The Wharton Global Forum in Panama had an exciting start with Professor Mauro Guillen interviewing the host country’s president: Alberto Martinelli.
Professor Guillen and President Martinelli were introduced by Forum Co-Chair, Credicorp bank president Joseph Harari. The one-on-one discussion covered a range of topics concerning the business sector, poverty, Latin America, and the expansion of the Panama Canal. President Martinelli took office in 2009 after working in the private sector; he is president and director of the board of Panamanian supermarket chain Super 99, and he also sits on the boards of at least eight other companies.
President Martinelli first spoke of some of the key initiatives he spearheaded during his presidency. These included increasing the minimum wage; providing a monthly pension to Panamanians 70 years old or older; simplifying the tax code; and providing scholarships to 800,000 students. These initiatives have resulted in lower poverty, an increased standard of living for millions of Panamanians, less tax evasion, and a decrease in the dropout rate of students.
Professor Guillen asked about balancing the budget and addressing Panama’s growing debt. President Martinelli responded that he was addressing these issues by increasing tax revenues. By eliminating many loopholes and decreasing the corporate tax rate from 30% to 25% and by decreasing the personal tax rate from 20% to 15%, he had been able to increase net tax revenues. This has allowed him to reduce the budget deficit and Panama’s debt as a percentage of GDP.
The president said that he has sought to stimulate economic growth by signing a number of free trade agreements with Europe, the US, and Canada. President Martinelli said Panama will soon join the Pacific Alliance, a Latin American economic integration and free trade bloc established in 2011 that already includes Chile, Colombia, Peru and Mexico. He stressed that there are great benefits to these agreements. Panama will soon have the largest airport in Latin America and one that is increasingly viewed as the hub that connects all the countries in the region, replacing Miami airport’s role. This will also increase tourism, which will further drive growth in this service-based economy.
Professor Guillen next asked: why invest in Panama as opposed to Miami or Houston? What are the key reasons? President Martinelli responded by about Panama’s excellent business and geographical climate. Taxes are low and there is an abundant supply of cheap labor. There are no earthquakes or hurricanes, and the prevalence of air conditioning renders the tropical climate hardly noticeable. It is a democracy and each day, flights from Panama connect it with 83 other cities.
The discussion then turned to China, Cuba, and Venezuela. Professor Guillen wanted to know what President Martinelli thought about the possibility of the Chinese building a canal in Nicaragua. While Panama welcomes competition, the President said it would be too expensive to build a canal in Nicaragua and also that country lacks the critically important supporting infrastructure required. As for Cuba, President Martinelli noted that it was only a matter of time before Cuba becomes democratic.
On the subject of Venezuela, Martinelli thought it was one of the best promoters of Panama: its policies have encouraged Venezuelans to migrate, bringing their financial resources with them. According to current estimates, there are 65,000 Venezuelans in the country.
The last question concerned his advice to young people. The president encourages them to first enter the private sector to learn how business and life works, but they should subsequently get involved in politics because business executives know how to get projects accomplished efficiently.