Alberto Vallarino Clement, Panama
People Profile - Alberto Vallarino Clement, Panama
Who is he? Vallarino took over as economy minister on 1 July 2009, under the new rightwing president, Ricardo Martinelli.
Why watch him? The economy is slowing down sharply. On 24 June the outgoing administration announced that economic activity fell 2.65% in April, year-on-year. This was Panama's first economic contraction since 2003. To be fair growth in the first quarter was still positive, at 2.5%, year-on-year.
Born: 2 April 1951, Panama
Education: Graduated in industrial engineering from Cornell University, US, before going on to gain a masters in business administration (1974), also from Cornell.
Public life: Vallarino was born into one of Panama's most prominent - and wealthiest - families and is the nephew of Arnulfo Arias Madrid. Arnulfo Arias was president of Panama (1940-1, 1949-51 and for a brief spell in October 1968). Arias's widow, Mireya Moscoso, won the 1999 elections on the ticket of the Partido Arnulfista (PA) - later the Partido Pañamenista (PPA). Another uncle, Carlos, was also economy minister, under the previous Martín Torrijos administration before being named comptroller general.
Vallarino himself competed (unsuccessfully) in the PPA presidential primaries in 1998 and 2008.
While never far from the political scene, Vallarino had a flourishing business career. In 1988 he became CEO of Panama's leading financial group, Banistmo, overseeing a frenetic campaign of mergers and acquisitions which turned Banco del Istmo from a small local player into the largest private-sector bank in Panama. The sale of the group to HSBC for US$1.17bn in 2006 was controversial. The sale took place a month after congress had approved a law reducing the maximum capital gains tax rate from 30% to 5%. As a result of the change, the government lost US$400m, which remained with Banistmo shareholders - including Vallarino.
At the time of his appointment as economy minister, Vallarino was executive president of the Grupo Verdeazul, which has stakes in the tourism industry and with big stakes in Hotel Bristol Panamá, Hotel Bristol Buenaventura and Desarrollo Turístico Buenaventura.
Timeline:
1975-1988: Executive vice president of Metalforma, a bottle caps manufacturing company.
1979-1988: Managing director of Industria Nacional de Plásticos S. A.
1981-1982: President of the industrialists' association.
1982: President of the Latin American association of industrialists.
1983: President of the Panamanian exporters association.
1988: CEO of Banistmo.
1998: Competes in the party primaries for the PPA.
2006: Sells Banistmo to HSBC
2008: Competes in the party primaries for the PPA.
1 July 2009: Takes over the economy portfolio.
Strengths: As a member of the ruling elite, Vallarino is well-connected and his business acumen is indisputable: he sold Banistmo close to the top of the international business cycle. As Panama's new economy minister, he will play a key role in the US$5.2bn Panama Canal expansion project, due to be completed by 2014, which will create around 5,000 jobs.
Weaknesses: Vallarino's political clout was clear from the takeover of Banistmo by HSBC. In the run up to the deal Vallarino met President Martín Torrijos, whose PRD party also controlled congress. The allegation from Vallarino's critics is that he offered Torrijos his support in the referendum on the Panama Canal expansion project (which was held in late 2006) in return for a downward adjustment in the capital gains tax rate. The tax was cut and the referendum won a resounding yes. Martinelli, also a hugely wealthy business tycoon said that “the politicians' habits of putting their personal interests, before those of the people are finished. In my government you can mess up, but you cannot steal".
Prospects: A keen proponent of the free market, Vallarino is key to implementing Martinelli's declared aim of making “Panama the best place in Latin America to do business". Vallarino's priority is to get the US congress to approve the FTA between both countries. This will be tough unless Panama makes some concessions on banking secrecy - which Martinelli has repeatedly said he will not touch.
Provided Martinelli avoids disaster, Vallarino is likely to be the right wing candidate to succeed him.
So far the Martinelli government has shown its rightwing populist credentials with the implementation of the campaign pledge to provide the elderly with monthly US$100 handouts. Vallarino may introduce a flat tax system, in an effort to reduce tax evasion and bring the informal sector into the tax net. This is in line with the US insistence that Panama take steps to increase the transparency of its tax system which is a requirement for the FTA.
Despite the April blip, the economy is in reasonable shape. The IMF said, on 1 June, that Panama is facing the global economic crisis “from a position of strength". It singled out the well-regulated banking sector, sustained fiscal consolidation and canal expansion project, which will allow Panama to preserve macroeconomic stability and continue growing during 2009, albeit at a slower pace than in recent years.
Aside from the canal expansion, the 24 June congressional approval of a revised budget, which allows the fiscal deficit to rise to 3% of GDP (up from 1%), will also provide Vallarino with leeway. The law was part of an agreement unveiled on 2 June by Martinelli and Torrijos, which expands the anti-crisis plan announced in January by Torrijos to free up funds of US$400m from the central bank, US$210m from the Andean development corporation (CAF), and US$230m in six-month loans from the central bank.