Panama’s Achilles’ heel

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Panama’s corruption and weak rule of law could threaten its promising future, the U.S. ambassador to the country, William Eaton, said in a speech today to the Panamanian Chamber of Commerce, Industry and Agriculture. He is not the first ambassador to issue such a warning. But his plea for judicial, labor and environmental reform comes at a time when Panama is at a crossroads, its economy booming and foreign investment starting to climb.

Eaton said Panama stood to make make significant economic strides by virtue of the widening of the Panama Canal and from the influx of foreign companies and retirees. But that prosperity could be stillborn, he said, unless potential investors feel they can get a fair shake from the legal system.

That’s not the case now, Eaton warned. Although he mentioned no specific cases, U.S. Embassy staffers have said they are alarmed by the growing number of complaints from real estate investors who say they have been ripped off by unscrupulous developers taking advantage of Panama’s murky real estate title laws, and who find no recourse in the judicial system. Many of those investors are U.S. retirees drawn to Panama in recent years by favorable tax and cost of living breaks.

It was hoped that provisions of the pending U.S.-Panama free-trade agreement would bring some relief since it includes the installation of dispute resolution mechanisms to which U.S. investors could appeal. But the deal, which still requires U.S. congressional approval, has been in serious trouble since last month, when Panama’s National Assembly elected Pedro Miguel Gonzalez as its president. Gonzalez was indicted by a U.S. grand jury on murder charges in connection with the 1992 killing of an American soldier in Panama, and U.S. officials say passage of a free-trade bill won’t happen as long as Gonzalez holds the exalted post.

Posted by Chris Kraul in Bogota