Breathing New Life into a Key Crossroads of World Trade    

By approving the expansion of the Panama Canal on 22 October 2005, the Panamanian people will take a historic decision that should ensure their country continues to play a key role in global maritime trade. H.E. Omar Jaen Suarez, the Ambassador of Panama to France, talks to our readers about the project to widen the canal and the political reforms undertaken by President Martin Torrijos.

The Diplomatic Letter: Mr Ambassador, seven years after regaining control of the Panama Canal, the Panamanian people has approuved in a national referendum on last October 22nd on a plan to widen the inter-ocean waterway. Is the expansion of the canal vital to your country’s future?

H.E. Omar Jaen Suarez: This last October 22nd, the Panamanian people has answered the following question: “Are you in favor of expanding the Canal?” Their answer is vitally important, in that its consequences will be felt for a long time to come. This vote has extremely high stakes: it will determine both the medium- and long-term future of our country as well as its ability to remain competitive on the fast-changing global market. The waterway that now transports some 14,000 ships between two oceans is already operating at nearly full capacity. What’s more, it can only handle Panamax type ships weighing up to 75,000 tons. The line of ships waiting in Pacific and Caribbean anchorages to cross through the canal is growing steadily longer, sometimes stretching out a full 100 ships. Ship builders are also making more and more post-Panamax vessels that cannot fit through the canal. Consequently, modernizing the Panama Canal – by expanding the locks and deepening the entry and navigation channels to accommodate 150,000-ton container ships – will improve our country’s port system and boost its importance as a key service and trade hub. In fact, our port system is already becoming the heart of a key pole that links all the planet’s transportation and communication routes, as Ferdinand de Lesseps had initially planned when he laid out his maritime passageway in America. The Panama Canal has become a vital part of maritime transport in the 21st-century global economy. The global economy is changing ever and ever faster, with the recent arrival of powerful new actors such as India and, above all, China. Expanding the canal will have a very positive economic and social impact on our own country and on the region as a whole. It should enable Panama to continue posting annual economic growth rates above 7%, quadruple canal revenues starting in 2014, and reduce unemployment to 4%. In addition, it will give countries bordering the Pacific Ocean greatly expanded access to the Atlantic. I would also like to underscore the fact that this project will have minimal impact on the environment and will not affect rural areas near the canal.

T.D.L: Your government has announced the launching of other major infrastructure projects in addition to the canal expansion plan, such as the construction of a megaport on the Pacific coast. Could you outline the government’s national development strategy, in light of the dynamic Panamanian financial platform?

H.E.O.J.S.: A worldwide network of maritime transportation routes is building up around the beltway formed around the globe by the equatorial route, which is exactly where the Panama Canal lies. This trend is growing stronger right before our very eyes, with the plan to expand the canal. It also explains the appearance – over just the past dozen years – of large port centers at the two entrances to the inter-ocean waterway, with modern docks that can handle post-Panamax type ships. These two ports are just 60 kilometers apart. One is on the Pacific, next to Panama City. The other is on the Caribbean, near the city of Colon. They are linked by a railroad that crosses the isthmus and has recently been modernized. Container ship traffic has increased tenfold since 1995, and is still growing at a fast pace.

The Panama port system will be an integral part of the trade, services, and goods distribution hub that is building up around the Panama Canal. It is already South America’s leading port, by far, as regards the number of container ships handled (over 3 million a year). With the opening of the megaport on the Pacific, its capacity should soon rise above 5 million container ships, as many as Antwerp. Right now, large ships that call at Panamanian ports, especially container ships, offload their cargo onto smaller ships. Panama is an important Pacific Ocean port for South America, Central America, and the Caribbean.

The two ports and the canal form an indissociable whole at the heart of the continent. They lie on an isthmus that has become the hub of the new worldwide economy, which is governed by the regulations pertaining to the globalization of information and trade. The megaport project is located in the special Pacific economic zone, which spreads out over 2,000 hectares at the entrance to the Panama Canal. Companies like Dell and Singapore Technologies Aerospace, which specializes in aircraft repair and maintenance, are now working in this zone. There is also a very large international airport there, on a former U.S. military base.

On a broader level, Panama’s development strategy seeks to: put our strategic location to full use; gain wider access to the extremely active and highly competitive international market; and ensure that our labor force is better trained, more productive, and able to work in sectors with high added value.

T.D.L.: There were high hopes for widespread reforms when voters elected President Martin Torrijos, on 2 May 2004. On what specific areas will he focus during the second half of his presidency, as he continues his drive to stabilize the national budget? Will he be taking special measures to fight unemployment and poverty?

H.E.O.J.S.: Immediately after taking office, on 1 September 2004, President Martin Torrijos launched a program focused primarily on social concerns: battling employment, which now hits nearly 13% of the working population; battling corruption in the public sector, which grew tremendously under the previous government; and battling insecurity, which chiefly concerns the most underprivileged social categories in urban areas.

We have already made positive headway. At the end of two years, unemployment has dropped under 9%. New anti-corruption measures have been put in place, such as the transparent use of all public funds, including funds reserved for the President of the Republic, whose accounts can even be viewed on the Internet. There has also been a slight drop in the number of crimes committed.

But the government has done far more than this. It has set up programs to fight child malnutrition and to supply direct aid to the most marginalized groups, especially in rural or indigenous zones. We also reactivated health programs and state-subsidized housing programs that benefit tens of thousands of Panamanians. But first and foremost, let me underscore the tremendous efforts made by the government to stabilize public finances and attract greater foreign investment. Foreign investment stock has risen to 3 billion dollars in two years time, pouring into sectors such as real-estate, ports, tourism, trade, banking, and communications. These initiatives have jump started the Panamanian economy, which now has an annual growth rate of 7.5%. This is the highest rate posted by Panama in many, many years, and is 2.5 points higher than the Latin American average.

We must nonetheless never forget that the key to improving social conditions is, firstly, fostering economic growth, which creates jobs and wealth, and secondly, redistributing this wealth judiciously. The biggest challenges for our society and our government, the ones that will be the main task during the second half of the Torrijos presidency, are: reducing social inequalities, which are still too great; and raising the standard of living of the nearly 40% of the population that live below the poverty line, especially in rural and indigenous zones (where 10% of the national population live, close to 80% of them in poverty). Education is another top priority on the government’s social agenda. We will do more than just teach people to read, with 94% of Panamanians over age 10 already literate (except in indigenous pockets, where the illiteracy rate runs around 40%). We will improve the quality of education, especially vocational training. It must meet the demands of a fast-changing market and an economy that is comprised 85% by the service sector and exports on a highly dynamic and competitive global market.

T.D.L.: Could you describe the rather controversial heritage of General Omar Torrijos, twenty-five years after his death?

H.E.O.J.S.: General Omar Torrijos lived during a period in Latin American and Panamanian history that is now behind us. In a declining democracy undermined by extreme corruption, where all power was in the hands of a greedy oligarchy with incredibly outdated social ideas, General Torrijos took part in the 1968 coup d’etat against an elected president who had been a fascist dictator. He set up a military government, as did most countries in the region. He was considered an authoritarian and even dictatorial leader. He launched controversial internal reforms, designed primarily to: fight social exclusion; foster the social advancement of large layers of the population that had no political power; and implement a wide-scale infrastructure program. He launched a strategy to champion the Panamanian cause among the international community. Finally, he led very difficult but successful negotiations with the United States that ended with signing of the 1977 Torrijos-Carter treaties, which brought an end to the Panamanian state’s worst conflict with the world’s leading power. It also ended an even graver national identity crisis, and gave Panamanians a newfound sense of dignity. These treaties gave us back jurisdiction over all of our national territory in 1979, when the colonial enclave known as the “Canal Zone” disappeared. U.S. military bases were dismantled. The Panama Canal was finally returned to Panama in 1999. But the government had to work hard for many years, conducting long and very difficult negotiations between 1971 and 1977, in order to make that happen. It had to be strong enough and popular enough to get the treaties approved by national referendum. All of the previous government’s efforts ran up against the oligarchy’s internal power struggles, which undermined the negotiations launched in 1964. This period in our history is examined in a two-volume book I recently published: “Las Negociaciones de los Tratados Torrijos-Carter 1970-1979” (Panama, 2005). It goes a long way in explaining General Omar Torrijos’ popularity and the political heritage he left to his son, President Martin Torrijos. At the end of his second year in office, President Torrijos has a 68% approval rate. But the Panama of today is very different from the Panama of the 1970s. We live in a real democracy. The army was disbanded 16 years ago. Human rights are now fully respected. To tell the truth, with over half of the current population born after General Torrijos’ death, Panama has become a country that looks more to the future than to an already distant past. It is striving to strengthen the rule of law, carry out the canal expansion project, and make the country an integral and fruitful part of the 21st-century global economy.

T.D.L.: Panama handed over the rotating presidency of the Central American Integration System (SICA) to Costa Rica in July. Could you outline the headway made under Panama’s stewardship in strengthening regional economic integration?

H.E.O.J.S.: Even though Panama does not share the same historical roots as the countries of Central America – aside from the fact that we all were part of the Hispanic Empire during the colonial era – our political and economic ties have been growing steadily stronger for the past fifty years or so. Our economies compliment each other more than they rival each other. Panama is moving towards integration working through SIECA (Central American Economic Integration Secretariat), the economic branch of SICA that handles the purely political aspects of the Central American regional integration process. This past July, Panama took stock of the strides made during its 6-month SICA presidency: we laid out strategies for creating a regional energy market; we implemented measures to eliminate malnutrition, now suffered by nearly one million children in our region; and we opened negotiations with the European Union on a free-trade agreement. The concrete projects that have grown out of this cooperation are also worthy of note, such as the king-size regional oil refinery that will be built in Central America (hopefully in Panama) to process Mexican and Venezuelan oil. The advance work for this project, which will take an estimated investment of close to $6 billion, is already far along. Panama’s staunch determination to strengthen its economic ties with the States of Central America is also witnessed by ongoing negotiations for free-trade agreements, and by our country’s membership in the Central American Bank for Economic Integration (CABEI) since August.

T.D.L.: Extending the Venezuela-Colombia gas pipeline into Panama, as approved this past July, is a key step in the regional energy integration process. Could you describe some of the other arenas in which Panama is cooperating with its two South American neighbors?

H.E.O.J.S.: We have excellent and closely maintained relations with our Colombian neighbor. We have great esteem for the Colombian people, for their strong work ethic, their endurance, their love of culture, and their contribution to our own history, a history shared by our two countries between the mid-18th century and 1903. We also share a common border and are working together closely in a merciless battle against trafficking of all sorts, especially drug trafficking. We also signed an agreement with Venezuela this past June, during President Chavez’s visit to Panama, for bilateral cooperation in refining, supplying and selling oil. Then in July, Presidents Torrijos, Uribe and Chavez signed a memorandum of understanding extending the pipeline from Venezuela to Panama, via Cartagena. In August, during an official visit to Panama, the Colombian Foreign Minister put forward new agreements laying out a joint agenda on energy, security and migratory flows. All of these measures bear witness to our strong ties and close contacts with our neighbors to the south. We share a long joint history and a wide range of interests, as well as deep-rooted person-to-person ties. Don’t forget that the countries on the northern face of South America, Venezuela and Colombia, are Panama’s leading trade partners in its free-trade zone. Our country’s prosperity and security are also due in part to our good ties with Colombia, our most important next-door neighbor.

T.D.L.: In addition to strengthening your country’s ties with South America, President Torrijos made an official visit to Cuba in October 2005, after reestablishing the diplomatic relations that had been cut off by his predecessor. Can you tell our readers what prompted this move?

H.E.O.J.S.: Panama and Cuba have had friendly relations for many long years. As Caribbean residents, our two peoples have very similar temperaments. They forged their close ties during the colonial era. The imbroglio that led to a breaking off of diplomatic ties with the Moscoso government is a thing of the past. President Torrijos’s government wanted to put these regrettable events behind, and rebuild bridges between two countries that have great respect for each other, despite their differences. Our economic and trade ties with Cuba are another illustration that our free trade zones also benefits the regional market of which the Caribbean islands are a part. What’s more, we have excellent ties with all the countries on the American continent and receive frequent visits from the presidents of neighboring countries in Central America as well as the presidents of Mexico, Colombia and Venezuela.

T.D.L.: While the United States withdrew its troop from Panama in 1999, your country has yet to sign a long desired free-trade agreement with its northern neighbor. Can you tell us how a free-trade agreement would help your country? What obstacles must still be overcome, before the treaty becomes a reality? How would you describe Panama’s current relations with Washington?

H.E.O.J.S.: We have had very friendly ties with the United States for a great many years, and have cooperated in a wide range of areas. There hasn’t been any cause for conflict or mistrust between the two countries since they resolved the canal problem with the Torrijos-Carter treaties. In fact, the United States is our biggest client and leading supplier. The U.S. is a gigantic market to which we would like to gain wider access, an issue that has been debated in long and difficult negotiations in view of signing a free-trade agreement. What’s more, the American and Panamanian peoples share the same values, laying great importance on democracy and freedom. President Bush visited Panama in 2005, and President Torrijos has already been to Washington. Both of our governments understand full well that Panama has become an indispensable trade, transportation and communications hub, and not only for our continent but for the entire planet. We have been determined, throughout our history, to foster better understanding between the most widely varied peoples and cultures, as well as peace. We are consequently at the disposal of all those who seek to resolve conflicts and achieve conciliation. In that light, Panamanian international policy aims to boost our image as a reliable country that respects others, champions understanding and dialogue between all, and fosters consensus.

T.D.L.: The countries of Central America are set to open negotiations on a free-trade agreement with the European Union. Apart from these economic ties, does Europe play an important role in your country’s foreign policy? In what areas would you like to see the interregional political dialogue strengthened?

H.E.O.J.S.: We want to revive our economic ties with Europe. In fact, the European continent plays a key role in our foreign policy. It represents a large market for our products and is a potential source of tourists. We believe in the virtues of multipolar relations, and thus support the rise of new political action poles working to bolster peace and international security. We believe that a stronger Europe – one that speaks in a united political voice – would be an additional guarantee of peace and equilibrium in a world plagued by conflicts that end up affecting all of us, to one extent or another.

T.D.L.: During a trip to France this past June 15th, Panamanian Vice President and Foreign Affairs Minister Samuel Lewis described the Panama Canal expansion plan to French officials at the French Geographical Society, where the decision to build the canal was taken more than one hundred years earlier. Are you hoping to see French investors get involved this project? In what other sectors does Panama offer good investment opportunities? In light of your own university experience in France, are there other areas where you would like to see bilateral cooperation expanded?

H.E.O.J.S.: The warm welcome given to our First Vice-President and Foreign Affairs Minister Samuel Lewis Navarro, when he came here to present the Panama Canal expansion project to French diplomatic, business and academic leaders, did a great deal to help rekindle bilateral ties. The Geographical Society, the cradle of the Panama Canal, and its president, Mr. Jean Bastie, were particularly welcoming. The expansion plan presentation heightened the symbolic weight of this important historical site, in that it caught the attention of the public, which had been rather indifferent until that point. Minister Navarro met with fifty French firms interested in the project at MEDEF International headquarters. This reenergized ties between our two countries’ business communities, which will hopefully grow steadily stronger. French firms got a chance to explore several investment opportunities other than those created by the canal expansion plan, which will cost $5.2 billion and will be carried out between 2007 and 2014. The Panamanian economy is booming right now. Panama offers investors undeniable advantages, because of its international role as a regional business platform in a wide variety of sectors: trade, banking, the insurance industry, corporate representation, and communications. Let me also underscore the strong interest in creating a direct air link between Panama and France, perhaps through Air France. This would foster increased trade and tourism between our two countries, and, on a wider lever, between Central America and Europe.

I would also like to use this opportunity to say that I hope to see a wide-scale program of cultural cooperation reestablished between Panama and France. And why not open a Lycée français in Panama, the most international and most cosmopolitan city in the entire region? This would heighten our society’s multilingual and multicultural character, and would most certainly help France and French culture gain a firm foothold in the heart of the Americas. Finally, we would like to enhance our political ties at the highest level. We would like France’s top officials to come visit our country, to give them a better appreciation of its unique characteristics. Panama has become an indispensable crossing point between the planet’s two great oceans. France has tremendous capital in our country, as it launched its most ambitious infrastructure project on the American continent in Panama, more than one century ago.