Panama's economic future looks grim. Cash shortage persists; proposed solution may only intensify problem
Panama's economy needs more than the mild revival of commerce that is under way this week as more stores open their doors. Cash remains scarce and many workers are still idle. The future is grim, many businessmen say.
``The economy is totally destroyed,'' says Moises Mizrachi, an importer of electronic watches and housewares.
The economy remains severely hampered by the country's desperate shortage of cash. And plans proposed by the National Banking Commission to resolve the shortage, many businessmen say, will only intensify the problem.
Last week, some pensioners and most public employees were paid in government checks that couldn't be cashed because banks remained closed. Most of the newly opened stores also refused to cash the checks.
``This piece of paper isn't worth anything,'' retired bank employee Luis Delgado said last week, waving his $150 bi-weekly pension check. Mr. Delgado was one of a dozen pensioners blocking a major street to protest the government's failure to arrange for the cashing of pension checks.
Foreign bank branches and Panamanian-owned banks have been closed for the past month in an effort to prevent a run on deposits following Washington's freeze of Panamanian assets in US banks. This has created the serious shortage of dollars, on which Panama's economy runs.
Panama's National Banking Commission has been trying to fashion a program under which banks can reopen. But business associations say that won't solve the basic economic problem.
The banking commission's proposed measures ``will only aggravate the economic stagnation, with effects worse than those now suffered,'' the Industrial Association of Panama said in a Saturday statement.
The association specifically criticized a proposed limit on withdrawals by private depositors, while checks written to the government could be cashed without restriction. ``This implies a rapid decapitalization of our companies through the transfer to the government of the few available funds.''
Bank resources have not been available to the business sector since the bank closing March 3. Construction loans had already stopped since the political crisis intensified last summer. During the past month, businessmen haven't had the funds to pay their suppliers.
In an announcement Monday, authorities blamed the US for their economic woes. ``Due to the arbitrary freezing of funds of the National Bank by the North American government, it has been difficult to acquire suffi cient funds to cash checks,'' the Social Security Funds announced.
Tensions between Washington and the Panamanian regime sharpened over the weekend. On Sunday, US Ambassador Arthur Davis's car was pursued for two miles in Panama City by members of the Panamanian Defense Forces. Embassy spokesman Terence Kneebone called the episode ``serious.
[Reuter reported yesterday that the State Department accused Panamanian military police of harassing the ambassador. And it said the US would take all steps necessary to protect Americans in Panama.]
Panama's Foreign Ministry denied harassing Mr. Davis, saying a police sergeant decided to follow the ambassador when he saw an ``exaggerated display of automatic arms carried by men in civilian dress in the three cars accompanying ... Davis.''
Relations between the Noriega regime and its domestic opponents have also worsened. Attempts of the past week and a half to arrange a negotiated settlement foundered on the government's apparent refusal to accept a proposal for talks mediated by Roman Catholic Archbishop Marcos McGrath.
The Panamanian Bishops Conference said last week that Noriega should step down. The government saw that position as the latest evidence of church partisanship. In a letter to the papal nuncio criticizing the church, Panama's acting-President Manuel Solis Palma insisted that it was the US that was responsible for Panama's economic plight.