Assessing Panama's Future

Assessing Panama's Future


More on:


Diplomacy and International Institutions


Isabel de Saint Malo de Alvarado, the vice president and minister of foreign affairs of Panama, joins Nelson Cunningham, president of McLarty Associates, to discuss the political, economic, and foreign policy issues facing Panama and the region, including the impact of the Panama Papers, the ongoing reform efforts of the Varela administration, and the economic benefits from the anticipated expansion of the Panama Canal, to be launched this summer. 

CUNNINGHAM: Well, good morning. I’m Nelson Cunningham. I’m the president of McLarty Associates. And I’ll be presiding here at this morning’s session. Unlike most Council sessions, this one is on the record. You’ll see the cameras here. There’s some reporters in the room. We do ask you to silence—to turn off your mobile phones, because it interferes with the sound system. We’ll be—I’ll introduce the vice president, we’ll spend—she and I—she’ll make some remarks, she and I will spend until about 9:00 in a dialogue, and then we’ll open it to the audience, as it typical here at the Council.

For me, it’s a privilege, of course, to preside at any CFR event, but this one is a special one for me, because my family lived in Panama for six years when I was a boy, my father was a businessman in Panama City. He founded the American Chamber there almost 40 years ago. And for us, Panama has a very special place in my family’s life. And I’m fortunate today, and for the last 20 years, to be involved in U.S.-Latin American relations. And Panama, of course, has played such an important role at key moments there. So it’s a pleasure for me to be able to be here to introduce the vice president.

Vice President Saint Malo has a very international background. She, of course, was raised in Panama, studied in the United States for both college and for her business degree, and then spent 15 years in Panama working for the U.N. Development Program as the country manager there. In that role, she spent a great deal of time both in Panama, and then dealing around the world with multilateral issues. And I understand that she got to know the current president, President Varela, during that time, working with him on various dialogues dealing with the canal and other issues. And so someone who came out of the multilateral world, out of the business world, found herself pulled into the political world. So you bring—you bring a great deal of experience and breadth to this position.

As is common in Panama—although you are of course the constitutional vice president—but as is common in Panama, the president also asked you to take a second role as foreign minister. And you now carry out that role. So you’re here today in two capacities. It’s a real pleasure to be able to introduce to all of you Vice President Isabel de Saint Malo. (Applause.)

SAINT MALO: Thank you very much, Nelson, for those kind words. I was walking in and he greeted me in Spanish. And I said, wow, where is that Spanish from? (Laughs.) And he said: I’ve lived in Panama. So it’s a pleasure to be sharing this podium with you.

Good morning, everybody. It’s really an honor to be here today. I’ve been actually an admirer of the Council’s work for a long time, first as a student of international affairs, then when I began my career actually here in Washington, D.C. with the Center for Democracy, and later on as a practitioner of development and of democracy, and now of diplomacy. You definitely make great contributions to policymaking in terms of foreign policy. And that’s—I think that’s very important. So it’s an honor to be here today.

I’ve been told that the objective is to have a conversation. So I’ll try to be brief in these remarks so that we move onto the interesting part of the morning, which is the conversation with you. I’ll try to make some remarks to let you know a little bit more about my country where we are right now. And I’d like to begin by referring to Panama as a global place. And I like to say, Panama has been globalized before globalization was in fashion. And that’s actually true. Ever since we were—we were born as a republic, we’ve been—we’ve been a crossroads of people, of trade. And with the Porto Bello (sp) affairs, and then through the gold rush, and then, of course, the Panama Canal. And that has really made us who we are as a country, a country really open to the world.

And this has been kind of like the basis of one of the principles of our foreign policy and our domestic policy in terms of our ability of bringing people together. Latin America enjoys today democracy, pretty much. And not too long ago I’m sure around these tables discussion of the dictatorships that were taking place in the region were happening every day. The guerilla warfare, we don’t have that now. Fortunately, Panama has been part of that democratization of the region. We are proud to have been—recuperated our democracy. And for the past 25 years, we’ve had already five democratically elected governments. And we enjoy democracy. Panama, our country, our people, we value democracy. We value freedom of expression. We value a market economy, providing opportunities to all of those that wish to seize those opportunities.

In terms of our economy, we have a very diversified economy. According to the IMF, we are ranked third as the most economically prosperous country in Latin America. In terms of the World Economic Forum we rank second in terms of competitiveness. In the past 10 years, we’ve enjoyed a growth of 7.6 percent, making it one of the fastest-growing economies in Latin America. Even during the difficult years, recently, Panama managed to continue to grow. We grew over 6 percent last year. Our projects for this year are also over 6 percent. And of course, the Panama Canal, which we are very proud to be inaugurating this year the enlarged Panama Canal, makes and important part of our economy.

However, our economy is very diversified and we do not depend on any particular sector of the economy. Our canal is complemented by a worldwide platform of logistics and services. One of the best ports and airports in the region are in Panama. And with the expanded canal, which we are proud to be inaugurating June 26th, capacity will triple in terms of volumetric capacity to transit through the canal. And I was actually yesterday at the—at the Energy Summit chaired by Vice President Biden. And we were discussing what this canal will offer in terms of the possibility of transit to LNG vessels from the United States Gulf Coast to Asia. So all of this, and given the difficulties of energy in the region and the efforts for integration, there are great opportunities and also possibilities for Panama to once again put our country to the service of the world, to the service of trade, and of development in the region.

Amidst this growth in economic terms, amidst our democracy, which we are proud to have recuperated, you would ask where are our challenges? And we do have important challenges in terms of development, particularly. Our challenges remain in terms of overcoming poverty, in terms of improving social indicators. And that is actually the core of our government plan. Our five-year government plan is concentrated in providing these opportunities to almost 4 million Panamanians. We have development budget of over $17 million, devoted primarily to education, to health. We’ve come a long way in terms of our poverty indicators—a long way.

But we still have important steps to take. And that is our concentration of our—of our government. A country that grows, a country that has the economic indicators that we have, a country that serves the world has all of the necessary capabilities to make this available to all Panamanians. And that is what we’re working at. That is our concentration. And these investments in social and infrastructure projects will definitely help us deepen our social welfare, increase stability, expand human capital, and further develop our infrastructure.

In terms of our foreign policy, we base our foreign policy on two pillars. The first pillar being a country that promotes dialogue, that promotes understanding. This has been part of our foreign policy for many years. It’s kind of who we are as a country, as a result of having been the crossroads of the Americas and of the world for a long time. An example of this vision was the Summit of the Americas, which we were proud to host last year, and which allowed for the participation of all countries from the Americas for the first time ever in the Summit of the Americas. I was that the—our effort was part of that vision of Panama as a country that promotes dialogue, that promotes understanding.

Our second pillar in terms of foreign policy is to have an active participation in the global development agenda. And we have been very, very active in this government in terms of, for example, of human rights, which led to have a seat for the first time. We were able to have a Panamanian elected to the Inter-American Commission of Human Rights for the first time ever. We were elected at the United Nations Commission on Human Rights, also for the first time.

And our participation in the Sustainable Development Goals, which were agreed upon by many countries last year at the United Nations General Assembly, it’s not only a commitment in terms of the global development agenda, but it’s at the core of our national government plan. We have actually decided by decree that the SDGs will guide Panama’s investments and Panama’s social efforts. So in this regard, there is a complete alignment with the global development agenda and our domestic policy.

Our participation in the Paris agreement. Panama even led an effort in terms of the countries that have forest, and the efforts that the world needs to make in order to ensure that those countries that have forest can keep them, and the contribution that this makes to climate change. All of this is, again, a result of this importance that we give to the global development agenda, understanding that that is where the world needs to concentrate its attention.

We need, as a world, to overcome the issues of today, the issues of people migrating from countries where there is war and where there is lack of opportunities, to developed countries. The issues of human rights, which still today are violated in many parts of the world. The issues of incorporating those excluded from development into development. We see these not as an issue that is apart from our core domestic policy. And we see Panama as a country that can play a role in order to continue to push those efforts.

Now, we are today in the mind frame of many people not for everything that I’ve shared with you. We are at the top of mind of many people because of some publications that came out about a month ago, already. It seems like a year ago—(laughter)—so much has happened ever since—ever since that came out. Let me tell you something about the wrongfully called Panama Papers. And I’m sure they were named Panama Papers because Panama is a great name. (Laughter.) Panama is a great name. And this journalist needed to have a great name for their publications. And, you know, that’s our problem for having a great name.

But the fact of the matter is that, yes, the publications referred to business conducted by a law firm in Panama. But furthermore, the publications refer to dealings of banks in 21 jurisdictions, none of them in Panama. Not one of the banks that have been mentioned in those publications is based in Panama. The publications referred to offshores. Twenty percent of those, registered in Panama. Eighty percent of those, registered elsewhere—British colonies, United States, everywhere. The publications really underline that there is a global problem in terms of the financial system, something that the world has recognized for a long time and this publication just make it clear that we still have a long way to go. We still have a long way to go as a world.

It’s been hard on Panama that the publications are named Panama Papers. It’s been very hard, particularly for our government. I must admit that Panama, as a country, we came a little late to the efforts of transparency for the financial sector. When President Varela was vice president and minister of foreign affairs, during the last government, Panama had not signed one treaty for double taxation. And under his leadership, we established a national commission, we initiated our signing of and negotiating of double taxation agreements. And we signed about 25 at that period of time. And then the alliance broke. And then he left the government. And then the previous government didn’t do much in terms of this global effort.

And when we took office two years ago, Panama was on the gray list of the FATF because we had failed to comply with some of the global efforts. And we initiated a strategy which moved so fast, even recognized so by the FATF. I heard them at a meeting in Panama say that they had never seen a country move so fast in terms of the decisions that need to be made and the processes that need to be put in place in terms of transparency. And we were able to be removed last year from FATF’s gray list as a result of Panama implementing anti-money laundering legislation, prevention of money from terrorism into our financial services. We installed the governance institutions that we needed to install.

And we got our act together. And we were able to be removed from the gray list. And we were able to move to the phase two of the peer review of the OECD. So all of these efforts that our government has been doing, and that have been recognized globally because FATF’s decision to remove us from the list is a recognition of our efforts and the OECD’s transition to phase two of the peer review is a recognition of our country’s efforts, it’s hit hard by some publications that have our name, because our name is pretty nice. (Laughter.)

So we have been in an effort to, again, share with the world what it is that we’re doing. And, yes, there are problems with the financial system around the world, problems of which Panama must be a part of its solution, but the rest of the world as well. And we will continue to work in that direction. We are committed, not because of the Panama Papers. We were committed the day we took office. And the actions we’ve taken speak for themselves. But I wanted to take this opportunity to let you know our vision on these publications and what it is that our vision is in terms of transparency in the financial sector, transparency in general.

Transparency has been at the core of our government plan. Procurement in the past years in Panama has been known. And actually, the justice system can say a few things in that regard. Procurement in Panama was really permeated by corrupt practices. We have really, really cleaned Panama’s act in that regard. And you can ask foreign companies now what it is to invest in our government investment plan. And we know what it was to invest previously. So our commitment to transparency in the financial services, in our procurement processes, we are committed to changing politics in Panama to really be what politics needs to be—a service to the people. Politics—not to have a personal agenda, not to enrich yourself, politics to be a tool to serve the people and to serve the country.

So our commitment is strong. Our commitment, once again, I would like to reiterate, is not the result of responding to some publications. Our commitment has been clear ever since we took office. The measures taken speak for themselves. And as I began sharing with you, Panama is a lot more than that. Panama is a country that enjoys democracy, that enjoys freedom of expression, that enjoys economic growth that is fighting to ensure that this economic growth transform into the improvement of life of all Panamanians. And we’ve seen some important progress in that regard in terms of education, in terms of health, in terms of water, and sanitation.

And our success story is there. I invite you all to come see for yourself. And more than that, we are truly committed to continue to make Panama a country that shares this prosperity with the rest of the region, and that ensures that this prosperity permeates not only Panama, but our neighbors that have difficulties a lot harder than we have. And we are working hard in terms of our foreign policy to play that role and make sure that the global development agenda, which guides multilateralism and foreign policy in many ways, really reaches the people of Central America, of Latin America. And that’s what we’re committed to do.

Thank you very much for your attention. (Applause.)

CUNNINGHAM: Madam Vice President, you touched on one of the issues that I know has been on the forefront of the minds of those here, which is the transparency issues in Panama. Your boss, your president, President Varela, as you mentioned, was vice president in the prior administration, was foreign minister, and had a very notorious split with President Martinelli because Vice President Varela no longer had confidence in the way President Martinelli was governing the country when it came to transparency and corruption issues. And he was, of course, relieved of his duties as foreign minister, but he could not be relieved of his duties as vice president. So he had an empty desk for a number of years, which prepared him well to take on the role of running—again, running for president, and now serving as president. President Martinelli, meanwhile, former President Martinelli is living in Miami.

SAINT MALO: What can I tell you?

CUNNINGHAM: Your government has—your Supreme Court has issued some charges against him. I know you have an extradition request pending. There may be further charges—if one reads the newspapers—there may be further charges coming. What can you tell us about the status of President Martinelli here in the U.S. and your efforts to bring him to justice in Panama?

SAINT MALO: Interesting question. As you have mentioned, our Supreme Court has a few cases pending on Mr. Martinelli, former President Martinelli. One of those—which is for the issue of rigging telephone conversations—one of those has been approved by the board of the Supreme Court to, under that—under those charges request the extradition to the United States. Now, in terms of Panamanian legal framework, the Supreme Court needs to prepare the extradition request and submit it to the Ministry of Foreign Affairs. And then the Ministry of Foreign Affairs will be responsible for transferring that request to the United States. We have not yet received from the Supreme Court that request for extradition.

Now, we’ve of course evaluated and studied the issue. And it’s a complicated situation. We understand in terms of—first of all, our extradition treaty with the United States dates as far as the beginning of the 1900s. So the crime by which the Supreme Court is authorized to request the extradition is not part of the treaty because, of course, at that time, there were no telephones, so even less there was a crime to listen to conversations. Of course, this can all—and we’ve had discussions with the United States authorities—of course, this can be supported. But that’s an issue that we need to deal with.

The second issue is that according to the treaty, if we request Mr. Martinelli’s extradition based on that case, we cannot judge him in Panama for any other case. And he—the cases—I believe it’s almost 10 cases that are in the Supreme Court regarding Mr. Martinelli right now. And most of them are a lot more serious than listening into conversations, which is serious enough. The charges are basically referring to corruption, and his participation on corruption practices, on our procurement processes, and even linked to processes that are now at the judicial system in the United States.

So another issue that I understand our Supreme Court has is, how are we going to request his extradition and make sure, in the dealings with the United States, that we are not just protecting him from future processes? So those issues are critical issues there, and as of—as we have been told by our Supreme Court, and actually we’ve discussed, as mentioned, with U.S. authorities, the importance of making a very strong case so that the case doesn’t fall through the cracks in the United States system. And we do know that Mr. Martinelli has the resources to hire knowledgeable lawyers, and we understand he has hired a large number of knowledgeable lawyers. That’s an issue for Panama. We need to make sure that we can process him properly for all of these issues.

Now, that’s one thing, the request for extradition. And I do hope that we will request his extradition soon enough. It’s not in our hands, but we will definitely go on with the process once we receive a request. That is one thing.

But the second thing is what’s happening in the United States with the fact that former President Martinelli is living in the United States. Now, I understand that your authorities cannot mention, for example, if he has requested asylum. He might have. Some of you might be lawyers and would probably know better than I what happens in terms of an extradition request if he’s in an asylum request process. And I understand asylum request processes can take as long as three years for a decision. And I understand that once this is—this process is going on, this person cannot be touched. So, when and if Panama requests the extradition, I don’t know what’s going to happen with the United States system.

But what is—what is harder, I think, is not this judicial situation that I do hope for Panama’s sake goes through. But the thing is that this person is living in the United States really just dedicated to Panamanian politics through social media. So I don’t know, that is something that I’d like to pose the question to you. (Laughter.) You know, it just blows my mind. It blows my mind. And I think—I think the world has a long way to go to ensure that we stop protecting those that should be brought to justice.

CUNNINGHAM: I want to commend you, in your—in your remarks and just now, for the candor in which you’ve addressed some of the most complicated issues facing Panama today—the Panama Papers, the issues with former President Martinelli, the issues of development. You mentioned also—but I think you swallowed some of the good news, which is of course the opening of the—of the new locks in the Panama Canal. Forty years ago here in the United States, Panama was one of the hottest political topics over President Carter’s—over, actually, President Ford and then President Carter’s negotiation of a treaty to return the Canal Zone to Panama and to eventually turn over the management of the Panama Canal to the Panamanians. Those who may not have focused on Panama since then might not know that Panama successfully took over the management of the canal and have had really an unimpeachable, for the last 20 years—almost 20 years, management of the canal, belying all of the fears and concerns that had been raised at the time. You’ve also gone ahead and then moved ahead with a major expansion of the canal to permit much larger vessels to go through. Tell us how—and that will open in June, as you mentioned. Tell us how you expect that to impact Panama’s economy, as well as further the global shipping lanes that go through Panama?

SAINT MALO: Thank you for that question, because we are very proud in Panama to be inaugurating our expanded canal June 26th. And let me share with you what I think we’re most proud of.

And you’ve mentioned that we’ve successfully assumed the administration of the canal, and that it’s recognized internationally by the trade world and by other countries the transition from U.S. management to Panamanian management was imperceptible to the world. That was—we’ve done it. We’ve done it well.

But more than that, over a hundred years ago, when we began the original canal, we had to turn to the French and that we had to turn to the United States, but this expansion was done by Panama. And if we look at the investment, which is over 5,000 million dollars, in terms of dollars in that time we’re building a second canal. This is a major infrastructure project, and we are very proud to be inaugurating the canal, and being a Panamanian—a Panamanian project funded by Panama, led by Panama, contracted by Panama. And this just shows what Panama is capable of.

And this will represent a major transition to world trade. I mentioned the LNG vessels, for example, that will be able to transit through an enlarged canal. The administrator of the canal was just saying a few days ago that ever since the inauguration was announced, they have just been receiving the bookings, and it’s booked for its initiation. The world—the maritime sector has been expecting the expansion of the canal and were just there ready to jump as soon as it was finalized, and that’s great news.

An enlarged canal will represent important additional revenues for Panama. One of the most important things from the transfer—for the transfer of the canal to Panamanian management is that, under U.S. administration, the canal was managed—in terms of its budget, it was managed—money that came in, money that was—that came out. There were no revenues for Panama, nor the United States. That was definitely changed when Panama assumed administration, and the canal is today an important source of income for our national budget. And an expanded canal will increase that dramatically. And we are—we are waiting for those resources in order to divert them to what I have mentioned is our most important challenge, which is development.

As mentioned earlier, our challenges in terms of water and sanitation are amazing. You go to Panama City—I don’t know if you’ve been recently; if you haven’t been recently, you should go—you go to Panama City, and Panama City looks like New York City. But in a country where we have a city that is booming, we have sectors of our country that are excluded. And we’re working hard at ensuring that our human development indicators just jump, and the resources that we will receive from an expanded canal will definitely be diverted into that—into that direction.

CUNNINGHAM: I’m going to turn now to the audience. Those of you who have questions, I’ll ask you first to tell us who you are, what institution you’re with, and then to keep your questions brief, fierce, and decisive.

Well, the press has an interest in asking questions, so let me turn to the table here. The woman in the—in the red jacket, please.

Q: Hi. Welcome, Madam Secretary. My name is Nadia Chow, Washington correspondent for Liberty Times.

I have two question(s). The first one is, for the inauguration, Panama already extended an invitation to Taiwanese President-elect Tsai Ing-wen and both Chinese President Xi Jinping. I wonder, are you expecting both of them to attend? Because Madam Tsai already expressed his (sic) interest to, you know, participate.

The second question, the Panama Paper(s). More detail were coming on Monday, next Monday, and you said that Panama has been hit hard by this paper. Can you elaborate, you know, if more detail is coming, what the impact will be on Panama’s economy? Thank you.

SAINT MALO: Thank you very much.

On the first question, yes, we have extended invitations to both the president of China Taiwan and the president of People’s Republic of China. Panama has diplomatic relations with Taiwan and Panama has commercial relations with China. We have an office in China. We have an office in Hong Kong. And we have an office in Taiwan. And we have invited to the inauguration of the Panama Canal the commercial sector of the world, and we have invited heads of state.

Now, what has defined which heads of state we have invited? We invited about 40 heads of state. The decision has been based primarily on those countries that are the primary users of the Panama Canal, and China is one of the primary users of the Panama Canal. So we would love to have them both, definitely. This is—this is an event where Panama places ourselves once again to the service of world trade and world commerce, and we hope to share this celebration with the rest of the countries that participate of this—of this service that Panama provides.

Regarding the second question, yes, we’ve heard that there is a second round of information coming. I said Panama has been hit hard because it bears Panama’s name. But many countries have been hit hard because the information that has come out here touches, as I mentioned, 21 jurisdictions in terms of banking, many other jurisdictions in terms of the registration of offshores, and furthermore, people that have a public life all over the world.

What can come of those—of those publications? I would imagine more information on people that have offshores or that have registered businesses. And we’re just as expecting as the rest of the world of these new publications.

CUNNINGHAM: Good. Yes, here at the front table?

Q: Good morning. Thank you for joining us. Clara Brillembourg of the law firm Foley Hoag.

I wanted to ask, given Panama’s historic role as a leader in the region, and also given your close relationship with the United States, how the opening of the relationship between the United States and Cuba has affected Panama.

SAINT MALO: The opening of the relationship with the United States and Cuba, it’s great news to Latin America. It’s not only great news to Panama, but it’s great news to Latin America. It was a—it was something that needed to happen at some point. We are very proud to have been the venue where the president of the United States and the president of Cuba met for the first time over 50 years. And it’s interesting that the last time they had met before the Summit of the Americas, the last time a president of the United States and a president of Cuba had met, was in 1956 in Panama.

So we take pride in being a country that brings people together, that brings countries together. We have been open to the world forever. Due to our geography, geographic location, Panama has been a crossroads of people, of culture, of trade. And that has made us open to the world, and that has made us a country that takes pride in bringing people and countries together. So that’s great news, and we do hope it will continue to move forward.

CUNNINGHAM: Let me ask a question that follows on the one about the expansion of the Panama Canal, because this—the opening of the canal and the new locks actually touches on another topic of global concern, because there may not be enough water to fully power the locks going forward, as I understand, at least for the moment, because of El Nino.

It’s—not everyone may know that one of the miracles of the Panama Canal is that it’s fed entirely by the waters of the rain forest in the interior of Panama. There are no pumps. It’s not recirculated. The water starts in the interior of Panama and then flows through the locks into the sea. Because of El Nino, you’ve had a drought. Some have linked El Nino, and this particularly severe El Nino, to climate change.

What is Panama doing to both address the immediate issue of the water that it needs for the locks and the broader question of climate change?

SAINT MALO: Well, I’ll begin with the second question first, the broader question of climate change. As mentioned, we were very active in the negotiations towards the Paris agreement. We think that’s great news to the world that the world has finally reached an agreement in terms of climate change. The implementation will definitely be difficult.

There is a question here of the cost of taking measures and who bears the cost. When I mentioned the efforts of Panama, which led—Panama led a coalition of 52 countries towards the negotiations of the Paris agreement, 52 countries that have forest. And the proposal of these 52 countries was basically what do we do to conserve this forest, and who foots the bill? Because at the end there is a cost to development when you commit to conserving your forests. And forests are basically in the underdeveloped world. So countries like the United States will have an important role to play in this effort towards climate change.

Locally, we are doing a lot of things. We have a strong leader of the efforts right now in Panama, which is our minister of environment. She’s been an advocate of environment for a long time. She’s been trained in environment, and she’s working in this regard.

We have a project of reforesting Panama, which is going very well. And we’re just really turning around how we manage environmental processes in Panama, and we’ve really raised the commitment of our government in terms of environment in general.

Now, the water for the canal. The issue is that the lakes that feed the canal are also the lake that feed the Panamanian population for drinking water. So, yes, this is an important issue. The good news is that the new canal does recirculate water. So the locks that were built at the beginning of the last century, they were throwing that water into the sea. But the new locks work recirculating water. So that’s the good news.

We have—President Varela mentioned last year at his speech at the National Assembly a project that we need to look into soon, which is a project to build further water reserves in Panama. And the lakes that feed the canal are manmade lakes, are lakes that were made for the canal, and they now provide the drinking water to the city.

There is a lot of water in Panama. We need to work at preserving this water. And there is an area of Rio Indio where there are several rivers come together. And we’re looking towards in the future just building a large new water reservoir—reservoir.

Now, the other good news is that in Panama we had El Nino. But in Panama, when it starts raining, it starts raining. (Laughter.) And last week it started raining, and then we had floods. (Laughs.) So fortunately enough, the dry season has—it’s over. The lakes will—how do you say that? They will regain—

CUNNINGHAM: Replenish.

SAINT MALO: Replenish—thank you—replenish with water. But that’s an issue that Panama needs to look into for the future, the issue of water for the canal and water for our population. We’re fine for the next—you know, for the near future. But long term we’re already looking into additional projects that will ensure the supply of water.

CUNNINGHAM: Yes, the gentleman at the back table.

Q: Thank you. Madam Secretary, this is Alex. I am the Washington correspondent of United Daily News of Taiwan.

I have a question with regard to diplomatic tie between Panama and Taiwan. We know Panama and China have robust economic ties, which China have diplomatic tie with Taiwan. And Panama has been expressed its willingness to establish diplomatic tie with China before. And my question is, how would you describe the diplomatic relations between Taiwan and Panama at present? And is so-called dual recognition a possible way to figure out the diplomatic issue among Panama, Taiwan, and China? Thank you.

SAINT MALO: We have diplomatic relations with Taiwan. We have very good diplomatic relations. We have, as I have mentioned, commercial relations with China. We understand the two Chinas have an agreement, currently a truce, which we respect. And we are very respectful of the way they handle their relations and their rapprochement. It’s been a long process for them.

Meanwhile, we are friends of Taiwan and have diplomatic relations with Taiwan. And we have strong relations, commercial relations, with China. And we do hope that both of them will continue to become stronger.

CUNNINGHAM: Yes, sir, over here.

Q: Hello. Steve Rodriguez. I’m a venture capitalist, but I spent some time in the region with the U.S. Mil Group in Colombia.

My question, Madam Vice President, is your country sits at the crossroads of a number of important issues related to terrorism, epidemiology, and, of course, trade. I guess my question is not so much getting a current update of where things are. I can read plenty of papers that have been written here in D.C. on that. My question is, how do you view your country’s role at the crossroads of so many of those issues going forward?

SAINT MALO: Those issues that are global issues are—we are having to face them, as well as the rest of the world. And I take the opportunity of your question to refer to one particular issue, which is difficult for us and which is a current affair, in the situation of migrants going through the isthmus on their way to the United States.

For the past years, many years, there have been—there has been a flow of migrants through the Central American isthmus to reach the United States. Now, the flow is made up of Cubans, many of them wanting to reach the United States, given the policy that the United States has of welcoming Cuban migrants.

And there has also been a flow of people from another continent. There is a flow of people from Africa, from Asia. These people enter the continent, most of them, through Brazil or Ecuador. Brazil and Ecuador both have a migrant policy that they’re open to the world and they don’t require visas for many nationalities.

And I think it’s a drama. I think it’s a human drama to have people that flee their countries with their families. We have people going with their young children. We have pregnant women. We have entire families. And, you know, the issue of refugees in Europe, it’s very visible right now because they’re coming in large numbers. The issue of migrants going through the Central American isthmus towards the United States, it’s a smaller number than the refugees in Europe so it’s not as known. But it’s a human drama. It’s a human drama that people have situations in their country in terms of wars, in terms of lack of economic opportunities, that are so dramatic that they’re willing to risk everything to find a better livelihood.

And I really think the world needs to look into what’s happening in these countries. The response is not closing the gates, because at some point I don’t know if you can close the gates. I mean, look what’s happening in Europe. But I think the response needs to be a coherent, integral response. Addressing the issues of development and the issues of peace are countries that are far away from us, but that have these issues.

And the issue of migrants, right now we have 3,900 Cubans in Panama that cannot move to Costa Rica because Costa Rica closed the frontiers. And Costa Rica closed the frontiers because Nicaragua closed the frontiers. And we cannot close the frontiers with Colombia because we don’t have a frontier with Colombia. We have a jungle on our frontier with Colombia.

So what are we to do? Are we to move these families with four-, three-, two-year children into the jungle, which we actually did with a few of them a couple of weeks ago, and a four-year-old got lost? And then we sent our police. After sending our police to stop them from coming in, we sent our police to look for the kid, because what are you going to do, ignore this human drama? I mean, we cannot be a world talking about a global agenda and talking about poverty and talking about human rights at the tables of the U.N. and then looking to the other side when there are people that are willing to risk everything because they have no future at their original countries.

I don’t see an easy response. Panama is going to have to do something at some point. We’re going to have to—I don’t know—send Cubans back to Cuba, send them to Ecuador, which issued the visas. They have Ecuadorian visas. They don’t have visas from Colombia. They don’t have visas from Panama. We received about 400—a few months ago about 400, 390, people from Congo. And we were, like, what? Three hundred and ninety in one month? We’ve had people from Senegal, from Congo; you know, two, three. They come through Brazil and they walk their way up to the United States. Can you believe this? So we were, like, this doesn’t make sense, you know, 390.

Well, we have some agreements with the United States and some systems to identify some people through their—what do you call this, their—

CUNNINGHAM: Fingerprints.

SAINT MALO: —fingerprints, thank you, because they claim they don’t have papers. They “lose” their papers because they don’t want to be sent back. And if countries don’t know where they’re from, you cannot send them back. They were Haitians. They were Haitians claiming to be from Congo.

So this is a human drama that the world needs to start looking at. And I don’t think the result is to close the gates. I think the result is to push development in those countries. And I don’t think we can any longer pretend that this does not affect us, because we thrive in development and economic prosperity because this is not so far away when these people are every day coming into our own countries.

CUNNINGHAM: Well, thank you for that very articulate description of the issues involved. Our country is about to embark on a—on a debate on this very issue, a presidential debate. And it’s one of those who believes that America is much stronger when it welcomes those from around the world, I personally welcome your articulate comment, although it was not intended to be a comment at all affecting our own political debate here.

Other questions? Yes, sir, in the back.

Q: Hi, my name is Tony Perez. I’m a—

CUNNINGHAM: Wait for the microphone, sir.

Q: Yeah, thank you. My name is Tony Perez. I’m a professor at Catholic University. And earlier in my career, I had the lack of fortune of working on international extradition matters, so I was intrigued by your comment about the Martinelli situation.

The United States for the last 30, 40 years to my knowledge has been seeking to renegotiate extradition treaties into the modern dual-criminality format. And I was wondering—if I understood you correctly, Panama has not yet joined in that process, and I was wondering if you’re changing your view about it, and whether or not you could utilize that change to extradite Mr. Martinelli? And the follow-up question is: Are you really better off with Martinelli in Panama or in Miami? (Laughter.)

SAINT MALO: I don’t know if I want to answer your second question. (Laughter.)

We would welcome the renegotiation of a treaty. I don’t think we have—we have a formal request. We have not initiated a request. Now, the negotiation of those agreements, which need to be passed by our legislative bodies, are not so quick. So I don’t know if we should be waiting for that to deal with this and other cases. We certainly could move into that direction for the future.

And I take the Fifth Amendment on your second question. (Laughter, laughs.)

CUNNINGHAM: Yes, here at the back table. Wait for the microphone, sir. Thanks.

Q: So, thank you very much, Madam Vice President, for being here. And congratulations on the new government’s commitment to transparency and to development issues.

So, my name’s Itai Grinberg. I’m at Georgetown Law. Important, I guess, also relevantly, I was previously at the United States Office of International Tax Counsel, where I worked on offshore tax evasion issues.

In prior governments, Panama developed a reputation as being perhaps the most recalcitrant of the major or significant financial intermediary jurisdictions around the world with respect to offshore tax evasion issues. And in this government, you’ve only recently joined the Common Reporting Standard, which is kind of the new globally accepted standard for what countries will do to try to address offshore tax evasion. I think you did that last week.

Given this history, I think there’s sort of this reputational question that Panama faces. And the question is, just tangibly, are there things Panama is prepared to do besides kind of the bare minimum to get off the, OK, they’re different than everyone else list that you’re prepared to share with this audience? So that would include, for example, changes in rules about how lawyers and accountants do due diligence, rules about beneficial ownership. There are a variety of things that Panama could do to change the way it’s perceived. I’m curious if you have any thoughts about that.

SAINT MALO: Well, definitely. And actually, some of the things that you’ve mentioned we’ve already done in this past 20 months in government.

We have very strong know-your-client legislation in Panama. Actually, I invite you to go to Panama and try to open a bank account. It’s a lot harder than opening a bank account in the United States. We have know-your-client legislation. We have due diligence legislation. The previous government approved a legislation changing bearer shares and making it obligatory for lawyers to know the end owners of shares. And they passed that legislation and they placed it in a hold for five years, until 2018 or something like that. We reinstalled that legislation, which was placed into effect January 1st this year. So, today, important changes have been made to our legislation.

Now, there is a question that I don’t think is that well-known in terms of our commitment and in terms of our actions. And I think it’s something that needs to be put into the table and just figure out how we deal with it. And it’s part of our reality.

First of all, our taxing legislation, we do not tax Panamanians for income generated outside of Panama. That is our system, which works well for us. Now, we respect other countries’ system(s). And we are committed to helping other countries follow the money of their own citizens that try to hide their money in other jurisdictions. We are committed to assisting those countries, and we will continue to do everything that we can to assist those countries.

However, the cost of implementing the Common Reporting Standards is going to be very high on our financial system. And we’re going to do it. But fear—I mean, nobody has put onto the table what it represents for a small country to ensure that you commit to certain standards—because other countries need that information; you don’t. There is a large cost in terms of operations for banks if they’re going to exchange information.

Our taxing authority can barely collect taxes in Panama. I mean, we have our own problems of tax evasion that we’re working hard at conquering. Now, we don’t only need to concentrate now on strengthening our taxing authorities in order for them to collect the taxes that we need to improve the livelihoods of Panamanians, but now we need to make sure we strengthen our tax authorities so that they can share information with the rest of the world, with countries that are a lot more powerful and have a lot more resources than we do.

Now, we’re going to do it. We think it’s fair that we do it. But you need to know there is a cost involved here. And that is something that I think needs to be brought into the table at some point, because it’s like—it’s like developed countries—and I understand the need for additional resources, and I understand the need to go after your own citizens that find whatever way to evade taxes. And so international legislation has just been getting stronger to move that fence, and in the process you’re setting up some standards to the rest of the world that are standards—that bear a high cost to your own system at the—at the cost of your people, at the cost of money you need for development. So I just wish—since you’re in that area, you know, I just wish that that reality was also placed on the table.

Now, regarding are we willing to do something more than just committing to the bare minimum, yes. I would love to see my country become a leader in terms of transparency. And this is something that we’ve debated. Locally, we’ve installed an international committee of experts as—last Friday, we installed it—as part of the measures that we’ve taken to respond to the information that has come out through the Panama Papers and as a part of our commitment to improve our system, committee to be co-chaired by Nobel Peace Prize Joseph Stiglitz. Now, we all know where Professor Stiglitz’s views are in terms of transparency and in terms of development. And we are committed to just waiting for the recommendations of that committee and see what information they provide there that will help us be better.

And, yes, I would love to be at the forefront. But you’ve got to understand, just committing to what we’ve committed, it’s not an easy thing. We are having to face questions of whether we devote money to education or we devote money to the standards. It’s not an easy—it’s not an easy position to be in. But, yes, we’re committing, and we are working in that direction.

CUNNINGHAM: Well, we’ve just crossed the 9:30 hour. And so, as I—as we bring matters to a close, let me note that in this country we have a long tradition of vice presidents who use the job as a platform for other jobs. (Laughter.) We have a more recent tradition of secretaries of state, foreign ministers, even women secretaries of state using that as a position for further jobs. And I commend that to Panama. (Laughter.)

Thank you all. Thank you all for—thank you for joining us here. Thank you all. Please join me in welcoming and thanking the vice president. (Applause.)

SAINT MALO: Thank you. Thank you very much. (Applause.)



Explore More on CFR


Saudi Arabia pressed Lebanese Prime Minister Saad Hariri to resign to try to weaken Iran-backed Hezbollah in Lebanon. The path to resolving the crisis could run through Yemen.



A growing number of countries are legalizing same-sex marriage amid a steady advance in lesbian, gay, bisexual, and transgender rights, but opposition remains strong in many countries.