Investor Concern Over Panama

Investors concerned over Panama arrests, while Ecuador’s president doesn’t want Brad Pitt’s movie.

BY LATINVEX STAFF

Last week’s arrest of Frank de Lima, Panama’s well-respected finance minister from 2011 to 2014, has raised eyebrows and concern among foreign investors.

“The arrest of the former minister of finance ... is likely to undermine Panama's business environment, increasing uncertainties over contract stability,” IHS analyst Diego Moya-Ocampos said in an analysis. “De Lima was one of the key players under [former president Ricardo] Martinelli's administration in terms of attracting foreign-direct investment.”

De Lima was detained on May 12 over a case of alleged embezzlement of funds in which Martinelli is also being investigated. De Lima, who has been accused by the national prosecutor's office but not by the court of justice, denies any wrongdoing, as does Martinelli, who claims the investigation as being politically motivated. The case is related to a national plan to supply food to schools, which was part of a broader National Plan for Aid (PAN). The prosecutor's office claims overpricing of items were identified in the PAN for schools at a time when de Lima was managing the country's budget as minister of finance.

“Risks of contracts revision are likely to increase in Panama in the one-year outlook as the current administration of President Juan Carlos Varela, who was sworn in on July 2014, continues to intensify,” Moya-Ocampos warns.

Sectors most likely to be affected are those related with infrastructure and construction and food.

Varela won Panama’s presidential elections a year ago, promising to clean up corruption in Panama. Martinelli, who has not been seen in Panama since January, is likely to face a formal trial over corruption charges. Varela says the total stolen during his predecessor's administration is nearly $100 million, AFP reports.

However, the arrest of de Lima may undermine Varela’s credibility.

“De Lima's arrest is … increasing subjective perceptions of corruption in the country and will most probably undermine trust from investors, signaling that some elements of political persecution might be taking place,” Moya-Ocampos says. "Indeed, the arrest of a well-reputed technocrat who had exercised such close oversight over the whole economy and a very close interaction with key well-established investors in Panama is unusual in Panama's post-Noriega-era political landscape. If the corruption investigation into Martinelli's administration continues to extend into the formal activities of ministers and technocrats, it could indicate that Varela's ongoing anticorruption drive will be perceived by markets and investors as becoming more political than institutional, thereby lowering investor's confidence.”

ECUADOR FRAUD CRITICIZED BY BRAZIL, MOVIE NEXT

Last week, Brazil’s Federal Prosecutor’s Office issued a recommendation to the country’s Superior Court of Justice that the $9.5 billion fraudulent Ecuadorian judgment against Chevron Corporation not be recognized for enforcement. 

In an opinion requested by Brazil’s Superior Court of Justice, Deputy Prosecutor General Nicolao Dino found that the Ecuadorian judgment against Chevron was “issued irregularly, especially under uncontested acts of corruption” and that recognizing it would violate Brazilian and “international public order.” Under international and Brazilian law, foreign judgments that violate public order, including the right to due process, may not be recognized in Brazil.  

In the 16-page recommendation, Dino quotes extensively from U.S. District Court’s March 4, 2014 opinion, which found that the $9.5 billion judgment against Chevron Corporation in Ecuador was the product of fraud and racketeering activity. He also cites the Organization of American Sates’ Inter-American Convention on Corruption, of which the country is a signatory, adding that recognition of the Ecuadorian judgment would likewise contravene “international public order” and “good morals.”

The non-binding recommendation cannot be appealed.  With this information in hand, Brazil’s Superior Court of Justice will now take up the Ecuadorian plaintiffs’ petition to have the judgment recognized.

“Brazil’s Deputy Prosecutor General’s recommendation that the fraudulent Ecuadorian judgment against Chevron not be recognized for enforcement upholds international and Brazilian law,” Chevron spokesman James Craig says.  “This recommendation is consistent with the U.S. federal court ruling that found the Ecuadorian judgment to be the product of fraud, bribery and extortion, and not enforceable in the United States.  We are confident that other jurisdictions that observe the rule of law will similarly find the Ecuadorian judgment to be illegitimate and unenforceable.”   

Meanwhile, Ecuador’s president Rafael Correa is trying to dissuade Hollywood star Brad Pitt from making a movie out of Law of the Jungle, the extensive tale of the Ecuador fraud against Chevron written by Paul Barrett, an assistant managing editor at Bloomberg Businessweek.

Correa has started a Twitter campaign urging Pitt to drop the film plans, while claiming that Barrett’s book was financed by Chevron, a claim denied both by the author and the US oil company. 

“There's not a shred of truth in it,” Barrett said, according to the Daily Telegraph. “It is appalling that the president of a country, Ecuador, would be using his power and influence to spread defamatory statements of that nature.”

Brad Pitt’s production company Plan B Entertainment edged out George Clooney’s Smokehouse Pictures to win the film rights to the book, according to Fortune.

In March last year, US Judge Lewis Kaplan ruled that a $9.5 billion Ecuador verdict against Chevron in 2011 was tainted by fraud. “The decision in the Lago Agrio case was obtained by corrupt means,” he said. “The defendants here may not be allowed to benefit from that in any way.”

Meanwhile, Correa is earning a reputation as a leading opponent of freedom of expression. In addition to persecuting local journalists and cartoonists, he physically attacked a teenager who had pointed the finger at him, according to Fusion.  

“Ecuador’s notoriously thin-skinned president took his hypersensitivity to the next level … when he abruptly ordered his motorcade to halt in the middle of the street to berate a teenager for mocking him from the sidewalk,” Fusion said. “President Rafael Correa stopped his motorcade in downtown Quito on May 1 after spotting a 17-year-old teen flipping him the bird from the sidewalk. Bravely surrounded by his bodyguards, Ecuador’s most powerful man stepped from his bullet proof vehicle and aggressively huffed and puffed towards the teenager to confront him and his mother.”

The startled teenager, Luis Carrera, says President Correa poked him repeatedly in the chest and scolded him on the sidewalk. He said the president was so angry that tears were forming in his eyes.

“He screamed ‘Show some respect, little kid! I am your president, you rude scoundrel!’” Carrera said.

Carrera and his mother, who slapped one of the president’s security guards during the incident, were dragged to a police station. Later on the teen was sentenced to 20 hours of community service.

The president accused opposition groups and the media of using the 17-year-old kid as part of their efforts to discredit his government, Fusion reports.

The latest incident follows Correa’s move to publicly out Twitter critics and encourage his supporters to troll them with the “truth” about his “citizen’s revolution.”

LATIN AMERICA’S BEST PLACES TO WORK

The Great Place to Work Institute has ranked the top multinationals to work for in Latin America. 

US-based Microsoft tops the list, followed by Spain-based Telefonica. US-based JW Marriott, France-based Accor and Argentina-based Arcos Dorados (the world’s largest McDonald’s franchisee) round out the top five.

“Arcos Dorados is excited to be selected again as one of the top five places to work in Latin America. This is an honor that we share with the thousands of employees who work in our McDonald’s restaurants across the region and strive to provide the very best experience to our customers,” Woods Staton, Chairman and Chief Executive Officer of Arcos Dorados, said in a statement.

Other companies that make the list include US-based Dell, US-based Cisco, UK-based Diageo, Peru-based Belcorp and US-based Monsanto.

SLIM SELLING NEW YORK MANSION

Mexican mogul Carlos Slim, Latin America’s richest man, is selling a Fifth Avenue mansion for $80 million, or 82 percent more than he bought it for five years ago, The Daily Mail reports.

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