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No, Bernie wasn’t right about Panama — and offshore havens have little to do with trade

Even before a bilateral free trade deal with the United States, Panama City was thriving as a center of commerce, banking and shipping in the Caribbean. (Kevin Lees)
Even before a bilateral free trade deal with the United States, Panama City was thriving as a center of commerce, banking and shipping in the Caribbean. (Kevin Lees)

During Barack Obama’s presidential administration, the United States entered into bilateral free trade agreements with not only Panama, but Colombia and South Korea as well.USflagPanama Flag Icon

It might surprise Vermont senator Bernie Sanders, but that didn’t transform Colombia and South Korea offshore tax havens.

Panama, like the British Virgin Islands or a handful of well-known jurisdictions (including Delaware), was known as a top offshore destination for foreign assets well before 2012, when the U.S.-Panama Trade Promotion Agreement took effect. Today, in the aftermath of the jaw-dropping leak of the ‘Panama Papers,’ a 2011 video clip of Sanders, the insurgent candidate for the Democratic presidential nomination, is now going viral.

But it’s far from evidence that Sanders was somehow prescient, and the suggestion that the U.S.-Panama free trade agreement somehow led to Panama’s reputation as a tax haven is disingenuous.

The truth is that offshore jurisdictions have been under siege for years, and the United States has been at the forefront of that fight. It began in earnest in the 1990s, a result of efforts to stymie money laundering related to drug trafficking. But it accelerated to warp speed after the 2001 terrorist attacks in response to concerns about the intricate networks that financed terrorism. Both before and after the aftermath of the global financial crisis in 2008-2009, the Organization for Economic Co-operation and Development took steps to force many of the worst global offenders, named and shamed on its ‘blacklist’ and ‘graylist’ of violators, to weaken their bank secrecy regimes.

That included, perhaps most notably, Switzerland, once the gold standard of secret bank accounts, which agreed to relent its famous standards of bank secrecy in 2009 and 2010. For the record, neither Panama nor the United States signed a more recent effort from 2014 to introduce greater tax transparency. Yet, under the Obama administration, the Foreign Account Tax Compliance Act (FATCA) has put unprecedented burdens on foreign financial institutions in the effort to root out American tax cheats.

Despite the easy meme about Sanders, the U.S.-Panama free trade agreement was always about free trade.

Continue reading No, Bernie wasn’t right about Panama — and offshore havens have little to do with trade

What will Solís do as Costa Rica’s new president?

LGS

He won the Costa Rican presidency yesterday with 78% of the vote. His opponent considered the runoff so hopeless that he conceded defeat and suspended his campaign a month ago. With nearly 1.3 million votes, he won more votes than any other Costa Rican presidential candidate in the country’s modern history.costa_rica_flag

But now that he’s been officially elected Costa Rica’s new president, what will Luis Guillermo Solís (pictured above) do in office?

The first thing he’ll have to do is temper high expectations that Costa Rica’s first third-party president in modern history will suddenly transform the country into a wealthier, corruption-free, social democratic paradise.

The son of a cobbler and the grandson of a laborer on a banana plantation, Solís vowed to reverse the income and social inequality that’s become a growing concern in what is arguably Central America’s most politically and economically successful country.

Solís, a historian who has never held elective office, won a surprise victory won the first round of the presidential election on February 2, edging out one-time frontrunner Johnny Araya, the candidate of the ruling Partido Liberación Nacional (PLN, National Liberation Party) and the longtime mayor of San José. Solís’s strong showing against Araya in the final presidential debate bolstered his candidacy, which had languished in fourth or fifth place in polls, even a week before the February vote. 

It was a magnificent turnaround for a candidate who barely figured in the polls at the end of 2013. 

tico2014

Solís won 77.85% in Sunday’s runoff, while 22.15% voted for Araya, despite the suspension of Araya’s campaign on March 6. He said that he’ll start announcing key members of his cabinet next Monday, April 14.

Araya was attempting to win a third consecutive presidential term for the PLN. In the 2010 vote, Costa Ricans elected Laura Chinchilla as the country’s first female president. Despite initially high expectations, Chinchilla’s administration has been a disaster, marred by embarrassing corruption scandals within the PLN and charges of lackluster economic policy.

Costa Rican voters also had doubts about Araya’s leading challenger, the far more leftist José María Villalta, the candidate of the socialist Frente Amplio (Broad Front), who had been expected to advance to a runoff against Araya.

So it’s not a surprise that voters would turn to Solís, who offered a slightly more leftist vision for Costa Rica than Araya and the PLN, but not so socialist as Villalta and the Broad Front.

He’ll take office with an incredibly fragmented Asamblea Legislativa (Legislative Assembly) — his own party, the Partido Acción Ciudadana (PAC, Citizen’s Action Party), holds just 13 seats in the 57-member chamber. That means he’ll have to form an alliance with the PLN, which holds 18 seats, or form ad-hoc coalitions with other lawmakers who range in ideology from Christian democratic to radical libertarian to chavista-style socialist.

It helps that Solís — and the PAC’s unofficial leader Ottón Solís (no relation to the president-elect) both started their political careers with the PLN. Ottón Solís, elected in February to the National Assembly as a deputy, will play an important role in forming and achieving the new administration’s agenda. For the past decade, opposition to the ruling PLN and to corruption has united the PAC, and it’s ideological diversity has been helpful in the 2014 campaign. Once in government, however, Luis Guillermo Solís may find it difficult to unite a party that contains both socialists and liberals — and to maintain a constructive role for Ottón Solís.   Continue reading What will Solís do as Costa Rica’s new president?

Upstart leftist challenges Araya dominance in Costa Rican vote

Villalta

Not so long ago, the Costa Rican presidency was Johnny Araya’s to lose.costa_rica_flag

But as Costa Rica holds a general election on February 2 to pick a new president and all 57 members of its Asamblea Legislativa (Legislative Assembly), Araya is on the defensive and may find himself in a runoff against an upstart progressive candidate, José María Villalta (pictured above).

araya

Araya (pictured above), the mayor of San José since 1998, the candidate of the relatively dominant center-left Partido Liberación Nacional (PLN, National Liberation Party) and the nephew of former president Luis Alberto Monge, led polls throughout 2013.

chinchilla

There were always reasons to believe that lead was soft, in light of the massive unpopularity of outgoing president Laura Chinchilla (pictured above), who late last year has a 12% approval rating, making Chinchilla, according to pollster Mitofsky, the least popular leader in Latin America.  Elected in 2006 to great fanfare and high expectations as the country’s first female president, Chinchilla has struggled to contain Costa Rica’s exploding public debt, which grew from 30.7% of GDP in 2011 to 35.3% in 2012.  Fifteen ministers have resigned during her administration following corruption and other scandals, and Chinchilla last May hit rock-bottom when she accepted jet rides from a Colombian businessman with suspected drug trafficking links.  Furthermore, Araya’s two-decade record as mayor of Costa Rica’s capital, including ongoing investigations for corruption, provided his opponents with ample ammunition.  Araya has also struggled at times to respond to critics about how he could lead a government that commands the trust of the electorate.

Despite those headwinds, Araya had hope to believe that he would win the PLN’s third consecutive presidential term, given the near-complete collapse of Costa Rica’s traditional center-right party of the past three decades, the Partido de Unidad Socialcristiana (PUSC, Social Christian Unity Party).  Though it held the presidency three times between 1990 and 2006, its parliamentary caucus shrunk from 27 in 1998 to just six today, and its presidential candidates in 2006 and 2010 failed win more than 4% of the national vote.  When former presidents Rafael Ángel Calderón Fournier and Miguel Ángel Rodríguez were convicted and imprisoned on corruption charges stemming from PUSC’s time in power, it massively discredited the party.

But the PUSC’s troubles have only worsened in the campaign leading up to Sunday’s vote.  PUSC’s presidential candidate Rodolfo Hernández dropped out of the race, blasting his own party’s record on corruption along the way.  That Hernández dropped out on October 3, changed his mind two days later, and left the race again on October 9 only made the PUSC’s chances worse.  The PUSC hastily named Rodolfo Piza, the former head of Costa Rica’s social security system, who previously contested the PUSC primary for the presidential nomination in May 2013, as its nominee instead.

Support for three other candidates now threaten to deny Araya the 40% support he needs to win the election outright on Sunday, leading to a runoff between the top two candidates, likely on April 6.  It would be just the second time in Costa Rican history that the presidential race requires a runoff (the first was in 2002).

The strongest challenger is the 36-year-old Villalta, whose popularity surged dramatically last autumn.  He’s the candidate (and currently the sole parliamentary member) for the Frente Amplio (Broad Front), a relatively new social democratic party that has figured minutely in Costa Rican politics — until now.

A brash, confident leftist, Villalta has embraced a campaign heavy on human rights for an agenda to  boost environmental regulations, enact same-sex marriage, and enact more progressive economic policies at odds with the broadly free-market policies that have dominated both PUSC and PLN administrations over the past three decades.  But his youth and his rapid rise in Costa Rican politics have kept some voters from fully embracing his candidacy.  Though he’s not a communist as his opponents have charged, words of solidarity with the late Venezuelan president Hugo Chávez have not helped convince voters that Villalta is moderate enough to govern Costa Rica effectively.  He received some ridicule in the final presidential debate for suggesting a tax on sodas and other junk food, including chifrijo, a Costa Rican bar food that combines rice, beans, chicharrón (pork) and chimichurri.

guevara

The strongest candidate on the right is Otto Guevara (pictured above), who’s making his fourth consecutive presidential bid.  Guevara, an attorney, founded the conservative Movimiento Libertario (ML, Libertarian Movement), in 1994 as an anti-corruption party championing free-market liberalism and greater individual rights.  First elected as a legislator in 1998, Guevara has won increasing amounts of support in each election — 1.7% in 2002, 8.4% in 2006 and 20% in 2010.  Guevara has taken a strong social conservative stand in the current campaign, especially against abortion and same-sex marriage.  He’s benefitted from the collapse of the PUSC and, though he seems unlikely to make it into the second round, polls show that he could win the presidency in a runoff against either Araya or Villalta.

solis

If Villalta had the momentum through the end of 2013, yet another center-left candidate seems to have captured that momentum as the campaign ends — Luis Guillermo Solís, an academic, diplomat and one-time adviser to former president Óscar Arias on the Esquipulas Peace Agreement that helped bring an end to the ideology-based civil wars that plagued much of Central America in the 1980s.  Ariás, who won the Nobel Peace Prize in 1987 for his efforts, has served twice as Costa Rica’s president, from 1986 to 1990 and again from 2006 to 2010, and he remains one of the region’s most respected statesmen.  Solís (pictured above) left the PLN in 2005, however, and he’s running on a solidly center-left platform to improve the country’s health care and pension system and reduce corruption.  Solís has sharply criticized both Chinchilla and Araya throughout the campaign and, as a more moderate center-left alternative to Araya, Solís may be winning voters who are having second thoughts about catapulting the more radical (and younger) Villalta to the presidency.

Solís represents the Partido Acción Ciudadana (PAC, Citizen’s Action Party), another social democratic party founded in 2000 by Ottón Solís (no relation) that emerged as an anti-corruption alternative to the PLN that, like the Broad Front, is more skeptical of the PLN/PUSC adherence to neoliberal policies.  The PAC, for example, opposed Costa Rica’s membership in the US-Central American Free Trade Agreement. Ottón Solís ran for president in the previous three elections, and he nearly defeated the seemingly unstoppable Arias in the 2006 election.

The final CID-Gallup poll released January 28 showed Araya holding onto a 35.6% lead, followed by Villalta with 21.0%, Guevara with 17.6%, Solís with 15.6% and Piza at just 6.5%, with other candidates winning just 3.6%.  Those numbers represent a narrow drop for both Araya and Guevara, but it’s a bit of a sharper drop for Villalta, who was pollign in the mid-20s and high-20s earlier this month and in December.  Villalta’s loss has been Solís’s gain.   Continue reading Upstart leftist challenges Araya dominance in Costa Rican vote