NotiSur - Latin American Political Affairs
August 15, 1996
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L A T I N A M E R I C A D A T A B A S E
NotiSur - Latin American Affairs
ISSN 1060-4189 Volume 6, Number 10 August 15, 1996
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Copyright 1996, Latin America Data Base (LADB), Latin
American Institute, University of New Mexico
Director: Nelson Valdes
Associate director: Roma Arellano
Managing editor: Kevin Robinson
Staff writers:
Patricia Hynds, Carlos Navarro, Robert Sandels
In This Issue:
COSTA RICA: EXECUTIVE SUPPORTS GOVERNING
PARTY'S FINDINGS ON BANCO ANGLO SCANDAL
GUATEMALA: EXTENSIVE ENVIRONMENTAL DEGRADATION GENERATES
PUBLIC CONCERN & NOVEL GOVERNMENT-PROTECTION PROGRAMS
PANAMA: PROTESTS ERUPT IN COLON PROVINCE OVER TAXATION
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COSTA RICA
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COSTA RICA: EXECUTIVE SUPPORTS GOVERNING
PARTY'S FINDINGS ON BANCO ANGLO SCANDAL
The congressional investigation of the 1994 collapse of
the country's oldest bank, Bank Anglo Costarrricense (BAC),
yielded three conflicting and highly politicized reports. The
executive branch accepted the report submitted by committee
members from the governing Partido de Liberacion Nacional
(PLN) and issued a lengthy set of recommendations that critics
say usurps the prerogatives of the judicial system, which is
considering criminal charges against several bank officials
and others linked to the scandal.
In July 1994, the government took over operations of the
BAC after discovering questionable lending practices and heavy
losses from the purchase of Venezuelan government bonds.
Eventually, government auditors found that the bank had lost
more than US$100 million.
In September 1994, the government closed the BAC and
charged top BAC officials, including former general manager
Carlos Robles, with fraud, mismanagement, and embezzlement.
Also charged were two Chilean businessmen, Jose and Mariano
Lopez. Among their business holdings is Ariana Trading and
Finance (ATF), which sold the Venezuelan bonds to the bank,
supposedly acting as sales agent for the Nederland Bank. Jose
Lopez also owns Bolsa de Cafe, a business that received money
drawn on BAC accounts (see Chronicle of Latin American
Economic Affairs, 10/12/95).
Later in September, the Legislative Assembly set up a
committee to investigate the causes of the BAC collapse and to
make recommendations for reforms in the state banking system.
Of the committee's seven members, three are from the PLN,
three are from the Partido Unidad Social Cristiana (PUSC), and
one is from the Fuerza Democratica. Thus, all three reports
are minority reports.
Nearing the end of its 20-month mandate, it became clear
that the committee had politicized the investigation and that
it might be unable to come up with a single report based on
consensus. The PLN's position going into the investigation
was that former president Rafael Calderon (1990-1994) of the
PUSC was responsible for the scandal because he had appointed
the BAC's officers, including Robles. In testimony before the
committee, Calderon said he was not aware of the bank's
precarious financial condition while he was president and that
he had intervened in bank affairs only to the extent of asking
the bank to review loan applications for unnamed individuals.
The PUSC's view of the scandal is that the bank's real
problems were caused by its closing, and this became the
central tenant among the party's members on the committee.
The closing, said PUSC leaders, cost more than the bank's
faulty operations had.
In late May, just as the committee was supposed to finish
its investigation, new evidence came to light indicating that
the bonds supposedly purchased by the BAC remained in the
hands of ATF and were never under the bank's control. Profits
earned by liquidation of the bonds were never sent to the
bank. Documents requested by Judge Ewald Acuna Blanco from
the US Department of Justice showed that some of the BAC funds
ended up in US bank accounts. Discrepancies also appeared
between the amounts and dates of BAC investments that the bank
reported and what the Justice Department documents showed.
Furthermore, contradicting a written statement by the Lopez
brothers, the Nederland Bank denied that ATF had ever acted as
its agent in the sale of Venezuelan bonds.
The revelations set off demands for new criminal charges
against the Lopez brothers, bank officials, and others
connected to the BAC. In particular, PLN members on the
committee wanted to investigate Juan Antonio Robles, former
director of the Central Bank and a cousin of former BAC
general manager Carlos Robles. The Justice Department
documents showed that Juan Antonio Robles had received US$1.8
million in checks written on ATF accounts, though he had
earlier testified to the committee that he had no dealings
with ATF.
Furthermore, much of the money originally disbursed by
BAC was transferred to banks in the US by businesses linked to
ATF and to the Lopez brothers, according to the government's
bank oversight agency Superintendencia General de Entidades
Financieras (SUGEF).
The SUGEF investigation also suggested that the BAC's
US$38 million portfolio of Costa Rican government bonds was
liquidated in 1993 and that US$15.9 million of that amount
ended up in a variety of Costa Rica businesses and other
properties. According to the report, the whereabouts of some
of this money is known.
The PLN committee members asked for an extension of the
June 3 deadline for filing their final report to review the
case in light of the new information. The committee agreed to
a two-week extension, but the request and subsequent delay in
finishing the PLN report raised further charges by the PUSC
that the governing party was trying to use the committee to
tar former president Calderon and the PUSC.
All possibility of a single committee report disappeared
when the PLN members missed the new deadline of June 10. PUSC
members submitted their report on time as did Fuerza
Democratico member Gerardo Trejos. Among the PUSC
recommendations was that the management of the bank by Rodrigo
Bolanos, who took over as the government's receiver in 1994,
be investigated for irregularities.
The PLN members called the report "superficial, weak,
timid, and negligent," for concentrating on the closing of the
bank rather than on the scandal itself.
"What interests them is who signed the bank's death
certificate," said PLN committee member Luis Gerardo
Villanueva. "We are interested in finding out who killed it.
Moreover, no one has explained to me how the PUSC could
deliver its report on Monday [June 10] when Juan Antonio
Robles had until today [June 12] to present his statement,
which in the end, he did not do."
In his report, Trejos blamed the failure of the committee
to reach consensus on the PLN members.
"They did not deliver their report and now there is no
time to search for agreement," he said.
He echoed the PUSC view that the government erred in
taking the bank over and called the takeover "precipitous" and
"political"--a clear reference to the administration's attempt
to blame the scandal on Calderon. Neither report attempted to
fix blame for the scandal on individuals.
The breakdown of the committee along party lines and the
three reports have not pleased all sectors. Jose Luis
Desanti, president of the Industrial Chamber (Camara de
Industrias) said that the reports undermine the committee's
credibility.
"Who are we going to believe?" asked Desanti.
Albino Vargas, secretary general of the Asociacion
Nacional de Empleados Publicos, said that all three reports
were an attempt to cover up personal responsibility for the
scandal.
"This shows how the political class defends itself from
itself," said Vargas. "The politicians wash their hands of it
by throwing the blame on this group and that, until finally
everyone gets confused and nothing is resolved."
On June 24, the Council of Government (Consejo de
Gobierno), made up of cabinet members and the vice presidents,
formally endorsed the PLN report and most of its
recommendations. It its own report, the Consejo de Gobierno
recommended the formation of a blue-ribbon committee to
develop proposals for reforms that would, among other things,
remove the appointment of state bank directors from political
influence. It also called for the resignation of five state-
bank directors accused of conflict of interest in dealings
with the BAC, the deportation of the Lopez brothers once they
have served out any sentence imposed by the court, and the
removal of political rights from former government officials
implicated in the scandal, such as Rolando Lacle, an
influential minister during the Calderon administration
suspected of influence peddling.
The Council's support of the PLN minority report further
politicized the BAC investigation. Since none of those whom
the Council singled out for punishment has yet been convicted
of a crime in connection with the bank debacle, the
administration is being accused of trying to exercise judicial
powers by determining guilt. Critics also charge that the
administration short-circuited the legislative process by
accepting the report of an Assembly committee before it had
gone to the Assembly for consideration. [Sources: La
Republica (Costa Rica), 04/17/96, 04/19/96, 05/28/96,
06/01/96, 06/10/96, 06/12/96, 06/13/96, 06/25/96; La Nacion
(Costa Rica), 04/28/96, 05/28/96, 05/31/96, 06/05/96,
06/11/96, 06/12/96, 06/25/96, 06/26/96; Agence France-Presse,
07/25/96]
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GUATEMALA
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GUATEMALA: EXTENSIVE ENVIRONMENTAL DEGRADATION GENERATES
PUBLIC CONCERN & NOVEL GOVERNMENT-PROTECTION PROGRAMS
Growing civic awareness of environmental degradation in
Guatemala has led to increased public pressure on the
government to protect the country's natural resources. In
recent months, debate has centered on the extensive
deterioration of Lake Amatitlan, the nation's fourth largest
fresh-water lake and the capital's only long-term reservoir.
Debate is also intensifying over rampant deforestation around
the country as well as the alarming level of air and water
pollution in the capital and other urban areas.
In recent years, domestic and international pressure to
protect the environment has grown immensely in all the Central
American countries, which led to the creation of the Central
American Sustainable Development Alliance (Alianza para el
Desarrollo Sostenible, ALIDES) in 1994. The birth of ALIDES
has, in turn, focused an unprecedented public spotlight on
environmental problems in each of the isthmian nations,
encouraging the creation of dozens of ecology-related
nongovernmental organizations (NGOs) that aim to educate local
communities and lobby for greater government action to protect
the environment.
In Guatemala, public awareness and civic action have
grown particularly in the past year, with a host of
conferences and other public events aimed at raising national
consciousness about the need to enforce sustainable-
development policies. In August 1995, for example, the
Comision Centroamericana de Ambiente y Desarrollo (CCAD),
together with Guatemala's Universidad Nacional de San Carlos
(USAC), organized a conference to develop strategies to
protect Guatemala's biodiversity.
About 150 environmental specialists and representatives
from 25 NGOs attended the conference, which called on the
government to recognize the "strategic national-security
element" implicit in sustainable-development policies.
According to specialists at the conference, Mesoamerica
(Mexico, Guatemala, El Salvador, Honduras, and Belize) is one
of the principal areas of biodiversity in the world.
Guatemala, in particular, is considered one of the world's 12
recognized flora and fauna "megacenters," where 8,681
different species of plants have been identified.
In April of this year, Mexico's Instituto Nacional de
Ecologia (INE) and Guatemala's Comision Nacional de Medio
Ambiente (CONAMA) organized a binational conference in
Guatemala to explore joint efforts to enforce respect for
environmentally protected zones. Some 50 specialists from the
USAC and two other private universities in Guatemala
participated in the conference. In October 1995, Mexico and
the Central American countries signed a joint declaration to
protect the environment, and in June of this year, those
governments agreed to create a Mesoamerican Biological
Corridor (see EcoCentral, 08/08/96).
Among other recent events, on April 22 some 1,500 people
participated in a demonstration in Guatemala City to
commemorate Earth Day. The demonstration aimed to draw public
attention to environmental problems in the country.
"This event is to increase the awareness of Guatemalan
citizens," said CCAD head Jorge Cabrera during the march. "We
have to develop a collective consciousness that we are all
responsible for what we do to the earth. We must work
together to protect our natural resources."
And, more recently, community organizations from Rio
Dulce--the largest inland watershed in the far eastern
department of Izabal--launched a campaign to push the
government to take action to stop industries and residential
property owners from polluting Lake Izabal and the Dulce
River, which have been officially recognized as state-
protected ecological zones. The uncontrolled construction of
houses, chalets, and hotels around Lake Izabal--a major
tourist attraction--is leading to rapid deforestation and the
dumping of toxic wastes and residential garbage in the lake
and river.
In fact, in March, the international environmental
organization Greenpeace reported that the French oil company
Basic Resources International is responsible for various oil
spills that have dumped substantial amounts of crude into Rio
Dulce, the latest of which occurred in August 1995. Basic
Resources pumps petroleum in the far northern department of El
Peten, and it operates a 300 km pipeline that transports crude
from the Peten down to Puerto Barrios on the Caribbean Coast,
near Rio Dulce.
"Tragically, Rio Dulce has become the victim of the most
diverse ecological crimes," said the Rio Dulce Comite de
Vecinos in a statement published by the local press in late
July.
In recent months, this growing civic concern over
environmental affairs has riveted public attention on three
urgent ecological dilemmas in Guatemala. Since June, the
immense destruction of Lake Amatitlan--which has been a source
of controversy for more than two decades--has gripped the
nation's attention as never before, encouraging a series of
government meetings to discuss strategies to clean up the
lake.
Amatitlan, the country's fourth largest inland lake with
15.2 sq km of water area, is located 30 km south of Guatemala
City and is the only long-term water reservoir for the
capital. The city of Amatitlan is an industrial center, and
the lake is a key source of water for some 225 medium and
large factories located there. It also provides water to some
125 residential settlements in the area and to about 25 large
coffee estates.
In addition, the lake has traditionally been an important
source of income for local fishers, and Amatitlan is a
bustling tourist center, especially for domestic weekend
vacationers. And, the state electric institute (Instituto
Nacional de Electrificacion, INDE) has a huge hydroelectric
damn located on the lake that generates 12% of the country's
energy needs.
Nevertheless, the lake is a recipient of human and
industrial sewage, not just for the surrounding area, but for
Guatemala City as well. Hundreds of factories are located
along the two central rivers that wind down from the outskirts
of the capital and feed into the lake. Most of those
factories dump toxic materials into the rivers, although a
recent study by the congressional Comision de Medio Ambiente
indicates that 45 large factories are responsible for the
majority of toxic-waste dumping.
The government estimates that about eight metric tons of
industrial and residential waste from the capital and the
areas around Amatitlan find their way into the lake every
month. The rivers that feed the lake provide outlets for
about 75% of the water drainage from the capital and its
surrounding zones.
In large part, the recent surge in debate over the fate
of Amatitlan was caused by the dumping of a huge amount of
processed crude into the rivers that feed the lake in early
June. The government is now investigating how much oil was
actually unloaded and which industry is responsible.
In the meantime, however, the incident generated a flurry
of government meetings and public pledges to enact programs
that will both protect the lake from further destruction and
begin to clean it up once and for all. The Banco
Centroamericano de Integracion Economica (BCIE) has already
approved US$70,000 for a study of environmental damage to
Amatitlan and has offered to contribute US$20 million to help
clean up the lake. Still, some independent organizations
estimate that an effective program to reverse the damage done
to the reservoir during the past few decades would require
nearly US$375 million.
Apart from Amatitlan, rampant deforestation around the
country has been a second focal point for public debate in
recent months. The Guatemalan government estimates that about
90,000 ha of forest is cut in Guatemala every year. Given
that reforestation efforts only manage to replant about 1,500
ha per year, the country is losing an average of about 89,500
ha of its forests annually.
According to estimates by the directorate of the Plan de
Accion Forestal para Guatemala (PAFG), in 1980, about 51.2% of
the country's land area was covered in forests. By 1992,
however, the forested areas only accounted for 31.1% of
national territory, meaning that forests were reduced by
nearly 40% just in that 12-year period.
The timber industry accounts for an important part of the
annual deforestation, including illegal logging of trees that
are sold as contraband to neighboring countries. But,
according to the PAFG, the central cause of deforestation is
the unsustainable practices of the country's campesinos, as
well as owners of medium-sized and large farms who
indiscriminately chop down timber for firewood and clear land
for planting.
"Contrary to what many believe, illegal activities by
timber merchants are not the central problem, but rather the
use of the land, which is reducing forests for agricultural
purposes," said PAFG coordinator Claudio Cabrera. "The growth
of the agricultural frontier is generally commensurate with
the increase in deforestation. As a result, the only way to
protect our forests, apart from those zones that are already
designated as protected areas, is through sustainable
management of resources."
Consequently, government programs are focusing mostly on
re-educating farmers about sustainable-development policies.
The Inter-American Development Bank (IDB), for example, has
provided US$14.4 million for a new program to work with some
150 indigenous communities along Guatemala's Rio Chixoy
watershed to carry out reforestation and soil-conservation
works to prevent erosion and to protect a major hydroelectric
project in the area. Severe soil erosion and sedimentation
threaten to shorten the life span of the huge 300,000-kilowatt
Chixoy hydroelectric plant, the country's principal source of
electric power.
Since much of the deforestation is caused by the
extensive use of firewood for energy, the program is helping
farmers install stoves that use 60% less firewood than
traditional stoves. The program also encourages farmers to
plant trees on their farms and adopt soil-conservation methods
by "paying" them with tools, improved seed, veterinary
supplies, and egg-laying hens.
Finally, the alarming level of air and water pollution in
the capital and other urban zones is now also a central point
of public debate. Guatemala City, together with San Salvador,
are now considered the two most polluted urban zones in Latin
America and the Caribbean after Santiago de Chile and Mexico
City.
According to CONAMA, there are three central problems in
the capital: the lack of adequate waste-disposal areas and
treatment facilities, the lack of water-treatment plants, and
the exhaust from motor vehicles. CONAMA estimates that about
1,500 MT of garbage is produced each day, but only about 900
MT is disposed of at the only major city dump downtown. The
rest is strewn throughout some 325 illegal neighborhood dumps
and in the ravines that dot the capital.
Given the critical conditions in the capital, the IDB is
now evaluating a US$39 million loan for cleanup projects in
the city. Among other things, about US$21 million would go
for construction of five waste-processing plants, which would
be the first such mills to operate in the city. According to
Greenpeace, an adequate processing and recycling program would
significantly reduce pollution from residential and industrial
debris since an estimated 60% of the city's waste is organic
and could be recycled.
Some of the IDB funds would also be used for water-
treatment plants. The country has 34 such plants, but only
two are currently functioning, and even those two are only
working at 10% capacity.
Meanwhile, the government is planning a series of other
measures to fight environmental degradation around the
country. President Alvaro Arzu's administration has announced
a strategy to improve the efficiency of state programs by
centralizing them under a new "environmental cabinet" within
the executive.
The environmental cabinet, to be headed by the vice
president's office, would include the Ministries of
Agriculture, Energy, and Mines, as well as CONAMA, the tourism
institute INGUAT, and the Consejo Nacional de Areas Protegidas
(CONAP), among others. As part of this initiative, the
government will create an "environmental fund" with an initial
US$7 million in capital to finance private-sector projects
that contribute to sustainable development and environmental
protection.
Among other things, the government is also seeking
approval of new environmental laws. For instance, in June the
Arzu administration sent a bill to Congress to create a
general law for water use (Ley General de Aguas). The bill
would regulate all aspects of water use around the country and
would set heavy fines and other penalties for industries and
citizens who dump waste in rivers and lakes.
Notwithstanding the government's efforts, however,
independent groups criticize the government for not doing
enough.
"The fact is, environmental concerns have occupied a very
low position on the government's political agenda," said Gina
Sanchez, spokesperson for Greenpeace in Guatemala.
According to Sanchez, there are 50 areas around the
country that have been recognized as potential environmental-
protection zones, but to date the government has not extended
protected areas beyond the two currently recognized zones: the
Maya Biosphere in the north of the nation and the area around
Lake Izabal. Moreover, the government has yet to
energetically enforce the environmental laws that already
exist.
Critics say the government must yet demonstrate the
"political will" to force compliance with environmental
legislation. Moreover, rampant corruption is largely
paralyzing the few state institutions that have been set up to
protect the environment.
"The level of environmental degradation has reached the
extreme that it has because destroying natural resources in
Guatemala is cheap, and those responsible enjoy absolute
impunity," read a recent editorial in the influential Prensa
Libre, the country's oldest and largest daily newspaper. "It
is extremely easy to bribe authorities to obtain a license to
damage and contaminate the environment, and until now, there
has been no indication that the government will make any
concerted effort to change business as usual in Guatemala."
[Sources: Agence France-Presse, 02/24/96; Agencia
Centroamericana de Noticias-Spanish news service EFE,
08/18/95, 02/24/96, 02/26/96; Notimex, 04/10/96; The IDB-Inter
American Development Bank report, June 1996; Inforpress
Centroamericana (Guatemala), 05/09/96, 06/13/96; Siglo
Veintiuno (Guatemala), 04/26/96, 05/12/96, 05/27/96, 05/31/96,
06/02/96, 06/04/96, 06/09-11/96, 06/13/96, 06/29/96; Prensa
Libre (Guatemala), 04/16/96, 04/21-23/96, 05/05/96, 05/29/96,
06/01/96, 06/03-05/96, 06/09-11/96, 06/16/96, 06/17/96,
06/30/96, 07/01/96, 07/02/96, 07/21/96, 07/27-29/96]
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PANAMA
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PANAMA: PROTESTS ERUPT IN COLON PROVINCE OVER TAXATION
An independent study of a recent business slowdown in the
Colon free zone (Zona Libre de Colon, ZLC) laid much of the
blame on the government, and it warned of a worsening economic
crisis if reforms are not made. Meanwhile, even as President
Ernesto Perez Balladares's administration analyzes the current
report, the ZLC merchants association (Asociacion de Usuarios
de la Zona Libre de Colon, AU) and other groups in the
Caribbean province of Colon have been widening their demands
for a change in economic policies.
In April, AU members held a two-day strike to protest a
June 1995 tax law, to contest regulations aimed at curbing
money laundering in the zone, and to push the government to
cut bureaucratic red tape. The tax law, aimed at removing
special tax incentives, had slapped a 15% tax on ZLC profits,
doubling the tax burden on the zone's re-export trade (see
Chronicle of Latin American Economic Affairs, 05/09/96).
In May, an AU report indicated that importation of
merchandise into the zone for re-export was falling 25% behind
imports in 1995, and it blamed government policy for the
decline. During the first five months of this year, the ZLC
saw a 21.3% drop in its overall commercial activity compared
with the same period last year. Giovani Ferrari, former AU
president, said that the crisis could deepen and that as many
as 50 of the zone's 2,000 businesses might close this year
because of plummeting sales and increased taxation.
A week after the shutdown, Perez Balladares had said he
would agree to changes in the tax law but would wait for the
results of an independent study comparing the ZLC with other
free zones in Latin America and the US.
The study, made by the firm of KPMG-Peat Marwick and
released on May 30, tends to support the AU's contention that
the tax has caused a reduction in re-exports, but it also says
that other factors, such as increased global competition, were
equally if not more important. The report confirmed that the
ZLC was rapidly losing competitiveness to other re-export
zones in Aruba, Chile, Uruguay, and Miami.
The report indicates that for every additional dollar of
goods imported during the past six years, the value of exports
went up by US$1.07. But between 1994 and 1995, the export
value dropped to US$0.06. The report called this reduction
the most serious setback in the 25 years of ZLC statistics
analyzed in the study. If this downward trend were to
continue through 1996, 3,000 of the zone's 13,000 jobs could
be lost, according to the report.
Another indication of the ZLC's decline is the increase
in imports by competing free zones in other countries.
Traditionally, Hong Kong has been the ZLC's largest supplier,
providing 27% of its imports. In recent years, however, the
increase in exports from Hong Kong to other countries in Latin
America has been three times greater than the increase in its
exports to the ZLC. In the case of Japan, the increase has
been 10 times greater.
Contributing to the ZLC's decline, the report found a
lack of overall planning and effective marketing strategies to
keep up with global competition. The ZLC also has not kept up
with changing data management and communications technologies
nor has it adopted cost-effective "just-in-time" distribution
systems. Further, the ZLC continues to emphasize re-export of
clothing and shoes, which have a low market value for their
weight and are consequently costly to ship. Meanwhile,
competing zones in other countries are concentrating on higher
value-for-weight goods such as electronics. In 1996,
international sales of computers are expected to increase by
40% and of electronic components by 50%, whereas sales of
textiles are expected to drop by 14%.
Making matters worse, Panama suffers from inadequate or
obsolete cargo-handling and freight services. Air-cargo
service is especially lacking, and ground transportation
infrastructures are badly deteriorated, or in the case of
railroad service, practically nonexistent, says the report.
Other factors that have contributed to the decline in re-
exports are the lack of public security; inefficient water,
electric, and telephone services; and excessive government
controls on methods of payment to prevent money-laundering
through ZLC businesses.
As for the new tax law, the report noted that while other
countries are offering tax and other incentives to increase
competitiveness in their free zones, Panama is eliminating
them. Competing free zones included in the study are taxed no
more than 2% or not at all, but the ZLC is taxed 15%.
The report recommends that the government consider
converting the ZLC into a center for assembly and distribution
to the Latin American market of goods manufactured in Asia and
Europe. It also calls for tax reduction, a general revision
of tax policy in the ZLC, and the elimination of restrictions
that prohibit the location of banking and insurance operations
in the zone.
Responding to the report, Planning and Political Economy
Minister Guillermo Chapman minimized the impact of the
controversial tax on the competitiveness of the ZLC and said
he was not satisfied with the report. The report does not
show that taxation will discourage businesses from
establishing themselves in the ZLC, he said. However, he said
the government would analyze the report before announcing any
changes in tax or other policies affecting the ZLC.
On July 1, the president announced the he would ask the
legislature to eliminate one of the most hated aspects of the
tax law--a requirement that ZLC merchants make advance tax
payments.
"There is a loss of competitiveness because of the way
the tax is collected," he said.
The president told the press that he would call a special
session of the legislature in August to consider the bill,
which is to be written by a committee made up of cabinet
ministers and representatives of the ZLC merchants.
The announcement appeared to be the president's response
to a June 26 AU warning that it would call for another
business shutdown in the zone if the president did not move
quickly to resolve the crisis. Their principal demand was
suspension of the collection of a US$10 million advance tax
payment.
In July, the ZLC grievances meshed with a general protest
affecting the entire Caribbean province of Colon. On July 3,
a coalition of business leaders and municipal officials called
a one-day general strike "for the dignity of Colon," which
paralyzed economic activity in the province. The strike was
intended to call attention to the high rates of crime and
poverty in the province. Although it has the port of Colon,
canal installations, three US military bases, the ZLC, and the
country's only oil refinery, the province also has a 40%
unemployment rate and the highest crime rate in the country.
The coalition included the mayor of Colon and 26
associations. Included were the Chamber of Commerce, the AU,
and representatives of small and medium-sized businesses,
public-transportation workers, freight haulers, teachers,
business executives, and the unemployed. Colon Mayor
Alcibiades Gonzalez said that the strike was decided by a
general assembly of the coalition "to defend us as a people
against the government's [economic] measures."
Aside from tax relief for the ZLC, the strike leaders
demanded the application of a 1994 law that would give the
entire province free-port status. This would exempt the
province from taxes and make it more attractive to foreign
investment, said strike leaders.
The president promised no action on the Colon province
demands but said that the new tax would be rescinded sometime
in August during the special session of the legislature.
[Sources: La Prensa (Panama), 05/31/96; La Estrella de Panama,
05/08/96, 05/14/96, 05/17/96, 05/31/96, 06/14/96; Inforpress
Centroamericana (Guatemala), 06/20/96; Agence France-Presse
05/30/96, 07/01/96, 07/03/96]
