‘We Are Winning. But There’s Always the Threat’

Panama’s new president, Juan Carlos Varela, took office on July 1, determined to do away with corruption, fight terrorism, and restore Panama to a central position in Latin American politics. Last week, he spoke to Foreign Policy while attending the opening of the United Nations General Assembly. Here are excerpts from the interview:

Foreign Policy: Do you feel that President Obama did the right thing in striking the Islamic State?

President Juan Carlos Varela: For sure. We cannot allow terrorist groups to grow and control areas inside countries and states. It is a conflict between ISIS and all the countries that want to live under the rule of law. Our government was one of the first in Latin America to issue a formal statement supporting the coalition created by President Obama.

FP: You were running number three in the polls before the recent presidential election.

JCV: According to public polls, I was in number three. According to my campaign polls, I was always in a close race. It was a very difficult election but democracy prevailed.

FP: Why were the people of Panama attracted to you?

JCV: Because of my proposals and my mission — to change politics.

FP: Does that mean they had enough of corruption?

JCV: They saw me as someone who wants to serve the people and doesn’t play party politics — someone who would fight the problems affecting the people: their health, education, and security.

FP: Did they see the government of former President Ricardo Martinelli as corrupt and not focused on their needs?

JCV: They saw the former government was buying political leaders and using government resources for its campaign. They stayed quiet to protect their jobs and benefits but in the end, they voted with their conscience for me.

FP: How are you going to change Panama?

JCV: My main challenge is to change politics from a business to a service. I want to make sure politics and public life is all about serving the people.

FP: How do you expect to do that?

JCV: By appointing cabinet members and a government that is committed to transparency and honesty. [I want] a government that focuses all of its effort on not worrying about elections but worrying about the problems that affect people every day.

Today we have 65 percent of Panamanian kids graduating from high school. I want to make that 100 percent. So you need to build more schools and to give scholarships to kids that are living in poverty to achieve that goal. 30 to 40 percent of Panamanian homes don’t have basic sanitation.

FP: You spoke about that during your campaign.

JCV: Drinking water and sewage — basic sanitation. I want to accomplish the goal of getting that to 100 percent. We need to impact 300,000 homes. I hope I can get it to 85 or 90 percent in my five-year term.

FP: Panama has had high economic growth rates until this year?

JCV: Yes. The past five years we had between 7 and 9 percent. In 2014 it is going to be close to 6.5 percent, so it is a good economic growth. Unemployment is at 4.3 percent. The big challenge for our government is to make sure the good times we are having transfer to all Panamanian citizens — improving their lives, their neighborhoods, their schools, basic sanitation, and health.

FP: You have a big banking sector?

JCV: Very strong. [Panama is] a strong financial center with strict and transparent rules.

FP: Didn’t the Federal Reserve put Panama on the grey list  on banking regulations and money laundering?

JCV: They believe there are sectors of the economy that are vulnerable to money laundering. The reason we are on the grey list is because we have some industries that are not supervised. That does not include the banking sector. That includes the casinos, the jewelers, the car dealers. We are working on that, and we hope to get out of the grey list within the next year. We have a strong financial center. Protecting our system from organized crime is a goal of this government. We are working closely with U.S. law enforcement agencies.

FP: When will the expansion of the Panama Canal be finished?

JCV: We expect it to be at the beginning of 2016.

FP: And it will allow bigger ships to go though it?

JCV: Yes. [It will go from] ships that can carry 5,000 containers [now] to ships that can carry 12,000 containers. So it will mean more income for our country.

FP: And more income for the U.S., too?

JCV: Yes, ships will be able to come from Asia to ports on the east coast of the United States.

FP: What security measures have you taken regarding the Canal?

JCV: We work with the Panama Canal Authority, and every year we do exercises with other countries to ensure the security of the Canal. More than 25 countries participate.

FP: Next year the Summit of the Americas will be held in Panama. Some countries have said they won’t attend the meeting unless Cuba is included.

JCV: Many countries have said Cuba must come. As a host country, we have invited Cuba. We have told the U.S. and the Canadian governments. When you see what is going on in Syria, Iraq, and Afghanistan — I think the Americas are at peace now. There are differences but there is also collaboration. We have seen Cuban doctors going to Africa to fight Ebola. Having [representatives of all countries] together in Panama to discuss issues like immigration and energy and social justice [would be a good thing].

FP: What has been the U.S. response?

JCV: I think there is a debate. I feel that as the U.S. has a large Hispanic population, the right thing to do would be to attend. I think it would be a good opportunity to find common ways to put us together and put aside conflict.

FP: Are you trying to improve your country’s relationship with Venezuela?

JCV: We have relations with Venezuela and Cuba. The past government had some issues with Venezuela. We reestablished relations with Venezuela on July 1, my first day in office. If we have the Canal and want to be a mediator, we  can’t be part of conflicts.

FP: And you want to be a mediator?

JCV: That’s our foreign policy.

FP: How do you see the situation in Venezuela?

JCV: The country has problems like in security.

FP: It’s not that stable?

JCV: [President Nicolas] Maduro has some internal issues and a dialogue is what is needed there — a dialogue with the opposition leaders. [He needs to] respect human rights and freedom of expression.

FP:Is there any difference between you and Martinelli in terms of U.S. relations?

JCV: It has been a good relationship, but I will strengthen it working closely on the border with Colombia and the fight against drug trafficking. The big difference is internal.

FP: How?

JCV: U.S. companies will have an honest and transparent government to do business with in Panama. There’s a big change here. The U.S. companies and government will see a government here committed to transparency, democracy, and the rule of law.

FP: So a U.S. company competing for a contract in your country will have a fair chance?

JCV: Yes. My first tenders are for energy and construction. Many companies are coming to Panama because they see a government committed to transparency.

FP: How were the same companies reacting a year ago?

JCV: There was a lot of debate about lack of transparency. That is one of the reasons the coalition split. Many companies didn’t compete in certain areas because they didn’t see an open process.

FP: Are you interested in joining the Pacific Alliance?

JCV: As minister of foreign affairs, I started that dialogue. And we now have [free trade agreements] with all those countries [Mexico, Colombia, Chile, Peru] which is a requirement to join. We have re-launched free trade negotiations with Israel.

FP: How are your relations with Israel?

JCV: They are a friend.

FP: What do you think about the immigration situation and the children from Central America trying to enter the U.S.?

JCV: It has to be addressed. The U.S. economy needs the workers from Central America. If you need the workers, you must accept their families. It doesn’t make any sense that workers needed in the U.S. have to come  through illegal channels. Hispanic workers in the U.S. are sending money to their families to try to get them to the U.S. Instead of that money going to airlines, it is going to human traffickers.

We have significant immigration issues [here] in Panama. Because our unemployment is so low, we have people coming in from Nicaragua, the Dominican Republic, Venezuela, Colombia, and Spain.

FP:What are your chief concerns?

JCV: Organized crime. Thirty years ago, drug trafficking was done through the Caribbean islands to Florida. Then the U.S. agencies cleaned up that problem. Now the problem has moved to Central America and Mexico. There are a lot of drugs crossing our isthmus on the way to Mexico. The drugs have strengthened the FARC [the Revolutionary Armed Forces of Colombia] and the Mexican cartels. Drugs are sold to poor kids. We have to fight against drug trafficking. It’s a hard fight.

FP: Is the U.S. helping you?

JCV: Yes. We are working together.

FP: How much power does organized crime have in Panama?

JCV: We are winning. But there’s always the threat. We’re protecting our ports and airports. Security is my main challenge.

FP: Do you think Colombia’s President Juan Manuel Santos will succeed in his proposed peace deal with the FARC?

JCV: That is his goal. But after the FARC, there will be the BACRIM [criminal bandits]. There is already a dialogue between Panama and Colombia about what will happen after the negotiations.

FP: Because there is so much money in the drug trade?

JCV: Yes. It is always the same fight between the outlaws and those who want to live under the rule of law.

I don’t want the region to go back to the eighties. I grew up in that era. I followed the Nicaraguan civil war in the newspapers, and it had a lot of impact on me. I grew up seeing kids my age carrying assault weapons in Nicaragua. You study why those kids fought that civil war, and you take measures to make sure that doesn’t happen in your country. You get involved in public life and you fight for social justice.

FP: But the Nicaraguan civil war was Russian-backed?

JCV: It was but we left the ground [free] because of social inequality. My challenge in Panama is to be sure that the economic growth gets to everybody. My legacy will be to leave a functional democracy — to strengthen institutions and be sure that everyone who goes to public life understands it is about serving the people, not about using power for personal benefit.