Caribbean & Central America - December 2016 (ISSN 1741-4458)

Last month, the government led by President Juan Carlos Varela released a report by a panel of experts commissioned in April in the wake of the ‘Panama Papers’ scandal [RC-16-04], the biggest leak of secret information in history which exposed the internal operations of a locally-headquartered law firm dedicated to the incorporation of offshore entities. The previous month, Panama signed the Organisation for Economic Cooperation and Development (OECD)’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters (known as ‘The Convention’). However, these efforts by the government to reassure vis-à-vis tackling official corruption have yet to convince either the public or some members of the international community.

The report into Panama’s financial system was not without controversy itself after two of the panel’s members – US Nobel Prize-winning economist Joseph Stiglitz, who led the commission, and his colleague, Swiss legal expert Mark Pieth – both quit in August over accusations that the Varela government would not make the contents of the report public. On 21 November, the government released the report’s findings. The overriding message was that Panama must revise and strengthen its corporate, financial and legal system to help create a new global financial architecture in which tax havens have no part. Among various recommendations, the 23-page report urged the national government to “establish as soon as possible an integral vision for the national strategy of international services, which must respond to the national interest and to the national strategy of long-term development. Specifically, this should include Panama's exclusion from any discriminatory list related to tax issues, transparency and effective exchange of information as one of its main objectives. The strategy should define short-, medium- and long-term initiatives to ensure compliance with this strategic objective based on the recommendations made below and on a constant analysis of trends and risks in the international context.”

The report also calls for the creation of an independent, permanent committee of legal and financial experts to ensure that its recommendations are implemented and to further oversee the whole process and recommends that the finance & economy ministry (MEF) presents as part of its annual budget a report into the government’s progress in implementing the report’s recommendations.

The Varela government has also trumpeted as further evidence of its commitment to strengthening transparency, Panama’s adherence to the OECD’s ‘Convention’ on 27 October while, a week later, Panama joined the OECD’s Inclusive Framework which aids collaboration in the implementation of the OECD’s and G20’s Base Erosion and Project Shifting Package (BEPS) which seeks to harmonise tax policy to avoid loopholes and mismatches. However, these efforts have yet to reassure either the public (see box) or members of the international community such as France which announced last month that it would not remove Panama from its list of tax havens (see sidebar).

Popularity

The most recent survey by pollster Dichter & Neira, released on 22 November, showed President Varela with 42% approval in November, up from 39% in October and 40% in September. However, the same survey showed that just 15% of respondents believed that the government operated in a transparent manner. This is the lowest rating of the last twelve months and down from 31% in December 2015. For all the government’s recent efforts [RC-16-11], the same survey also showed that the main public concern is security – cited as such by 30% of respondents (up from 21% in September), followed by unemployment (12% down from 13% in September) and cost of living (9%), down from 17% in September. The survey interviewed 1,200 people and had a 2.9% error margin.

• France

Last month, the local press reported that despite Panama’s inking of the OECD ‘Convention’, France had opted to retain Panama on its list of tax havens, to which it was added in April this year, in the wake of the ‘Panama Papers’ scandal.