After a decade led by two globalist and establishment presidents, Ricardo Martinelli and Juan Carlos Varela, Panama has a new leader who brings a nationalist flare to political discourse. Despite a career in business and politics, President Laurentino “Nito” Cortizo has never seen eye to eye with Panama City elites.
Earlier this year, Cortizo was propelled to the presidency despite, or because of, his status as a critic of previous governments. For instance, in 2006, Cortizo resigned from his position as minister of agriculture to protest then-President Martin Torrijos’ push for a free trade agreement with the United States. True to form, earlier this year, Cortizo decided to take on Panama’s two main parties, the Panameñista Party and Democratic Change (CD), campaigning with the Revolutionary Democratic Party (PRD) on restarting country’s agricultural industry and regulating unchecked imports currently stifling local producers.
Turning Point
His election marks a turning point in Panama’s democracy. During the presidential campaign, Cortizo received support from various political independents and social sectors that were eager to prevent the Panameñista Party from taking over the executive branch. Additionally, Cortizo’s campaign promised a fight against corruption and a revival of the national economy, giving priority to local projects and debt reduction.
A decade after the end of the dictatorship of Manuel Antonio Noriega in 1998, Democratic Change was founded as a new center-right political alternative. Today, CD controls 18 out of 71 seats in the country’s national assembly, making it the second-largest delegation in Panama’s current legislature. Previously, CD controlled Panama’s legislative assembly during the tenures of the country’s two previous presidents.
After the end of his term in 2014, Democratic Change leader Ricardo Martinelli had to face a series of judicial inquiries that ultimately led to trial without the possibility of bail. Martinelli was tried by Panama’s supreme court on charges of corruption and illegal wiretapping of political adversaries, journalists and other prominent figures during his tenure.
With an initial arrest warrant issued in 2015, Martinelli was detained by authorities in the US in 2017 and, a year later, extradited to Panama at the national government’s request. As his trial was ongoing, Martinelli was denied the opportunity to participate in Panama City’s local elections. Most recently, in early August of this year, a court found Martinelli not guilty, ending his house arrest.
President Varela’s Unconventional Path
Former President Juan Carlos Varela served as vice president to Martinelli between 2009 and 2014 as part of a coalition formed by CD and Varela’s own Panameñista. Nevertheless, in the 2014 election, Varela faced off against Martinelli’s CD and defeated the party’s candidate, José Domingo Arias. Thus, Martinelli and Varela’s joint political tenure and alliance ended in 2011.
A businessman and engineer, Varela led the Panameñista Party, a right-wing political formation founded in 1931. Presided over by Varela between 2006 and 2016, Panameñista only held 16 out of 71 seats in the national assembly during his tenure as president. In addition to his weak legislative position, Varela’s government faced harsh criticism for its pro-business legislation and tax reforms, which were perceived as having mostly favored the country’s upper classes and foreign capital. Furthermore, Varela himself, coming from a family of entrepreneurs within the country’s liquor industry, was seen as disconnected from the average citizen.
During Martinelli’s and Varela’s tenures, Panama maintained its traditional appeal as a geostrategic and financial hub in Central America, while also acting to address international criticism regarding its reputation as a fiscal paradise by implementing new legislation to avoid money laundering and tax evasion schemes.
Simultaneously, in recent years, major infrastructure projects have been successfully developed and ambitiously undertaken throughout Panama. Perhaps the most notable was the expansion of the Panama Canal, which was completed in 2016 after a decade of work and a $6-billion investment. The project that started under the administration of Martin Torrijos in 2006 is considered a turning point for Panama given that it was approved by a national referendum and currently gives the country an undisputed strategic advantage as a crossroads for international maritime trade. Today, as the country celebrates the 20th anniversary of the canal’s 1999 transfer from the US to Panamanian control, the national government’s revenue from transoceanic passages keeps growing.
Another feat completed under President Varela’s watch was the multibillion-dollar expansion of Panama City’s metro system, with two lines inaugurated by Varela himself. Construction of a third line is set to begin in 2020 at a total cost of $2 billion in a city that wants to position itself as a globally competitive financial and business hub.
This development frenzy that also envisions a railway line across the canal and another one all the way to the Costa Rican border has not yet led to any major corruption indictments. But the large amounts of contracts being awarded, as well as the impunity that contractors like Odebrecht have enjoyed in Panama, have certainly contributed to the popularity of Cortizo’s campaign.
Despite coming from different political parties, President Varela gave continuity to most of the projects started by his predecessor, President Martinelli, particularly the urban renovation of the Colón Free Trade Zone (FTZ), an important port city along the country’s Caribbean coast. These two projects featured an investment of almost $2 billion by the scandal-ridden Brazilian contractor, Odebrecht.
The persistent focus on the capital city and large infrastructure projects has become the hallmark of Panama’s political establishment. Despite being a small country, the non-urban regions of Panama, particularly the agricultural provinces, felt abandoned by the city lawyers and bankers.
Panama’s Position in the World
Even though President Varela’s approval rating was low toward the end of his term, Laurentio Cortizo inherited a positive macroeconomic outlook. Panama’s credit rating was recently upgraded by rating agencies, including Moody’s, and both GDP and foreign investment continue to grow.
Simultaneously, issues such as ongoing mass migration from Venezuela and other Central American nations will be high on President Cortizo’s early agenda. Likewise, the Cortizo administration will have to decide what diplomatic role it wants to play within the regional Lima Group set up to resolve the crisis in Venezuela, and how to handle cooperation with Colombia and Costa Rica in the fight against illegal smuggling, human trafficking and money laundering.
Besides being Central America’s financial hub, Panama has increased its participation in recent years across various multilateral organizations. From hosting Pope Francis as part of the 2019 World Youth Day to acknowledging Juan Guaidó as Venezuela’s legitimate president, Varela has been active in regional politics.
However, Varela’s most significant foreign policy feat was Panama’s severing its historic diplomatic ties with Taiwan. In 2017, having for decades been one of the last countries in the world that did not recognize Beijing’s authority over Taiwan, known officially as the Republic of China, Panama established formal relations with the Chinese. For a country with close historic and economic ties to the United States, Panama’s open-door policy toward mainland China in recent months has provoked nervousness.
Moreover, during Chinese President Xi Jinping’s first-ever official visit to Panama last year, President Varela discussed free trade agreement negotiations as well as Chinese investment in major infrastructure projects such as a fourth bridge across the canal, a railroad from Panama City to the country’s second-largest city, David, and two new harbors for tourism and commerce.
2019 Elections
In 2018, as the presidential campaign was picking, Panama experienced a lower-than-average rate of economic growth. This dynamic, along with a national sentiment of excessive government centralization around urban centers and willful neglect of the country’s agribusiness sectors, ultimately led to the election of Laurentino Cortizo.
Cortizo, a former congressman and minister, won with 33% of the vote despite losing in the country’s most populated urban provinces, including Panama City. In addition to its victory in the executive branch, the PRD controls 35 of 71 seats in Panama’s national assembly, giving the president a good position to advance his government’s agenda.
The new government will face some challenges in implementing its promises, however. Currently, some of its main projects include reforming the national constitution, in place since 1972 (when Panama did not even control the canal zone), transforming the social security and educational systems, and battling corruption. Likewise, the new administration will have to provide continuity to some (but not all) of the contracts and projects inherited from Martinelli and Varela, totaling over $5 billion.
Thus far, President Cortizo has chosen his ministers and cabinet, while his party prepares to present bills to the legislative assembly. Another foreign and domestic policy issue that Cortizo will have to address relates to the Venezuelan crisis and migration into Panama.
Cortizo’s new government seems set on fighting the excessive centralization and unequal wealth distribution in a country of 4 million people. In this regard, the census planned for 2020 is set to be a turning point for the national administration in how it is going to deal with resources, planning and economic forecasts.
Having just celebrated the fifth centennial of Panama City’s foundation, the election of a new leader with a broader national agenda is a reminder that the country extends well beyond the canal, the banks and the law firms that have for decades dominated the country’s policy and discourse. President Cortizo’s administration will certainly face challenges on many fronts. However, reviving Panama’s important agroindustry, boosting its commodity exports and refocusing foreign policy on hemispheric priorities are all steps in the right direction.
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.
Excellent piece Tom! Thank you and welcome back!
Werner