Caribbean & Central America - August 2014 (ISSN 1741-4458)

One of Panama’s President Juan Carlos Varela’s first acts upon taking office on 1 July was to restore ties with the Venezuelan government led by President Nicolás Maduro. These were severed by Maduro in March in protest at Panama’s efforts to have the Organization of American States (OAS) discuss the internal political situation in Venezuela [RC-14-03]. Varela and the new Partido Panameñista (PPA) government have a clear interest in restoring ties given trade concerns and the continued dispute over the failure of Venezuelan companies to pay debts to suppliers in Panama’s Colón Free Trade Zone (FTZ).

At the start of the year, the local Panamanian press cited official figures which suggested that trade in the FTZ reached US$28.9bn in 2013, down 9.4% on 2012. According to a report by Panama’s economy & finance ministry (MEF), re-exports to Venezuela via the FTZ were down 43.3% in 2013 compared with the same period in 2012, from US$3bn to US$1.7bn. The MEF report noted that on average, between 2009-2012 re-exports to Venezuela accounted for 17% of the total sales via the FTZ, second only to Puerto Rico (19%). However, many Venezuelan buyers have yet to pay for these re-exports and have racked up large debts with their Panamanian suppliers. These debts, which in March the Colón FTZ’s general manager Leopoldo Benedetti said amounted to some US$2bn, were attributed by the previous Cambio Democrático government led by former president Ricardo Martinelli (2009-2014), to Venezuela’s official foreign currency controls that restrict the supply of US dollars available to Venezuelan companies for trading purposes. On 19 March Panama’s then trade & industry minister, Ricardo Quijano said that Panama had presented “various protest notes” before the World Trade Organisation (WTO) in relation to this issue.

With Luis Germán Gómez, the president of the Colón FTZ’s users’ association (AU), telling reporters this month that partly as result of these problems, AU members were seeking other markets in Europe, Asia and Africa, there is also no end in sight to the dispute with another key market for Panamanian FTZ re-exports – Colombia. The dispute with Colombia stems from a March 2013 decree issued by Colombia’s President Juan Manuel Santos that introduced a temporary (12-month) ad valorem duty of 10% and a specific duty of US$5 per gross kilogramme on all imports of apparel and footwear from countries with which Colombia does not have a Free Trade Agreement (FTA). These duties affect Panamanian exports as although both countries signed an FTA in September 2013, the agreement must still be ratified by their respective legislatures. Despite Panama’s filing of formal complaints against Colombia before the WTO in June 2013 over the decree, on 19 January 2014 Santos announced that he will be extending the measure for a further two years.

Santos in Panama

There was no mention of the trade dispute during President Santos’s visit to Panama City on 25 July – his first since President Varela took office. The two men instead pledged to revive an electricity transmission line project between the two countries that will also supply power to the rest of Central America. The project, which would stretch some 590km in total, of which 280km would run through Panamanian territory, had stalled under the Martinelli government, which cited a lack of resources. Varela however told reporters that the transmission line could be completed by 2018.

There were also no developments as regards the other key issue for bilateral relations - the extradition of the former director of Colombia’s defunct national intelligence agency (DAS), María del Pilar Hurtado, who in November 2010 was granted asylum by the Martinelli government, a decision that had riled Santos, upsetting bilateral relations (see sidebar).

On 29 May Panama’s supreme court ruled that the asylum was unconstitutional as Hurtado was not a victim of political persecution but rather was being investigated for “common crimes”. During their 25 July meeting, Santos reiterated his call for Hurtado to be extradited but Varela said that his government did not know her whereabouts.

• Hurtado

María del Pilar Hurtado has been charged in Colombia with crimes including aggravated conspiracy, illicit violation of communications and abuse of public function, among other things, for her role in the so-called ‘Chuzadas’ illegal intelligence gathering operation by the DAS. This targeted prominent members of the political opposition, the press and the judiciary. It is believed that Hurtado could provide key information regarding the participation of other high-ranking members of the Alvaro Uribe administration (2002-2010) in the ‘Chuzadas’ scandal. The decision to grant Hurtado asylum back in 2010 was widely seen as a personal favour from former president Ricardo Martinelli (2009-2014) to Uribe, with whom Martinelli had close personal ties.