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Panama banks on reconstruction.


TWO FIERCE LOOKING BRONZE lions guard the entrance to the sleek Hongkong & Shanghai Bank building in downtown Panama City. According to a nineteenth-century Chinese legend, the lions--originally intended for the bank's San Francisco branch--are there to protect the bank's treasures and ensure success in business dealings. Clearly, the lions have done their job--with help from Panamanian-born Joseph L. Salterio Jr., the bank's executive vice-president and highest ranking officer in Latin America.

Under Salterio's leadership, Hongkong Bank not only survived the chaos of the Manuel Noriega years, a bank freeze and finally the December 1989 intervention which removed Noriega from power, but has emerged from the crises stronger than ever. "When the situation got very difficult in 1988-89, a lot of the foreign banks got nervous. They started cutting credit lines and collecting obligations," said the 48-year-old banker. "But we decided to selectively single out prime corporations in Panama--both locals and multinationals--and assist them in providing additional credit facilities. We went completely against the tide. Everybody was retrenching, and we went forward."

Today, Panama enjoys one of the fastest-growing economies in Latin America. According to official figures, Panama's gross domestic product jumped 9.3 percent last year, outpacing Venezuela, Chile and Argentina and all its Central American neighbors. While some claim that figure is exaggerated, saying that the prosperity has yet to be felt among Panama's poorer classes, no one doubts there has been a rush of foreign investment in the last few years, and a frantic construction boom evident to anyone strolling along Panama City's ocean-front Malecon.

Unlike its Caribbean and Central American neighbors, most of which are highly dependent on manufacturing and agriculture, Panama's is a service economy. Transport, storage and communications alone account for 25 percent of the country's gross national produce of $5.2 billion, while financial services account for 15 percent, government services 13 percent and wholesale/retail trade 12 percent. Despite important banana, shrimp and coffee industries, agriculture represents less than 12 percent of Panama's GNP, and manufacturing accounts for even less, only 9 percent.

Salterio, like many executives here, traces much of his success to the phenomenal growth of Panama's free zone, located in Colon. The country's second largest city and principal Caribbean port, Colon is the Atlantic gateway to the Panama Canal. Founded in 1952, the free zone consists of streets and avenues laid out in a neat grid and surrounded by a high wall. Within its boundaries, hundreds of shops owned by Arab, Jewish, Hindu, Chinese and European businessmen display a variety of expensive merchandise from all over the world. It is a sharp contrast from the rest of Colon, one of the poorest slums in Latin America. "The free zone functions more or less independently from the Panamanian economy, though Panama benefits from the activities which go on there," says Rogelio Garcia, the zone's general secretary. "Everything imported into the free zone is for re-exportation. Companies pay taxes to the government ranging from 2.5 to 8.5 percent on their annual profits."

By the end of 1992, Panamanian officials say that the city's sprawling free zone--the world's second largest after Hong Kong--will have imported and re-exported more than $8 billion worth of goods, up from $7.6 billion in 1991. The main reason is that in the last few years, previously closed Latin American markets from Mexico to Argentina have officially opened up, prompting Japanese, Taiwanese, Korean and other Far East electronics manufactures to build huge warehouses in the zone. "Things are booming here," said Jaime Ford, the free zone's general manager. "Any business you can think of can be done in the free zone, as long as it's legal." Currently, some 900 businesses have operations in the 1.6 square kilometer zone providing 11,500 people with full-time employment and attracting more than 60,000 overseas buyers annually.

At present, the zone's chief source of goods is Hong Kong, which annually ships over $1 billion worth of watches, garments, electronics and toys every year. Many of those goods actually come from China and are channeled through Hong Kong. Other major suppliers of cameras, electronics, high-fashion apparel and office equipment are South Korea, Singapore, Japan and Taiwan. Volumewise, the free zone's biggest customers are Aruba (which imported 60,585 metric tons last year), Chile (36,720 tons), Ecuador (35,656 tons), Venezuela (32,962 tons) and Nicaragua (30,410 tons).

Traditionally, larger countries such as Argentina, Brazil and Mexico did little business via Colon because their protected economies made imported goods prohibitively expensive. But that is changing with Latin America's new free-market policies. "Argentina, for instance, is a very large market," says Richard M. Joyce, assistant sales manager for Sony Corporation of Panama. "Until last August, they were paying 100 percent import tax on electronics. When Argentina opened up, our business jumped 40 percent in one month." Sony, along with Kenwood, Canon and other large multinationals, are together investing some $60 million in France Field, an adjacent tract of land which was recently returned to Panama under the 1977 Panama Canal Treaty signed by former President Jimmy Carter and the late General Omar Torrijos. "France Field was almost totally deserted two years ago," says Garcia. "Now, there's no space. Sony and others have constructed huge warehouses to serve their Latin American operations." In the next few months, he adds, the government will begin building a bridge linking France Field to the rest of the free zone.

Despite the impressive statistics, which include an 87 percent literacy rate and a per-capita income of $2,084--Central America's highest--relatively few Panamanians can afford a decent education. Attorney Roberto Troncoso, president of Panama's Human Rights Committee, says 44 percent of the nation's 2.3 million people live below the poverty line, with 24 percent said to be in "extreme poverty." Social conditions are particularly bad in Colon, outside the free zone. For that reason, Panama's Legislature voted, on September 22, to expand the zone into a duty-free tourist port eventually encompassing the entire city. The new law will allow retail sales of liquor, cigarettes, apparel and electronic goods at cut-rate prices to tourists visiting Colon, whose population of 130,000 is predominantly black and impoverished. "Colon has never gotten what it deserved. It's the life of the country. Everything moves through here," said Marcos Avila Salazar, an 80-year-old retired dockworker wearing a cream colored straw hat, dark sunglasses and an "I Love Colon" t-shirt. Salazar, along with hundreds of other Colon residents, came to the capital recently to urge lawmakers to approve the free-port measure.

The expansion of the free zone to other parts of the city coincides with a recent proposal by Evergreen Corporation, a Taiwanese shipping conglomerate, to construct a $600 million container terminal at Telfers Island, near the Panama Canal's Colon entrance. At the same time, the Panamanian government is pushing the privatization of Intel--the state-owned phone company--as well as sugar mills, hotels, a citrus-processing plant, a cement factory and the bankrupt Air Panama. In almost all cases, the plans have met with opposition from workers and their labor unions. Yet if the Intel privatization succeeds, it would be the first of its kind in Central American history. With 240,000 lines and 3,800 workers, Intel is considered the region's most efficient phone company. "People expect it is a simple matter of selling with no obligations. But this law will set up an open competitive environment for the telephone company," said a spokesman for the Intel privatization effort.

Banker Salterio is of the opinion that the recent economic boom Panama has enjoyed will eventually filter down to the country's masses. "All you have to do is look at the construction industry. They're hiring thousands of new laborers," remarked banker Salterio. "It's ridiculous to say you can't have economic growth without improving living conditions. People think things can be turned around overnight. It takes years to rebuild a country. A lot of destruction took place and we had to start from scratch."

One industry the construction boom has already helped is air cargo. Otto Littman, cargo manager at Compania Panamena de Aviacion (COPA), the nation's leading airline, says contractors are increasingly flying building materials from Miami to Panama rather than shipping them--despite the higher cost--in order to finish jobs on time. "Contractors need a lot of steel beams right away. Instead of waiting a week for a ship, a contractor can have it here in 24 hours," he said in an interview at Panama's Tocumen International Airport. "Today, in fact, we received 2,700 pounds of aluminum parts for windows. Bigger aircraft have to do special flights from Panama just for steel beams."

Some observers say that with tighter U.S.-Panamanian cooperation on bank-disclosure laws--the new regulations require banks to file reports on any transaction over $10,000--drug smugglers are now avoiding banks altogether and shifting their laundering activities to both the free zone and the construction sector. But Salterio says there's no evidence to suggest that: "With the extremely close ties the Panamanian government now has with the United States, fiscal authorities and the banks themselves, I think Panama would be the last place for money launderers to go." According to Roberto Eisenmann, Jr., president and director of La Prensa, Panama's largest and most influential newspaper, "Banks are making a legitimate effort in regulating money laundering. That doesn't mean that a lot of it still isn't going on. Money launderers will constantly look for ways to beat the system. It's not anything like it used to be, but you can't sweep it under the rug."

With the laundering issue out of the limelight, three of the government's top priorities, under the administration of President Guillermo Endara, are reducing unemployment (which is estimated at 15.7 percent), preparing to assume ownership of the Panama Canal at the end of this century, and promoting tourism. Last year, tourism brought in $195 million--more than bananas, coffee, shrimp and sugar exports combined. Panama now has 4,000 hotel rooms, of which 1,000 are rated first-class. Angelica Guinard, deputy director of the Panama Government Tourist Bureau, says the country had 325,000 visitors in 1991, a number expected to rise to 350,000 by the end of 1992. "The government has declared tourism as a priority for economic development," says Guinard, adding that Panama has a lot to offer. "We have the canal, we have the San Blas Islands, we have an indigenous Indian culture. Besides that, we have a dollar economy and the most modern infrastructure in Central America." To further encourage tourism, the Panamanian government is drawing up a $300,000 master plan with the help of experts from the Organization of American States and other agencies.

Although Panama continues to face a myriad of problems, the country's future is looking brighter. For one thing, many military personnel, principally from the national police force, have been transferred to civilian positions. Secondly, Panama is expected to show six percent economic growth in 1993 and will hold free elections in 1994. Even the recent street demonstrations calling for social and political change are viewed as a positive factor. "I think the protests are a sign of a vigorous democracy," remarks journalist Eisenmann. "I'd be alarmed if there weren't any."

Larry Luxner is a freelance journalist based in San Juan, Puerto Rico.


Visitors to the Finca Agroforestal Rio Cabuya outside Panama City are greeted with an unusual sight: more than a dozen incubators housing 2,100 baby iguanas in various stages of development. Sand-filled containers topped with corrugated metal provide a home for the reptiles. In the middle of all this is forestry engineer Maritza Isabel Jaeu. "The iguana is an endangered species, especially pregnant females, because they're prized for their meat and eggs," she explains. "Our aim is to preserve the species, repopulate the areas that are protected and establish iguana farms in rural communities so people can get iguanas from the farms and not have to go to protected areas to hunt them." An added benefit: if Panamanians eat iguana meat, they will be less likely to eat beef, thereby reducing cattle grazing and preventing further destruction of the country's forests.

The iguanas, along with a related experiment to farm agatis paca--a squirrel-like rodent known for its tasty meat--are among several innovative projects sponsored by Panama's Asociacion Nacional para la Conservacion de la Naturaleza (ANCON), one of the most aggressive, outspoken and successful environmental groups in Central America. Under ANCON's leadership, some 12 percent of Panama's land surface has been converted into national parks, among them the 1.5-million-acre Darien National Park along Panama's eastern border with Colombia; the 50,000-acre Soberania National Park north of Panama City, and the 300,000-acre Chagres National Park along the upper Chagres River.

Since its creation in 1985, ANCON has been headed by 30-year-old Executive Director Juan Carlos Navarro, who studied at Dartmouth College and earned his master's degree in public administration from Harvard University. According to Navarro, this nonprofit organization has a $1.5 million budget, a paid staff of 60 people, around 100 corporate associates and more than 3,000 local supporters. "The key to our success is that from the start ANCON has been run from a results-oriented approach, incorporating the leadership and business acumen of the country's top executives," says Navarro. "We are run like a private business to produce a public good. At the end of the year, instead of getting a dividend check, the board of directors contributes an average of $5,000 to $10,000 each. These people are not just talking about conservation, they're putting their money where their mouth is." Among ANCON's 12 board members are Gilberto Guardia Fabrega, chief of the Panama Canal Commission; Fernando Eleta, owner of Panama's biggest television station, Stanley Motta, one of the country's largest liquor distributors, and Ira Rubinoff, director of the Smithsonian Tropical Research Institute.

In a recent interview in his Panama City office, Navarro remarked, "Since our inception we've turned Panama's system of parks, which used to exist only on paper, into a real system of nature reserves. Furthermore," he continues, "we have pioneered at a regional level massive use of the media, particularly TV, to educate people and press for environmental protection. We have initiated what will undoubtedly become a strong private-sector institution. This is vital. ANCON is immune to politics, and it guarantees a permanent watchdog on the environmental issue." Despite these advances, Navarro admits that there is much more to be done. "In 1950, two-thirds of Panama's land area was covered by forest. Today, it is exactly the reverse: two-thirds of the country has been deforested. We are losing between 50,000 and 100,000 hectares of forests every year" adds Navarro. "What this means is that the Panama Canal, water supplies and electricity are at stake, plus the destruction of Panama's priceless natural resources, including thousands of species found nowhere else on earth."

The Darien National Park, internationally renowned for its natural and cultural wealth, has been declared both a World Heritage Site and a Man and the Biosphere Reserve by UNESCO. ANCON assisted in the development and implementation of a detailed management plans for this preserve as well as training and equipping park rangers, posting signs, fencing park boundaries and maintaining park ranger stations in Pirre and Cruce de Mono. An experimental farm at Rio Cabuya was also founded with help from ANCON. Here, in addition to iguana-raising, personnel help neighboring communities in agroforestry techniques, thus mitigating pressure on the areas' forests, which are critical to the preservation of the Panama Canal Watershed. Another important goal of the Rio Cabuya project is to protect the vulnerable southern and eastern borders of Soberania National park from encroachment and deforestation. To that effect, a 46-kilometer boundary patrol trail was built, and 15 kilometers of park boundaries from Cerro Cotorra to the community of Chilibre Centro were reforested with 10,580 trees to create a living natural fence. Despite ANCON's high-profile presence throughout Panama, not everyone is happy about the organization's activities. "I've personally had death threats," Navarro said. "We're changing the way our country looks at the environment, and the way we deal with lumber concessions. This is upsetting a lot of privileged lumber magnates." The young executive added, however, that "we have managed to convince a clear majority of Panamanians that we must protect our own interests," and that "cattlemen will be our future allies. They're coming to realize you can have both cattle and conservation. We simply want to stop deforestation."
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Title Annotation:includes related article
Author:Luxner, Larry
Publication:Americas (English Edition)
Date:Nov 1, 1992
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