Possible Canal Privatisation Reopens Old Dilemma

By Silvi Hernandez, IPS, 21 March 1998

PANAMA CITY, Mar 18 (IPS) - The possible privatisation of the Panama canal when it enters national jurisdiction on December 31, 1999 has fanned the flames of an old fight involving the business sector, experts and politicians.

Director of the US Citibank, Ricardo Fernandez, described as "higly attractive," an offer from the finance director of the Canal Administration Commission, Ricaurte Vazquez, to transform the current canal corportion into a normal profit-making company after 1999.

"The Panama canal will become a corporation with a balanced budget and a desire for profit, conscious of its competitiveness in the globalised world of today," said Vazquez.

A similar proposal, which earned harsh criticism from the canal workers' union, was made by business leader Moises Mizrachi, one of the four Panamanians on the Canal Admistrative Commission board of directors along with five US members.

Since its inauguration in August 1914, under US administration, the canal has operated as a non-profit corporation serving international maritime transport.

And former member of the canal management council, Cecilia Alegre, said Vazquez's suggestionwill only increase the tension amongst users of the the interocean link.

Alegre said the proposal would mean "radical change in the administrative policies which have prevailed in this company since it began," adding that if the canal is converted into the profit- making company Vazquez is proposing "it could lose competivity" with other sea transport routes.

One of the fears affecting the shipowners using the canal "is precisely our tendency to improvise,"' and if the canal stops operating as it has done up until now "we could be killing the hen that lays the golden eggs," he added.

The 493.6 million dollars brought from tolls on ships using the the canal in 1997 were topped by a further 170.7 million dollars for additional services offered to the international shipping companies.

Alegre said that speaking of the possible conversion of the canal into a profit-making corporation "when in less than two years the tolls have increased more than 16 percent, not to mention other aggregate increases, is not condusive to gaining user confidence."

He admitted the increases of the last two years could be justified by the need to fund the canal extension work underway, but said it was "illogical" to impose new costs to the world shipping industry "for the sake of profit alone."

Economist Roberto Mendez, professor at the state University of Panama, said when the canal goes into the jurisdiction of this country there will be a substantial saving of resources "which are currently squandered" by the Canal Commission on perks for its US employees.

Mendez, who published a study on the Canal Commission budget this year, said a quarter of this went on "the inflated costs of (the US) military personal and civil burocracy" providing services in the zone.

The study, based on data of the income and outgoings of the canal, stated that when the interocean link comes into Panamanian control, the Corporation will save some 70 million dollars per year on this item alone.

This expenditure was considered in the 96-70 law adopted by US Congress in 1978 setting the critera with which the US government would operate the canal until December 31, 1999 through its defence department.

This law, along with other legal dispositions adopted by Washington for the transition process, will disappear when the canal treaties expire in 20 months time.

The controversy has also aroused the interest of civil society organisations, like the Centre of Social Research and Action (Ceaspa), which held a forum of national and foreign experts on the future of the canal in September.

Ceaspa director, Raul Leis told IPS the successive governments of the last 20 years have wasted too much time in discussing a the future of the canal and the goods to be handed over by the US under the 1977 canal treaty.

This lack of definition led to a dilution of the original civil society proposal and likewise late General Omar Torrijos' plan to give the canal "the most collective use possible" when it enters Panamanian hands, along with the inititive from the local business community who wanted to see it privatised.

The latter proposal has veered toward privatisation linked to the private transnational sector, with "an evident loss of protagonism" on the part of the local private sector, said Leis.

Meanwhile, the civil society groups have split into many factions incapable of coming up with a joint proposal on the future of the canal, although the sector could pull together rapidly to oppose Vazquez's privatisation proposal, warned Leis. (END/IPS/tra-so/sh/mj/sm/98)