Panama at the Polls: A Study in Political Weakness

On May the 3rd, 2009, Panama will elect a new President. With less than a week to go, opinion polls show Ricardo Martinelli, the candidate of the Democratic Change Party (PCD), with a comfortable lead over Balbina Herrera of the incumbent Democratic Revolutionary Party (PRD).

If polls prove accurate, the result would come as a rather surprising turnaround. Since 2004, the current PRD administration, of President Martín Torrijos, has scored a series of successes that at some point made its continuity look like a formality (although the President is barred from running for immediate reelection). Economic growth averaged 8.6% in 2004-2008, reaching nearly 12% in 2007. In October 2006, Torrijos achieved a major political victory when Panamanian voters overwhelmingly supported in a national referendum his plan to expand the Panama Canal, one of the largest investment projects in Latin America, to the tune of $5.2 billion. In the past 5 years, poverty rates have gone down by about 5% to about 28% of the population, and even income distribution seems to have improved marginally, while remaining very inequitable. All things considered, there was, until recently, the perception, both in the country and abroad, that the PRD had done a very good job of unleashing Panama’s potential as a regional commercial and financial hub, a kind of Latin American Singapore.

Given these results and perceptions, any candidate running on a platform of change should face heavy odds. Yet, that has not been the case. Moreover, Mr Martinelli appears as an unlikely vehicle to rattle a solid administration. Twice sacked from previous governments (from opposite parties), Martinelli has long been regarded as a colorful figure in the Panamanian political landscape. On the back of a large personal fortune, the PCD’s standard bearer has run a very effective campaign, almost bereft of contents, and defined by a relentless call to throw the rascals and the elite out (one of his main campaign slogans is telling: “They enter government empty handed and leave rich”). Blessed with a populist touch, Martinelli resembles, in many ways, a tropical version of Silvio Berlusconi.

Besides the effectiveness of Mr Martinelli’s message, there are real issues that explain the incumbent party’s vulnerability:

• Fractiousness of the PRD’s internal politics. The PRD has become a victim of its own success. The perceived achievements of the government unleashed a vicious internal fight to succeed Torrijos, in which Herrera, a Cabinet member in his administration, narrowly prevailed over Juan Carlos Navarro, until recently Panama City’s mayor. Navarro, currently the party’s vice-presidential nominee, has made no secret of his dislike for both Herrera and Torrijos, and is clearly acting with an eye on a presidential run in 2014, a date that is also on the mind of the current President. Herrera has looked like a weak candidate throughout. Moreover, she has been tainted by her close association in the past to former strongman Manuel Antonio Noriega.

• Crime. In 2008, the national murder rate jumped 47%. It has nearly doubled from 11 homicides per 100.000 inhabitants in 2005 to 19 in 2008. According to local opinion polls, 47% of the Panamanian population regards crime and insecurity as the country’s top concern, more than twice the figure for any other issue.

• Corruption fatigue. Panamanian politics has long been defined by close, almost incestuous, links between business and political elites, as well as by the dominance of two main parties – the PRD and the Panameñista Party (or Arnulfista Party), with very little ideological differences between them. The intertwining of the elite, the cartelization of politics, the legacy of Noriega’s narco-dictatorship, and the country’s long acknowledged role as a center for money laundering, have made corruption scandals a permanent feature in Panama. This is yet to be tempered by the presence of strong controlling and overseeing institutions. There is a widespread perception that, just as all his predecessors, President Torrijos has condoned ethical lapses in his administration, and that only a clean break from the past offers a chance to clean up the political system. Although Mr Martinelli has been as visible a member of the elite as anyone and has formed an electoral alliance with the traditional Panameñista Party, the fact that he represents a new political movement backed by his own wealth –which is supposed to make him impregnable to corruption—has nurtured a faint hope that old corrupt vices will at last be tamed.

• Campaign finance scandals. The latter message has been reinforced by the financial scandals that have haunted the PRD’s campaign. A few weeks ago, David Murcia Guzmán, a fast-living character linked to Colombia’s recent Ponzi-scheme collapse, claimed to have handed millions of dollars in contributions to the PRD, while receiving security protection from members of the President’s entourage. While some details of the story are unlikely to be true, the accusation has stuck. It also plays against the background of a party that demonstrably received money from Colombian drug cartels in the 1994 campaign of former President Ernesto Pérez Balladares.

• Martinelli’s marketing campaign. By all accounts, the challenger’s marketing campaign has been a phenomenal success. It has come with a price tag. Martinelli is thought to have spent nearly $35 million in his campaign, a stunning figure in a country with slightly more than 2 million registered voters.

Whoever wins the election on May the 3^rd will face a more difficult situation than at any time in the recent past. Heavily dependent on international trade, Panama’s economy is being hit by the global economic downturn with particular harshness. Economic growth is expected to decelerate sharply in 2009 (3%, according to IMF; -1.3% according to EIU) and remain weak in 2010, a prospect that not even the most intensive phase of the Canal’s expansion –scheduled for the next two years—is likely to arrest. Furthermore, 2009 has seen a net reduction in the number of tons handled by the Canal, a worrying sign in a country for which activity at this passageway represents 19% of GDP and 28% of the government’s tax revenue. At the G-20 Summit in London, Panama was singled out as a major tax haven and chastised for its bank secrecy laws. This has already become an issue in the ratification process of the country’s Free Trade Agreement with the U.S. The agreement was ratified by Panama’s National Assembly in 2007, but is yet to be ratified by the U.S. Congress.

Yet, this election campaign has laid bare that the biggest challenge faced by Panama concerns, undoubtedly, its political and institutional weakness. This has become evident, first of all, in the dismal quality of political debates throughout the campaign. Almost totally devoid of substantive proposals, the campaign has been thoroughly dominated by smears, personal attacks, and frivolous marketing ploys (one example: When Mr Martinelli was accused, apparently with some merit, of suffering bipolar disorder and having undergone psychiatric treatment, his response was as robust as it was juvenile: a large media campaign with the slogan, “Yes, the crazy people in Panama are a majority! We are all crazy for a change!”). The level of political discussion seen throughout this campaign simply does not befit a country with bright development prospects. More seriously, the campaign has evinced the lack of institutionalization of political parties, the fickleness of political alliances, the chronic nature of corruption, and the disturbing, and mostly unchecked, role of money in the electoral process.

Unsurprisingly, levels of social trust in political institutions are dramatically low. According to Latinobarómetro (2008), a regional opinion survey, 84% of the Panamanian population believes that the country is run by a few groups in their own benefit, one of the highest figures in Latin America. Only 44% of the voters believe that parties are necessary for democracy (much lower than for Latin America as a whole: 56%), and a paltry 16% trust them.

Seen from afar, this election looks as a harsh reality check for a country that many thought was on the brink of a significant leap in its development level. It seems that the construction of sound political institutions and mores has fallen seriously behind Panama’s economic dynamism and potential. The current set of institutions and political actors look unlikely to provide a sound foundation for long-term economic success. Most likely, growth will continue to happen in spurts, marked by policy reversals, pervasive corruption, and increased political disengagement. In a way, political institutions in Panama look capable and stable enough to handle political change, but not political continuity. Both are crucial for any country’s long-term development prospects.

In the light of this description, it is a sobering thought that Panama, in spite of it all, can be regarded as one of the better functioning and most stable polities in Latin America. An impressive achievement though they are, the past two decades of democratic rule in the region is merely the end of the beginning.