Caribbean & Central America - June 2015 (ISSN 1741-4458)

President Juan Carlos Varela’s anti-corruption drive in Panama has mainly targeted his predecessor, former president Ricardo Martinelli (Cambio Democrático [CD] 2009-2014) – until now. The emergence of a fresh corruption scandal involving the hiring of a company, Cobranzas del Istmo, under the previous CD government is raising some uncomfortable questions for the current Partido Panameñista (PPA) - led El Pueblo Primero (EPP) coalition government – and President Varela’s own family and ministers.

On 27 May Martinelli’s lawyer, Sidney Sittón, alleged that Varela’s brother, José Luis Varela, a PPA deputy and Benicio Robinson of the opposition Partido Revolucionario Democrático (PRD), had received US$1m each from Cobranzas del Istmo, a company hired by the CD administration to collect past due taxes. According to local media, the company charged inflated commissions – allegedly costing the State some US$47m – of which Cristóbal Salerno, the company’s owner, returned US$20m on 1 June. Salerno was arrested on 21 May while the ex head of the tax authority, Luis Cucalón (2013-2014), was arrested on 26 May. Salerno claimed to have given Cucalón US$5.8m, which the latter said was a personal loan. Salerno said that his company – whose contract with the government was suspended in January 2015 by the supreme court (CSJ) - was paying Martinelli US$200,000 a month in kickbacks.

While José Luis Varela has dismissed the latest claims as efforts to distract from the current investigation into alleged corruption which took place in the government social fund (PAN) under Martinelli [RC-15-05]- there are growing calls for Economy Minister Dulcidio de la Guardia to step down over alleged irregular payments to Cobranzas del Istmo worth some US$7m. These calls have come from prominent civil society leaders like Magaly Castillo of the NGO Alianza Ciudadana Pro Justicia.

Another key Martinelli ally implicated

This month Felipe ‘Pipo’ Virzi, a former second vice-president under the Ernesto Pérez Balladares government (PRD, 1994-1999) became the latest member of Martinelli’s inner circle to face corruption charges. Virzi is accused of receiving US$10m from an Ecuadorean firm, Hidalgo & Hidalgo, which won a US$115m contract from the CD government in 2012 to build an irrigation system in Tonosí municipality, Los Santos province. The company received US$37m in funding for the scheme from the government, but the project has never materialised.

Virzi’s name already came up in relation to corruption allegations surrounding a former CSJ president, Alejandro Moncada (2012-2013), who in March received a five-year prison sentence for falsifying documents and illicit enrichment [RC-14-11]. As part of the investigations, Moncada claimed that he had borrowed US$700,000 from Virzi but said there was nothing odd about this loan, as Virzi had lent money to “many”, including companies like Martinelli’s Super 99 supermarket chain and President Varela’s liquor company, Varela Hermanos.

• Concerns over Metro bidding process

The announcement by Metro de Panama S.A regarding its decision to award the contract for the second line of the metro to Consorcio Línea 2 came just after Panama's public contracting department (DGCP) confirmed that it was rejecting a complaint submitted by the PANAMetro consortium alleging procedural errors due to the fact that at least two members of the evaluation committee – Óscar Ramírez, the dean of the Universidad Tecnológica de Panamá and Agustin Arías, an engineer- had links to Odebrecht. According to the local press Ramírez and Arías served as consultants to Odebrecht between 2009-2012 and in 2009, respectively.