Financial Performance of State-owned Enterprises and the Median Voter
There are no well-defined criteria that include or exclude State-owned Enterprises (SOEs) in the Non-Financial Public Sector (NFPS). Some are included (and therefore have no administrative independence, for example, IDAAN, a water and sewer system management entity), while some are outside the NFPS accounting: The Panama Canal Authority (ACP), Tocumen International Airport (AITSA), the National Highway Company (ENA) and the Electric Transmission Company (ETESA). However, these SOEs have been included or excluded arbitrarily to reduce the accounting government deficit, a capability that has been criticized by national and international analysts.
In 2012, the government argued at the time that AITSA, ENA, and ETESA had enough solid financial conditions to be autonomous and could serve their debt without recourse to the Central Government. Because these companies are owned by the State, the government could be held liable for any breach of debt contracts and therefore they represent a de facto contingent liability not included in the NFPS numbers.
If we add the NFPS debt and the liabilities of state-owned companies excluded from the NFPS accounts today, the general government's public debt would increase from US$21.6 billion to US$28.9 billion, i.e., from 39.1% to 52.4% of GDP (including the turnkey projects), which is far from the legal limit established by the LRSF (40%).
Among the main SOEs, the financial results are diverse, but there is a direct relationship between greater autonomy and better financial results. Excluding the ACP (which is the most profitable entity), these enterprises do not have administrative autonomy (the President appoints their CEO directly). Thus, the question is: why don’t governments restructure companies by giving them the autonomy to be effective and efficient? We have two complementary hypotheses: the first one, for fear of losing control of making appointments of bureaucrats and losing control over budget and investment management; the second one, in order to evade setting higher tariffs and fees, which would cover its operations, even though this is socially manageable.
The challenge of the future government is to make these operations at least cover their economic cost and, ideally, to contribute to the financing of the public sector, instead of being a burden on the budget.
On May 2019 a winner-take-all general election will take place in Panama. It will be the sixth consecutive free tournament since the re-instatement of democracy in the early 90s. The new administration will face challenges on several fronts: Crime (which is still the most pressing problem citizens perceive), unemployment, economic activity, and prices. Corruption, the main topic in media headlines, is in a distant fifth position.
Taking data from 42,000 people surveyed by the Encuesta de Hogares (Household Survey) in 2016 and estimating the main characteristics of the Median Voter at a national level, we consider that politics should target the following issues to catch the median voter in the next election: the property tax is important (the median voter is a home owner), there is no difference between the message for men and women, the median voter does not pay income tax, can receive subsidies and its relationship with the tax collection agency is only the ITBMS (sales tax), the income gap between the metropolitan area and the rest of the country is very high, the issue of unemployment may be less important than that of income, messages cannot be complex but understandable, and the reform to the Social Security System to "guarantee" pensions is still far away to be in the public debate.
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