Tuesday, November 13, 2012

Country Focus: Panama

November 3, 2012, Panama parade celebrating Panama independence from Colombia. This independence provided the overall means for transfer of the Panama Canal from United States ownership to Panama ownership (Foundation for Democratic Advancement).

Insight into the contemporary politics of Panama

This information on Panama was compiled by Mr. Stephen Garvey, FDA Executive Director, on a recent visit to Panama. Readers may see parallels with many other democracies. The information below focuses on some of the key political issues facing Panamanians.

1. The Panamanian President is elected for a single five year term. The current president is Mr. Ricardo Alberto Martinelli, who was elected in 2009. The intent of this term limit is to reduce political corruption and discourage coup d'etats. Yet, at the same time, the term limit may encourage Presidents to take what they can while in office through opportunistic and self-serving policies, expenditures, and laws.

2. Based on FDA sources in Panama, Panamanians as a whole are dissatisfied with the current President from growing Panamanian debt, the President pursuing unnecessary mega projects, and political corruption such as non-tendered public contracts. Panamanians are waiting for President Martinelli's term to end in 2014. For examples, the current Panama City project involving the development of an offshore road around the second old city of Panama (Casco Viejo) was not subject to a competitive bidding process, and it is questionable what benefit this road offers Panamanians. In addition, there are the land titling scandals in Juan Hombrón, Paitilla, Costa del Este, and Chilibre in which the government granted land titles to anonymous companies and friends. Further, the government conducted suspect bidding processes on the multi-billion dollar Panama Canal expansion project (Council on Hemispheric Affairs).

Despite this discontent with President Martinelli, Panama's unemployment rate in 2011 was 3 percent (Index Mundi). Yet, Panama's debt at the end of Martinelli's term will be about $16.75 billion dollars. Panama's debt level prior to Martinelli was $10.83 billion dollars. Martinelli's increase in Panamanian debt is 55 percent more than the debt incurred by the previous President, Martin Torrijos (Panama-Guide.com).

3. Panama has a multi-party system. There are two main political parties, and nine other political parties. No one party has enough popularity to form government, so coalition governments are the norm in Panama. (List of Political Parties in Panama, Wikipedia).

4. The Panamanian government is selective of what laws are enforced. Also, laws that are enforced may be circumvented through bribery. For example, traffic laws are highly enforced as demonstrated by scannable Panamanian ID cards which contain information on traffic violations and other offenses, and numerous and daily speed traps along the Trans American highway in Panama.

In contrast, Panama has a number of national parks and environmental laws, and yet these laws are mostly not enforced. And even when they are enforced, the enforcement is not sustained. For example, through FDA sources, turtle eggs were being sold along a main road in front of a police station in the Pedasi area. It is illegal to sell turtle eggs. Some citizens complained. The police stopped the sale of the turtle eggs, but after a month or so, the sale of the eggs resumed in front of the police station.

5. Through FDA Panamanian sources, the national government uses tax dollars to pay for partisan advertisements which support incumbent candidates and the ruling parties.

6. The transparency of private and public finances has improved. Though there are still loopholes which allow for illegal financial activity such as transparency is subject to request only.

(Panama has not been able to finalize an FTA with the U.S.A. due to the Economic Co-operation and Development (OECD) labeling Panama as a “grey” tax haven. As a result, President Ricardo Martinelli recently signed the country’s first-ever tax-information exchange treaty on November 30, 2010 in an attempt to remove Panama from this “grey list.”

This tax information exchange treaty will reform Panama’s banking system, which has been scrutinized for its lack of transparency. Until recently, Panama had resisted international demands for the release of information on foreign investors’ holdings. The reform treaty allows for full disclosure of information upon request."

In April 2009, the Economic Co-operation and Development (OECD) included Panama on a “grey” list of 12 nations lacking financial openness. Panama became a “tax haven” because individuals and corporations were exempt from paying taxes on income generated from foreign sources; these investments were shielded from any oversight following banking secrecy rules. The banking commission was bound by the strict secrecy laws, which prohibited investigating individual client accounts. In addition, the banking commission was not allowed to reveal a client’s account information to a third party unless it was subpoenaed by a Panamanian court. As a result, there was little to no transparency in the banking system (Center for Strategic and International Studies).

7. Recently, the national government has changed the election laws to make it more difficult for opposition presidential candidates to compete in the upcoming 2014 Panamanian Presidential election. (As of September 2012, President Ricardo Martinelli signed into law a new election law which regulates independent candidatures for presidential elections. The Electoral Tribunal and opposition Frente por la Democracia de Panamá (FD) called for the law to be vetoed because it favors the government candidates and parties over opposition candidates and parties. The new law eliminates voting by party lists, establishes primaries six months prior to elections, and obliges independent candidates to collect a minimum of 2 percent of the total votes cast in the previous election in order to compete. Based on FDA's audit of other countries, the 2 percent threshold is excessive, and inconsistent with the 0.5 percent threshold established in countries like Venezuela. In addition, Panama has no financial transparency of campaign contributions and expenditures, and therefore, the opposition parties believe that a door is open for government candidates and parties to use public funds to finance their campaigns (The Argentina Independent).

8. Panama has no safety net for its citizens. Panamanians are left to fend for themselves. However, due partly to the warm climate and availability of food, most Latin American countries do not have safety nets.


Based on FDA Panamanian sources and research, Panama's politics are the same under the current civilian rule as it was under the military rule in the 1980s. Panamanians have improved freedom, but the political corruption associated with Panamanian military rule has remained.

To advance its democracy, Panama needs public transparency of election finances, and open and transparent competitive bidding process for all government contracts. Moreover, Panama needs enforced conflict of interest laws to reign in political corruption which is undermining Panamanian democracy. Further, Panama needs equatable and enforceable electoral finance laws which create an equal and fair financial playing field for candidates and parties.

Entrance to Former Supreme Commander Manuel Noriega's residence in Panama City. Under Manuel Noriega, military rule was imposed on Panamanians. Civilian freedoms were severely restricted if citizens were not connected to the military regime. (Photo Source: Foundation for Democratic Advancement (November 3, 2012))

Mr. Stephen Garvey, Foundation for Democratic Advancement Executive Director

Question for Readers:

Based on the information above, what political parallels are there between your home country and that of Panama?


  1. I live in Canada, but I can still see corruption as a core element of our "democracy". In fact, the government in Quebec has been taken to court for funding the mafia and for favouring contracts to the mafia for construction projects.

    It is always unfortunate to see such an amazing element of human invention (democracy) be taken so far out of context. We need real leaders, men and women that can be greater than power, greater than money, greater than fear. I pray that I will live to see the day when this can happen ANYWHERE on the planet...

    1. Thanks for sharing your perspective.

      The human condition (imperfect) always allows an opening for misconduct and corruption regardless of the system. Obviously the more sound the system and the more safeguards in the system against corruption the less likelihood it occurring.

      Is praying enough for honest, real leaders to emerge? The recent FDA post on social entrepreneurs suggests that people need to be pro-active by creating their reality now, rather than waiting, especially waiting on government.


Thank you for sharing your perspective.