Panamá’s Economic Puzzle
By Mira Korber, guest blogger.
Just two days ago I bought a plane ticket to Panamá City International Airport in Tocumen. I will be participating in a classical music festival there, somewhat ironically studying music from centuries past as brand-new skyscrapers are erupting all around. Panamá is booming, and not just with music.
Panamá is among the fastest growing economies in all of Latin America; the 2011 GDP surged at 10.6%, up from 9.2% in 2010. A new, glittering skyline boasts the 70-story Trump tower. Central America’s first subway system project broke ground in 2011. And a $5.25 billion construction project promises a third channel to the Panamá Canal.
As international trade has blossomed, the canal has connected the Americas and linked East with West for the past 100 years. Just since December 1999, when the US relinquished control of the canal to Panamá, it generated $6.6 billion in revenue.
Now, workers feverishly construct a larger, deeper channel to accommodate massive tankers and cargo ships coming from Asia –primarily China — heading to the United States consumer market. The project (if it doesn’t delay) is slated for completion in 2014, a century after the canal’s inaugural year. Once open for passage, the new channel will support 50% more traffic each day, and may encourage ships to travel east to Panamá from Asia, instead of traversing the Suez Canal in Egypt.
Amidst massive development projects and increasing foreign investment (+33% in 2011) lurk other concerns. Panamá’s history is blighted by crimes, perhaps most notably by ex-military dictator Manuel Noriega, whose 1983-1989 rule was marked by drug trafficking, money laundering, and murder of political opposition.
As this stigma looms, 40% of the population in Panamá lives in poverty, with an ever-growing divide between the wealthy and the poor. Even the development comes with concerns about an economic bubble – remember all those new skyscrapers? Most are dark — empty — at nighttime.
The Bottom Line? Panamá’s rapid growth is remarkable. The Economist likens its economic expansion to Singapore, although it’s not even 1/5 as wealthy (“on a per-person basis”). However quickly Panamá may develop, the risk of corruption and interference with markets rises just as ominously. Case in point: Singapore ranks 2nd on the Index of Economic Freedom; Panamá ranks 55th.
PS. You’ll get a from-the-ground perspective on the Panamanian economic explosion when I see it in person this June.
Read about Panamá directly from El País, a Latin American newspaper (in English). NPR podcast on the subject. Delays in the construction of the new Panamá Canal channel? NY Times offers insights on growth and Panamá’s military history.