IHS Global Insight Perspective | |
Significance | Ricardo Martinelli, a supermarket magnate, is the first president in decades to not come from the ruling Democratic Revolutionary Party (PRD) or the Panameñista Party (PP). The PRD was also defeated in the simultaneous legislative elections and it has probably lost the Panama City mayoralty, taken by opposition contender Ricardo Bosco Vallarina. |
Implications | Martinelli’s victory will guarantee broad continuity in policy. He is expected to forge ahead with business-friendly policies, including the introduction of a flat tax rate system, and to push the United States to ratify a pending Free-Trade Agreement (FTA). |
Outlook | The deteriorating economic outlook and a concomitant worsening fiscal position will create a hard environment for Martinelli’s costly electoral pledges to be fulfilled, especially in the areas of security, public services, and education. If elected in Panama City, Ricardo Bosco Vallarina could face further legal challenges over his eligibility. |
A Clear Victory
Business tycoon Ricardo Martinelli, the candidate from the Democratic Change (DC) Party, yesterday scored a clear victory in Panama’s presidential election. According to official preliminary results based on 89% of the vote polled, Martinelli has won 60.3% of the vote, a full 10 percentage points more than predicted by pre-electoral polls. Balbina Herrera from the ruling Democratic Revolutionary Party (PRD) finished far behind, claiming only 37.3% of the vote. Given Martinelli’s irreversible lead, the president of the Electoral Tribunal (TE) Erasmo Pinilla has already declared Martinelli the "undisputed winner". For her part, Balbina Herrera swiftly conceded defeat, promising to form a "responsible but very energetic" opposition. As expected, former president Guillermo Endara from the Moral Vanguard party (VMP) did not play a role in deciding the outcome of the poll, winning only 2.37% of the ballot. Turnout was relatively high at 73% and the voting process was marked by a climate of mutual respect, according to a statement by José Octavio Bordón, the head of the electoral observation mission from the Organisation of American States (OAS).
Legislative Majority
Making things worse for the PRD, the incumbent party will also have to swallow a bitter defeat in the simultaneous legislative elections. According to official preliminary results on the basis of 75% of polling stations, the parliamentary representation of the PRD will be almost cut in half, as the party took only 21 seats compared with its current tally of 40. It should be noted that results are not strictly comparable, as the new Congress has only 71 seats compared with 78 seats previously. Despite losing a considerable number of deputies, the PRD is likely to remain the strongest force in the legislature, narrowly staying ahead of the Panameñista Party (PP), currently predicted to gain 19 deputies. This, however, will be of little solace to the PRD, as Martinelli’s four-party AC coalition, which alongside the DC and the PP includes the Patriotic Union (UP) and the Nationalist Republican Liberal Movement (Morilena), has taken 37 seats overall, more than enough to form a working majority.
More bad news for the PRD came from Panama City, where Martinelli-backed Ricardo Bosco Vallarina is likely to take the mayoralty in the capital. Preliminary results from 63% of polling stations show him leading the race for the second most important political post in the country with some 6%, ahead of PRD contender Roberto "Bobby" Velásquez. If elected, he could however face legal action, as doubts over his eligibility have emerged in the run-up to the elections (see Panama: 1 May 2009: Election 2009: Panama's Opposition Candidate Heading for Victory Amid Looming Campaign Finance Scandal).
Outlook and Implications
Losing the presidency, the congressional majority and probably also the mayoralty of Panama City, the elections have delivered a resounding defeat for the PRD. While the incumbent party has overseen a period of strong economic growth, it was unable to create a sense of inclusiveness, thus fostering voter discontent. A perceived failure to improve security and public services, internal divisions, and an emerging campaign finance scandal further diminished Herrera’s chances of winning a second term for the party. Packaging himself as an alternative to the established political parties, this situation has been skilfully exploited by Martinelli, whose victory effectively ends the dominance of the PRD and the PP. He grabbed more than ten times more votes than in 2004, when he won a slim 5% of the ballot, and the inclusion of the PP in his coalition has allowed him to win control of the legislature.
Bolstered by a legislative majority, he will have a free hand to implement his electoral programme. He is expected to push for the approval of an FTA with the United States, the ratification of which is pending in the US legislature, inter alia over concerns concerning issues of transparency and tax information. His proposals to simplify the tax code and to introduce a flat tax system are hints to the United States that his government is committed to tackling these issues. Another top priority will be to oversee the implementation of the massive US$5.25-billion project to upgrade the Panama Canal. Alongside "strong hand" policies to crack down on violence and crime, Martinelli has also pledged to improve education and public services, including urban transportation. As Panama faces a sharp economic deceleration, slower economic growth and falling fiscal revenues will however provide a challenging environment for the incoming government to deliver on these promises.