Whither Panama?

Buoyed by the Panama Canal and its current US$5.3 billion expansion, Panama hopes to ride out the current financial tempest crashing down on the United States and much of the rest of the world.

The near future will be choppy for Panama, which is coming off the crest of a building boom, but the rest of the Central American and Caribbean region could face more drastic upheaval as economic growth, lending and remittances fall amid the worst financial crisis since the Great Depression.

While there is little the small country and the rest of the region can do to alter the course of the current global financial turbulence, Ricaurte “Catín” Vásquez, GE president and CEO for Central America and the Caribbean, suggested one way to help Washington.

“Latin America has had plenty of experience with this type of financial crisis,” Vásquez said at a BRAVO Council meeting in Panama City on Feb. 27. “We could send President Obama some of our officials who have been through this.”

The suggestion, which sparked laughter from the top business and government leaders at the meeting arranged by Latin Trade magazine, was not entirely in jest. Since the 1980s, when foreign debt defaults engulfed Latin America, to the more recent bouts of banking and currency collapses, finance officials and top executives have had to guide countries and companies through difficult times.

Michel Chancy, a past winner of the BRAVO awards and the current minister of animal production in Haiti, said the problems will be felt deeply in his country because of declining remittances and because the Caribbean nation attracts fewer foreign investors, especially compared to a country like Panama.

The BRAVO awards are given out annually to a handful of government officials, private sector leaders and humanitarians for their contribution to Latin American progress. This year marks the 15th anniversary in the awards that are organized by Latin Trade. The BRAVO Council meetings are an effort to bring together past winners and others to showcase the awards.

During the discussion in Panama City, participants in the meeting agreed there are problems that the countries must face in a cooperative manner, such as keeping the world’s finances and trade on track. There are difficulties countries need to attack individually, especially the problems of providing better education. But at a time when the U.S. government is stepping in with more than US$1 trillion in aid to ailing companies, banks and consumers, the BRAVO Council members made a plug for private sector participation, especially in education.

Herman Bern, chief executive of Empresas Bern, said two schools on the outskirts of Panama City that are funded by his group of companies had graduating classes of students who passed the entrance exams for the Technological University. “Our schools cost US$600 a year per student. The cost at public schools is US$1,000 per student,” said Bern, whose company is based in Panama City.

Participants supported the private sector role in education.

“We believe that by supporting education, we are backing the economic development of Panama,” said Pedro Sigui, petroleum giant Chevron’s district sales general manager for Central America. “We do this by identifying the area and schools in the greatest need.”

Several factors could help Panama through the crisis.

The country is increasingly viewed as a regional hub for shopping and commerce and a safe haven for investors, many from surrounding countries who have invested in real estate in the capital. Officials so far believe the country’s banks followed a more conservative path than their counterparts in the U.S. and Europe in terms of high-risk investments and are relatively protected against the current global financial meltdown.

Ovidio Díaz, CEO of Isthmian Financial Advisers, said he was confident that Panama would boost its economy by attracting more tourists in the long run. But he expressed concern in the short run over a drop in hotel occupancy rates from 78 percent to 64 percent and whether the Panama Canal had contingency plans for the slowdown.

The Panama Canal CEO Alberto Alemán Zubieta, also a past BRAVO winner, said that world trade was slipping, but ships were still lined up waiting to pass through the inter-oceanic channel, one of the biggest tourist magnets in Panama and the major engine of its economy. Alemán Zubieta pointed out that the canal has survived world wars, economic recessions and other problems in its history and would weather the current downturn as well.