President Nicolas Ardito Barletta, relying on a questionable electoral mandate and facing an angry opposition, has set out to usher Panama down a narrow path of economic and political reform.
One month after his inauguration, the new president's supporters and opponents agree his major challenge is to take painful steps to right the economy, including spending cuts and an attack on official corruption, without upsetting his military patrons or stirring unrest among unions and government employes.
A misstep leading toward conflict with the Panamanian Defense Force or popular disorders that would bring in the military to put down street violence could swiftly endanger Ardito Barletta's position as the first elected president of Panama in 16 years.
The challenge is particularly difficult, Panamanian and diplomatic observers say, because Ardito Barletta lacks his own political base and came to office through elections in May so marked by fraud charges that his enemies have nicknamed the president "Fraudito Barletta."
In addition, they explain, meeting the country's economic needs tends to steer the president toward confrontation with the officers who put him in power or their friends in the military-sponsored Revolutionary Democratic Party that controls the legislature.
"The problem is that anything he may want to do in the economic and social fields puts him on a collision course with his supposed supporters," a diplomatic source declared.
Vice President Roderick Esquivel, whose liberal party allied with Ardito Barletta in the presidential race, said Gen. Manuel Antonio Noriega, the Defense Force commander, has so far remained faithful to a repeated pledge to keep the military from interfering.
The general reaffirmed that pledge in a meeting of top military officers called by Noriega only days after the president was certified as having won the election, Esquivel reported.
"They still have their hands in a lot of things," he added. "But they are pulling them out, whether voluntarily or by necessity, they are doing it."
Ardito Barletta successfully tested the pledge last month by picking a Cabinet without prior clearance from the Defense Force, formerly the National Guard, according to diplomatic and Panamanian official sources. His move drew a complaint from Noriega but nothing more, a diplomat reported.
The country's military, political and business establishments have turned unanimously to Ardito Barletta for leadership in refinancing a crushing public debt estimated by bankers at $3.4 billion. About $700 million comes due by the end of the year, but banking sources say a renegotiated payment schedule is likely by then.
Arthur Giraldi, executive vice president of the Latin American Export Bank here, said private and public banking officials were reassured by Ardito Barletta's election. The 45-year-old president was a Washington-based World Bank vice president for Latin America before returning to Panama to run for office at Noriega's request.
Other necessary steps, however, are less likely to draw unanimous support. A high government official said that a tax increase is inevitable and Ardito Barletta had resolved to fire some redundant public employes, reduce corruption and cut back official salaries or perquisites. These measures, and revision of labor laws to stimulate foreign investment, could stir anger among unions and officials with friends in the Defense Force or Revolutionary Democratic Party, the official acknowledged.
In addition, a serious attack on corruption would likely include the military, whose officers are widely considered here to be involved in smuggling and other illegal acvitities, Panamanian and diplomatic sources said. Supporters of Ardito Barletta's defeated opponent, Arnulfo Arias, predicted the president would make a strong effort to reduce corruption in ministries but avoid the subject in dealing with the military to avoid confrontation that could create a crisis of authority.
Ardito Barletta this week proposed tax increases and austerity measures, including a two-year wage freeze for government employes, to cope with what he called a "situation of national urgency," The Associated Press reported.
To overcome what he called "nonexistent economic growth," Ardito Barletta proposed a two-year freeze on government employes' salaries, coupled with unspecified increases in property taxes and fees for licenses to operate banks.
Ardito Barletta said his administration was clamping down on government spending in all areas and would "fire those who don't show up for work and those who do not faithfully fulfill the obligations of their positions."
The crackdown, he said, was to include strict limitations on special privileges for high-level bureaucrats, such as paid trips abroad and improper use of government vehicles.
Ardito Barletta's authority even over politicians has been circumscribed, however, by the controversy over his election. According to an official count, announced after the Defense Force suspended the tally while Arias was leading, Ardito Barletta won by 1,713 votes out of 600,000 cast.
"He took office with a mandate of doubtful value," said a diplomat, assessing the president's chances.
The doubt led to street demonstrations by outraged Arias supporters and a pastoral letter from the country's Roman Catholic bishops that called the election a "serious step backward on the path to democratization and a deterioration of our country's image abroad.
"It is obvious that these events have disillusioned all the people and have damaged the credibility of their electoral institutions, the essential requirement for which is that votes must be freely cast and meticulously counted," the bishops said.