Panama's New President `Toro' Charges at Free-Trade Cape

PANAMA'S new President Ernesto Perez Balladares is living up to his nickname of ``Toro'' the bull.

After just two months in office, he is charging forward with proposals to strip Panama's lagging industry and agriculture of excess tariff protection, sell public utilities to the private sector, and shake up a labor code considered too favorable to workers.

All this is in pursuit of greater international competitiveness for Panama's $6.5 billion, service-oriented economy, and eventually a more ambitious goal: membership in the North American Free Trade Agreement (NAFTA), which Mr. Perez Balladares says he'd like to see by the end of his five-year term.

Panama is coming late to the privatization and free-market policies that have swept Latin America in recent years. Opponents object to the pace Mr. Perez Balladares is setting and obliquely infer that it could cause sporadic social and political conflict, as has occurred in Venezuela.

Panama's new president is unswayed but frank. He says the proposed changes will produce winners and losers.

To head off conflict, he is trying to build consensus around the proposed changes. He argues that attracting more foreign investment and generating capital from privatizing government utilities are necessary to attack entrenched poverty and to improve Panama's huge gap between the rich and poor. Income distribution is the second most unequal in Latin America.

The outlook for foreign support looks bullish. On Oct. 25, the Inter-American Development Bank signed off on a $750 million letter of credit that the new Panamanian government can use to build roads, schools, clinics and to create new jobs. The US attitude toward Panama, swayed by Perez Balladares' willingness to harbor Haitian strongman Lt. Gen. Raoul Cedras and Cuban refugees, is also positive.

But Perez Balladares, a minority president elected with just 33 percent of the vote last May, must calculate domestic support and opposition carefully. Asked where the principal resistance to his consensus building was emanating, the president replied, ``From private enterprise, particularly from industry.''

Next week, US and Panamanian negotiators will sit down to start talks on Panama's request to join the General Agreement on Tariffs and Trade (GATT), which marks the first step in a commercial opening that will eventually slash agricultural and industrial tariffs. Panama's import tariffs range from 3 percent to 50 percent, compared to Mexico's 5 percent to 20 percent tariff range.

Perez Balladares, like many Central American nations, sees membership in GATT as a precursor to gaining duty-free access to the relatively wealthy US market via NAFTA.

Panamanian companies know that increased competition could cost them market share. ``All our industries are in jeopardy. We must reduce the cost of GATT adherence to a minimum,'' says economist Rogelio Alvarado of the Panama Industrialists Union.

Exposing domestic producers to foreign competition is only one plank in a strategy designed to jack up Panama's ability to compete in foreign markets. The government also wants to lower presently high rates for public utilities by privatizing the services. Hence it began its term floating a proposal to sell off 49 percent of the phone company INTEL to foreign investors.

Polls here say 70 percent of Panamanians oppose privatizing telephone and electric service. The country's unions don't much like the idea either.

Julia Suira of the National Workers Council (CONATO) insists that ``if private enterprise takes over INTEL, it's going to stop servicing out of the way places and public pay phones. This isn't negotiable.''

Despite such talk, the unions are weak, and willing to negotiate. Among the subjects of conversation will be reforms to Panama's Labor Code, which dates from the populist years of strongman Omar Torrijos and is the third target of the government's reform program. Here the aim is to get employers out from under rigid job security clauses, high productivity bonuses, severance pay, and other benefits that Panama's workers have taken for granted since the 1970s.

All this is going to hurt a government that ran under Torrijos' mantle last May. But Labor Minister Mitchell Doens explains the government's strategy for overcoming opposition. ``The secret,'' Mr. Doens says, ``is to pass the changes quickly and use the next four years recouping the political cost we are paying during these first few months.''

The government's view is that economic reform, coupled with new investment, will spur export and job growth vigorously enough to win support from the private sector, while lower prices for both foreign and domestically produced goods will curry favor with consumers.

And Panama's president appears determined. ``My idea is not to break anybody's back,'' insists Perez Balladares, ``but the status quo is no longer a possibility.''