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Panama's President-elect Plans Price Controls on Basic Foods

Juan Carlos Varela of the Panamenista Party (PP) shakes hands with supporters during his first public presentation as the elected president of Panama outside the Virgin of Carmen church in Panama City, May 5, 2014.
Juan Carlos Varela of the Panamenista Party (PP) shakes hands with supporters during his first public presentation as the elected president of Panama outside the Virgin of Carmen church in Panama City, May 5, 2014.
Reuters
Panama's president-elect will impose price controls on a range of basic foods to dampen rising costs, a step that will hit his bitter rival, outgoing president and supermarket tycoon Ricardo Martinelli.

Juan Carlos Varela, the Panamenista Party (PP) leader and winner of Sunday's election, told Reuters he is clear what his first policy will be when he takes office on July 1.

"Establish emergency price controls on 22 products in the basic basket to lower the cost of living by more than $600 million for the Panamanian people and avoid speculation in products," he said.

The measure would apply to basic foods such as rice, cheese and meat, Varela said, adding that huge profit margins were being put on basic foodstuffs.

"We feel that this is very unfair for the people," Varela, a 50-year-old U.S.-trained engineer whose family owns Panama's largest liquor company, said in an interview.

Martinelli, who Varela helped to win election in 2009 before the two fell out acrimoniously, owns one of Panama's largest supermarket chains. When asked if the controls would apply to Martinelli's stores, Varela said: "Without a doubt."

Panama's constitution gives the president power to intervene on prices, but Varela could quickly find himself at odds with Congress, where he and his allies won barely 20 percent of seats, according to a preliminary count from the elections.

At up to $624 per month, the minimum wage in Panama is high, but the country has a large informal economy and the cost of food has been running higher than overall consumer prices.

Annual inflation was trending lower last year and dipped further in 2014 to hit 3.3 percent in March. Food and drink prices have bucked that trend, and were up 5.1 percent on the year in March, up half a percentage point from December.

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Varela won the presidential election with 39 percent support after he and his center-right alliance ran a campaign claiming credit for many of Martinelli's successful economic policies.

He has vowed to continue his rival's infrastructure spending and social programs, but in a more transparent way.

"I'm not going to raise taxes, my taxes are going to be on corruption," Varela said.

Panama's economy has grown at an average clip of 8.2 percent under Martinelli, one of the fastest rates in Latin America.

Varela said he expects it to post growth of around 6 percent on average during his five-year term.

Debt became an issue in the election as the public works boom and handouts for those outside the social security system have slowed the country's ability to pay it down.

Although debt has fallen, the strong growth has not led to significant fiscal consolidation, ratings agency Fitch says.

"We will use our cash flow to confront the debt, pay our creditors and also take on more debt and keep investing in the works that the Panamanian people need," Varela said.

During his term, he said Panama would invest more than $15 billion, mostly in big infrastructure projects such as at least two further metro lines in Panama City and social programs.

Although Panama's famous canal brings the government around $1 billion a year in revenue, the constitution prohibits politicians getting too involved in its administration.

Varela must, however, oversee a major expansion of the canal. Work was briefly suspended earlier this year by a dispute with the canal authorities and the building consortium.

Work ground to a halt again last month due to a nationwide strike over pay, raising more questions about the finish date.

Varela said he would seek to resolve the dispute when he takes office but declined to say whether the expansion would be completed by the current deadline of December 2015.

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