Panama Marks 100 Years of Independence And Seeks Free Trade Agreement With U.S. by Larry Luxner Exactly 100 years ago this month, Panamaówith a little help from the United Statesódeclared independence from Colombia and signed an agreement giving the U.S. government the right to build and own what would soon become the worldís busiest canal. These days, more than 14,000 ships a year transit the 51-mile waterway, which is now under Panamanian sovereignty, and Panama finds its once-stormy relationship with Washington so cozy that the two countries are considering a bilateral free trade agreement. Roberto Alfaro Estripeaut, Panamaís ambassador to the United States, said that Secretary of State Colin Powell will represent the Bush administration at Panamaís official festivities on Nov. 3 to mark the Central American nationís first century of independence. ìOur story is very unusual because although we got independence from Spain at the same time as everyone else, Panama was very small, so we voluntarily decided to join Colombia,î Alfaro explained in a recent interview. ìBut the experience wasnít so good, and by the late 1800s a movement for independence had started.î Panamaís moment came when the Colombian government rejected the terms of Washingtonís original canal proposal. ìThe United States started looking for other options like Nicaragua. At the same time, Panamanian dissidents started contacting the U.S. government to see if they would help Panama gain independence,î Alfaro said. ìOf course, we couldnít fight the Colombian army, but our patriots took the headquarters of the army by force. When Colombia sent in reinforcements to fight the insurrection, the U.S. stationed a battleship in the bay of ColÛn and stopped the Colombians from landing new troops, guaranteeing our independence. From then on, a great alliance with the United States has begun, and a treaty was signed 15 days later to build the canal with the new Panamanian government.î In 1914, the Panama Canal officially opened to traffic. It remained under U.S. sovereignty until Dec. 31, 1999, when the Stars and Stripes came down and the Panamanian flagóalso red, white and blueórose over the former U.S. Canal Zone for the first time. The 1977 decision by President Jimmy Carter and Panamaís leader at the time, Gen. Omar Torrijos, to return the canal to Panama was crucial to the two countriesí generally friendly relations. ìI think that today, we have the best relations ever with the United States,î said the ambassador, whose office walls are decorated with reproductions of antique maps of the Caribbean. ìWe are very happy with the transfer of the canal, which has been a success story for the U.S. also. It was very hard for Congress to pass the Panama Canal Treaties, but they did, and Washingtonís relationship with Latin America improved from that moment on.î Alfaro, 59, is married to Rossana Luigia Ameglio Samudio and has five children. He comes from a long line of distinguished public servants: One of his grandfathers served as ambassador to the United States and later as president of Panama. An insurance executive by profession, Alfaro studied at both the Canal Zone College and the George Washington University before beginning his career. During the dictatorship of Manuel Noriega, when political parties were outlawed, Alfaro became active in the National Council of Private Industry, one of the few associations allowed to flourish at the time. In 1989, after U.S. Marines helped overthrow Noriega, Panamaís new president, Guillermo Endara, called Alfaro and invited him to join the new government. He did, becoming the countryís vice minister of commerce and industry. Six months later, he was promoted to minister of commerce, a position that lasted until 1994, when the opposition party headed by Ernesto ìToroî PÈrez Balladares was voted into office. During his tenure as minister, Alfaro served as president of the Panamanian Stock Exchange Commission. He also helped to write Panamaís memorandum of adhesion to the General Agreement on Tariffs and Trade (now the World Trade Organization). When Mireya Moscoso won the presidential elections in 1999, Alfaro returned to public life and was nominated ambassador to Italy, a post he occupied for three years before relocating to Washington earlier this year. ìMy two main objectives here are to start negotiations for a free trade agreement and to try to get Panama designated as a distant foreign port,î said Alfaro, who speaks Italian, English and Spanish fluently. ìWe are not interested in joining CAFTA,î he said, referring to the proposed Central American Free Trade Agreement now being negotiated among the United States and five countries: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. ìWe want to do a bilateral free trade agreement with the U.S.,î Alfaro explained. ìWe are a service economy, whereas the rest of Central America is agriculture and textiles. We have very few labor and environmental problems, and no immigration issues.î Panama, with 2.6 million people, has a relatively high per-capita income but suffers from extremes of wealth and poverty. The 55-story skyscrapers of Paitillaóa wealthy suburb along the Pacific shoreóare among the tallest in Latin America, while the favelas, or slums, of ColÛnóa predominantly black city on the Atlantic coastóare among the worst in Rio. On the other hand, things generally work in Panama, from the telephone system to the canal itself. And the country has been using the U.S. dollar as its official currency ever since independence, which has helped it become a booming offshore financial center. Asked about money launderingóa perennial problem that always crops up when discussing Panama and its proximity to the Colombian drug tradeóAlfaro said that with the adoption of recent banking and tax reforms, it is now harder to open a bank account in Panama today than in the United States. For all of these reasons, he said, ìAn FTA with Panama would be very simple because we donít have anything that would compete with U.S. industry. And there wouldnít be much opposition in Panama to an FTA, since all four candidates in Panamaís May 2004 presidential elections support the concept.î So do a number of U.S. lawmakers. A Sept. 25 letter signed by 30 members of Congress, including Rep. Tom DeLay (R-Texas), Rep. Lincoln DÌaz-Balart (R-Fla.) and Rep. Don Young (R-Alaska), urged U.S. Trade Representative Robert B. Zoellick to push hard for an FTA with Panama. ìDuring 2002, Panama generated a favorable balance of trade of $1.1 billion with the United States,î said the congressional letter. ìU.S. private investments in this country are greater than the other five Central American nations combined. Further, the Panama Canal, the container ports transshipment center and the ColÛn Free Zone make this small country one of our most important allies, particularly regarding commercial and security matters.î Alfaro said his second priority, getting Panama designated a ìdistant foreign port,î is very important because it would encourage cruise ship lines to add Panama to their Caribbean itineraries. Specifically, Panama is seeking a waiver of the Passenger Vessel Services Act, which currently requires vessels to stop in a distant foreign port as part of a voyage between East and West Coast ports. Alfaro said the law dates back to 1886 and was originally enacted to protect U.S. labor unions from cheap foreign competition. ìRight now, we are only getting passengers to stop over,î the ambassador explained. ìThey can take a trip through the Panama Canal, but a ship that calls on U.S. ports cannot leave passengers in nearby foreign ports.î Ironically, Cartagenaóa popular cruise ship destination on Colombiaís Caribbean coastóenjoys the distant foreign port designation, even though Cartagena is closer to Miami than Panama City is. The issue has been taken up by the U.S. cruise ship industry, which is always on the lookout for new and interesting destinations. Micky Arison, chairman and chief executive officer of Carnival Corp., complained in a July 24 letter to President Bush that ìthis requirement discourages passenger vessels from stopping and disembarking passengers for extended tours or overnight stays in Panama, a desirable destination for cruise passengers.î Modifying the law, Arison wrote, ìwill generate additional tourism revenues for Panama, thereby enhancing canal expansion projects and furthering the interests of the entire shipping community.î Alfaro speculates that if Panama were branded a distant foreign port, it could attract at least 300,000 more tourists per year, ìinjecting about $50 million more into our economy.î That is why the country ís hotel, travel and duty-free industries are all pushing for the designation. For the last three years, tourism revenues have increased by an average 10 percent annually, with Alfaro hinting that 2003 tourist arrivals may break the one-million mark for the first time ever. Since getting back the Panama Canal, Alfaro said the Panamanian government has invested more than $1 billion into canal improvements, including the widening of the Culebra Cut. That allows two ships to pass through simultaneously, whereas before only one vessel could transit at a time. In addition, a new lighting system allows container vessels and cruise ships to traverse the Panama Canal at night, allowing 24-hour-a-day operations for the first time. These improvements have boosted the canalís annual revenues, which have helped offset losses in the ColÛn Free Zone triggered by economic difficulties in Argentina, Venezuela, Ecuador and Colombia. Last year, the canal recorded a record 14,000 transitsóincluding 350 cruise shipsówith the number expected to be even higher this year. But the biggest expansion is yet to come: a $5 billion, 10-year expansion project that will substantially widen the Panama Canal itself to accommodate supertankers, container vessels and enormous cruise ships. ìWe have to expand the canal because almost 45 percent of the ships being built today are too wide to go through the canal,î Alfaro said. ìSo if we donít enlarge the canal, we will begin to lose business.î Larry Luxner is a contributing writer for The Washington Diplomat.