Panama Investor Blog

Populism, Corruption concern business execs in Latin America

Latin Business Chronicles carries an article about a recent poll by the American Association of the American Chamber of Commerce in Latin America with over 900 business executives. The survey results do not surprise those of us who live and work in Latin America as these same themes are the ones I post most about in my blog each week. Here are some excerpts of that poll.

“Despite a forecast of negative growth for the region in 2009, survey respondents overwhelmingly indicated that they expect 2010 to be a recovery year,” commented Adrean Rothkopf, the outgoing executive vice president of AACCLA.

However, nearly half – 47 percent – believe populism and authoritarianism will rise over the next four years and 29 percent say it will stay the same. Only 14 percent believe it will decline.

 

“Respondents predict no quick end to the worrisome trend of populism and authoritarianism in the region,” Rothkopf says.

Most of the respondents had a clear preference for democratic countries versus authoritarian ones. Two-thirds said they were not likely to invest or expand business in countries that have had democratic setbacks.

 

“The judgment has been firm both in survey responses and foreign direct investment statistics - foreign investors are steering clear of countries where democracy and its attendant freedoms are under attack,” Rothkopf says.

“By and large, rule of law and investor protections remain a serious concern for countries throughout the region, but especially in Spanish-speaking Latin America, where 79 percent of respondents characterized rule of law as poor,” Rothkopf says.

Nicaragua moves one step closer to dictatorship

Daniel Ortega has made a successful move to get the constitution changed to allow him to run for reelection in 2011. Although it still has to be approved by the supreme court, this should be only a technicality. Once he is reelected he will be able to tighten his grasp on all elements of the country and stay in power as long as he wishes, which as with most dictators is as long as they live. I know that many investors in Nicaragua had hoped that he would be out by 2011, but chances are growing slim of this happening.

AFP Managua

Sandinistas celebrate the ruling that allowed re-election of Ortega in Nicaragua

06:59 PM, 20 Octubre 2009 06:59 PM, 20 October 2009
MANAGUA, 20 Oct 2009 (AFP) -  MANAGUA, 20 Oct 2009 (AFP) - Hundreds of supporters took to the streets Sandinistas of Nicaragua to "celebrate" and "defend" a court ruling that removed legal obstacles to the intention of President Daniel Ortega to run for reelection in 2011, and that the opposition branded as "illegal".
"I burn with Daniel that we" read banners carried by hundreds of supporters gathered near Ortega in Managua Parliament to express their support for the decision of the judges Sandinistas in the Supreme Court.
"We will not let anyone else take power," said a young man who was involved in the mobilization called by party organizations.
  In the streets adjacent to Parliament in the historical center of Managua, the traffic was closed and sound equipment were installed to encourage the manifestation with music and with explosion of firecrackers, AFP journalists found.
  The mobilization also occurred at the various roundabouts in the city, where youths waved flags with the red and black Sandinista National Liberation Front (left) and blue and white of Nicaragua.
  "We're going to take to the streets to celebrate and defend the decision given by the Supreme Court and accepted by the Supreme Electoral Council," the Sandinista union leader Gustavo Porras.
  Sandinista magistrates on Monday declared "irrelevant" a constitutional provision forbidding reelection of the president and mayors continuous, but not the deputies, Ortega considered an inequality before the law.
  The ruling has legal history in similar processes in Costa Rica and Colombia, allowing the re-election of current President Oscar Arias and Alvaro Uribe, respectively, said Porras.
  If the international community accepted in those countries "must be accepted in Nicaragua," he said.

Iran Is Not a Good Partner for Latin America

This is an extremely well written article that I hope is read by many politicians both in America and Latin America. The influence of Iran in Latin America is significant and growing. To my knowledge Nicaragua is the only Central American country that has made deals with the regime.

I hope you take the time to read this from the Council of the Americas.

Abraham Foxman
Summer 2009

The fraudulent Iranian presidential election and its repressive aftermath put the focus on the Islamic regime's behavior in an unprecedented manner. Even during the more than one year hostage crisis of 1979-1980, Iran had its defenders, based on criticism of U.S. treatment of Iran going back to the U.S.-supported coup against Prime Minister Mohammad Mossadegh in 1953.

Today, Iran has been exposed. Efforts to blame the U.S., Israel, and Britain expectantly continue but have no impact. The government has attacked its own people, has abandoned any pretense of respecting the voice of its citizens, and has come under attack from some fairly conservative clerics. It has lost legitimacy and can't successfully conjure up the usual enemies to divert attention from its abuses.

As a result, internal and external actors are more willing to pay attention to Iran as a destructive force in the world. Most importantly, this applies to the potential of a nuclear Iran and its clear intention to develop nuclear arms. There is new opportunity to put the squeeze on Teheran.

It also applies, however, to another troubling area which has been the subject of far less attention: Iran's threatening expansion in Latin America. Iran has seen Latin America as a region of opportunity at least for 20 years. Its planning and implementation in the early 1990s of the terrorist attacks against the Israeli Embassy and the Jewish Community Center in Buenos Aires (AMIA), and its use of its surrogate Hezbollah in those destructive operations signaled that Iran believed it had a certain freedom to carry out terrorist attacks on Latin American territory. Since then, a series of factors have come together to allow Iran to spread its influence on the continent.

Most important has been the coming to power in several countries of leaders and parties who are inimical to the United States. This has translated into economic deals because of the a key factor at work, Iran's oil wealth. Had Iran simply looked for allies based on “the enemy of my enemy is my friend,” that would have been one thing. But Iran has cut a series of deals in the region that make tangible its influence. It is now the second-largest investor in Venezuela, playing a substantial financial role in the further development of Venezuelan oil deposits and is funding housing projects for the poor.

In Bolivia, Iran has a cooperative arrangement worth over $1 billion to develop Bolivia's oil, gas, and industrial sectors. It has set up health clinics and training programs for physicians. In Ecuador, Iran has signed a series of economic agreements in the last year including one for energy production.  In Nicaragua, Iran has promised millions to aid to building a dam and a hydroelectric power station, and donated $2 million for the construction of a hospital.

Magical Realism

Susan Kaufman Purcell of the Center for Hemispheric Policy has written a very insightful piece on the hypocrisy of the OAS in its dealing with Honduras verses Cuba and other non democratic countries in Latin America. Recent statements from the U.S. administration make one wonder why they support these non democratic regimes when one that is striving to maintain democracy is being threatened.

Excerpts from the Latin Business chronicle.

The OAS's condemnation of Honduras while admitting the Cuban dictatorship is surrealistic.

BY SUSAN KAUFMAN PURCELL

The recent behavior of the Organization of American States (OAS) regarding Honduras is worthy of a magical realist novel. According to one definition, magical realism is “what happens when a highly detailed realistic setting is invaded by something too strange to believe.”  

Among the things that are “too strange to believe” is the precipitous classification of events in Honduras as a traditional military coup, despite the fact that the military was asked to intervene by the Honduran Congress and Supreme Court after the incumbent president, Manuel Zelaya, decided to ignore Honduras’ constitution, which forbids reelection, by organizing a “poll” to show that “the people” wanted him to run again. This supposedly would then make it all right for Zelaya not only to ignore the constitution, but to change it. The OAS had sent a team of observers to oversee the “poll,” a strange decision, given that the organization had never before observed a Latin American poll.

ADMITTED CUBA

Even more surrealistic was the condemnation by the OAS of the overthrow of democracy in Honduras only weeks after the OAS had pushed hard to readmit Cuba, a dictatorship that has not held a presidential election in fifty years. The fact that the OAS had earlier added a “democratic clause” to its charter apparently was not considered relevant to its decision to readmit Cuba. Nor, according to the secretary general of the OAS, was it relevant to the situation in Venezuela, where President Hugo Chávez has systematically used the democratic rules of the game to destroy Venezuelan democracy.  

Why wasn’t the “democratic clause” applicable to Cuba and Venezuela? Because, according to the secretary general, the lack of democracy in those countries was an “internal” issue, and the OAS doesn’t intervene in the internal affairs of member countries. But if democracy or its absence is an “internal” issue, why is the involvement of the Honduran military in the internal affairs of Honduras also not an “internal”  issue? 

Equally surrealistic was the sight of the leaders of the most non-democratic countries in the hemisphere -- Cuba, Venezuela and Nicaragua  -- calling for the return of the democratically-elected president of Honduras.

Panama vows to quit Central American Parliament

I don't know much about the Central American Parliament, but based on what I know of most governing bodies and the fact that each of the five member country can have 20 emissaries, I suspect that it is nothing but a waste of time and money. They say the cost is about $4.2 million a year. The new government is being polite in saying it is "part of the past". Another good move by the new administration!  If anyone knows anything more about them please share it with us.

From AP

Panama's foreign minister says his country will quit the Central American Parliament.

The Cabinet of President Ricardo Martinelli has already approved the proposal to exit the largely consultative body.

Minister Juan Carlos Varela says he will present the country's letter of intention to resign from the body soon.

He calls the group "part of the past" and said Sunday it had contributed little to resolving the region's problems.

The Central American Parliament is based in Guatemala City and has 132 members representing five nations.

We The People Stimulus Package

If you have not seen this video yet, I encourage you to do so. A number of readers sent it in to me and although it has little to do directly with Panama investment, it does affect all of our lives. Over 7.5 million views to date and growing rapidly. Could one strong articulate voice be enough to persuade Americans to wake up to reality? We shall see.

Martinelli's first month a positive one

Today's La Prensa carries and article highlighting President Martinelli's first month in office. By all accounts it has been active and high profile, important for politicians, especially in a country as cynical about them as Panama. As the article points out, his first session with the assembly was held in a small, poor village, highlighting the plight of Panama's impoverished. He then went after some high profile developers who had been behind on payments for concessions and had filled in sea floor without proper permits. As expected, many felt this was a bit heavy handed, but the man on the street who elected him was thrilled. It showed he was not playing favorites and that money was not going to protect you if you are cheating the people. This is a good article and worth Reading.

From La Prensa: Ricardo Martinelli was swept into office on the promise of change and with the support of almost 60 percent of the electorate. And, at least in his first month in office, he has been able to carry through on his promise.

He held his first cabinet meeting in the impoverished community of Las Garzas de Pacor, a community 40 minutes from the capital. There, in one of his first official actions, he announced the creation of a Secretariat of the Metro which would be tasked with modernizing Panama City's public transportation system.

Read the whole story here.

Ruben Blades of Hollywood, Panama, Grammys Recovers Music Roots

I am very happy to see that Mr. Blades is back in his element and enjoying life again as a musician/actor. I appreciate his efforts for the benefit of Panama and although I had many a disagreement on his methods and actions, there is no question that he did a lot of very positive things for his country while Tourism minister. As many of my readers know, Mr. Blades was very unhappy with me even going so far as chastising me on the governments official tourism website for writing disparaging posts about some of his actions as Tourism minister. I only had my blog to strike back which I did on more than one occasion. I have to say that I miss him and I wish him well. I have met him on a number of occasions and have always found him to be a really fun and charismatic person. Good luck Ruben!

Excerpt from Bloomberg:

Since a 5-year stint as Panama’s minister of tourism ended June 30, he’s putting music back on center stage in his life.

Blades, who tried to overhaul the tourism industry, came back to the U.S. in part because Panama’s government wouldn’t let him serve another term. He also looks forward to more- lucrative studio and performing work after struggling on a bureaucrat’s salary.

“I gotta make some money, man,” Blades, 61, said with a grin during an interview at the Blue Note. “I’m like another unemployed person with mortgages.”

Ministries to simplify bureaucratic procedures and processes

In a very brief statement in La Prensa today, the Ministry of Trade and Industry say's it is working to reduce the amount of procedures for foreign investors to make investments into the country. Although each administration makes these same promises we have yet to see any improvement in the speed at which applications and documents are handles by the state. Developers can wait years for approvals, foreign investors may have to wait years to get visas and paperwork for employees and the approvals for the introduction of new products are usually delayed way beyond reason. Not knowing how the public offices are supposed to work I cannot do more than complain about the situation, but I would think that lack of qualified people and proper incentive to perform has much to do with it. Usually you have to find the right person to pay off in order to expedite things. Maybe the government needs to pay public servants based on a quota system rather than for just showing up and shuffling papers along with the threat of jail time for taking money to expedite paperwork.

Another article talks about the development of new budgets for the 74 various public entities. I can't begin to imagine what all these public entities do, but I am sure between them they manage to do as little as possible and to slow things down for investment.

Go here to learn more about how Panama is regulated.

For a partial list of entities go here.

What's the real scoop on Honduras?

Honduras has been in the news a lot the last two weeks and I am sorry to have heard so many come out against the so called coup that removed Zelaya from office. I can understand people reluctance to support any kind of government overthrow by the military, especially with the history of Central American countries, but if you look a little deeper into this story you will find there is more to it than that and his removal from office was both justified and necessary. Here is an email from an expat who has lived in Honduras for a number of years and he shares his knowledge of the ouster and what lead up to it. This makes me feel more positive about Central American security when I see the people turn away from Chavez type dictatorships. For another look at the issues you may want to read the Honduras Trinuna "Will Obabam blackmail Honduras into installing a bullying would-be dictator?"
Hat Tip to Yari.

(What follows was written by Mitch, who has been living in Honduras since 2002. This is the best, blow-by-blow description I've seen to date of what happened in Honduras, and the events leading up to the removal of Zelaya as the president there.)

"I don’t profess to be an expert at Honduran politics or constitution, but I have been here a while and stay pretty involved with what’s going on in Honduras and especially Roatan. For those that don’t know me, I’m an American investor that has lived in Honduras full time since 2002. I’m very active on several commissions and have met with minister level executives=2 0of the Honduran government many times in the past few years. (more)

There have been a lot of comments, descriptions, and hypothesis over the past few days. I’ve spent a LOT of time reading Spanish and English reports, talking to a lot of people on the islands and on the mainland, and listening to the local politicians. I’d like to present my take on what’s happened. This is especially for Nick who’s been posting on the Roatan Tourist discussion group, but hopefully it will help clarify some points for others as well.

Mel Zelaya was elected 3 ½ years ago with an underwhelming 49% of the vote. He was seen as a fairly conservative member of the liberal party. The general feeling when he was elected was that he wasn’t the greatest pick, but his background as a wealthy logger and rancher coupled with his more liberal social policies would probably be OK.