Finance minister says Panama could scrap land sale after protests

Lomi Kriel

PANAMA CITY, Oct 24 (Reuters) - Panama's government could abandon plans to sell state-owned land in Latin America's largest duty-free zone and instead raise commercial rents, the finance minister said on Wednesday, following a backlash of violent protests that killed three people.

The dilapidated port city of Colon, which depends economically on the duty-free zone near the Panama Canal, descended into chaos after Panama's National Assembly last Friday passed legislation allowing the land sale.

`` If the opinion of Colon is to cancel the sale of the land, that is what we will do, '' F inance Minister Frank de Lima said in an email to Reuters on Wednesday. ``We need to have peace and calm return to Colon.''

Heavily-armed police now patrol Panama's second biggest city, which has been under an indefinite curfew since a 9-year-old boy was shot dead there on Friday.

A 27-year-old woman and 40-year-old ambulance driver were also killed late on Tuesday. Police said in all, 29 civilians and 15 police officers have suffered gunshot wounds in the mayhem. About 200 people have been taken into custody.

Various groups, including teachers and transportation workers, have gone on strike and blocked roads across the country in their opposition to the land sale plan.

Instead of selling the land, which the government has said would bring in about $390 million over the next 10 years, including related taxes, De Lima said the government co u ld in crease the rent charged to the 2,000 companies leasing space in the free trade zone, the largest in the Americas.

``That increase will go to a trust fund that is administered by Colon,'' De Lima said in the email.

Government delegates were meeting with opponents late on Wednesday, their second attempt after activists refused discussion until the government agreed to scrap the plan.

President Ricardo Martinelli, who is in Japan, said on Twitter that the sale would be canceled if residents of Colon do not want to proceed. Martinelli, who has pushed the plan saying it would benefit the region, has been under fire for not returning to handle the situation.

Residents of Colon, Panama's most impoverished and crime-ridden city, say they will lose jobs and income if the land is sold. The Free Trade Zone employs approximately 30,000 people and earns $33 million a year for the government.

In Colon, Laura Estar, 50, watched police search her neighbors' homes and take up sniper positions from balconies as she pointed at the crumbling buildings, mountains of trash, and black water gushing through the street.

``Look at how we live. You can see how these houses are here, they are all falling apart,'' said Estar, who supports her family by selling drinks and snacks on the street. ``All of the money that is made here from the canal, from the free trade zone, where does it go? It all goes back to Panama City.''

Though Panama's economy has boomed in the past few years, expanding by 10.5 percent in 2011, roughly one-third of Panamanians live in poverty. Inflation hovers around 6 percent.