Panama Papers and Latin America:  The elephant in the room

In the latest development in the Panama Papers drama, police in San Salvador, El Salvador on Friday raided the offices of the law firm of Mossack Fonseca, one of the main players in the scandal.  Someone had noticed that the sign on the office had been taken down, leading authorities to conclude that the controversial firm was about to skip town, perhaps taking key records with it or destroying them. 

According to a statement from the Salvadoran Ministry of Justice, it would appear that authorities were worried about a potential cover up of tax avoidance and money laundering by wealthy individuals in El Salvador and perhaps other countries.  This may be; Mossack Fonseca certainly has a lot of Salvadoran clients. 

However, there may be another reason for a high level of interest by the Salvadoran government, headed by leftist President Salvador Sánchez Cerén, in the massive trove of documents from the shadowy law firm.  

The roots of Mossack Fonseca specifically, and of Panamanian shell companies in general, are intimately intertwined with the activities of the U.S. Central Intelligence Agency (CIA) in the Central American area and beyond.   And for the left in Central America, “the agency” is enemy number one.

Since the CIA’s founding in 1947, part of its budget has been a secret from the U.S. public and even Congress.  This amount, estimated at more than $52 billion a year at present, is used for “covert action” which includes the sort of espionage all major countries engage in. But historically, it has also included many sinister and violent actions.    One of its first operations in Latin America was the overthrow of a mildly left wing president, Jacobo Arbenz, in Guatemala in 1954.   As documented by the authoritative National Security Archive,  based at George Washington University in Washington, D.C.,  the CIA’s plan contemplated not only the removal of the legally elected government of a sovereign nation by means of violence, but the murder of officials and government supporters. 

In subsequent years, the CIA was involved in other efforts to overthrow national governments, especially the socialist government of Cuba, and various acts of terrorism and the trafficking of arms and drugs.  This got “the Agency” into numerous scandals and controversies. One of the big ones was that of the BCCI, the Bank of Credit and Commerce International.  This bank was actually a criminal enterprise used by the CIA to pay its own operatives, no doubt out of its secret “black budget’.  BCCI laundered drug money from Colombian narcotics cartels, in close coordination with the dictator of Panama at the time, Manuel Noriega, who was also, simultaneously, a valuable CIA asset.  

The BCCI also was a principal money laundering agency in the Iran – Contra scandal, in which the Panamanian connection–the liaison between dictator Noriega and Lt. Colonel Oliver North– was a key element.  The profits from the scandal went to help finance the violent right wing “Contra” movement which was fighting a murderous war to overthrow the left wing Sandinista government in Nicaragua. When then Senator, and now Secretary of State John Kerry tried to carry out legislative investigations and hearings to uncover the scope and nature of the BCCI scandal, he got little cooperation from the CIA. 

So Panama has been, for a long time, a hotbed of illicit and grey area activity which has involved the use of shell companies and sleazy lawyers and bankers, not only to hide money from tax authorities but also to launder drug profits and to channel CIA and other funds for various kinds of sabotage, destabilization and dirty tricks campaigns in the Central America region and worldwide.

But what about Mossack Fonseca specifically?   This specific law firm, founded in 1986, must be understood in the context of the role of Panamanian banks and law firms in all of these things.  The two original partners of Mossack Fonseca illustrate this.   Jürgen Mossack is the son of a former German Nazi Waffen SS soldier who settled in Panama after the Second World War.  He has had a close relationship with Panamanian officialdom, including the administration of the current president, Juan Carlos Varela of the right wing populist Panameñista Party.  (Ironically, Varela’s government is asking for the United States to extradite his immediate predecessor, Ricardo Martinelli, who is being investigated on charges of  corruption and abuse of power).

Ramón Fonseca Mora, Mossack’s partner in the firm, is even closer to power circles in Panama, having been the head of the Panameñista Party until the recent scandal.

So Mossack Fonseca is not a marginal entity in Panama but near the very centers of national power.  And though the firm is not necessarily the only or main link-up of the CIA in Panama and Central America, it is certainly in the mix, and it is likely that more details of these involvements will come out  as reports continue to be generated from the massive “Panama Papers” data trove.

Meanwhile, prominent names in Latin America that have surfaced in the Panama papers scandal belong largely to the political right.  Perhaps in hottest of hot water is the new president of Argentina, Mauricio Macri, who already has been facing massive protests because of his harsh imposition of austerity policies which have cut sharply into the living standards of Argentine workers.  It transpires that while Macri was mayor of the Argentine capital, Buenos Aires, the post from which he managed to project himself as the winning presidential candidate, he was President and a director of a Bahamas-based company, Fleg trading, and failed to include this information in legally mandated campaign finance declarations.   Macri denies that he profited from this arrangement, but then why did he not declare it to Argentine authorities as required? 

A second Latin American head of state who has trouble explaining what has come out about him in the Panama Papers is the Mexican president, Enrique Peña Nieto, from the right of center Revolutionary Institutional Party, or PRI.   In Peña’s case, this now a recurring nightmare, because he was already in trouble about his and his wife’s relationship with a controversial contracting firm.  The firm, Higa Group, is headed by a very close personal and political associate of the president, Juan Armando Hinojosa, who is revealed by the Panama Papers to have moved to conceal almost 100 million dollars into secret accounts  a short while after a scandal had erupted about Higa having giving the president’s wife, Angélica Rivera, a palatial house, evidently as a free gift or permanent loaner, in the context of three way negotiations among the government, Higa and a Chinese consortium whereby Higa was contracted to build a high speed railway between Mexico City and the city of Querétaro.  This caused such a stink in 2014 that the Mexican government cancelled the contract, leading to a diplomatic incident with China.  Any thinking  person would be likely to conclude that there was some sort of kickback scheme going on, whose details were being concealed by Hinojosa Cantú by means of the familiar technique of using bogus shell companies.

Yet another person who finds himself in hot water over the Panama Papers is the speaker of the lower house of the Brazilian Congress, Eduardo Cunha.  Last week it was revealed that he may have received kickbacks  to the tune of over $5 million from a Portuguese  construction consortium that wanted to bid for contracts with the state owned PETROBRAS, the oil giant which is at the center of the “Lava Jato” (“Jiffy Car Wash”) scandal rocking South America’s largest country.   Cunha is a right wing evangelical Christian whose party, the Brazilian Movement for Democracy Party (PMDB) has just broken off an uneasy coalition partnership with President Dilma Rousseff’s left-center Workers Party (PT); Cunha is leading the charge for impeachment of Rousseff, not because of the PETROBRAS matter, but because of budgetary adjustments she made, allegedly to plug a shortfall.  The vice president of Brazil, Michel Temer, also from Cunha’s PMDB, is also facing possible impeachment in another matter.  If Rousseff were removed from power, Temer would normally take over the presidency.

On Sunday April 10, Peru held general elections.  At least four of the presidential candidates are implicated in the Panama Papers scandal in one way or another, including the front-runner, Keiko Fujimori, daughter of the former dictator, Alberto Fujimori.  She is considered the most “hard right” of the presidential candidates, and in polls she had been followed by Pedro Pablo Kuczynski, of the Peruvians for Change Party, who is closely aligned with transnational capitalist interests.  As both Fujimori and Kuczynski are named in the Panama Papers, it was thought that their numbers would drop enough by election day so that the candidate of the leftist Broad Front, Verónika  Mendoza (who is not mentioned in the Panama Papers), might end up in a June 5 run off against Keiko Fujimori.   Since a majority of Peruvians tell pollsters that they don’t want anything to do with the Fujimori family, it has been thought possible that this would be the first opening for the left in Peru in many election cycles. 

However, at writing, the most likely runoff appears to be Fujimori versus Kuczynski.

Meanwhile, the drama of the Panama papers rolls on.  There has been one high level casualty already:  The Prime Minister of Iceland, Sigundur David Gunnlaugsson, has been forced to resign.

No doubt more names will be named, and investigations undertaken.  We in the United States should not scratch our heads about why there is not more mention of U.S. names; the U.S. involvement – by the CIA – is the great elephant smack in the middle of the room.

Photo: A marquee on a building in Panama City, Panama, lists the Mossack Fonseca law firm, one of the leaders in setting up offshore bank accounts for the rich and powerful.  |  Arnulfo Franco/AP


Emile Schepers
Emile Schepers

Emile Schepers is a veteran civil and immigrant rights activist. Born in South Africa, he has a doctorate in cultural anthropology from Northwestern University. He is active in the struggle for immigrant rights, in solidarity with the Cuban Revolution and a number of other issues. He writes from Northern Virginia.