Caribbean & Central America - February 2017 (ISSN 1741-4458)

President Juan Carlos Varela was recently forced to deny having received money from Odebrecht, the Brazilian engineering company which pleaded guilty in a US federal court to bribery in December 2016 and is the subject of major corruption investigations in Brazil, the US and other countries in the region. According to the US Department of Justice (DoJ), more than US$59m was paid in bribes in Panama to secure public works and infrastructure contracts valued at US$175m between 2010 and 2014. While this took place under the previous Cambio Democrático (CD) administration led by Ricardo Martinelli (2009-2014), incendiary remarks by a former Varela ally has left the unpopular President scrambling to provide reassurances regarding his commitment to transparency.

President Varela has been forced to respond to claims made on 9 February by Ramón Fonseca Mora, a partner at a local law company, Mossack Fonseca, who, along with another partner, Jürgen Mossack, was arrested the same day on money laundering allegations. A former member of Varela’s inner circle (see sidebar), Fonseca was cited by the local press as saying that “he [Varela] told me that he had accepted donations from Odebrecht because he could not fight with everyone”. The arrests came after the offices of the company – which made headlines in April 2016 over the ‘Panama Papers’ scandal, the biggest leak of secret information in history [RC-16-04] – were raided by local prosecutors as part of the ‘Operation Car Wash’ anti-corruption investigations under way in Brazil which are looking into corruption networks developed by Brazilian companies at home and abroad.

Varela – who on 24 January announced plans to sue Odebrecht – has responded by saying that any donations received during his electoral campaign were “political contributions not bribes” and publishing a list of his 2014 campaign donors. However, in a post on its Facebook page on 13 February, the CD claims that key figures who have been “identified as important financiers” of the campaign do not appear on the list. It cites as an example, Stanley Motta, the owner of Copa Airlines and one of the wealthiest men in Central America. Relations with the CD are set to further sour after the media reported on 13 February that the country’s special anti-corruption prosecutor, Tania Sterling, had asked Interpol to issue an international alert for the arrest of two of Martinelli’s sons, Ricardo and Luis Enrique, for allegedly having accepted bribes from Odebrecht. The two are widely expected to feature on the list of 17 people who, attorney general Kenia Porcell revealed on 24 January, have now been charged in relation to the case. While Porcell did not give names, she did say that those charged include three former government officials, 13 businessmen, and an official from a private bank – eight Panamanians and five foreigners.

Presence in the country

In 2015, Odebrecht, which has been active in the country since 2006, won the US$1.9bn contract for the second line of the Panama City metro, (as part of a consortium which also includes Spain’s FCC Construcciones). The same consortium built the first metro line, which was inaugurated in 2014. Also in 2015, Odebrecht won the US$500m urban renewal contract for Colón city, the capital of the eponymous province.

Earlier this month, Alvaro Alemán, minister for the presidency, said the government expected Odebrecht to meet its contractual obligations on the Metro Line 2 project; on the US$800m contract to build a new terminal at the Tocumen International airport (serving Panama City); and on the Colón city contract. However, the government has terminated a contact to build a US$1bn 213MW hydroelectric project in Bocas del Toro province and the company is dropping out from the bidding process to build the metro’s third line (valued at US$2.6bn) and the fourth Panama Canal bridge.

• Fonseca

A former ally of Varela, Fonseca had served as president of Varela’s Partido Panameñista (PPA) and as a minister without portfolio in his administration – a post he had held since July 2014. However, Fonseca stepped down from both posts in March 2016 to defend his company’s reputation after investigators said at the end of January 2016 that, as part of ‘Operation Car Wash’, they were looking into its suspected role in the corruption scheme. At the time, a Brazilian prosecutor, Carlos Fernando dos Santos Lima, cited evidence suggesting that “Mossack Fonseca is a big money launderer”.