Panama Elects New President Who Vows To Shut Migrant Trail, Restore Economy

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by Tyler Durden
Monday, May 06, 2024 - 11:20 PM

Voters in the Republic of Panama on Sunday elected a new president who has vowed to sever a key segment of the Latina American migrant trail that leads to the United States while restoring the country's reputation as an investment destination.   

“We’ll promote a government that’s pro-investment, and pro-private enterprise,” said Mulino in his victory address. (Matias Delacroix/AP)

Former security minister Jose Raul Mulino won via an approximate 34% plurality of the vote. He was a late entrant to the race -- subbing in for former President Ricardo Martinelli, who was banned from running after being convicted for money laundering and sentenced to nearly 11 years in prison.

The conviction arose from the use of public money to buy a media firm, which then gave Martinelli a majority ownership position. Martinelli is currently living in the Nicaraguan embassy in Panama City, where he's been granted asylum. That didn't stop him from being an active voice in the campaign, urging voters to choose Mulino via messages from his makeshift home in an embassy storeroom. On Sunday, Mulino acknowledged the boost, visiting Martinelli at the Nicaraguan compound after he'd cast his own vote: 

Mulino, whose five-year term will begin on July 1, has vowed to stem the massive flow of illegal migration that transits Panama en route from South America to the United States. In 2023, more than 500,000 migrants traveled through Panama; most of them were Venezuelan, reports Bloomberg

“I will not permit thousands of illegals to pass through our territory like nothing, without control,” said 64-year-old Mulino as he campaigned for office. Making good on that promise will require major attention to Panama's notorious Darien Gap, a roadless, 60-mile stretch of of swamps, mountains and rain forest that is the only terrestrial connection between South and Central America.

Passage through the gap is filled with perils, not least of which are assault, robbery and rape at the hands of criminal gangs. Aid groups say the criminals in the zone are extraordinarily evil, and are known to steal food -- including baby formula -- and abandoning beaten, hungry victims in the jungle. 

Mulino has also promised to confront the country's many economic challenges -- which have prompted credit downgrades. Fitch lowered Panamanian debt to junk status in March. For now, S&P and Moody's score Panamanian bonds one slot above junk.

Lashing out against inflation and government corruption: In 2022, demonstrators imposed roadblocks across the country 

The shuttering of a single enterprise has hit Panama's economic and fiscal prospects hard. It's the $10 billion Cobre copper mine run by First Quantum Materials, which accounted for 5% of Panama's GDP and 1.5% of the global copper supply. In December, the Supreme Court said the company's contract -- which it took over through a hostile takeover -- was unconstitutional.

The terms of that contract were perceived by Panamanians as leaving too much on the table, and the mine has been the subject of major protests. Some of the opposition springs from ecological concerns. Mulino's challenge: Strike a new deal and get the mine working again, bringing money into the economy and taxes into government coffers.

The country has also suffering an economic hit from a drought that has lowered water levels in Gatun Lake. The lake an important component of the Panama Canal route, and the lower water level forced restrictions that slashed canal transits and total tonnage. "The run rate for fiscal year 2024 of vessels through the canal is 9,700, 23% lower than the 2023 fiscal year throughput," FreightWaves reported in February. 

Nudging the canal back toward normal operations will require identifying a new water source. One proposal calls for the construction of a $900 million water reservoir, something the US Army Corp of Engineers explored in the late 1990s. If it gets the green light, construction is expected to span five years. 

The proposed Rio Indio Reservoir would be situated southwest of Lake Gatun (via Engineering News-Record)

In 2022, the country was rocked the largest civil unrest since the end of dictator Manuel Noriega's reign in 1989. The action included strikes by teachers and construction workers -- and demonstrators using fiery roadblocks -- as citizens lashed out against rising prices, as well as government corruption in the form of legislators' families and cronies being granted bloated contracts and salaries. Members of the ruling Democratic Revolutionary Party threw fuel on the fire when photos captured them drinking $340 bottles of Macallan whisky while celebrating the start of a new legislative session.  

Order was restored after President Cortizo ordered 10% government payroll cuts and imposted price controls. Of course, government market interventions are never a path to lasting prosperity and stability. That's a fact President-Elect Mulino may not fully grasp: One of his promised economic remedies is a boost in the country's minimum wage.