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Volume
14, Number 2 |
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Also
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Last year in the Panamanian economy
by Eric Jackson 2007 was in many respects a boom year for Panama and indeed for almost all of Latin America.
Yes, our official economic statistics are by methodology and by political design habitually more rosy than reality, and yes, there is a persistent and extreme inequality in the distribution of wealth here. If it is true that the percentage of Panamanians living under the poverty line went down from 40-something percent to 37-something percent as the government says, it's also true that with inflation those at the bottom are in many cases even worse off. However, nobody is denying the growth, particularly in the construction sector, tourism and Colon Free Zone exports to other Latin American countries with relatively thriving economies.
In this reporter's view, these are the most important economic stories of 2007:
1. Construction began on the Panama Canal expansion. There are billions of dollars in contracts being handed out and things are going full speed ahead despite any and all doubts, which the government has been treating as unpatriotic.
2. The Northwest Passage thawed to the point of navigability. Faster than anyone had expected, in 2007 the polar icecap melted to the point that for several weeks ships could navigate it without the help of icebreakers. Using this route will cut about 4,350 miles off of a voyage from Yokohama to London as compared with the Panama Canal route. Sea routes between Europe and the US West Coast and between ports in northeastern Asia and the northeastern United States will also be substantially shorter than via our canal. The new northern route will only have a short annual shipping season to start, but that will tend to increase every year.
3. Continued US hostility to foreigners has strengthened Panama as an air hub and as a destination for Latin American shoppers and vacationers. Panama City's upscale shopping malls survived and thrived despite a local economy that doesn't have enough rich people to support them. Why is that? Because affluent people from South and Central America who used to go shopping in Miami and New York now can't or don't want to go there now. This has also strengthened Panama as an air hub between destinations in Latin America and the Caribbean and --- despite the failure of Air Madrid --- prompted the opening of new direct air connections between Panama and Europe.
4. A flight of Venezuelan capital, and to a lesser extent rich Venezuelans, has often landed here. The year began in Caracas with Hugo Chávez getting powers to legislate "21st Century Socialism" by decree and ended with the voters turning down their president's package of constitutional reforms in a close referendum. We are beginning to see, if not an all-out anti-Bolivarian counter-revolution, a paradigm shift in Venezuela. But Chávez has most of his economic program in place and the former ruling parties have been bypassed by history, which means that a major section of the old Venezuelan oligarchy is voting with its feet. The developers of Costa del Este have been a big beneficiary. When Proctor & Gamble decided to move their regional headquarters from Caracas to here they brought their Venezuelan management employees, and decided to finance an expansion of the International School of Panama. But a lot of Venezuelan-owned small businesses have already come and gone in Panama, as people have found that privileges that Chávez took away are not automatically available to them here. A lot of the Venezuelan exodus is partial, with money being invested into businesses or houses here by people who have not completely abandoned Venezuela.
5. A booming Latin American economy has helped Panama grow as well. When the regional economy was down in the last few years of the 20th century and the first few years of the present one, the huge duty-free import/export emporium that's the Colon Free Zone suffered. But now times are better and retail merchants in South America are ordering more, and the increase in wholesale commercial activity has also meant an increase in shipping, both to Panama's benefit.
6. A suddenly faltering PRD government at least temporarily blew a free trade pact with the USA. Free trade with the Americans --- on terms mostly favorable to US agriculture with manufacturing negligibly affected on either side of the equation --- was a key plank in such economic plans as President Torrijos had. Then, after jamming the treaty through our legislature, the president's party went and made a guy who's wanted by the FBI on terrorism charges the president of the National Assembly. That froze the US ratification process, and has prompted some further critical glances at Panama from our northern neighbors.
7. Obnoxious developments have spawned protest movements. Whether it's a strip mine by a former governor who's facing embezzlement charges, the bulldozing of a mangrove swamp by the president's uncle, land grabs going on on beachfronts around the country, Panama City buildings going up without regard to whether urban infrastructures can service them, the destruction of historical building and archaeological sites, encroachments into parks or communities being displaced by hydroelectric dams, people who stand to be affected are increasingly inclined to fight. The courts have in the most cases sided against the protesters, but the protests are starting to become a political factor that's not easily ignored.
8. Galloping inflation. It's by and large a function of high world energy prices (which in turn is in large part driven by the Iraq War) and by increased demand for construction materials in China and to a lesser extent India, which are experiencing economic booms accompanied by much construction. Add to that a weak US dollar --- Panama's currency, for better or worse --- and a national government committed to electric utility profits and the price of everything has been and is going way up.
9. The doctors' strike. In November and December the public sector physicians walked off their jobs and despite heavy spending on anti-labor hate propaganda the government was forced to settle with the unions, yielding pay raises of some 26 percent. It was the first public sector strike that the Torrijos administration lost, in part because many Panamanians concerned with inflation were rooting for doctors when the president expected them to be angry about the disruptions of non-emergency medical services.
10. A Panama
City real estate speculation bubble began to burst. Yes, there is still a ton
of Colombian drug money driving the capital's upper-end construction boom.
But no, there are no hordes of gringo millionaires lining up to buy the
blue sky. The failure of the Palacio de Bahia project, which would have put
Latin America's tallest building on Avenida Balboa, came with the revelation
that the project had been based on ludicrous building plans --- seven stories of
underground parking on a site that's landfill and the developer's promise that he'd
pay people back their pre-construction sale deposits without interest --- and forget
those flippers who had bought from the original buyers, and the real estate agents who
would have to repay or foget about sales commissions. Shortly thereafter
two more upscale skyscraper projects, the Ice Tower and Park 32, went
bust. Meanwhile, in the mad scramble to pay Miami real estate prices for
Panama City properties, a bunch of developers invoked revocation clauses
and canceled pre-construction sales contracts in order to sell to other
buyers at higher prices. Then there was a string of exposures about real
estate frauds, many wherein apartments were being sold in canal-front
buildings that had no permits and wouldn't be getting them. All of these
factors combined to convince most of the speculators that playing the high
end of the Panama City real estate market isn't such a sure way to riches
after all. Now a lot of developers are hurting, and although we haven't
yet seen mass bankruptcies or a steep decline in prices, there just aren't
a whole lot of buyers for upper end real estate and most of the ones that
do exist are Venezuelans, Colombians or Europeans. Also
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2008 by Eric Jackson
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