The heir.

Panama, Central America's second-most sparsely populated country with 3 million inhabitants, has the highest gross domestic product per capita amongst its neighbors save Costa Bica. That's thanks to the Panama Canal its financial district and a busy free-trade zone. After suffering through Mireya Moscosos' presidency--she's accused of corruption and ineptitude--voters in 2004 chose a new president, Martin Torrijos, the son of the late President Omar Torrijos, who in 1977 initiated the return of control over the canal from the United States. Torrijos, 42, spoke with LATIN TRADE Spanish Editor Andres F. Velazquez, about his country's present and future.

Why should Panama host the Free Trade Area of the Americas?

Not only do we offer a great way of being interconnected in terms of airlines and through telecommunications, but our geographic location also offers many advantages.

Do you think Panama and Columbia will ever be connected through the jungle of the Darien Gap?

The Colombian government has been saying for many years, as has [Colombian] President Uribe, that there is a possibility of connecting the Americas. We've said that we're going to study all of the ramifications of such a project, including the environmental problems in an area that has been declared as an international park. Many of the points that can be argued in favor of the project are the same ones that can be used to argue against it, but it is a topic of conversation that will have to be clarified when we discuss the integration of the region.

What will your government do to strengthen the banking sector and at the same time control money laundering?

Panama has cutting-edge legislation designed to protect our banks from being used for money laundering. Not only have we signed all of the international accords in regards to this matter, but we have adjusted our laws so that these accords can be enforced.

What projects does your government have planned for energy and infrastructure?

We are carrying out a bidding process to build new ports in the Pacific. We've identified the areas for ports on the Pacific side of the canal. We also want to finish, during our term, the widening of the highway going from Panama to Colon, in other words from the Atlantic port to the ports on the Pacific, so we can finally have a highway that will help with the transportation of shipments from one ocean to the other. We also have an interconnected electricity project; we are conducting studies with Colombia and Venezuela for an interconnected natural gas pipeline. Hopefully, in the next three years these projects will be completed.

Why is energy so expensive in Panama, among the highest prices in the world?

Because our country depends on oil and gas producers, just as many other countries do. We need to define the country's energy policy in such a way that will allow us to use renewable energy sources. That is, we need to take advantage of the hydroelectric resources that we have, and the facilities we could have to produce wind-powered energy, to extract bio-diesel, ethanol, etc. We have created an energy policy that will guarantee us not to be so dependent on oil.

What is your administration doing in terms of tourism?

We want Panama to become as important a tourist destination as other countries in the region. We have great potential, a tremendous amount of biodiversity and attractions such as the Panama Canal. I'm certain that Ruben Blades [Panama's current Minister of Tourism], with his vision and popularity, is helping us a lot to promote the country internationally. In addition, there's been growth in the cruise industry through Panama.

Let's talk about the project to widen the Panama Canal.

The project has to be approved by a referendum. It must be voted on by the Panamanian people and approved by the legislative and executive offices. We continue to conduct studies on the widening of the canal. Everything indicates that it is a financially, socially and environmentally sound project. We've been moving forward on the design of new locks, which allow for a more efficient use of water. The canal operates with water from the river, and therefore its efficient use is very important. We don't have a date for the completion of the project, but for now we are very optimistic about it.

How have the canal's revenues increased with the boost in foreign trade thanks to demand from countries such as China?

In less than five years, China has gone from being the fourth to the second primary user of the canal [after the United States]. There is an additional influx of merchandise, in particular, shipments that go to the East Coast of the United States. The canal is an additional route that complements the dry canals that exist in the ports on both coasts of the United States. There has been an increase in the quantity of shipments that go through the canal, especially in terms of containers.

What plans does the current government have in terms of telecommunications?

We have five different submarine cables that unite different Latin American countries. The telecommunications industry was opened up a few years ago, and next year competition will open mobile telephony, and we are installing in Panama an important string of call centers. Dell is working in what previously was a military base, employing 1,900 people. We have very able human resources, and this is an area with tremendous potential for growth in the future. We are consulting with the International Finance Corporation, a subsidiary of the World Bank that services the private sector [to make good use of the old installations at Howard Air Force Base.] We are contracting a developer to outline this project. The idea is that we'll be able to attract more technology, telecommunications and manufacturing companies to export using Panama's facilities and installations at this air base. Dell aside, there are aircraft repair and maintenance companies who are also interested. There are others in technology and those that transport of goods.

What opportunities do you think Panama has in becoming a member of the Group of Four?

It gives us access to important markets such as those in Mexico, Venezuela and Colombia. It's not only an opportunity to have political relations with these countries, but it also creates mechanisms to move forward on commercial agreements that otherwise might be difficult to carry out in bilateral situations.

What is this administration's plan to maximize the potential for revenue from such important sources as the canal, the banking industry and the Colon Free Trade Zone?

Panama is a competitive country because of its banking services, the free trade zone and the canal, where around 14,000 ships go through each year. Anything that can be developed around the maritime industry and commerce is really unlimited. We have a lot of potential for growth and, for that reason, we have established clear rules that guarantee investors that Panama enforces the law, that investments can be made without the wrong that the rules of the game will change.

How do you see the economic integration among Central American countries?

It's happening every day. In some areas, such as electricity integration, we've advanced much more rapidly than in other areas. We have very little to go. Hopefully, we can add additional sources of energy that could come from the south, such as the gas pipeline project with Colombia and Venezuela and electrical interconnection with Colombia. The Central American presidents agree on the importance of establishing an economic integration.

What objectives do you want to meet with the new fiscal reforms?

We have a fiscal system that is a little unfair because it imposes more taxes on salaried workers. We're looking for a more equitable system that will allow us to have healthier public finances, to improve our competitive capacity but also deal with a series of social problems that go hand-in-hand with a program to modernize the economy.

Why should a foreign company consider setting up shop in Panama?

Because of our geographical location, our ability to connect with the region as a whole, because of our financial stability, and because we are a democratic country with a system that works. In addition, Panama has a highly skilled work force that can contribute to the success of any company.

What are the differences between the Panama governed by your father and the Panama today?

My father had the opportunity to resolve in a peaceful manner the differences, which had existed for many years, between Panama and the United States. This was accomplished through the Torrijos-Carter treaty. We have the opportunity to participate in a modernization process where the points of conflict with the United States have been completely overcome.