Speeches 2006
October 2006
Ambassador Eaton's Remarks at the Panama Week Power Breakfast Remarks
"The New Panama" Introduction: Panama Sets Sail Toward a Bright Future First, I'd like to thank Ambassador Juan Sosa and General Eugene Renzi for inviting me to join you again for this year’s “Panama Week” celebration and for their enthusiastic commitment to strengthening the ties between the United States and Panama.
These are, indeed, some exciting days for Panama. And, with last Sunday’s decision by Panamanian voters to modernize the Panama Canal, what better time to talk about “The New Panama” and the course that Panamanians have set toward a bright future?
When we met at last year’s “Panama Days,” I mentioned the sense of expectation I felt in the air after I first arrived in Panama. The economy was going strong, jobs were being created, the government was getting on with fiscal and social security reforms, we were preparing to conclude a Free Trade Agreement, new high-rises were going up all over Panama City, and Americans were flocking to Panama as tourists and to retire. There was a palpable sense of optimism, both among Panamanians and among newcomers.
It's the same again this year . . . even the part about preparing to conclude an FTA. But I’m even more excited this year about Panama’s prospects. And, it’s not simply because Panamanians have just taken a huge step forward by deciding to modernize the Panama Canal.
There are plenty of other reasons to be optimistic about Panama’s future. Over the past decade and a half, Panamanians have restored democracy and political stability. They have become strong partners with the U.S. and others in security cooperation and in combatting narco-trafficking, money laundering, and organized crime.
Panamanians have also opened up to global trade and foreign investment and posted some of Latin America’s best GDP growth. All of this while enjoying relatively low inflation and the stability of a dollarized economy. It’s no wonder that Panama continues to grow as a regional financial center and a hub for civil aviation and global commerce.
As perhaps the world’s first globalized country, Panama has been a crossroads of international trade for about 500 years. Today, it stands at a historical crossroads, where the Panamanian people face some critical decisions.
Panama Canal Modernization
Last Sunday, after six months of debate, Panamanians took a momentous decision on the future of the Panama Canal. In exercising their democratic voice, our Panamanian friends chose hope over fear. They clearly showed that Panama is eager and ready to meet the challenges of the 21st Century.
Free Trade Agreement
Now that the Canal referendum is done, the next big decision is the U.S.-Panama Free Trade Agreement. Here again, by choosing wisely on the FTA, Panama could give a huge boost to its exporters, as well as to those consumers who want the range of options and price reductions that a more competitive market can bring. It could also help give American companies greater confidence that their investments in Panama will be reasonably safe and that any potential disputes would be treated fairly, transparently, and expeditiously.
The competition for concluding an FTA with the U.S. has been stiff, as we’ve seen Peru and Colombia forge ahead over the past year to finish negotiating their deals. Now, it’s Panama’s turn. Time is of the essence. I met this week with the folks at USTR and I’m optimistic that we’ll soon get it done. But, the FTA will need a hard push to get Congress’ approval before Trade Promotion Authority expires at the end of next June.
Other Positive Signs for Panama’s Future
Even without the prospects of a Canal modernization project and an FTA, there are plenty of other signs that Panama is moving forward. Let me cite just a few examples.
First, the maritime sector continues its impressive development, thanks especially to the strong growth in trade between Asia and the East Coast of the U.S.. Ports are expanding and container traffic through the Canal has grown by 15 to 20 percent annually over the past three years.
Thanks to phenomenal growth in residential tourism, construction is still booming, having grown by about 90% in the past year. Panama City’s skyline is undergoing a remarkable transformation and we’re seeing a tremendous amount of development activity in other parts of Panama, such as Boquete and Bocas del Toro. This trend also poses some serious challenges for government authorities, as they are increasingly hard-pressed to manage the traffic, water, and sanitation infrastructure needs that come with this development. But, with every challenge also presents an opportunity. In this case, American companies that have the planning and engineering know-how can find opportunities in Panama to help local officials cope with their urban development needs.
Another need is in health care. Last February’s opening of Punta Pacfica Hospital, a $40-million venture with Johns Hopkins, put Panama on the map with perhaps the region’s most modern hospital. Meanwhile, the U.S. Health & Human Services Department is working closely with Panamanian health authorities on a range of fronts. This includes Avian Flu preparedness and responding to health care emergencies – like the investigation into the tragic “mystery syndrome,” where CDC and FDA experts worked side-by-side with Panamanians to figure out the cause of this illness. “Health Diplomacy” is at the forefront of our engagement in Panama, as we and the Panamanian government see the critical role that community-oriented health care plays in achieving poverty reduction.
Panama is emerging as the civil aviation “hub of the Americas.” With its location at the crossroads of the hemisphere, COPA, which is partly owned by Continental, now serves some 35 destinations in 21 countries. It continues to add new routes. I understand that, not to be outdone, American Airlines and Delta are both contemplating possible expansions of their service to Panama in the coming year.
A booming economy also means that Panama’s demand for energy will continue to grow. In fact, some worry that Panama’s growing demand for electricity might outstrip supply as early as next year. However, fourteen new hydroelectric and thermal energy plants are either under construction already or are planned.
And Occidental announced earlier this year its plans to build a $6 billion regional refinery in Panama. That project alone could create several hundred new jobs directly and many more indirectly in the Puerto Armuelles area, which sorely needs this kind of economic boost.
Next month, the Special Economic Zone at the old Howard Air Force base expects to choose a consultant to do a master plan for this terrific facility. Although Dell has had a call center there for the past several years, Howard is essentially a new town waiting to be re-developed. It has extensive aviation and other infrastructure ready to be put to productive use. In fact, about 95% of Howard’s 5,400 acres are currently unused.
Finally, the continued boom in Panama’s eco-tourism is driving strong growth in the hotel and tourism industry. This means that the demand for English-speaking employees will continue to be strong for the next several years, at least, as Panamanian firms continue to seek well-qualified employees for new call centers, hotels, and tour companies.
Clouds on the Horizon
But Panama’s path to a bright future does have some threatening clouds which, if left unattended, could bring some rough seas. In the decade and a half since the restoration of democracy, Panama has had one of Latin America's fastest growing economies and low rates of inflation. At about $4,500 per person, Panama has one of the region's highest per capita levels of GDP.
And yet, despite all of this good stuff, Panama has barely reduced poverty -- cutting it by only about one-half of 1 percent -- during this same period of about 15 years. Likewise, Panama continues to have one of the region's most unequal distributions of income. So, Panamanians continue to face stark income disparities, a persistent poverty rate of 40%, and institutions that are often weakened by corruption and crony capitalism.
Now is the time for Panamanians to show that democracy and free markets can and do deliver tangible results for all citizens, not just the well-connected few. By working together, the Panamanian business community and the government can chart a course that takes maximum advantage of today's wonderful opportunities and that enables the country to reach that bright future without running aground.
Conclusion: Public-Private Partnerships to Boost Development
And of this brings me back to my main point: Panama was a good bet before October 22. It’s still a good bet. In fact, it could be a great bet if it finds a way to finally translate its solid economic growth into real poverty reduction and more generalized prosperity. Governments can lead, but the private sector can and must play a vital role, as well.
I’d like to offer three suggestions for how governments and the private sector can work together on these challenges more effectively. First, promoting transparency and rule of law. Whenever any private party gains short-term advantages through unfair or illegal means, the rest of us lose. Sunshine is the best antidote. Various civil society organizations are doing great work to bring the sunshine of transparency to Panama.
Our ability, as a government, to support groups like Transparency International and the Alianza Pro Justicia, just to name a couple, is subject to the vagaries of Washington’s budget process. Worthy NGOs deserve stronger private sector support and I believe that firms in Panama – be they American, Panamanian, or whatever – will find that supporting them is good for the corporate bottom line, as well as society.
Second, deliver real corporate social responsibility. Study after study has shown that being a responsible corporate citizen is simply good business. That is why every year, our Secretary of State gives an annual “Award for Corporate Excellence” to U.S. firms that demonstrate outstanding corporate responsibility overseas. We will do the same in Panama. I am delighted to announce that (in January), we will recognize two U.S. firms that have been doing terrific work in Panama, with the first annual “Ambassador’s Star Partner” awards. The Embassy will work more actively with business chambers, NGOs, and leading corporate social responsibility proponents, such as the local network of the U.N. Global Compact, to encourage more firms in Panama to move from words to action on CSR.
Third, promoting small & medium sized enterprises (SMEs). SMEs are vital to lifting that 40% of Panamanians out of poverty. SMEs create well over 90% of the economy’s jobs. Moreover, instilling a sense of entrepreneurship in young Panamanians can help them to change their mode of thinking. Instead of aspiring to work for company X or Y, why shouldn’t they aspire to have their own companies? And, with all those Americans moving to Panama these days, who better to help young Panamanians lift their sights to become entrepreneurs?
So, today, I call for volunteers among my compatriots in Panama. Let’s call it, “Entre Nosotros/Between Us.” The Embassy’s “People-to-People” coordinator and our Commercial and Economic officers will work with USPA, AmCham, and other business and civic groups to help match retired or semi-retired Americans in Panama with promising young Panamanian entrepreneurs. As volunteer mentors, the Americans may donate as many hours or days per month as they wish to help young Panamanians develop the management, marketing, or other skills they need to succeed with their own companies.
I can’t think of a better way for Americans to help Panamanians develop their best resource: their young people. And what better way for a newcomer to Panama to learn more about the language and Panamanian customs? Building greater understanding between our peoples as we work together to build for a more prosperous society will go a long way toward ensuring the strength of Panama’s security and its democracy for future generations.
Yes, there are many challenges on the horizon, but I know that, working together, we can help Panamanians to build on their recent successes and to become a shining example for the region. The ingredients are there. Now all we have to do is muster the will. I look forward to working with all of you in doing just that.
Thank you very much.