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Two cabinet ministers and two Supreme Court justices of Ernesto Pérez Balladares' government rented luxurious homes on Albrook Air Base and Quarry Heights, without ever having to bid on them. The scandal lead many people to call for the resignation of Nicolás Ardito Barletta, director of Panama's Interoceanic Regional Authority (ARI), which administers the former military properties.

Revelations that Housing Minister Francisco Sánchez Cardenas and Labor Minister Mitchell Doens live in the houses came while they were on leave from the cabinet to direct the president's failed campaign to reform the constitution and allow his re-election. Supreme Court Justices Graciela Dixon and Eligio Salas also rented houses bidding on them. Although the ARI's policy is to sell homes in the "reverted areas," hundreds of houses have been rented since 1995. Renters have a preferential option to buy the properties at a 30% discount, according to former ARI director Rafael Arosemena.

"They took the best homes in the neighborhood," said Roberto Eisenmann, publisher of the opposition daily La Prensa. "These homes had been put up for public bidding and were taken away from the bidding only days before the public auction took place."

"The poor are subsidizing cabinet ministers and justices who earn $10,000 a month, and that is regrettable and shameful," said Arosemena. He said Doens will receive a $35,000 discount on his $118,000 home if he buys it. Funds from sales of former military properties go into a fund for affordable housing and social programs, Arosemena said. The $35,000 less that Doens will pay is thus literally taken from the poor.

ARI administrator Barletta said that the ministers had waited between one and two years to rent homes in the reverted areas and were paying high rents for them. "This is a small detail in all of ARI's work," he said.

The scandal was the most severe test yet faced by the ARI, which will receive the bulk of U.S. military properties in 1999. The ARI board issued a statement saying that the houses were rented out to "prevent deterioration and vandalism, as well as the high costs of maintenance and security" during the time the properties were surveyed and assessed.

ARI board members said the concessions to high officials were completely legal, but "morally questionable."

Corruption and suspicions of graft continue to be Panama's Achilles heel in the base transfer process. Most Panamanians simply do not trust the government to administer the properties being transferred fairly and transparently. The scandal also provoked questions about the effect of favors granted on the actions of Supreme Court justices.

188 out of the 468 houses in Albrook have been sold (as of 7/21). 147 of the houses are earmarked for a retirement community there. Some 32 facilities have gone to public and private entities, including international organizations, non-profit groups and the Panama Canal Commission. [ARI news release 8/9] ARI has sold nearly 400 houses, bringing in $44 million into government coffers. [ARI release 8/31/98]

Sources: Miami Herald 8/16; El Panamá América 8/6, 8/7, 8/9. ARI press releases, 8/9, 8/31.