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Panamanian Election: A Referendum on Martinelli

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Citizens of the region’s fastest growing economy will elect their next president in Sunday in an election that has largely been read as a referendum on the current leader.

Panamanians will elect their next president this Sunday, a vote to choose the successor to President Ricardo Martinelli, who has been in the role since 2009. Two candidates seemed poised for victory – José Domingo Arias of the incumbent center-right Democratic Change (CD), and Juan Carlos Navarro from the center-left Democratic Revolutionary Party (PRD), with Arias slightly ahead. A third candidate – current Vice President Juan Carlos Varela – is also running on the ticket of the Panameñista Party, but has consistently trailed in the polls.

The election has largely been seen as a mandate on the legacy of the Martinelli presidency says Diego Moya Ocampos, Senior Latin America Analyst at IHS Global Insights. Indeed, Martinelli leaves a mixed legacy, a subject recently explored in the latest editionof Latin Trade magazine. The president, who made his fortune raining a chain of supermarkets, has lauded his administration as “the first government not run by politicians… but rather by entrepreneurs and businessmen.”  Under his watch, Panama has seen Asian-style growth: 10.7 percent in 2012, and 9 percent last year. This growth has been driven by ongoing expansion of the Panama Canal, as well as other mega projects, including highways and the introduction of the long-stalled Panama City metro system. Panama City’s skyline seems to be constantly evolving. The president’s approval ratings, according to a November 2013 poll, stand at 62 percent. 

However, his administration has also faced a few minor scandals, and he has been criticized for his governing style; a U.S. ambassador described him as having a “penchant for bullying and blackmail.” He has used heavy-handed tactics to break-up objects to mega-projects, such as sending in the police to break up indigenous protests to a mining project. His vice-president, Juan Carlos Varela, accused him of pocketing $30 million in bribes from Italian companies seeking to do business in the country. Delays in the expansion of the Panama Canal have upset Panamanians and investors. Further, while building a number of schools and clinics in the country, the government has done little to address the issue of poverty in the country: even while experiencing the hemisphere’s highest rates of growth, around 30 percent of the population continues to live in poverty.

Polls put Arias and Navarro neck-and-neck, and many analysts expect a tight finish in Sunday’s race. According to Moya Ocampo, spelling out real changes between the two front-runners is difficult as the campaign has focused more on Martinelli’s legacy than real policy issues. “Debates in the election have focused on issues such as the increasing cost of living and increasing crime, though candidates have provided few concrete details on how to address them.”

Still, there might not be too much to differentiate an Arias administration from a Navarro administration. “No matter who wins on Sunday, we are not going to see any real change in economic policy,” says Moya. “The biggest issue for whoever wins will be to make sure that Panama Canal expansion begins operations in 2016, which will mean expanding the pace of construction in 2015,” he adds. “Making sure construction happens on schedule will be the next president’s top priority.”

Panama’s economy should stay strong in the coming years as well. Although growth won’t hit the double-digits, it should remain ahead of the Latin American curve, around 6.8 percent. The Panama Canal expansion will double the cargo passing through, the free trade zones of Colón and Pacífico are expected to continue driving growth, and mining projects will add to the country’s wealth.

The next president will also have to continue addressing the issue of poverty, and making sure all Panamanians have access to basic services such as healthcare, education, and energy. “Providing better access to these services – especially energy – will be key for a country trying to sell itself as a center of finance and logistics,” said Moya, citing blackouts in the capital last year that forced companies to reduce their use of air-conditioning or limit business hours.

Another issue will be crime. Although Panama is safer than many other countries in its neighborhood, it remains a transshipment point in the international drag trade, and citizens have expressed increase concern about crime levels. However, it has not experienced the same level of crime or gang violence associated with other Central American countries.

Coincidentally, while the campaign has mostly focused on Martinelli’s legacy, that very legacy could be decided by his successor. “If Arias wins on Sunday, it will be a continuation of the Martinelli message of selling the country as one led by businessmen, with little red tape, and making sure business’ needs are taken care of,” says Moya. But, on the other hand, if Arias wins “we should expect more scrutiny of potentially corrupt contracts granted under the Martinelli government,” he says. If there was any foul play involved, it could tarnish the reputation of the controversial leader.

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