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Areas of Practices Taxes Public Contracting Intellectual Property Sanitary Registry

Contribution of this Edition

Mediation and Arbitration Maritime Law

José Javier Rivera

Registration Vessels

Francisco Bustamante Peña

Labor Law

Rafael Fernández Lara

Migration Issues

Cesar Alberto Rivera B.

Corporations

Augusto C. García

Business Establishments Private Interest Foundation

David Botello González

Trusts Banking Law Securities Law Síguenos en:

Notary Services

Rivera Bolívar y Castañedas

Environmental Legal Affairs Antitrusts Laws

@rbc_abogados

Telecommunications

CONSEJO EDITORIAL José Javier Rivera

Giovana del C. Miranda


INDEX I. EDITORIAL Alberto Alemán Zubieta: Independent candidate that is needed

V. POLITICS Pag. 4

II. INVITED WRITER

Will Obama obtain the victory in November

Pag. 25

VI. UP-TO-DATE NOTE Pag. 6

Economic Growth of Panama. Chance or Management? Conjucture or Structure?

III. LEGAL NORMS OF INTEREST 1. Information protection data contained Pag. 10 in test is regulated 2. Organizations without ends of Profit dedicated to humanitarian activities will have to pay a fee for concessions

Pag. 12

3. Panama gives important advances as for industrial property

Pag. 13

4. MOP stablishes penaltiens for misuse of signs and traffic control

Pag. 14

IV. CONSULT, DOCTRINE AND J U R IS P R U D E N C E Attorney’s office of the administration Pag.15 declares on the recall of resolutions in the ANAM Know your rights as guarantor

Pag. 17

Company is required to sign disabled workers

Pag. 19

CESCON realizes the First National Competition of Arbitration

Pag. 29

VII. PANAMANIAN ECONOMY 1. Comment on the national urban consumer prices index: August, 2012

Pag. 31

2. Panama: Competitive, driven by banks

Pag. 33

3. Occupancy rate in homes of Panama was 94.4%

Pag. 34

VIII. WORLD ECONOMY 1. Serious drought raise food prices and threaten welfare of the poor

Pag. 35

2. Economic Health Control. Pag. 39 United States: According to IMF, anemic recovery after crisis 3. ILO calls to invest in job opportunities Pag. 43 for youth


I.

E D I TO R I A L

ALBERTO ALEMÁN ZUBIETA: INDEPENDET CANDIDATE THAT IS NEEDED By: José Javier Rivera

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Also, there is a kind of drought in the electoral offer voters have been able to identify, and therefore a majority the number of people who would not vote for any of the current candidates, including so-called independent, or simply do Needless to then expand on the tasks not know who vote. in the last three decades was faced with his team of nine thousand employees, to The reasons are very worthy of consireinvent the canal as a profitable world- deration, and that despite the economic class, leading the process of expansion of advances in various fields, the fact is that the canal and prepare this structure major structural problems remain such as edupublic company to meet the challenge of cation, the lack of good public services converting the path leading logistics con- (water, transport, health) and the absoglomerates in Latin America, which only lute lack of independence key organs in a robust democracy and the administration needs a further boost in the port field. of justice and the Assembly of Deputies. This allows us to get to the point that is politics. We know only two years remai- A sort of urgent reconstruction proposal ning for the electoral tournament culmi- of ethical and moral values, without losing nates with the presidential election and the economic course, and therefore it is other representatives of local and natio- essential that a movement that has the civic profile that characterized Galimany nal legislature. Guillermo Endara, has the ability to unite ast September 3, till now administrator of the Panama Canal, Alberto Alemán Zubieta, completed a path that has deserved the local and international recognition.

4. Legislación y Economía - September 2012


Editorial

the thousands of citizens who are unhappy with the status quo, and that through a new political organization, to express their will of the majority to defeat conclusively both the ruling forces, and those opposition parties that in truth it they are doing is a new scam posing as opposition while bedrooms have agreement.

contracts, inflated costs and other cancer cells that eat away the national treasury. In the field of education, the only stable wealth is that which emanates from a public education that has the sole north improvements world-class practices. So it is not a crumb delivered in a backpack or a computer, but a true transformation in which the State, using canal resources, place the public, free, at the best level for an end once and for all the damn dependence on handouts poor electioneering or jumbo fairs.

In this hypothesis emerges the possibility that a person who has run the main state enterprise, tearing their hair and decide to take up the banner of decency, accountability, work and service to national interests rather to increase their personal wealth and convince dissidents like me, The challenge is thrown and the clock is your civic vocation. ticking. It is essential that there radicalism against Dawn and see. the unjustified increase in assets of private

5. Legislaci贸n y Econom铆a - September 2012


II.

IN V I T E D W R I T E R

ECONOMIC GROWTH OF PANAMA. CHANCE OR MANAGEMENT? CONJUCTURE OF STRUCTURE=? By: Francisco Bustamante Peña

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s you can see from the attached chart, since 1999 the GDP growth rate took off and has continued since then, except the bumps of 2001, coincident with the destruction of the Twin Towers in New York, and in 2009, by the global financial crisis. What happened in the national or international public policy and trust of domestic and foreign business sector to be given that such behavior is observed by all and sundry? What has been the constant in domestic and foreign environments has allowed this situation to continue? What have been the engines of national economic growth in the past, and perhaps this will be the same in the future?

6. Legislación y Economía - September 2012


Invited Writer

Is there, perhaps, circumstances or rigidities in macroeconomic or social variables that could possibly complicate the growth of the national economy? Is it appropriate or not that growth rates remain constant, sustained and high when apparently is near full employment indicators of human resources, as defined by convention? Do we need it or not, adjustments in national public policies aimed at promoting market conditions necessary and sufficient for the national economy continue to grow? Do the chronic problems associated with the most vulnerable in developing countries have been or will be resolved or policies may be maintained to support these sectors, tax rate smoothly?

Japan went through an euphoria of export growth and technological development at a time threatened to compromise the commercial leadership of the United States. An appreciation of its currency which undermined the competitiveness of their export products, followed by an abrupt drop much of its real estate, keep this country for more than 20 years in an economic lethargy and to complete, was recently hit by the triple disaster of a tsunami, an earthquake and a nuclear tragedy, everything cope with typical oriental patience. But socially, it is no longer news when worker suicides occur exhausted by long hours of work, and low expectations to regain former levels of life.

In 1985 the U.S. pressure to appreciate the yen and balance the trade imbalance between the two countries was not the trigger, one of the triggers of the crisis. Perhaps this experience, China refuses to accept WesSome questions reflect a common con- tern pressure to appreciate its currency, cern: economic growth experienced the Renminbi known in the West as yuan? by the country will continue indefinitely, and may incorporate the popula- In the examples above, we draw attention tion achieve national progress that invol- to the fact that external factors to the loves creating a higher national income. cal economy even in the case of countries such like powers discussed, weigh heavily First, based on historical experience, on the performance of local economies. high growth rates and constant, even- And Panama is no exception to this reatually losing momentum. Sometimes lity. Thus, the first great incentive and abruptly, sometimes by a slowdown or also risk facing the economy is the instaeven, you enter long processes of stagna- bility of international markets. And is that tion. In others, is a mix of all three types. our growth is strongly linked to interna-

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Invited Writer

tional trade movement, as we shall see. York, which generates new global scenarios altering continental priorities. DomesMoreover, a naive claim that the streng- tic growth is slowing, but it is recovered by th of our financial system protected us the end of the period. The next period of from the crisis of 2009, ignores the cau- government, 2004-2009, coincides with ses of this. Poor management of markets a global economic rebound. Policy incenand financial institutions, underpinned by tives for investment, the Canal expansion permissive legislation and seasoned with program, rising global trade and demand a large dose of greed for immediate and for services traditionally provided Panama substantial returns at the base of the cri- from his position as supplier of these private sis. For the non-existence of national constructions and exalted by the European banks of last resort, contrary to the opi- and American demand, spur the local econions of experts, has helped bankers to be nomy. The adoption of institutional mechamore cautious and avoid moral hazard. nisms such as the Fiscal Responsibility Act, contribute to send another message of seAlso the little local financial market sophis- riousness in managing the financial markets. tication, the weak development of local markets, and the abundant domestic cre- The current government is proposing in dit demand required no footage of bankers its Strategic Plan of Government, 2009risky positions, as in other latitudes. 2014, the following growth drivers: (a) Value Added Logistics Services, SLVA, One of the growth factors of Panama is associated with the activities of the exstrong public investment in Panama that panded Canal, (b) tourism, (c) Agrioccurs during the government from 1994 culture export, and (d) Financial Servito 1999, in which further reforms are ces. There is also the Colon Free Zone, advanced to state administrative appara- which has been a major business generatus, approved incentives for investment tor and re-exports, and provides for the and trade releases. Also privatized pu- expansion of the area of Howard, for the blic enterprises and constitutes the Trust installation of high-level regional comFund with the savings from privatization, panies. This picture is enough to ensusending a message to the markets, pru- re constant growth rates and sustainable. dent management of fiscal surpluses. The Strategic Plan identifies limitations that During the period 1999-2004 the des- require deep structural reforms in all those truction occurs of the Twin Towers of New fields, many of which have not been per-

8. Legislaci贸n y Econom铆a - September 2012


Invited Writer

formed. And the same is done mainly with massive investments in the area of Panama-Colon Transístmica, and some airports associated with tourism, as the Rio Hato. Turn Panama into a regional freight hub, is a proposal of that Strategic Plan. However, the same flaws as Plan identifies communications with Central, there are issues to be resolved multimodal transport, customs, etc. Summarizing, although able to identify niches be engines of growth, they are affected by deep structural constraints. By way of example. We have an ambitious plan for development of urban infrastructure and the load path, but communications port land and the rest of the country, limit the potential use of unused or under-utilized in the productive sector.

However, despite the current period 20092014 has remained satisfactory growth rates, end of period several of his most significant end engines, with the work completed, hopefully, the Canal, the expansion of public investment systems urban communications and airports, among others. There are spending and transfers policies called social, no clear mechanisms for setting measurable goals, and defined time and budget. There easing policy of fiscal prudence, with the changing of the Fiscal Responsibility Law. There is increased consequently public debt, no investments outside of accounting such as turnkey project. There are issues of social security unresolved. Capital inflows threats from drug trafficking in the elections, as recently warned the Security Minister.

MANAGEMENT AND CONJUNCTURE. STRUCTURE IS ABSENT But above all, is concerning the climate of political confrontation and wear and We understand that three factors, well potentially, loss of governance. In a scecombined, have contributed to Panama nario like this, where only residents of has been able to take advantage of global this country are responsible, you run the situations in perspective enviable position: risk of jeopardizing the achievement rea(a) making responsible fiscal management ched stability, growth and social harmony. positions in the public key, (b) political sta-   bility especially after the last U.S. invasion in 1989, which has been reflected in clean elections and governance in the best sense, and (c) investment programs and tax incentives increasing leveraging resources and careful management of public debt.

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III.

L E G A L N O R M S OF INT ERES T

INFORMATION PROTECTION DATA CONTAINED IN TEST IS REGULATED

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he Ministry of Health by Execu- clinical studies and the summary of tive Decree No. 1389 of Sept- all phases of research as appropriate. ember 4, 2012 that regulates concerning the protection of the information in the test data or other undisclosed using a new chemical entity in the pharmaceutical product and which will be presented to National Directorate of Pharmacy and Drugs for marketing through the authorization. Moreover, it also regulates a transparent process, to warn the patent holder is seeking someone else’s approval to market a drug product approved for the Decree provides that the Ministry of period of a patent covering the product. Health shall protect such data against unauthorized disclosure, when her geneAlso be noted that for veterinary phar- ration has involved considerable effort, maceuticals including registration of except where disclosure is necessary to new indications for already registe- protect the public or unless steps are red pharmaceutical products that are taken to make sure that the data are not described in the references accep- protected against unfair commercial use. ted, you will require the submission of

10. Legislación y Economía - September 2012


Legal Norms

In another aside, the rule contemplates commented that in the case of a pharmaceutical innovator who submitted the information specified in the preceding paragraph shall not be for a period of five years from the granting of your health record to grant other health records to pharmaceutical products containing the same chemical entity, with the exceptions.

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On the other hand, is set to be published in a visible area designated for that purpose or for information on its website, all health records granted, stating the case if any data protection or other undisclosed evidence, the new chemical entity and the dates of issuance and expiration of the protection. The publication in question, will be thirty (30) business days following the date of issuance of Another issue that develops Decree is the the certificate granting the authorization. concept of new chemical entity and defines it as the active ingredient at the time Finally, the rule contemplates that will of application for licensing has not been not affect pharmaceutical products conincluded in medical records previously taining a chemical entity approved for granted in the Republic of Panama. use or keep a pending request for use in Panama before its entry into force. To enjoy the protection of test data or other undisclosed information, the appli- It is noted that a reading of the Decree cant shall be required as a condition for commented considering, it arises as a obtaining market authorization of a phar- result of international commitments Pamaceutical among others: 1. Expressly nama, through international agreements provided information subject to confiden- and other legal instruments ratified, so tiality. 2. Presentation of data or other un- that comes out the need to consider new disclosed evidence necessary to determine aspects and to regulate matters that are the safety and efficacy of the product. 3. not regulated in order to adjust the law Statement that it is a new chemical entity. and maintain effective control in the areas that are required to meet commitments.

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ORGANIZATIONS WITHOUT ENDS OF PROFIT DEDICATED TO HUMANITARIAN ACTIVITIES WILL HAVE TO PAY A FEE FOR CONCESSIONS

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y Order J.D. No. 035-2012 of September 9, 2012 the Board of the Maritime Authority agreed that concessions may be granted with a minimum fee of one hundred Balboas (B/. 100.00) per square meter when the concessions requested by national public safety entities or organizations without profit organization engaged in humanitarian work because of emergencies that arise from disasters. The change lies in the fact that previously the concessions given under these circumstances could be free when the award was for charities, welfare, religious or nonprofit. Now there seems to be a limitation, since only be referred to nonprofit organizations dedicated to humanitarian and public safety entities.

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PANAMA GIVES IMPORTANT ADVANCES AS FOR INDUSTRIAL PROPERTY

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he Panamanian government acquires from today new international commitments to the input force of several treaties related to Intellectual Property as the Cooperation Treaty Patent (PCT), the Treaty on the Law of Trademarks and the Budapest Treaty on International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure. Since last June 7, the Panamanian government presented at the World Intellectual Property Organization its instrument of accession to these treaties. Regarding Cooperation Treaty patent is an international treaty administered by the World Intellectual Property Organization (WIPO) and signed by 146 countries party to the Paris Convention, including Panama. The PCT can apply simultaneously in several countries, the protection of an invention by filing a single "international" patent application without filing several national or regional applications. The granting of patents remains a matter for the national or regional patent which he calls "national phase", at this stage, they should comply with the requirements of national legislation. The PCT are to facilitate and strengthen the protection of the patent right of Panamanians, as well as those in our country who see a business opportunity, therefore, the possibility of more and better job opportunities for nationals.

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MOP STABLISHES PENALTIES FOR MISUSE OF SIGNS AND TRAFFIC CONTROL

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he Ministry of Public Works through Resolution No. 81-12 of August 10, 2012 banned the use of signs, badges and/or devices for traffic control that have distinctive alluding to MOP in activities unrelated to any work carry forward the Ministry.

Individuals or companies who do not comply with the order, shall be punished by a decision motivated by the imposition of a fine which is applicable from B/.5, until B/.10 000.00, 000.00 depending on the seriousness of the offense, it shall be canceled within a period of 10 working days. Against the imposition of a penalty, the person can appeal for reconsideration.

14. Legislaci贸n y Econom铆a - September 2012


I V.

C O N S U LT, D O CT RINE AND JURIS P RUDENCE

ATTORNEY’S OFFICE OF THE ADMINISTRATION DECLARES ON THE RECALL OF RESOLUTIONS IN THE ANAM

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y Check No.C-53-12 August 29, 2012, the Office of Administration had the opportunity to rule on the request presented by General Manager of the National Authority of the Environment, in the sense of establishing the procedure for the reversal of a judgment given by the Director of Planning and Environmental Assessment of the National Environmental Authority and if therefore the plaintiffs must resort to the administrative jurisdiction to achieve its mission. Attorney considers that since the entry into force of Law 38 of 31 July 2000 on general administrative procedure, is allowed to revoke the administrative authorities, ex officio or at the request of interested parties, a resolution that declare or recognize rights, as long as they meet any of the circumstances set forth in Article 62 of this law, as it was amended by section 3 of Act 62 of October 23, 2009.

15. Legislación y Economía - September 2012

Add that against the decision of revocation or cancellation, the applicant may file, within the corresponding terms, the resources that recognize the law. So, states that the power to revoke or revoked, an administrative act does not preclude any other interested party may apply, based on legal grounds, when the body or administrative officer has not done so. He argues that in cases where the revocation of decisions rendered by the Director of Planning and Environmental Assessment that entity has been requested by others via a complaint to the administration, that is, in the governmental National Authority environment should conduct the relevant analysis considering the assumptions contained in the law, in order to determine whether any of the acts set to declare feasible provided the revocation, or reject the application if not notice the presence of any of these.


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Accordingly, the Office considers that as, the query text, we see that the decisions amending an earlier, by which it approved the environmental impact study for the construction of a building material that is regulated by the General Law environment, so that this rule gives you the option to third parties affected by an act or resolution of environmental impact that can turn directly to the administrative Contentious jurisdiction to request the declaration of nullity of the administrative of this nature, but this is necessary to exhaust administrative remedies, however, affected third parties also have the option of using regular resources provided by law 38 of 2000 for the annulment or amendment of the act by Administration, without prejudice to their right to apply to such jurisdiction in the event of failing to respond to his claim. Authority concludes, stating that inasmuch as Act 41 does not provide a special procedure on how applications should be processed revocation, you must then go to the General Administrative Procedure contained in Law 38 of 2000, for being an extra as applicable provided in Article 37 of the law itself.

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KNOW YOUR RIGHTS AS GUARANTOR By: David Botello González

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n many occasions I have heard stories about friendships destroyed, disputes between brothers and separate marriages, caused by a contract of guarantee, a situation of great concern, since, that the contract within the financial environment is one of the most important, and that trust is one of the biggest dilemmas in the business world. The guarantee contract is a written agreement in which a third party outside the core business, undertakes compulsorily answer, subsidiary or jointly, for compliance with the creditor instead of the debtor. The contract of guarantee is essentially free, and this is because, the same arrangement is commonly based on the friendship between the debtor and the guarantor, however it is often a source of discord, primarily due to the irresponsibility of the debtor, why it is necessary to know some of the rights that hold under Panamanian law to guarantors, which will detail below. 17. Legislación y Economía - September 2012

RIGHT TO NOT BE REPORTED IN THE APC One of the main rights that a person should know is that this is the guarantor may not be included in the databases of the Panamanian Credit Association (APC), unless you have been previously reported breach of the obligation of the principal debtor or co-signer, in a longer (30) days. Similarly if the guarantor is uploaded to the database of the APC, is entitled to any of the fields in your credit history is made the observation that it is the guarantor of the debt and the principal debtor, and this proves to be of great importance, since, that when a loan is not the same be reported as delinquent being guarantor being a principal debtor.

BENEFIT OF EXCUSSION Another law that are reflected in our legislation is the right of discussion, which is the right of the guarantor to enforce oppose bail as the creditor has


Consult, Doctrine

not executed all the debtor’s assets. According to the Spanish author DIEZPICAZO in his Foundations of Civil Asset. Volume II p. 435. “The benefit of discussion is a power that the law gives the surety and aims weaken or paralyze executive creditor’s claim against him.” This means that the guarantor is entitled to object to enforce the guaranty pending the creditor has not previously pursued any property of the principal debtor, notwithstanding the exercise of that power is being placed on the guarantor. This means that the liability of the guarantor is the above mentioned request since the law does not have the character of an inescapable precondition for the creditor. This means that the creditor may well start their action directly against the guarantor without having to prove who previously directed his action against the debtor, but exposes the guarantor paralyze its action by invoking that right, this benefit works as a dilatory exception, and must resist the opportunity to point out procedural laws or the more, to answer the complaint. In our law the right of discussion is chalking rule in Article 809 of the Commercial Code, a letter which states:

Article 809: If the guarantor was executed in preference to the principal debtor, may offer the goods but if they be free of it, but if they 18. Legislación y Economía - September 2012

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are or are insufficient, run execution against property owned by the surety until payment of the creditor. (sic) Regarding this topic the First Chamber of the Supreme Court of Justice in the court record September 1981 stated: “…The benefit of discussion is intended that the sureties of an obligation of a third party, if incomplete on this, the payment required by the creditor to the debtor in the first place, that is required before implementing the security is have required the payment of the principal debtor or should be executed before, the guarantor may terminate the debtor’s assets for the purposes of compliance with the obligation of the principal debtor... (sic)

RIGHT OF DIVISION: Finally we mention the so-called benefit of division, which is that if there are two or more sureties in the same debt it will have to be divided equally between them, however the benefit of division does not work right, the guarantor interested must oppose him when claim more than his due, in this case constitutes a demurrer. Notably, both the right of discussion as the division may not be exercised in cases where the guarantor has undertaken jointly on debt as surety.


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COMPANY IS REQUIRED TO SIGN DISABLED WORKERS

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nder Law 42 of 27 August 2007 establishing the equalization of opportunities for persons with disabilities and which was regulated by Executive Decree No. 88 of November 12, 2002. The reference standard provides the general framework for creating the conditions that allow people with disabilities, access and full integration into society. It regulates matters relating to benefits and social services, health, empowerment and comprehensive rehabilitation, access to education, access to culture, sport, training and community access to the physical environment and transportation; entitled to work, criminal procedural rules applicable to persons with disabilities; procedures and administrative sanctions. Thus we see that the first article states that social interest is declared the integral development of people with disabilities, equal quality of life, opportunities, rights and duties, as the rest of society, with a view to their personal and social integration.

ter V Labor Law to regulate the rights and obligations of persons with disabilities and employers about the opportunity to get a place of work and the obligations assumed by the employer.

Articles range from 41 to 47, highlighting inter alia as regards the right of disabled people to opt for a productive and gainful employment on equal terms.

Another aspect to discuss, what is that workers whose disability has been diagnosed by competent authorities, shall be entitled to remain in job, in case you can´t exercise it must take steps to achieve or occupational retraining. So you also have the right to set their job and not being able to The reference standard devotes Chap- exercise is relocated to another position.

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It establishes the obligation that companies with fifty or more employees, hire and / or retain qualified workers with disabilities at a rate not less than 2% of the staff, with equal pay to that of any other worker holding the same position.

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Labor Development and the Ministry of Social Development to ensure compliance with relevant laws and penalize companies that do not meet the standard, for which inspections will regular business. In turn, the Regulation provides regard to the conditions of access to business premiThe company that does not meet the ses must have access to the disabled, such standard will be required to provide the as the use of ramps, parking, restrooms and Ministry of Labor an amount equal to the other measures and minimum conditions. minimum wage for each person left to hire. The rule in question, although the comTambién se indica, que los empleadores de pany imposes obligations not only as padres, madres o tutores de personas con such but also with respect to the hiring discapacidad deberán concederles permi- of workers has not been implemented so para la asistencia a los tratamientos re- and the authorities seem to have been queridos, previa solicitud con la debida permissive of breach of the employers, antelación del trabajador y la posterior however, it would be advisable compresentación de la constancia de asistencia. panies begin to pay attention to the layout and not expect the Ministry to Meanwhile Regulation provides that co- exercise its authority on the subject. rresponds to the Ministry of Work and

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ELECTORAL REFORMS OR TAILORED SUIT FOR ELECTIONS OF 2014? By: Augusto C. García

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n recent weeks, media have reported Simultaneous Application is allowed daily climate of confrontation between more than one elected office: the political class of our country because of amendments to the Electoral Code. The bill 508 allows members of political parties aspire simultaneously to more Clashes internally in the Assembly have than one elective office, which means been increasing and have even been no- that one candidate can run for various ted outside the House, arriving at the positions such as Township Representatisecurity forces intervene to restrict ac- ve, Deputy and President simultaneously. cess of supporters to Assembly floor. In addition to the above, the statuGiven the high expectations genera- te provides that political parties may ted by this controversial Electoral Re- not demand the resignation of any leform, we considered it appropriate vel positions as a condition for particito refer to the content of the amend- pation in the respective party primaries. ments in order that our readers know Nor may prohibit the application for why some of the internal confrontations two or more positions within a party. generated by full National Assembly. This has been strongly criticized by a In this vein, then we will list some large segment of society to be a perof the main changes to the Electo- ception that the amendment establisral Code introduced through Bill hes a privilege for some politicians in 508, as yesterday approved on third their personal and does not contribureading by the National Assembly: te to the strengthening of democracy.

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Electoral propaganda: In cases of violations of the provisions relating to electoral propaganda states that the Electoral Tribunal shall transmit immediately to the Attorney General Election complaints that arise, in order to issue the same concept in a period not exceeding fifteen days. Once the Office issues its concept the Electoral Tribunal may order the provisional suspension of propaganda.

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Postulation of Independent Candidates for Charges of Popular Choice. The approved legislative initiative introduces a number of changes from Article 234 of the Electoral Code, formally recognizing the nomination of independent candidates for President and Vice President of the Republic.

In this sense, to run for the presidency or vice presidency, candidates It is worth noting that this amendment must meet the following requirements: came under heavy criticism from oppoComply with the requisition Deputies, who have argued that • of the Constitution. it violates the effectiveness on the per- rements formance of the Electoral Tribunal, who Apply to start collecting signatures can´t stop publication of a harmful pro- • paganda, until after the Electoral Offi- for membership three months before the ce issues its concept, which can take opening and call for general elections, up to two weeks, causing the effective- which must be signed by at least 10% ness of the Court’s decision is illusory. of adherents required for candidacy. Joint postulations:

• Prove least support for the candidacy by accession signatures of 2% of the valid votes cast for the office of President in the last election. Applicants will have to register within adherents to 4 months before the election date.

Political parties that constitute electoral alliances may jointly nominate candidates for election, however prohibits the application of one candidate from another political party that does not belong to the For the elections of 2014 the mialliance, establishing that in that case it • will not the application made by the par- nimum percentage of adherents to free ty that does not belong to the Alliance. candidates for nomination shall be 1% of the valid votes cast in the last election. 22. Legislación y Economía - September 2012


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this respect the fo• The registration of candida- In rules are introduced: tes for accession to free applica- llowing tion will be made only in stationary The total number of valid vopositions located in public places. • tes cast in the circuit will be diviImportantly, the bill limits the application ded by the number of citizens to be of 508 independent candidates to three elected for the electoral quotient. presidential candidates, who will be proving When the sum of votes obtaithe three largest numbers of adherents. • ned by selective candidates in the parOnce a candidate free application has ty list is equal to or greater than the met the requirements for its applica- electoral quotient, shall be entitled to a tion and is recognized as such by the seat or as many seats as ratios reached. Electoral Tribunal, the same may be If positions remain to be filled to nominated by a political party, provi- • ded that no application period expired. complete the number of citizens to be elected, will be awarded one to each of the remaining lists which have obtained a Female representation: number of votes not less than half the elecIt requires political parties the obliga- toral quotient in the order in which such tion to guarantee in their internal elec- lists are obtained unique voting ballots. tions until the primaries that at least The parties that have won the electoral 50% of the candidates are women. quotient will not be entitled to half ratio. After applying the quotient Formula to elect deputies in multimember • circuits and removal of “plancha” vote: and a half quotient, if there were still seats to be filled, the candidaAs regards the choice of Deputies mul- tes will be awarded to the leading cantimember circuits, modifies the exis- didates among all who participated. ting formula nevertheless remain Finally “plancha” vote is removed and the figures of quotient and half quo- the selective voting is established as votient for the election of the members, ting mechanism, so that voters mark the while removing the residue figure. ballot in the one-party candidate, chec-

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king the box that corresponds to the candidate of your choice, so such that if the voter marks more than one box is void their vote. This method is also applicable to the election of councilors.

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vent them from being penetrated by drug money and other illicit activities;

• The obligation to attend a public debate by presidential candidates in order to be questioned and At this point it is worth asking - Is not sustain them to the public their it more democratic simply electing can- ideas and proposals for government; didates who accumulate the most votes in a particular polling station, without • Strengthening mechanisms that the need for mechanisms such as the prevent change of paries (transfugiselectoral quotient and half quotient who mo) not only among political parties but are not in sympathy with the voters? - also in regard to independent figures, which often benefit from the figure of These figures have spent many years in independent candidate elected and once our electoral system and arise every elec- they join the ranks of parties politicians. tion year strong critics of this system is confusing for the general population. Taking into account the amendments made by this Bill 508, is necessary to Reforms that were not done: ask whether or not these reforms to the Electoral Code contribute to a strenIt is important to note that out of gthening of our democratic system or this project were some modifications simply provides a tailored suit, tencome to pose several years, such as: ding to favor parties or specific political figures ahead of elections in 2014. • Establishing controls to over-   see the financing of campaigns to pre-

24. Legislación y Economía - September 2012


V.

POLITICS

WILL OBAMA OBTAIN THE VICTORY IN NOVEMBER? By: Rafael Fernández Lara

W

hile it is true that the foreign policy of the United States usually does not undergo radical changes with changes of government, from the emergence of this country as a world power their electoral processes and especially its presidential elections are closely followed as the results they can bring fundamental changes in domestic policy that may impact the future, especially the economic one, in our nations. Thus, there is an expectation in our country by the outcome of the tournament Nov. 6 election this year, to study the platforms and identify the strengths and weaknesses of the candidates, Republican Mitt Romney and the Democratic Party and current President of the United States, Barack Obama, who is running for reelection.

25. Legislación y Economía - September 2012

Mitt Romney, the Republican candidate 65 years old, comes from a family of Mormons and comes from a political family. Study at Stanford University and graduated cum laude in law from Harvard University, also earning the title of Business Administration from Harvard Business School. He managed a successful business career, holding important positions in the private sector. Then engage directly in political activity, run for the Senate in 1994 without success, but he persevered and was elected Governor of Massachusetts in 2003. Interestingly this election as governor, being conservative and Republican in a state traditionally identified with the Democratic Party. He earned prestige and recognition for the organization of the Olympic Games in Salt Lake City in 2002, considered the best organized in the history of the United States. Was aspiring presidential can-


P o l i t ic s

didate in the 2008 election against John McCain and Mike Huckabee in the hotly contested GOP primary, winning in 11 states and obtaining a total of 255 delegates. Unable to reach his main opponent, John McCain, later withdrew his candidacy and endorsed McCain’s presidential campaign for the Republican Party.

As presidential candidates are excellent, intelligent politicians, with a first-rate academic and experienced political, religious believers, and they are trained to rule the most powerful nation in the world.

There pessimism among Americans in general about the future of the nation and its biggest concern is the issue of the For his part, President Barack Obama, economy, unemployment and issues in 51 years old, born in Honolulu, Hawaii, taxation, public debt and budget balance. graduated from Columbia University in New York City and was Magna Cum Lau- Some believe that neither candidate rede graduation from Harvard Law School. presents a spectacular solution to the cuHe worked as a community organizer in rrent situation of the country. Not a few Chicago and practiced his profession of would prefer not to vote because they civil rights lawyer. He taught constitu- felt betrayed by empty promises, a bad tional law at the Faculty of Law of the economy and negativity on both sides. University of Chicago. In 2000 he lost the election for the House of Representa- Republican presidential candidate, Mitt tives of the United States. After this de- Romney, has said that if he shall direct feat he announced his candidacy for the election victory the course that leads the U.S. Senate, having been elected in the country, beset by its huge debt, reverse general election on November 4, 2004. health care reform signed by President Having defeated Senator Hillary Clin- Obama, promising fiscal austerity couton in a tight primary for the Democra- pled with a decrease in social spending tic nomination, obtaining 1.953 versus and foreign aid, and, above all, promi1.770 delegates of his rival, November sing to restore the millions of jobs lost 4, 2008 he was elected President and in the economic crisis in the United Stabecame the forty-fourth (44) President tes in 2008 and that the Obama admiand the first African American to hold nistration has failed to recover in four such a distinguished political office. years. The candidate Romney emphasizes that, unlike President Obama, their 26. Legislación y Economía - September 2012


P o l i t ic s

training and their success in business qualify him to create the jobs Americans need. Just reiterated leaning towards reducing taxes on high incomes, which are the sector that fosters job creation. It describes itself as conservative, however is credited with the establishment of liberal programs during his tenure as governor of Massachusetts, in public health policy, gay marriage and abortion. In economic management and decision-making on the national economy there are more Americans who think that Mitt Romney is better prepared than President Obama. Furthermore, the fact that Mitt Romney is a member of the Mormon church has caused not a few Protestants and Catholics will have some suspicion, although this was offset to some extent with their choice of Paul Ryan, a Catholic, in his presidential ticket. Meanwhile, the re-election team of President Barack Obama has the experience of success in the last election and has extensive databases, volunteers and tactics in order to obtain funds from small donors using digital networks. In the 2008 elections managed Chair in Internet use for election purposes.

27. Legislaci贸n y Econom铆a - September 2012

Even without the enthusiasm of last season, many still support the President Obama and believe it is the person able to lead the country out of the crisis, but take longer, because they fear that a Republican administration retake the actions that caused the 2008 crisis. Obama is more enjoyable than his rival Republican who has pushed laws that are intended to expand health coverage to all Americans. Merit is given to the actions taken in order to rescue the auto industry and raising efficiency standards in fuel consumption. Has implemented measures to ensure that women have equal wages for men and has been successful in foreign policy and national security, as the end of the Iraq war and the death of Osama bin Laden. Furthermore some criticizes broken promises, such as immigration reform, the failure to shut down the Guantanamo base, other social reforms are not established, and its foreign policy towards Cuba, Libya, Syria, Pakistan and Iran-Israel. President Obama responds to is aware that much remains to be done, but you need the second period to complete what he started, despite Republican obstructionism. It is considered a champion of the middle class and knowledgeable about the shortcomings of most people. He opposes tax cuts to higher income taxpayers


P o l i t ic s

and budget cuts to education and health his stance in favor of marriage for sameplans for the elderly and low-income sex couples), this time will have a greapopulation (Medicare and Medicaid). ter weight to tip the balance when the electoral vote and overwhelmingly favor So the question arises, which of the two the President Obama. Its largest organicandidates will win the election on No- zation of social marketing machinery and vember 6? Although both have great vir- political geography throughout the U.S., tues, and diversity of published surveys again will be a significant and will lead to will indicate that a close election, and President Obama for his election victory. aware that predict in politics is risky and I therefore believe that, at the end of this complex, we believe that in the end, un- contested campaign, the American peoless an unexpected event arises very im- ple favor Barack Obama, regardless of portant, President Barack Obama will be whether some of the surveys that today reelected for a second term. President aventajen to either. In the end the AmeObama has more experience than his Re- ricans must be aware that it is best expublican rival as he has exercised his first perienced an acquaintance continues the presidential term and is more in touch effort to solve problems, to know that one.  with the national and international issues. Obama’s political image at home and abroad as favors. Minorities such as Hispanics, African Americans, homosexuals (most of whom support him for

28. Legislación y Economía - September 2012


VI.

U P - TO - D AT E NOT E

CESCON REALIZES THE FIRST NATIONAL COMPETITION OF ARBITRATION By: Cesar Alberto Rivera

T

he Conflict Resolution Center (CESCON) held in recent days, the First National Arbitration Competition, which was purpose activity building and promoting the study and practice of arbitration in university faculties of our country, it obviously aimed strengthen the use of alternative means of dispute resolution among future lawyers in the country. This event was attended by ten (10) groups from recognized universities in our country, such as: University of Panama (UP), Universidad Santa Maria La Antigua (USMA), University of Science and Technology (ULACIT) and Latin University of Panama (ULP).

rresponded to the wording of the respective claims and demand answers, using the legal and factual arguments, within the framework of the proposed hypothetical problem, help support the claim or defense, as appropriate. After that, they called an oral argument phase, in which the list of arbitrators CESCON, heard the allegations and had the opportunity to ask questions specific to groups around the tenets of their respective positions.

I might mention it was remarkable enthusiasm, camaraderie and healthy rivalry we observe in all participating groups, which clearly shows the positive way in which the contest organizers managed to convey the purpose of the exercise, together with the respective The competition, which posed an in- teachers as good boxing coaches were teresting hypothetical problem staged in the corner of their respective wards. through arbitration proceedings, had essentially two (2) phases: the oral and the The categories that the contest priwritten. At the hearing, the groups co- ze with their respective winners were: 29. Legislaci贸n y Econom铆a - September 2012


Up -

1. BEST WRITING THE PLAINTIFF, Team 51 (University of Panama), Mr. Edgar Young and Emanuel Castro. 2. M BEST WRITING THE DEFENDANT, Team 48 (University of Panama), Mr. Gloristel Espino, Angel Santos, Ismael Gonzalez, Obel Conception, Abraham Reina). 3. BETTER INDIVIDUAL SPEAKER, Mr. Emanuel Castro, Team 51 (University of Panama).

to-

D at e N o t e

Alexander Watson, Gerardo Solis, Luis Picard-Ami and Desmond Conway, and Team 51 (University of Panama) comprised of Messrs. Edgar Young and Emanuel Castro, the latter being winning team.

It is our opinion that the event was a success, and that the initiative, along with commendable, is on track to promote alternative forms of dispute resolution, in our country. Management and go directly to the nursery where our Regarding the oral hearing the final was pla- professionals of tomorrow is very wise. yed between Team 47 (Universidad Santa Maria La Antigua) comprised of Messrs.

30. Legislaci贸n y Econom铆a - September 2012


VII.

PA N A MA N IA N E CONOMY

COMMENT ON THE NATIONAL URBAN CONSUMER PRICES INDEX: AUGUST, 2012

T

he variation of the Consumer Price Index (CPI) in August compared to July 2012 showed an increase of 0.5 percent in National City, to the districts of Panama and San Miguelito and 0.6 percent in other urban areas of 0.3 percent. In relation to August 2011, there was an increase of 6.1 percent in both the National Urban and in the districts of Panama and San Miguelito and in other urban areas. So far this year, the National Urban CPI reflected a cumulative 3.9 percent. The divisions that make up the Consumer Price Index National Urban August, compared to July 2012, showed up the following variations: Transportation 1.3 percent, the increase in the price of gasoline, food and beverages, and goods and miscellaneous services, each division with 0.5 percent, due to higher prices of soft drinks in plastic container and haircuts for men and women, respectively, furniture, household equipment and routine maintenance of the house 0.4 percent, for the increased prices ironing laundry, Housing, water, electricity and gas and Health, both 0.3 percent, the increase in the price of gas in one hundred pounds cylinder and glasses, in the correct order, entertainment, fun and cultural services 0.2 percent of the rise in input prices cinemas and clothing and footwear with 0.1 percent due to the rising price of underwear for women, while education was unchanged.

31. Legislaci贸n y Econom铆a - September 2012


Panamanian Economy

Comparing the National Urban CPI August 2012 over the same month of 2011, there was an increase of 6.1 percent, with the participation of the different divisions as follows: Food and beverages 9.2 percent; Furniture, household equipment and routine maintenance of the house 6.9 percent; Miscellaneous goods and services 6.2 percent, 4.4 percent Education, Housing, water, electricity and gas 4.0 percent, health 3.8 percent, 3.6 percent Transportation, Clothing and footwear 3.4 percent and Leisure, entertainment and culture services 0.8 percent.

32. Legislaci贸n y Econom铆a - September 2012


Panamanian Economy

PANAMA: COMPETITIVE, DRIVEN BY BANKS By: Entorno Inteligente

T

he annual competition is usually a reflection more or less certain of the economic, social and institutional of Panama.

In most of the parameters are recorded improvements. The most significant was in control of the stock market, which went from position 105 to 78.

Highlights weaknesses such as lack of judicial independence, the quality of the education system, the lack of trust in politicians and corruption as a major obstacle to doing business.

Only the so-called "legal risk index" worsened with the previous year, falling from position 60 to 89. BeĂąat Bilbao, WEF economist and one of the report's authors, said, "This variable measures the legal protection they get lenders and borrowers." This is an index calculated by the World Bank in its survey 'Doing Business', ranging from 1 to 10. The higher the score, the better are considered laws to expand access to credit. Panama scored a 5.

On the plus side include the development of infrastructure, especially ports, airports and telecommunications, and the financial system. In fact, of the 12 pillars that analyzes the World Economic Forum in its annual report, the "financial market development" is the one that drives the ranking of Panama, with For Nicolas Ardito Barletta, director of the position 23 of the 144 countries surveyed. National Competitiveness Center, an organization that collaborates with the World EcoThe sector is one of the architects of Pa- nomic Forum in drafting the report, said the nama, as a whole, climb nine positions bank has been strength in the past 40 years. in the global index to finish in 40th, se- The economist based the strong performanven of which are considered the most ad- ce of three factors: "The dollarized system, vanced country in Latin America, Chile. no central bank, a thorough monitoring to make sure that banks stay within the rules, Especially positive was the perfor- and a conservative banking liquidity remains mance parameters such as accessibili- high, high capitalization and where to invest ty to financial services (number 2 in the their resources cares.'s why Panama was not world), availability of financial services affected by the international crisis, "he said. (post 4) and the solidity of banks (4).

33. LegislaciĂłn y EconomĂ­a - September 2012


Panamanian Economy

OCCUPANCY RATE IN HOMES OF PANAMA WAS 94.4% (Source: MEF)

A

total of 963.409 households had in Panama in March 2011, with an average of 3.6 members in each. 67% of these households were located in urban areas, while the rest, 33% in rural areas, which were more numerous (3.9 members), summarizes a report from the Economic and Social Analysis, Ministry of Economy and Finance, based on figures from the National Institute of Statistics and Census, the Comptroller General of the Republic. During 2011, the occupancy rate in homes across the country was 94.4%, still above the single-person households (97.2%) who depend only on themselves. A greater number of household members, occupation rate was reduced because most members were young incorporated into the educational system (economically active population). The study noted that half of Panamanian households were made up to 3 people, according to the Survey of Multiple Purposes, to March 2011. Most (32% of households) had two members forming part of the labor force, even in the homes of indigenous areas. MEF analysis stresses that 5.8% of households in the Republic, had one of its unemployed members economically active in 2011, whereas the sizes of representative households in each province or statistical mode, the unemployment rate from 1.6% (Darién) and 9.0% (Chiriquí). The highest unemployment rate corresponded to that of households consisting of 6 members (6.8%), a family size of only 6.7% of households in Panama. While the lower occurred in the individual (2.8%). Notes that a higher proportion of households living in urban areas were more members unemployed (6.4%) compared to rural areas (3.9%). While in indigenous areas was 0.8%.

34. Legislación y Economía - September 2012


Panamanian Economy

ASSETS INCREASE NATIONAL BANKING SYSTEM Source: General Comptrollership of the Republic

T

he assets of the national banking system in the period January to June 30 reached B/.69, 062.2 million of which B/.59, 974.4 belong to private entities and B/.9, official entities 087.8 million, representing a total increase of 13.4% compared to similar period of 2011, according to the latest report by the National Institute of Statistics and Census (INEC), the Comptroller General. Assets of private entities grew 14.2% (from B/.52,538.1 to B/.59,974.4 million) and assets of government entities 8.5% (of B/.8,373.7 to B/.9,087.8 million). Preliminary figures from INEC also show that deposits totaled 12.2%, this means B/. 46,428.4 to B/. 52,091.7 million. Of these, 12.8% corresponds to the growth of deposits of private entities (of B /. 39,274.8 to B/.44,298.0 million) and 8.9% to the responsible official (of B/. 7,153.6 to B/. 7,793.7 million). Domestic deposits grew 10.8%, of B/.31,772.1 to B/.35,190.3 million dollars and 15.3% outside (of B/.14,656.3 to B/.16,901.4 million). Liabilities to official entities registered a positive variation of 7.4% (from B/. 4,787.9 to B/. 5,140.9 million), the particular entities 10.2% (of B/. 25,205.6 to B/.27,766.1 million) and 28.4% of banks (from B/. 1,778.6 to B/.2,283.3 million) Meanwhile, the credit portfolio rebounded 15.1% (of B/. 37,481.0 to B/. 43,129.2 million), the internal grew 16.2% and 12.3% external.

35. Legislaci贸n y Econom铆a - September 2012


VI I I .

WO R L D E C O N O MY

SERIOUS DROUGHT RAISE FOOD PRICES AND THREATEN WELFARE OF THE POOR Source: World Bank

T

he world food prices increased 10% in July from the previous month and corn and soybeans soar to record levels due to a dry summer and high temperatures unprecedented in United States as in Eastern Europe, according to the latest edition of Alert on food prices the World Bank Group (WBG).

Between April and July, there was a tendency for the unstable food prices observed over the previous 12 months, which slowed the sustained increases between mid-February 2010 and March 2011. Values rose in April, May and June fell and rose sharply in July.

Between June and July, the values of corn and wheat increased by 25% each, soybeans by 17% and only rice was reduced by 4%. In general, the price index of food Bank, which records the values of basic foodstuffs in the international market, was 6% higher than in July 2011 and 1% higher than the peak in February that year. "The food prices rebounded sharply, threatening the health and welfare of millions of people," said President of the World Bank Group, Jim Yong Kim. "The people of Africa and the Middle East are especially vulnerable, but this also affects other countries where cereals increased sharply."

36. Legislaci贸n y Econom铆a - September 2012

In this quarter, has continued the significant rise in domestic prices, particularly in Africa. These were particularly high in subSaharan Africa, with increases of 113% in some markets in Mozambique. At the same


World Economy

time, sorghum rose disproportionately in crisis, however, negative factors -such as the Sahel and parts of East Africa: 220% the implementation of policies to deal in South Sudan and 180% in Sudan. with the panic on the part of the exporting countries, a severe El Niño weather According to Alert on food prices, phenomenon, crop failures in the southern weather conditions are a major cause of hemisphere or sharp increases in energy international registered sharp increases in prices- could cause increases in grain prices July. The drought in the United States even more significant as four years earlier. -largest exporter of corn and soybeanscaused massive damage to summer crops The lack of rain has serious effects on of these products. At the same time, the the economy, nutrition and poverty. In lack of rain in the Russian Federation, Malawi, for example, is projected to a fuUkraine and Kazakhstan contributed to ture major drought -like those observed losses in projected wheat production. once every 25 years- could increase poverty by 17% and impact especially poor rural communities. In the case of India, the enormous losses suffered as a result of droughts between 1971 and 2002 reduced the annual household income between 60% and 80% in the affected areas. "We can´t allow these records increases in prices result in hazards for life as families withdrew their children from school and eat less nutritious foods to offset high prices," said Kim. "Countries should strengthen its specific programs to alleviate the pressure on the most vulnerable population and implement appropriate policies."

The steep increases in food prices negatively altered in this respect favorable projections for the year. World Bank experts not currently predict a repeat of the 2008

37. Legislación y Economía - September 2012

"The World Bank increased its support for agriculture to reach the highest level in 20 years, and will continue to help countries cope with these increases," added Kim. with agencies of the United Nations (UN)


World Economy

through Team HLTF on the Global Food Security and nongovernmental organizations (NGOs) as well as supporting the Alliance for the Information System on Agricultural Markets (AMIS, for its acronym in English) in order to improve transparency in the food market and help governments to take informed action to respond to increases in world prices of these products. Global Agriculture and Food Security (GAFSP, for its acronym in English), funded by multiple donors, and risk management mechanisms. Programs and policies to help mitigate these prices include social safety nets to ensure that poor families can afford

38. LegislaciĂłn y EconomĂ­a - September 2012

basic food, sustained investment in agriculture, introduction of crop varieties resistant to drought -which have provided high yields and productivity gainsand maintaining an open international trade to exports and imports of food. According to the Alert of food prices, these will remain high and volatile in the long run due to increasing uncertainty about supply, increased demand from a population that is growing and low responsiveness of the food system.  


World Economy

ECONOMIC HEALTH CONTROL UNITED STATES: ACCORDING TO IMF, ANEMIC RECOVERY AFTER CRISIS Source: IMF

T

he U.S. growth is likely to remain vernment has handled the economy and moderate in 2012 and 2013 when it might revive the housing market. IMF Survey Online: What are the • The uncertainty surrounding prospects for the U.S. economy? the tax cliff and the crisis of the euro area are the main risks to the outlook Milesi-Ferretti: According to our forecasts, the recovery will be anemic in 2012 • The authorities should reach agree- and 2013 -the order of 2% and 2 ¼%, ment on a medium-term plan to reduce debt respectively- in coincidence with the very slow recovery that we observed after fiIn the U.S., the recovery remains anemic. nancial crises and collapses sector housing. At the same time, risks have increased, as posed by the worsening of the crisis in the euro But the outlook remains difficult. As housing area and the uncertainty surrounding the prices do not rebound and households are national fiscal plans, the IMF said in its latest shedding debt to rebuild their wealth, conassessment of the world's largest economy. sumption growth will remain slow. Exports have given a positive note, but clash with The IMF recently concluded annual con- the limitations imposed by the slowdown trol of the U.S. economy, in what is in trading partners and a stronger dollar. known as an Article IV consultation. And the inevitable correction of the fiscal In an interview with IMF Survey On- deficit, which is very deep, it will mean less line, the head of the evaluation team, spending and more taxes from this year. Gian Maria Milesi-Ferretti, explains what risks hampering a recovery, how the go- Unfortunately, we also perceive negative

39. Legislación y Economía - September 2012


World Economy

risks, particularly if it deepens the debt crisis of the euro area, which would depress demand for U.S. exports and hurt the financial markets. The economy also suffer if the U.S. authorities do not reach an agreement to raise the debt ceiling and avoid tax cliff that is, spending cuts and large scale expiration of tax benefits that will occur from January 1, 2013 if nothing is done about it. But it could also have positive surprises if uncertainty cleared and then the housing market will improve and companies will increase spending and hiring scheduled. IMF Survey Online: Does how much worry the fiscal cliff?

Milesi-Ferretti: The authorities should address as soon as possible the uncertainty created by this event. If the United States fall into the fiscal cliff, effects would be severe: the economy would contract in early 2013 and the negative spillover effects would be felt worldwide. Some adverse effects could occur this year if, having no security on tax rates and spending levels, consumers and businesses cut spending.

of confidence of consumers and businesses.

IMF Survey Online: The federal funds rate is near zero. What else can the Federal Reserve to stimulate recovery? Milesi-Ferretti: Since late 2008, the Federal Reserve has taken unorthodox measures -as opposed to the more traditional setting of monetary policy rate- to help normalize financial markets and sustain the recovery. For example, substantial volumes purchased in domestic government bonds and mortgage-backed securities issued by Fannie Mae and Freddie Mac to lower mortgage rates and interest rates in the long term. The Fed also pledged to maintain low policy rate for an extended period, which will run at least through 2014. Now that interest rates are already exceptionally low levels, there is not much room to ease monetary policy further, but the Fed still has some more options to support economic activity if necessary. For example, you could buy even more titles, and that would further lower interest rates and also encourage investors to buy riskier assets like stocks. So achieve improved financial conditions and stock valuations. It could also announce that the policy rate will remain at a low level for a longer period, beyond 2014.

For us, the best we can do the authorities before the end of the year is to agree a medium term plan to cut debt to more sustainable levels through a gradual reduction of the deficit. Nor may take on raising the federal debt ceiling to avert the risk of disruptions in the financial markets and the loss IMF Survey Online: The housing prices re40. Legislaci贸n y Econom铆a - September 2012


World Economy

main low. When could revive the sector? is a reflection of the continued weakness of the recovery. In our opinion, the high Milesi-Ferretti: The housing prices remain unemployment is largely a cyclical phedepressed undoubtedly though interest ra- nomenon, for example, about half of the tes are at a very low level, but it is possi- drastic decline in the rate of labor force ble that the trend is reversing eventually participation occurred since the recesas prices were rising during the first half of sion began to be related to the weakness the year. And both construction and sa- of economic activity, that pushes people les are improving since the late summer of to choose to continue or return to educa2011, but started from very low levels. tion or to leave for a while the workforce. Thus, you would need a robust growth Our expectation is that these improvements -significantly higher than potential outputwill continue and that the housing market to strengthen substantially the creation of will recover slowly but surely and leave be- jobs and reduce unemployment and unhind the worst of the crisis. In particular, the deremployment rates, which are still high. increased affordability will promote sales, however, there are a lot of houses that will The acceleration of the recovery not probably end up selling it necessarily and only allow people to find work that is probably moderate the price recovery. At currently unemployed or underemplothe same time, an increasing proportion of yed, but also attract the workforce to new homes -which fell substantially during the large number of people who have the contraction of the economy- imply a stopped looking since the crisis erupted. greater demand for housing, which would support the growth of the construction. At the same time, there are measures such as training and assistance in finding emploOverall, we project retake sector activity yment that would help long-term unemlevels pre-crisis average in about 4-5 years. ployed to find work and preserve human capital, reducing the risk that unemployIMF Survey Online: What is needed ment will remain above previous rates to for a vigorous job creation and a sig- the crisis while the economy recovers. nificant decrease in unemployment? IMF Survey Online: To what extent are exMilesi-Ferretti: The weak labor market posed U.S. banks to the European crisis?

41. Legislaci贸n y Econom铆a - September 2012


World Economy

pread contagion that sharpen global risk Milesi-Ferretti: The direct exposure of aversion and volatility of financial markets U.S. banks to the countries of the peri- and would lower international assets prices. phery of the euro area is limited, strictly from the standpoint of credit. The exhi- IMF Survey Online: United States, you still can bition is a bit higher if we consider also play the role of main engine of global growth? the indirect relationship with banks and companies in these countries through Milesi-Ferretti: Fiscal consolidation and guarantees and credit derivatives. deleveraging of households are likely to continue to hamper recovery in the imBut on the other hand, U.S. banks have mediate future. Therefore, U.S. consubstantial interconnections with large tribution to global demand will be core banks in the euro area and the UK. lower than before the financial crisis. Therefore, it could be affected by the problems suffered by banks core euro area, As America recovers from the effects of are caused by the deterioration of the si- the financial crisis, other countries, estuation in their country or by the spread of pecially those with large current account the problems of the periphery of the euro surpluses, will have to catch up to the area to which these banks are exposed. occasion and contribute more to global demand. That demand rebalancing reduAt more general level, a situation of tur- ce vulnerabilities that brought out the crimoil in global financial markets would be sis and help achieve a faster growth rate detrimental to U.S. banks due to wides- and sustainable for the world economy.

42. Legislaci贸n y Econom铆a - September 2012


World Economy

ILO CALLS TO INVEST IN JOB OPPORTUNITIES FOR YOUTH

T

he International Labor Organization (ILO) called for urgently invests in opportunities for young people to meet the growing challenge of youth unemployment.

that policies and interventions are important and can make a big difference. "

Of the world's population, a total of 1.200 million people are 15 to 24 years, 90 percent of whom live in developing counIn a speech in the framework of the Glo- tries, 55 percent in Asia. In Africa, the bal Conference on Economic Opportuni- average age of the population is 19 years. ty for Youth in Washington, the Executive Director of the Employment Sector of the "This demographic reality means that ILO, José Manuel Salazar-Xirinachs, stres- in the coming decades, the problem of sed the need for strong collective action unemployment and underemployment in after the last unemployment data show most African countries is really a problem that, worldwide, 12.6 percent or about of youth unemployment," he added. 75 million young people are unemployed. Salazar-Xirinachs highlighted five key Salazar-Xirinachs told delegates that areas for action, which are part of the these data should not be taken as "the Call to Action of the ILO agreed by prophecy of an inevitable catastrophe". governments, employers and workers at the International Labor Conferen"On the contrary, my message is that if ce this year: education and training, it is true that the recovery has been weak youth entrepreneurship, rights youth and there are still clouds on the horizon, employment and macroeconomic powe must urgently invest in opportuni- licies to promote youth employment. ties for young people, because we know 43. Legislación y Economía - September 2012


World Economy

An ILO document published last week claims that unemployment rates among young people will deteriorate further worldwide as the consequences of the euro crisis spreading to emerging economies. The slowdown in the economies of East Asia and Latin America and the rapid contraction in global trade will further weaken labor markets.

med at the most disadvantaged groups, and young people should be assisted to establish their own businesses through business strategies for youth.

However, with the intention of promoting youth employment, government policy and employers should not put aside the labor rights of young workers, such as minimum wages and Salazar-Xirinachs said more must be done social protection, health and safety. to improve the quality of education and training, and to link the world of educa- A high and sustained growth is essention and training to the world of work tial, said Salazar-Xirinachs, and should through internships, skills and strategies be promoted through broader econofor better access to employment services. mic policies of agricultural, industrial and services that are more dynamic, and the Labor market policies should be ai- acceleration of structural adjustment.

44. Legislaci贸n y Econom铆a - September 2012


O UR T E AM

PARTNERS

José Javier Rivera

jj.rivera@rbc.com.pa Irene I. Bolívar C. irene.bolivar@rbc.com.pa Dayra Argelis Castañedas L. dayra.castanedas@rbc.com.pa Javier Said Acuña R. said.acuna@rbc.com.pa César Alberto Rivera B. cesar.rivera@rbc.com.pa

LAWYERS

Pedro Oscar Bolívar C.

pedro.bolívar@rbc.com.pa Giovana del C. Miranda G. giovana.miranda@rbc.com.pa Maybe Mendieta maybe.mendieta@rbc.com.pa Augusto C. García augusto.garcia@rbc.com.pa Alessandra Ocálagan alessandra.ocalagan@rbc.com.pa David Botello González david.botello@rbc.com.pa Lucila Rivas lucila.rivas@rbc.com.pa

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Alianzas alrededor del Mundo Mitrani, Caballero, Rosso Alba, Francia, Ojam & Ruiz Moreno-ARGENTINA Guevara & Gutiérrez S. C. Servicios Legales- BOLIVIA Machado Associados Advogados e Consultores- BRASIL DSN Consultants Inc- CANADA Lewin & Wills Abogados- COLOMBIA Rivera, Bolivar y Castañedas- PANAMA Espinosa & Asociados- CHILE Lawnetworker S.A. Asesores Legales- ECUADOR Peter Byrne & Associates- ESTADOS UNIDOS Machado Associados Advogados e Consultores- ESTADOS UNIDOS Ortiz, Sosa, Ysusi y Cía., S.C.- MEXICO Estudio Rubio Leguia Normand & Asociados- PERU Adsuar Muñiz Goyco Seda & Pérez-Ochoa, P.S.C.- PUERTO RICO Pellerano & Herrera- REPUBLICA DOMINICANA Alvarado & Asociados- NICARAGUA Torres, Plaz & Araujo- VENEZUELA Facio & Cañas- COSTA RICA


Magazine L&E September 2012