Panama FTA: Uncertain
Fate
Latin Business Chronicle
The delay in holding a
U.S. congressional vote
on the Colombia free
trade agreement has also
delayed the Panama free
trade agreement, experts
say.
"It’s unlikely...that
the Panama agreement
would be moved ahead of
the Colombia agreement,"
says Eric Farnsworth,
vice president of the
Council of the Americas.
"The fate of the Panama
agreement is now tied to
the Colombia agreement,
though there is nothing
that says the two cannot
move forward together."
GONZALEZ FACTOR
Peter Hakim, president
of the Inter-American
Dialogue, believes the
Panama FTA's main
obstacle is the issue of
Pedro Miguel Gonzalez,
who was elected
president of Panama's
national assembly last
year despite being
wanted in the United
States for killing a
U.S. soldier based in
Panama in 1992. (He has
been acquitted by a
Panamanian court, but
U.S. authorities
maintain he is guilty).
Gonzalez belongs to the
ruling PRD party and was
allegedly elected
congress president
despite concern by
President Martin
Torrijos, who has been
widely praised by local
and foreign investors
for his pro-business
policies.
"Consideration of the
Panama FTA has been
delayed because the
country’s parliament
elected a leader who is
accused in the United
States of murdering an
American soldier -
although he was found
not guilty by a Panama
court," he says. "He is
scheduled to leave
office in September,
which will open the way
for approval of the
Panama FTA, although
this could be delayed if
the White House and the
U.S. Congress have not
made any progress toward
an agreed-upon [Trade
Adjustment Assistance]."
U.S. Senator Hillary
Clinton has stated
Gonzalez as her main
reason for voting
against the Panama FTA.
"As long as the head of
Panama's National
Assembly is a fugitive
from justice in America,
I cannot support that
agreement," Clinton said
in a statement in
November.
LEADING TRADING NATION
Panama is a much smaller
trading partner for the
United States than
Colombia, but the
country has become a
trade champion in its
own right. U.S. trade
with Panama reached $4.1
billion last year, an
increase of 33.3 percent
from 2006, according to
a Latin Business
Chronicle analysis of
U.S. Census Bureau data.
That means U.S.-Panama
trade is roughly four
times smaller than
U.S.-Colombia trade.
However, U.S. exports to
Panama are growing
faster than with
Colombia. U.S. exports
to Panama reached 3.7
billion last year, a
38.5 percent increase
from 2006. By
comparison, U.S. exports
to Colombia grew 27.6
percent last year.
However, Panama has
become Latin America's
leading trading nation
measured in comparison
to its GDP (Mexico is
the leader in real
terms). Panama has also
become the third-largest
destination in Latin
America for exports from
China, only lagging
behind economic giants
like Brazil and Mexico.
And Chinese companies
now account for the
largest group at the
Panama Merchandise Mart.
Meanwhile, Panama is the
top destination in Latin
America for exports from
Singapore - a country it
often is compared with.
Panama has the highest
ratio of exports and
imports per GDP in Latin
America, according to a
Latin Business Chronicle
analysis. Its exports
account for 73.4 percent
of GDP, while imports
are the equivalent of
71.1 percent of its GDP.
By comparison, Paraguay
- its nearest rival -
boasts export levels
that are 50.1 percent of
GDP and import levels
that are 67.2 percent of
its economy.
MOST GLOBALIZED
Thanks to the high trade
levels - as well as
boasting the highest FDI
per GDP in Latin America
- Panama is the most
globalized country in
Latin America, according
to the Latin
Globalization Index from
Latin Business
Chronicle.
With a relatively small
economy (Latin America's
14th-largest), the high
degree of imports is not
due to local demand.
Instead, the large
imports can be linked to
the Colon Free Zone,
located near the
Atlantic entrance to the
Panama Canal and home to
the world's
second-largest free
trade zone.
In addition to its
growing importance as a
trade hub, Panama as
become a regional hub
for U.S. multinationals
ranging from Dell and
Hewlett-Packard to
Procter & Gamble and
Caterpillar. They have
been attracted by a
combination of factors,
including tax
incentives, the U.S.
dollar as the legal
tender, Latin America's
highest economic growth,
one of the region's
lowest inflation rates
and political stability.
SHIPPING, BANKING AND
CANAL
In addition to the Colon
Free Zone, Panama can
boast of having the
world's largest shipping
registry, Latin
America's largest
international banking
center and one of the
region's top offshore
company registries.
Last, but not least, the
country is home to the
Panama Canal, one of the
leading routes for world
trade and a key link for
U.S. trade with China.
At the pace the U.S.
Congress is keeping,
approval of the Panama
FTA may well coincide
with Panama's next
presidential elections,
scheduled for May 2009.
The frontrunner so far
is Balbina Herrera.
While she also belongs
to the PRD party, she is
seen as less friendly to
business and the United
States than Torrijos.
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