U.S. Departure will be windfall for Panama
By Tom Carter
THE WASHINGTON TIMES
he world's largest moving sale is under way in Panama.
The United States is pulling out and turning over more
than $4 billion in prime real estate to the Panamanian
government. It will all be in Panama's hands as of noon on Dec.
31 under the terms of a treaty signed in 1977.
Panama, in turn, is selling thousands of acres of land,
thousands of office buildings, barracks and warehouses, port
facilities, airports, and residential housing to the highest bidder.
The government is working hard to promote the potential of
these "reverted" properties, hoping to find investors with deep
pockets to turn Panama into the regional banking, shipping and
ecological tourism hub of the Americas.
"Panama is open for business," said Nicolas Ardito Barletta,
general administrator for the Interoceanic Region Authority
(ARI), the government agency responsible for selling the
reverted properties. "There is no reason why Panama cannot
become a Singapore of the Americas. Panama is positioned
where Singapore was in the 1960s."
Mr. Barletta, the president of Panama from 1984 to 1985,
said the country is particularly interested in maritime, banking
and tourism investment.
Mr. Barletta is particularly proud of the City of Knowledge
project to be located at what is now Fort Clayton, just outside
Panama City. It will offer degree programs from universities
from around the world, led by the Smithsonian Tropical
Research Institute and Texas A&M University.
"We may be at the right time, at the right place with the right
idea," he said, with obvious enthusiasm for the projects.
Some critics dismiss Mr. Barletta as a "dreamer" and
accuse him of running up Panama's external debt of $7.5 billion
during his stint as a World Bank vice president from 1978
through 1984. Mr. Barletta rejects the charges.
Still, some $1.5 billion worth of property already has
reverted to Panama, and much of that has been sold to foreign
and Panamanian investors who have signed contracts
committing more than $1 billion in investment. Construction is
under way everywhere in Panama City.
"As the infrastructure is laid and people begin seeing where
the money is being spent, it opens the doors to more
possibilities," said Michelle Douglas, an ARI spokeswoman.
"We expect much more investment as we gain momentum."
A $300 million cruise-ship port is being built in Amador at
the Pacific end of the canal by a South Korean firm. It will
serve some of the 300 cruise ships and 200,000 tourists that
now pass through the canal each year without stopping. With
the help of the Smithsonian Tropical Research Institute, a local
hotel magnate is building a $10 million luxury ecology resort in
the heart of the rain forest.
The Spanish hotel company Sol-Melia is building a hotel in
the Colon Free Trade Zone. There are golf courses and
shopping centers on the drawing board. Chinese and
Taiwanese firms are building transshipment port facilities and
And the Kansas City Southern Railway has purchased the
47-mile rail line that runs alongside the canal, which it plans to
operate as the Panama Canal Railway Co.
"The reason we are in Panama is because we saw the
possibility of building a ... land bridge" for moving shipping
containers, said Dario Benedetti, general manager of the
railway, in his office in Balboa. "We saw the container ports
had more success than anybody had originally anticipated, far
exceeding container volume projections."
Mr. Benedetti said his company is investing $60 million in
the first phase of rebuilding and renovating the railroad.
Panama has all the ingredients necessary to become a major
transportation hub for this hemisphere, he said.
Mr. Benedetti pointed out that Panama uses the U.S. dollar
as its currency, making its money the most stable in the region.
It has extremely liberal banking laws, a mature insurance
industry and the largest foreign registry of ships in the world.
ARI officials also point to the benefits of Panama's
flourishing free-trade zone in Colon and note that most
Panamanian businessmen speak English.
"You have all these ingredients to help catapult Panama into
a regional hub," Mr. Benedetti said.
He said his company has found the business environment
affable, even during a recent dispute that could have gotten out
At one point his company, another company that is taking
over an airstrip in the reverted Albrook Air Force Base in
Panama City and a Hong Kong-owned shipping company
discovered they all had been granted concessions to the same
piece of land. But Mr. Benedetti said the problem was
resolved to everyone's satisfaction.
"It was difficult and complicated, but there was a dedication
at the highest levels to getting the problem resolved so the
projects could go forward. It was sorted out and we are all still
here working," he said.
Asked whether he would recommend investing in Panama,
Mr. Benedetti said the nation's stock market was up by more
than 30 percent this year, and that crime "is not a big concern
here, as in some other Latin American countries. You have to
be careful, but no one has bodyguards."
Control Risks Group Ltd., an Arlington, Va., consulting firm
that identifies risks to companies and employees working
overseas, gives Panama good grades.
Except for the Panama-Colombia border area in Darien,
which it rates as a "high" security and travel risk, Control Risks
rates Panama as a low political risk, and medium-to-low
security and travel risk.
Still, several officials caution American investors to be
careful, saying the judicial system is subject to corruption and
outside political influence.
Two incidents in particular typify the problems faced by
foreign investors in Panama, according to U.S. observers.
Pedro Miguel Gonzalez, the son of a prominent Panamanian
politician, was accused in the 1992 murder of U.S. Army Sgt.
Zak Hernandez. Despite overwhelming evidence, Mr.
Gonzalez was acquitted in November, while the investigating
police officer now finds himself under indictment.
Second, the bidding processes employed until recently by
ARI are considered corrupt, at least by U.S. standards. That is
how Hutchinson Ports Holdings, a Hong Kong company with
close ties to Chinese leaders, won out over an American
company for the rights to coveted ports at either end of the
"We are forced to tell new American investors to be very
cautious when dealing in Panama or with the government," said
a Western diplomat based in Panama. "The courts are not a
Judicial reform programs consume a sizable chunk of U.S.
aid to Panama, being the second most important American
concern after protecting Panama's environment.
Nevertheless, some American companies have had success
in buying reverted properties.
The U.S.-based Stevedoring Services of America, in a joint
venture with the Panamanian Motta and Heilbron families,
opened the Manzanillo International Terminal (MIT) in 1995 in
Colon, and its 700 employees now handle 50,000 shipping
containers every month.
MIT has invested $200 million in the past three years.
"Everyone is so worried about what will happen Dec. 31,
1999. But we at MIT can show that in Panama things can be
done correctly," said Carlos Urriola, MIT vice president.
"Everything is going excellent. We feel that MIT is a showcase
for Panama and the world."
There have been numerous accusations that members of
Panama's ruling party, the Democratic Revolutionary Party
(PRD), is corrupt and awarding contracts improperly as
Last summer, the minister of housing, Francisco Sanchez
Cardenas, and several other government luminaries won the
right to rent some of the 462 houses that became available
from the reversion of Albrook Air Force Base. As renters, they
became eligible to buy the houses at about half the market
ARI officials dismiss the charges of corruption, but doubts
"When the river rumbles, rocks are coming down the
stream," said numerous Panamanians, quoting a Spanish
proverb meaning roughly, "Where there is smoke, there is fire."
"The only people who can get reverted houses are the
political power class and their friends," said Jorge Caballero,
an unemployed office worker eating lunch at Mr. Pollo, a
fast-food chicken place. "It is not just the PRD. The political
class are all liars. They make promises to get into power and
then do nothing."
Critics also say Panama is not taking care of the property
that has already reverted, raising questions whether it can deal
with the remaining 60 percent of canal and military buildings to
be returned to Panama this year.
The School of the Americas, an army facility that was used
to train Latin American military leaders, and the Panama
Railway, both early reversions, were allowed to deteriorate in
the tropical heat and humidity before being sold. But Mr.
Barletta claims his critics are out of touch.
"Those reversions took place before this agency existed.
ARI is only three years old. We are bringing order to the
process and we have good maintenance on the properties
we've been given," he said. "Our critics are relying on totally
The winners in the bidding system say things are going fine.
John McTaggart, the head of a group of American retirees
who just won a $6.7 million bid for 132 houses on Albrook,
said his members are generally pleased with the reversions and
ready to spend their twilight years in their Panamanian
The government mandates medical, hotel and restaurant
discounts for foreign retirees in Panama, and Mr. McTaggart
and his cohorts see no reason to leave.
"I could never understand why American retirees went back
to Florida or Texas," said Mr. McTaggart, who is married to
Panamanian woman and has spent most of the past 30 years
here. "My friends are here. Why would I leave? It's a kind of