ORIGINS OF THE PERMANENT CRISIS LEADING TO SOCIAL EXPLOSIONS IN THE COUNTRY OF THE PANAMA CANAL

ORIGINS OF THE PERMANENT CRISIS LEADING TO SOCIAL EXPLOSIONS IN THE COUNTRY OF THE PANAMA CANAL

 Recent developments have shocked everyone. A country well known for its people that loves to party, suddenly exploded into protests from one corner to the other, even though many groups did so with music and dances of indigenous origins.  Only in this tiny, tropical country where people party more than anywhere else such a strange thing could happen.   

Historically, Panama has been characterized by great activity in the narrowest part of the isthmus. This has produced an economy based on international services and a strong concentration of resources, in certain groups, linked to that model.

The high price paid for this culture of serving the world has been the complete deformation of the country´s productive structure. Any international economic crisis can be easily reproduced in Panama, affecting all sectors and further exacerbating the permanent problems of lack of full occupation of resources, worsening the uneven income distribution, while compressing the internal market, as real incomes for most people fall. 

The use of the United States dollar, as legal tender for all domestic and international transactions, has generally kept inflation low and allowed the people living in the country to use this strong currency for purchasing a wide variety of goods produced in other countries developing a culture of apparent opulence based on imports of most goods including indispensable things such as food and medicines that usually by oligopolies.

 The creation of the International Banking Center in 1970, and Panama's acquisition of sovereignty over the former Panama Canal Zone, have strengthened Panamanians’ access to public and private financial and credit resources; thus, creating the conditions for an increasing monetary supply feeding mostly on imports for consumption rather than stimulating new, expanded local capacity for the production high priority goods to satisfy social needs and a sustainable, well-developed economy.

 

As a result of the distorted growth pattern, the level of occupation and production remains permanently below the GDP potential. When COVID-19 created a global crisis from the supply side, with lower production and eventually relatively higher international prices, the conditions were already becoming very difficult for large segments of the population.

Increasing public debt, mainly from foreign sources, served to help develop a successful, yet, painful (in a number of deaths and social tensions from a long lockdown), combined with expanding subsidies and other government expenses eventually had begun to show sign of economic recovery, mainly stimulated by the mining sector, the Panama Canal and some commercial and international activities as well as the public sector services.

Yet, prices remained above the pre- COVID 19 level, and disguised employment, grew, even faster than before, when suddenly the War in Ukraine created another international shock on the supply side, pushing prices higher, and creating new pressures on the job market. At the same time, the political class continued demonstrating little concern about the reduction in real income and the accumulated social dissatisfaction accumulated during the COVID-19 pandemic.

As greater reopening took place, the masses became free to protest about all their unresolved expectations, with the embattled government becoming the main target. The manifestations went from one part of the country to another, and in the end they all came together, demanding changes, while sending signs of a higher quality of social organization that the status quo will have to deal with, for the future, of this strategic country that host the vital Panama Canal.