(Bloomberg) — Panama has elected investor favorite José Raul Mulino as its new president, wooing voters with his promise to revive the once-stellar economy, crack down on drug cartels and close migration routes to the United States.
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Mulino ran as a replacement for the former fugitive leader Ricardo Martinelliwho was banned from participating and sought asylum at the Nicaraguan embassy after a court upheld his money laundering conviction.
With 94% of the votes counted on Sunday, Mulino, a 64-year-old lawyer, had 34% of the votes, against 25% for his closest rival, Ricardo Lombana. The electoral authority declared Mulino the winner and all other main candidates conceded.
“We will promote a government that is pro-investment and pro-private enterprise,” Mulino told his supporters in his victory speech.
He will take office on July 1, replacing President Laurentino Cortizo, who was not eligible for re-election. The first results from Congress indicated a fragmented legislature.
The nation has been hit by unrest, credit ratings downgrades, low water levels in the Panama Canal and the closure of a major copper mine. During the campaign, Mulino said he would use public works projects and incentives for foreign investors to achieve nominal economic growth of 7%.
For much of this century, Panama has had the best-performing economy in Latin America, but it will grow just 2.5% this year, according to the International Monetary Fund.
Investors are focused on whether Mulino will find a way to reopen First Quantum Minerals Ltd’s $10 billion copper mine. After months of violent protests, the Supreme Court ruled in December that a contract for the mine violated the Constitution and ordered its closure. The project represented 5% of gross domestic product and was a large source of tax revenue and exports.
In his concession speech, Lombana warned Mulino against attempting to renegotiate the mine contract, warning that this would lead to people taking to the streets.
Fitch classified the country as junk in March, citing large fiscal deficits worsened by the loss of copper revenue. S&P and Moody’s still rate the country a notch above junk, but the once market darling risks falling even further if the next government doesn’t continue tax and pension reforms and try to reopen the mine, according to the economist local René Quevedo.
Read more: A $10 billion copper mine now sits idle in the jungle
Mulino will also need to weigh environmental concerns and community protests as the country searches for new sources of water for the Panama Canal after a severe drought this year forced it to restrict traffic through the waterway.
Panama’s debt already trades like it’s junk, and investors demand about an additional 40 basis points to hold Panama, compared to the average risk premium for BB-rated sovereign bonds, according to data from JPMorgan Chase & Co.
US elections
Mulino’s policies could have a potential impact on the US presidential election in November, where migration is a top concern for voters.
Read more: 10,000 migrant crossings per day undermine US presidential elections
He said he will close trails through the dense jungle region between Colombia and Panama. More than half a million migrants, mostly Venezuelans, passed through this route last year, making Panama one of the most important transit countries for people hoping to reach the United States.
He also promised a “frontal attack” on drug trafficking. Mulino served as security minister during the Martinelli administration from 2009-2014. A court upheld a money laundering conviction against Martinelli this year and banned him from running for president.
(Adds quote from Mulino’s victory speech in fourth paragraph)
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