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World Bank: Panama's informal economy is huge
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Business & Economy Briefs

archive photo by Eric Jackson

World Bank says Panama's informal economy is huge

by Eric Jackson, from other media

According to a World Bank report, the majority of Panama's Gross Domestic Product , some 64.1 percent, comes from the informal economy, which ranges from the incomes of people who sell fruit at traffic lights to the profits of international drug traffickers. In all of Latin America only Bolivia's informal economy accounts for a bigger share of GDP, at 67.1 percent.

The Latin American countries with the relatively smallest informal economies are Chile (19.8 percent) and Argentina (25.4 percent).

Some of the other World Bank estimates --- they can't have precise numbers because by their very nature informal economies do not directly report their incomes to governments --- are Peru at 59.9, Guatemala 51.5 and Uruguay 51.1 percent; while Costa Rica comes in at 26.2, Mexico 30.1 and the Dominican Republic 32.1 percent.

Since the 1980s the "Washington Consensus" free market economic reforms have driven millions of Latin Americans out of formal wage earning, tax paying jobs into all manner of ways to fend for themselves outside the ordinary economy, which is no longer so ordinary and is ever more controlled by a relatively few large businesses, an increasing number of which are multinational.

Generally businesses operating in the informal economy do not qualify for any sort of credit, and because of their off-the-books nature they are vulnerable to arrests, closures, audits, shakedowns for bribes or other governmental pressures whenever the wealthier and better connected businesses in the formal sector feel threatened by informal competition.

A big issue for Panama is that a generation forced into the informal economy after years of work in formal jobs will largely be unable to ever retire with pensions due to the Torrijos social security reforms. Because those changes are phased in over several years the really big upsurge in people sleeping on the streets of Panama City will come after the current administration is out of office. (The increased numbers of men we see sleeping on the capital's streets lately are largely functions of the government's policy of denying housing assistance to single men who are displaced by urban renewal, fires, floods or other catastrophes, and of the increased demolitions of derelict buildings in which homeless people, many of them drug addicted or mentally ill, used to spend their nights.)

During the Moscoso administration government economists began to count those working in the informal economy as "employed," which was and is controversial but does reflect certain realities of how people get by these days.

There are many gradations of informality. The raspado vendor shown above, for example, is formal enough to have city and health ministry permits for his push cart, but surely doesn't bring in the $800 per month that would make him have to keep business records, file tax returns and pay income taxes.

World Bank: Panama's informal economy is huge
Strange moves for a government that wants to promote tourism
The Panama News readership figures

Plaza Catedral Flea Market
Transparency: does it mean you should clam up?
Business & Economy Briefs