Latin Tiger? Economic Development and the Changing Face of Panama

Corgan - Panama - Skyline
Panama City skyline from Casco Viejo, with the Cinta Costera viaduct development project in the center.

Panama has the fastest growing economy in Latin America. According to the CIA World Factbook, the nation’s gross domestic product (GDP) expanded by more than 10% in 2012, miles ahead of its closest regional competitor, Peru, at 6.6%, and nearly double the growth rate of Chile. In fact, Panama’s economy grew faster in 2012 than all but six other nations’ worldwide – faster than China, faster than India, and far faster than the United States.

The gleaming skyline of the capital pays tribute to this unprecedented expansion. Of the ten tallest buildings in Latin America, nine are located in Panama City. Of the tallest twenty, Panama boasts fifteen, and all of them—all of them—have been completed since 2010. In step with this expansion, the country’s GDP per capita has risen from $6,200 in 2002 to $15,900 in 2012. According to the International Monetary Fund, Panama now boasts the fourth highest GDP per capita in Latin America, surpassing Costa Rica and Venezuela in recent years, and following close behind Chile, Argentina, and Uruguay.

Most commentators—and it seems, most Panamanians—seem to agree that Panama’s newfound economic prowess is the direct result of the government’s market-friendly, development-oriented policies. In 2006, a firm majority of voters approved a referendum—proposed by then-President Martín Torrijos—to build a third set of locks for the Panama Canal. Due for completion in 2015, this expansion project is expected to double the canal’s capacity by accommodating massive “post-Panamax” cargo ships. The government of current president and supermarket magnate Ricardo Martinelli, meanwhile, has aggressively sought to reform the country’s tax code to make it friendlier to big business and to attract foreign direct investment. His government has also invested billions of dollars toward the construction of a modern subway system—the first in Central America—and upgrades and expansions of the country’s roads, schools, and hospitals. These infrastructure projects have reached into the poorer areas of the capital, too. Residents of Curundú, a neighborhood famous here for its “black water” and open sewers, are getting a massive housing upgrade. Casco Viejo—the city’s most historic section—is transforming itself from a hollowed out ghost town to a trendy tourist attraction on the heels of its designation as a UNESCO World Heritage Site.

Not everyone is ready to label Panama a “Latin Tiger,” though. Critics bemoan the government’s persistent institutional weaknesses—small staff and low pay in critical agencies—and highlight the judiciary’s lack of independence from the executive. Martinelli himself was excoriated in leaked cables from the US embassy for asking for US assistance in wiretapping political opponents in 2009. Though the president has denied the allegation, it undoubtedly raises questions among investors about the country’s commitment to transparent governance. Others, meanwhile, have pointed out that while the country’s GDP per capita is rapidly expanding, income disparity in the country—a key indicator of economic inequality—remains among the worst in Latin America, itself the most economically unequal region in the world.

Whatever its precise impact, the rapid pace of development in Panama over the last decade has led to profound changes in Panamanian society, particularly in the capital. Many Panamanians perceive, for example, that the country is positively teeming with immigrants. Whether or not it actually is can be harder to establish, but in recent years the country has nonetheless witnessed the arrival of foreign investors and business people, highly qualified engineers and other professionals, and retirees from the US and Canada, as well as a substantial population of undocumented economic migrants and bona fide refugees fleeing the armed conflict in Colombia. (More on this last piece later.) The presence of these migrants has changed the way many Panamanians see themselves and their country, long the metaphorical “crossroads of the world.” Undoubtedly, the course of Panama’s development plan and the unprecedented pace of its economic growth are changing the country—but how, exactly, the country will change, and how diffuse the benefits of that change will be remain to be seen.

Posted by John Corgan – MA Candidate at CLACS 

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