Assessment of the privatization program of the government, Panama

consultant team visited Panama to evaluate the Government of Panama"s (GOP"s) Privatization Program and elaborate a long-term A.I.D. technical assistance (TA) plan. The team was able to identify 28 parastatals and review 6 targeted for divestiture in the first round of the program. Four major insights emanated from the visit: (1) thus far, the GOP program has lacked centralized control and clearly defined objectives (both overall and for individual parastatals); (2) severance pay for dismissed parastatal employees is a significant problem, complicated by the ultimate disposition of a particular parastatal (e.g., liquidation or sale to private buyers) and by regulatory factors; (3) while the GOP will probably resist divesting itself of utilities and port authorities, which contribute significantly to national revenues, the high tariffs charged by these entities constrain both private sector activity and the GOP"s export promotion strategy; and (4) problems in mobilizing capital to underwrite divestitures are a major barrier to privatization in Panama. Recommendations address these issues and an overall TA plan is outlined. Appended are brief descriptions of 5 parastatals. (Author abstract, modified)