailers, and even include critics of Panama's social security system.

Even the $5.6 billion price tag is in dispute. Some people think it is a gross understatement of eventual costs (perhaps the bill will be $12 billion), strong proponents think early contracts and concessions for concrete, steel, labor, and other variables will result in a lower budget.

To a nation of 3.5 million people with a median income of $6,000 per year, the thought of a $5 billion-plus additional debt is staggering. Either because of the ultimate lapse in proofreading copy, or the magnitude of the number in the brain of some editor, even the nation's oldest newspaper got it wrong.

The morning after Pres. Martin Torrijos announced the agreement for the October vote, the daily Estrella (Star) proclaimed across page one, in the lead paragraph of its canal story, that the vote would be for a $5 million project, that's million instead of billion.

I happened to be travelling to a remote school last weekend with some civic club volunteers who help bring school supplies and books to rural youngsters. Three of them were middle-to-upper career service supervisors for the Panama Canal Authority. For obvious reasons, I won't identify them. Suffice it to say that I have known two of these folks for more than five years, and trust and respect their judgment.

As the biggest cash cow in the country, the Canal turned over more than $200 million to the government in surplus revenue last year. When asked what the government does with the money, one executive with us replied:

"We see the official budget items, but sometimes even those of us who work long hours to make the post-U.S. canal-control era a great success wonder if the money is squandered. Educational test scores are dropping, and the gap between not just rich and poor but poor and abject poverty is growing."

A few days earlier the Education Ministry announced that literacy in the Spanish language was at an all time low for the last decade when tests have evaluated literacy skills. English, the once-universal second language, is taught by teachers who often barely speak it. The decline in functional literacy last week forced the quasi-autonomous government of the Kuna Yalu Comarca (Indian reservation province) to demand that in addition to honoring commitments for indigenous language and culture, the Panamanian government was failing to keep its promise for Spanish and English literacy training through grade six.

The super-hype for the construction of a third set of locks and "amplification" of the 90-year-old canal predicted "253,000 new jobs related to canal construction and a rise in average income by $500 per capital per year." When pressed by labor unions, environmentalists, and old-line conservatives calling for fiscal controls instead of more debt, the Canal Authority publicity machine cranked the number back to perhaps 12,000 new jobs and undetermined income gains for the average worker.

Most neutral or at least objective observers feel that without the expansion the current crop pf "Panamax" class ships will be the last generation of superships to fit through the Canal. In April at one point 112 ships were backed up trying to pass from Atlantic to Pacific or vice versa. China's export boom and Iraq-bound war supplies have added to the crunch.

Refreshingly, the Torrijos government (son of late Gen. Omar Torrijos, who negotiated return of the Canal Zone to Panama with Pres. Jimmy Carter) demonstrates some fiscal transparency in the debate. Torrijos said the Panamian people actually have little downside risk since international investment banks and large users of the Canal from Europe and Asia are lined up to underwrite (and probably insure) funding of project bonds.

As part of the "window dressing" for the international bond market, the government has been systematically retiring Brady Bonds, the U.S.-invented financing vehicles for low-cost financing of Latin American projects.

So shippers from China and Taiwan, Chile, the U.S. and elsewhere will wait for the Oct. 22 vote. How you view the issue depends on where you sit. Even in 2006, Panama can serve up a restaurant dinner for four for $200 or $10.

In either case, there's a pretty good chance your waiter ultimately has more at stake in the referendum than the international press corps might think.

Copyright 2016 Joe Shea The American Reporter. All Rights Reserved.

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