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Panama Papers

Transparency row drove Stiglitz to quit Panama Papers committee

Committee set up to investigate lack of transparency in Panama’s financial system lacks transparency, Nobel Prize-winning economist says

PUBLISHED : Sunday, 07 August, 2016, 3:55pm
UPDATED : Sunday, 07 August, 2016, 9:21pm

Nobel-winning US economist Joseph Stiglitz and Swiss anti-corruption expert Mark Pieth said that a dispute over transparency had prompted them to quit a panel on reforming Panama’s finance sector.

The pair resigned on Friday from the committee, which the Panamanian government set up in a declared bid to reform the country’s tarnished financial services after the “Panama Papers” scandal erupted in April.

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Stiglitz, a professor at Columbia University in New York who won the Nobel Prize in 2001,said that he was “shocked” and “very disappointed”. The pair had been “very reluctant to resign,” he said.

“In our first meeting we made it clear that we couldn’t proceed unless there was a commitment from the government to make our report public and it refused to make that commitment,” he said.

“We were just shocked. How could you have a committee on transparency that itself was not going to be transparent?”

How could you have a committee on transparency that itself was not going to be transparent?
Joseph Stiglitz

In a statement, Stiglitz and Pieth said they believed restrictions on defining the scope of their work, on speaking freely and on guarantees that the report would be released were “tantamount to censorship”.

In April, media outlets published details of murky offshore financial dealings gleaned from 11.5 million leaked documents from a Panamanian law firm - the so-called “Panama Papers”.

The leaks put a host of high-profile politicians, celebrities and sports stars in the hot seat over their assets in tax havens.

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Scrambling to clean up its image, Panama created a seven-member expert committee to recommend reforms on strengthening the transparency of its legal and financial system.

It was scheduled to report to Panama’s president and government by the end of 2016. Stiglitz was named as its head.

“The vice president flew up to New York to Columbia to try to talk to me, to persuade me to participate in this,” he said.

“It seemed as if there was a real commitment,” he said.

“I think they were trying to respond to the fire that was raging and may not have thought about how they managed some of the domestic politics,” he said.

At the first meeting in June, the committee agreed that the Panamanian government had to publish the report, Stiglitz and Pieth said.

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On July 29, Stiglitz said they were told the government would not provide the necessary assurances, and attempts to intercede with the vice president and president through intermediaries “got nowhere.”

“We had a problem with the government of Panama, not with the other members of the group,” Pieth, a law professor at Basel University, said.

“The government makes promises but there is no follow-through, there’s no implementation. The government of Panama is under pressure from the business world - it’s pulling back”.

In their joint statement, Pieth and Stiglitz said they thought the committee “should disband”.

“The question in my mind is - will they be able to push Panama to undertake the deeper changes that it needs?” Stiglitz said.

In their joint statement, the academics congratulated Panama for some of the measures it had carried out.

These include the signing of an agreement with the United States for swapping bank data about depositors and for committing to OECD standards on the automatic exchange of tax information from 2018.

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But they warned that global standards on transparency “are rapidly increasing” and if Panama fails to keep pace, it risks “substantial potential damage” to its reputation.

“It needs to be a global attack,” said Stiglitz of the way forward. Global standards need to be applied to Panama and other tax havens around the world, he said.

“The secrecy is being used in part for some activities that are socially destructive and the international community is really very concerned,” he said. “If there was more transparency, it would be much easier to suppress it.”

The Panamanian government said earlier that Stiglitz and Pieth had resigned over “internal differences” but gave no further details.