I write this article at a special moment for Panamanians. To commemorate 500 years of Panama City, an ample program of academic, cultural, and gastronomical activities has been set for indoors or in the streets. With the appropriate solemnity, on August 15th, 2019, Panamanians will remember the 500 years since Pedro Arias Dávila founded Panama City with a hundred inhabitants, the first on the Pacific coast.
This year is also significant because on May 5th Panamanians will cast their ballots for a general election. In addition to electing the president and vice president of the country, the citizens will also elect the congress members to the National Assembly, mayors, and other local positions. If poll projections stay the same during the last stretch of the electoral campaign, businessman Laurentino Cortizo—member of the Revolucionary Democratic Party (PRD)—will most likely become the next president of the Republic of Panama. Cortizo is an experienced politician who, between 1994 and 2004, was a member of the National Assembly. There, he presided over the institution from July 2000 to July 2001. Moreover, he was minister of Agriculture Development during Juan Carlos Varela’s presidency.
Panama’s economic development in the past two decades has been astounding. In June 2018, the World Bank called Panama’s economy as one of the fastest growing in the world. The evidence is categorical: between 2001 and 2013, its annual growth was 7.2%. Then, although it dropped down to 5.6% between 2014 and 2018, it remained satisfactory.
The Panamanian State’s public investments in large projects represent a considerable percentage of the decisive factors of this trend. In addition to the amplification of the Panama Canal, there are other works in progress. For example, the construction of 26 kilometers of the Panamanian metro’s line 3; the fourth bridge over the Panama Canal—a high engineering model almost 4 kilometers long; or the Urban Regeneration Project of the City of Colón. All of which are evidence for those who have an optimistic view of the prospects of economic activities in the short and medium term.
While addressing the economic perspectives in Panama, it is worth mentioning the contribution of the Colon Free Trade Zone—the largest free trade zone in the Americas and second in the world. There, over 2,600 companies operate, distributed in a little over a thousand hectares. Located on the coast, next to the Atlantic entrance of the Panama Canal, it is in the vicinity of the Manzanillo, Colón Container, and San Cristóbal ports, the Panama Railroad, the Enrique Adolfo Jiménez Airport, and the highway to Panama City.
Those who have not visited the zone can hardly imagine the quantity of services and operations happening there. Exports are received; products are assembled, packed, stored and exported. Household appliances, personal care products, medicines, footwear, jewelry, toys, clothing and footwear, liquor, furniture for home and offices, lamps, and so many more products mainly come from the United States, China, several countries in Europe, Taiwan, and Singapore. Later, these products will depart by different means of transport to multiple destinations in the continent: from Chile and Argentina, to Mexico. In addition to employing more than 25 thousand people, the Colon Free Trade Zone is on track to achieve almost 20 billion dollars in revenues per year.
In December 2018, the ECLAC published projections for 2019 worth considering in its Preliminary Overview of the Economies of Latin America and the Caribbean 2018. While the region could have a relatively low growth of 1.7% on average, and Central America—excluding Mexico—projects an average of 3.3%, Panama could reach 5.6%. That statistic would be considered a positive for the country, given the decline in world trade, which has decreased the expected income from the Panama Canal operations.
El Balance Preliminar de las Economías de América Latina y el Caribe de la @cepal_onu analiza el desempeño económico de la región durante el 2018, el contexto internacional, las políticas macroeconómicas y entrega perspectivas para 2019. 📌Descárgalo: https://t.co/ioHOkoJusk pic.twitter.com/I2Rh2hQJTr
— ONU Noticias México (@CINUmexico) December 20, 2018
Amidst this encouraging environment, the Republic of Panama and, in particular, the next government to be elected in May, face a series of challenges. One that worries many citizens is how to create shared opportunities in this environment of economic growth and meet the social demands of the unions. The International Monetary Fund, for example, has drawn attention to the impact of the 2018 construction strike that took place in April and May. According to the projections of the Panamanian Chamber of Construction, it caused almost $30 million in losses a day. This hindered the macroeconomic figures of the country corresponding to the two months mentioned, as well as the year.
Another recurrent worry in Panamanian society is, without a doubt, the quality of its public education system, which is aggravated by maintenance problems, the critical state of some of the infrastructure, excessive bureaucracy for managing resources, and the fact that some schools are saturated, operating with a number of students that exceed their capabilities. Through this panorama, around 18 teachers’ unions constantly paralyze the activities.
Between holiday days, celebratory activities, school breaks, and union-led strikes, there is a real decrease in the time devoted to teaching annually. In 2017, the Organization for Economic Cooperation and Development (OECD) warned about the strategic issue that is educational quality. The “Multidimensional Study of Panama” holds that one of the main barriers that limit the possibility of sustained and inclusive growth is rooted in education. In a statement issued in October 2017, Sebastián Nieto, Deputy Director for OECD Latin America, said: “The knowledge of a 15 year-old student in Panama is equivalent to that of a 12 year-old in other OECD countries. Panama has a educational delay of 3 years.” Almost 50% of companies do not find the people they need to attend their productive projects.
Improving the educational system—experts agree—is an essential platform to address the big challenge of reducing poverty, especially in rural areas habituated by Indigenous communities. The 2018 statistics from the Ministry of Economy and Finance highlights another achievement: in approximately 5 years, the percentage of its population living in poverty decreased from 26 to 21%. Of that total, about half (10%) qualifies as extreme poverty. Finally, another devastating number illustrates the difference is life expectancy at 79 years in urban areas, and 68 ears in rural areas and indigenous communities. A shocking difference of eleven years.
Fiscal discipline practices must continue to improve both outside of Panama and among the country’s leaders. Similarly, everything related to the anti-money laundering inspection, which will continue to be a fundamental element for the country’s economy, have to be strengthened if the country wants to remain a destination for investors and an ally in the fight against financial crimes, fiscal fraud and money laundering from organized crime.
In contrast to other countries in the region, Panama has evident advantages that allow it to continue improving over the next few years. To transform this possibility into a reality will depend, to a large extent, on the will of the next governments, on the quality of the management of the different entities, and on the disposition of entrepreneurs and organized civil society—including unions—to continue advancing towards an increasingly organized country, with a better quality of life.