What the ACP says, doesn’t say, and ignores

by Eric Jackson

The Panama Canal Authority’s (ACP’s) information control game was set up during the Panama Canal’s transition from US to Panamanian administration, under the direction of one Ricardo Martinelli Berrocal, then Minister of Canal Affairs, later President of the Republic of Panama, now a criminal fugitive being harbored by the United States government in Miami. It has not changed very much over the years. Its main features include:

• Ferocious attacks on Panama Canal employees’ unions and a relentless if not so effective effort find or better yet prevent any whistle blowers;
• A cozy relationship with the corporate mainstream media based primarily on family and business ties with their owners and managers, and also on the exchange of access for obedient reporting;
• The breaking of major, controversial or dubious stories through foreign media, whose reporters will neither bring up questions of importance to Panamanians that would not occur to people who have not followed Panamanian realities nor question assertions that any self-respecting Panamanian journalist would not let pass unchallenged;
• A presumption that Panamanians have no history and no memory;
• The principle that conflicts of interest are not news, and moreover that because of the lack of any comprehensive Panamanian law on the subject, don’t exist and can’t exist; and
  
• A fraud artist’s calculation that suckers — including a whole nation or even the whole world — can’t figure out basic incongruities in a business pitch.

Panama has seen all of that in recent days.

On March 28 La Prensa ran a gushy little ACP press release story about how construction of the new bridge over the Atlantic entrance to the canal is 56.5 percent complete, and that the project will cost $570 million.

Back when the canal expansion project was first announced in 2006, two things jumped out from the ACP’s first charts that called their financial projections sharply into question, although the mainstream media had been bought off with huge “Yes” campaign advertising buys so did not see fit to mention those.

On the revenue side, there was the projection that the growth in US imports from China would grow at the rate of increase that was seen between 2000 and 2005 through at least 2025. Not a series of straight ascending lines as in growth from month-to-month or year-to-year, but an ever-steeper upward curve based on how fast the increase was progressing at the start of this century. But those numbers would, when compared to economic reality, mean that the United States would export all of its industrial production to China and still have money to buy things on the world economy as if no economic disaster struck. So it was immediately apparent that the ACP’s revenue projections were spurious. Those projections failed even before the 2008 worldwide financial crash.

The second dead giveaway was on the project’s expenditure side. The new locks would cut off Colon’s Costa Abajo — that part of the province west of the canal, from Piña to Miguel de La Borda and beyond — from road access to the rest of the country. So where was the bridge or tunnel connection that would necessarily be a part of the canal expansion project? It wasn’t there. As in, an expenditure that would run into hundreds of millions of dollars not included in the price tag advertised by the ACP. And who did that schematic anyway? It was Parsons Brinckerhoff of Boston Big Dig notoriety, a road tunnel project that cost much more than had been advertised to the general public and to state and federal agencies, in which the main trick that was played was putting major necessary components of the job “off the project” and thus out of the calculations.

Add more than half a billion dollars to the canal expansion price with this bridge. That’s about 40 percent more than the bridge project cost had been placed at a few years ago, but set that aside ad a minor frill. The ACP compartmentalized the canal expansion project so as to understate its cost.

But then there are non-financial costs as well. Like the death of a straw man.

On October 16 the National Assembly published an article on their website, wherein they proclaimed the “Third Bridge over the Canal, without cracks and 52 percent done.” As in, two legislative committees visiting the construction site as a part of their oversight role. The lead paragraph concluded that the committees “found no cracks in the structures, as reported.” But WHO reported that? WHERE was it reported? The source of said alleged allegation is unspecified by the legislature’s website, no such claim is recalled by this reporter and none of that information can be found online by a Google search. Maybe someone said something somewhere, but by every appearance politicians seeking to curry favor with the ACP set up and killed a straw man.

But look at the number the legislators’ report cited, and the date. The project was 52 percent done in the middle of last October. Five months later, as the dry season approaches its end, La Prensa, with its unspecified but obviously ACP source, reports that the bridge is 56.5 percent done. There could be some interesting questions based on those two numbers, but ever since 2006 when this reporter declined to be an unpaid acolyte during the referendum campaign the ACP does not answer questions from this direction.

Fallout from the failed Port of Corozal bidding

The proposed new seaport at Diablo and Corozal has run into fierce opposition from several quarters. The ACP evicted the Diablo boat shed owners, calling them “squatters” and accusing them of various illegal activities. Litigation over whether the ousted people will be compensated and how much is pending and will surely continue for years to come. The canal pilots say that a port in that particular spot is a traffic hazard for ships going into and out of the Miraflores Locks. The legislature has been divided into factions backing various contenders — who came and went — for that private port concession. (At one point the big hue and cry was against the Motta family, which had allegedly rigged the process in their favor. But then the company in which they hold a stake was eliminated from the bidding process by a change in the prerequisites for bidders.) It came down to four remaining contenders who ere allowed to bid for the concession, the day to submit bids came — and nobody put in a bid.

The ACP won’t say whether they will continue with the Corozal port project. There are rumors of price reductions so that Panama gains nothing in taxes or shared revenues, but the project goes. The international consensus is that world shipping is in a bad way and that although it may be picking up in some segments it’s a risky investment at this point.

But from ACP circles there now comes “an alternative truth.” The Corozal ports project was set back not because the economics are bad for it at this time, but because a former PanCanal vice president for planning, Rodolfo Sabonge, leaked a confidential ACP feasibility study to Carlos Urrutia, an executive for one of the companies looking at bidding on the port concession. This version has burst upon the public thanks to the effort of ACP board member Lourdes Castillo, who has clashed with Sabonge before.

PanCanal’s inspector general and top officials beg off from comment, saying that it’s a metter under investigation, or that will be investigated.

But there is a big problem here. Sabonge retired from the ACP in 2013. The alleged leak took place no later than three and a half years ago. If one possible bidder was warned off by confidential information from within the ACP, all of the other potential bidders figured out the same stuff on their own anyway, and declined to bid.

There appears to be an even bigger implicit problem. Did someone see an internal document that indicated that something that the ACP was selling really wasn’t such a profitable deal? As in, Sabonge’s alleged offense was spilling the beans on a business deception? As in, the prevailing business model at the Panama Canal Authority is a culture of fraud, of the concealment of material information from potential business partners?

Why Corozal? The imperfectly concealed explanation

One issue that PanCanal unions have brought up is more serious, and what they point out contains the seeds of understanding why the ACP persisted, and it may still persist, in pumping a Corozal project that almost all independent, informed and astute observers think to be a turkey. It comes from a 2015 article in the Mexican edition of the business publication Forbes, in a feature about one of the wealthiest men in Panama, ACP board member Alberto Vallarino. It’s good business journalism, even if Vallarino gives some self-serving accounts of Panamanian business and political history in the article. Of immediate importance here is one paragraph:

There are other possible explanations, which could be shrouded in ACP secrecy like perhaps a recusal in a process that has never been publicized. But at first glance we are looking at a major league conflict of interest. Depending on the circumstances of when, how and why Vallarino acquired that property, we may be looking at insider trading.

Tugboat privatization

The Pänama Canal unions, the tugboat skippers and pilots in particular, alleged that the Panama Canal Authority was planning to privatize canal tugboat services. The allegation is long-standing. In the middle of March, the canal unions again made the charge, this time by pointing out that the ACP had not made the orders to purchase sufficient tugs to do the work and to a proposal that they had seen which suggested a change in work rules to allow the use of contracted private tugs. The ACP immediately denied it, issuing a vitriolic response that questioned the labor activists’ honesty. Two days later, at a business gathering, a private tug company announced its order of new tugs to provide services to the Panama Canal Authority. The company said that the ACP had awarded it the private tug contract in 2016. The ACP management issued no clarification or apology.

Preparing to cede the west bank of the Panama Canal to China

Article 3 of the Panamanian Constitution provides that:

That was one of the very first things that came up in a 1972 convention of the representantes chosen in the 1968 elections, assembled by General Omar Torrijos and his colleagues to give a fig leaf of constitutionality to their military dictatorship. The treaties that ultimately gave the canal and the Canal Zone to Panama were some years in the future but that constitutional provision, like those treaties, was a fundamental political requirement. It was neither some drafter’s intellectual whim nor some strongman’s demagogic promise. It was a national aspiration that burned in the hearts of Panamanians, something for which people had died. Without that section Torrijos could not have had his contsitution ratified.

That military constitution, with a few amendments, is still in effect in Panama.

But much has changed. The former American enclave reverted to Panama, which had only briefly held formal title for a few days between independence from Colombia and the Hay-Buneau-Varilla Treaty that established the Canal Zone. The Cold War ended. Globalization on corporate terms, including the widespread privatization of public assets, swept around most of the planet. The public property of the Soviet Union became the private property of Russian oligarchs, who under the leadership of Vladimir Putin blurred the distinction between the Kremlin’s public sphere and the activities of privatized — that is, stolen — fortunes. The people whom Chairman Mao reviled as “capitalist roaders” gained control of the Chinese Communist Party and the Peoples Republic of China after Mao died, and they also blurred the distinctions between public and private property and their respective functions.

And now the Panama Canal Authority, stung by the business world’s rejection of their Corozal project and still looking for new sources of revenue in light of their failed financial projections for the canal expansion, are looking to another plan.

They didn’t lay this out directly to any Panamanian news medium. To do that would risk questions from a reporter about the plan’s propriety under the Panamanian Constitution. No, the ACP went back to an old page in the playbook and released this one through Reuters journalists in Shanghai on the occasion of ACP administrator Jorge Quijano’s visit there. So on March 28 those of us who pay attention read of exploratory talks to concede parts of the former Empire and Balboa firing ranges on the western bank of the Panama Canal, a parcel of some 1,200 hectares, to three state-controlled and partially state-owned Chinese corporations, the China Communications Construction Corporation, its subsidiary the China Harbour Engineering Company and a separate firm, the China Railway Group.

There will be quibbling about what it means to cede or alientate, or transfer. Lawyers will make their stands about what’s a “state.” “Temporarily” and “partially” will no doubt be parsed into a meaningless twilight zone. But Quijano didn’t try to pull this on any worthy Panamanian reporter.

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Back whe

Old song, electricity outages that are still with us.

Our power supply: worse than just exploding transformers

by Eric Jackson

Two major electrical outages resulting from transformer explosions at the Condado del Rey power routing station on March 17 and again on March 21 have had some far-reaching consequences and prompted some discomforting questions. The first outage left the Panama City – San Miguelito – Colon metro are without electricity for about 16 hours, and also turned out the lights in large parts of Nicaragua and most of Honduras. The second outage was not so severe but also blacked ou the whole metro area. Since then parts of the Interior that were not affected by the two explosions have been hit by a serious of shorter power outages, here in rural Cocle where most production on The Panama News happens sometimes several per day.

The problem is at ETESA, the state-owned power grid company that’s the one public remnant from the 1998 privatization of the old IRHE public electric company. ETESA buys power from private generators, distributes it across the country and via a Central American power grid connection to other countries, while the retail distribution and billing for electricity happens through another set of private power companies. The natural questions of how, why and who is responsible have arisen. The career of ETESA director Iván Barría Mock is the first and most noteworthy casualty. After a series of sometimes alarming public statements and admissions, he submitted his resignation. As of April 1 Óscar Rendoll, who has worked in the electrical industry for 41 years, including in the management of IRHE way back when, will take over as interim director.

In the wake of the first and biggest power outage, ETESA announced that things were not entirely back to normal but they were working on it. People were advised to conserve electricity, particularly by not running air conditioners during peak hours, in the meantime. Then after the second outage the power grid company first put out a Twitter message that everything was back to normal, followed by a statement by Barría warning of possible new outages. In statements that followed Barría warned of electricity cutoffs in areas that use a lot more energy than most other places. That latter bit was a big political problem, as so many of Panama City’s downtown office towers are designed around air conditioning to the point that opening windows to allow natural ventilation is not a viable option, and as the neighborhoods where the country’s richest residents live are also the places where residential electricity consumption is the highest.

At the grassroots, and particularly in the social media, allegations began to be made by activists. With a little time lag, many of these began to appear in the mainstream media. These were tales of political intrigue, conflicts of interest and flat-out incompetence. The explanations from Barría made things worse and the silence of the ETESA board — Minister of Economy and Finance Dulcidio De La Guardia, Minister of the Presidency Francisco Sierra and National Energy Secretary Víctor Urrutia — did nothing to reassure anybody.

ETESA and its board, like so much of the Panamanian government, has been on a political patronage rotation. Every five years the top people and many in the lower ranks are fired. Some of the people who are let go will be among those few who know how to run more than a small part of the system. Most of the replacements will be political activists or relatives of politically important people, but some will be professionals in the field, and some will be old hands who lost their jobs in previous political patronage shuffles. But the returning old pros will come back to a different team, with a system that has been physically changed and that relies on a different set of business relationships.

Typically contracts are also rescinded, renegotiated or reassigned in every transition. Because of the extreme abuses of the Martinelli years, the transition at ETESA was all the more severe.

So who is Iván Barría? A competent engineer by looking at his resume. But also the brother of Aurelio Barría Mock, the executive vice president of Grupo Motta, the family-owned combine that’s the nation’s biggest private economic power. The Motta family sponsored the Independent Movement (MOVIN), the support of which was a key factor in Juan Carlos Varela’s election to the presidency. But lately MOVIN and President Varela have had a falling out over a number of issues and it has resulted in something of a government shuffle not caused by Varela reviewing situations and deciding to make changes but by people who are not Panameñista Party loyalists leaving posts in the current administration.

Among the contracts quickly rescinded once Barría took the helm of ETESA was the maintenance contract for the Condado del Rey power station. That was in 2014. However, no new maintenance contractor was employed and critics say that there were no proper adjustments to do that work in-house.

One of the Martinelli-era contracts that was revised, in 2015, was a provision of the deal with Odebrecht that allowed the company to negotiate and settle eminent domain claims for the long-planned ETESA Line 3. The corrupt Brazilian company stood to receive a percentage of all such settlements after an aggregate of $7 million was passed. The contract was modified to require ETESA approval of any settlement. It is said by critics that had Line 3 been in place the load on the transformers that exploded would not have been so great and the outages caused by their failure would not have been so extensive. But this power line has been tangled up in litigation, with lawyers taking their bites. (Have real estate speculators bought land along the route, based on inside information?) It’s a mess, with fingers being pointed in various directions for the slow progress.

Meanwhile almost all of the transformers and other equipment at the Condado del Rey facility are by ordinary ratings old, at 75 percent or more of their ordinary useful life expectancy. People can argue about whether that’s Panamanian maintenance culture or the habit of enterprises everywhere that live hand-to-mouth.

In any case, important organizations like the Panamanian Society of Engineers and Architects (SPIA) and the Chamber of Commerce have demanded that ETESA be put back in order, with various recommendations about how that should be done. Changes in the ETESA contracting system are suggested in most of the offered remedies.

One of the complaints that Barría had lodged, echoed by some of the business critics, is that ETESA has to go through government contracting procedures and these are too slow. But in 2015, a decision to move away from primary reliance on hydroelectric power in the direction of gas-fueled electricity generation was jammed through in just a few days. That contract, set to go into effect next year, was made without any real opportunity for environmentalists or others to object to its carbon emission and thus climate change implications. Competing bidders also complained about the almost nil evaluation process — three days to evaluate 27 offers. The winner there? Gas Natural del Atlantico (GNA) got a 10-year contract to generate 350 megawatts of power to be distributed through ETESA. And who is GSA? It’s a partnership between the US-based AES and Grupo Motta. At the time Iván Barría denied that there was any conflict of interest involved in his brother being VP of Grupo Motta.

Panama has no general conflict of interest law. National and international anti-corruption groups have been advocating one for many years.

President Varela has announced an audit of ETESA management decisions. Apart from that the National Public Services Authority (ASEP) says that it will hire an independent investigator to assign blame and recommend solutions in the wake of the power outages. And the president urges the public to conserve energy and show some patience in the several weeks that he expects it to take for the damages from the two blackouts to be repaired.

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