An economy open to the world
Panama's geographical location, at the heart of the Americas and between two oceans, gives the country a unique position in the global economy. From time immemorial, the isthmus has been an obligatory passageway for flora, fauna, human groups and, today, ships and aircraft from all over the world. Its vocation as a land of transit, first recognized when Balboa discovered the Pacific Ocean in 1513, was amplified when the Americans opened the canal over a century ago. Taking advantage of the inter-oceanic route's attraction for goods and capital from all over the world, the country has focused its development on maritime activities, trade and services (over 80% of GDP). This tertiarization of the economy sets it apart from other countries in the region, whose economic model is based more on agri-export. The canal, which allows 500 million tonnes of goods to pass between the Atlantic and Pacific oceans every year, remains the keystone of this service economy. New, wider locks, in operation since 2016, have made it possible to accommodate larger "Post-Panamax" container ships (366 m long and 46 m wide) and triple toll revenues, which account for 20% of GDP. The country has also built ultramodern port systems in Panamá City (Balboa) and Colón (Manzanillo, Cristobal, Colón Port Terminal), under concession to major Asian and North American groups. Powerful infrastructures (wharves, cranes, etc.) combined with immense storage warehouses enable thousands of containers to be unloaded, stored and then re-shipped in smaller lots to smaller ports on the South and North American coasts. Colón is also home to the Colón Free Zone, the second largest in the world after Hong Kong! A veritable goods distribution platform, this vast 400-hectare warehouse is duty-free for a wide variety of products (electronics, pharmaceuticals, perfumes, cosmetics, etc.) from all over the world. Content and container arrive separately to save volume. Goods are conditioned, assembled and packaged before being sent back tax-free to countries in the region. Finally, in addition to serving as an international hub for transport and trade, Panama boasts the world's largest merchant marine fleet! Thanks to its flag of free registration, or "flag of convenience", any vessel, regardless of age, tonnage or nationality of owner, can apply for Panamanian registration and benefit from particularly flexible social, fiscal and maritime legislation. Created in 1925 by the United States, eleven years after the opening of the canal, the Panamanian registry is managed by the Panamanian Maritime Authority, relayed by some sixty consulates around the world (in Marseille, for example). Rapid registration procedures, tax exemptions and the anonymity so dear to the hearts of unscrupulous shipowners explain the flag's success. With more than 8,000 ships representing some 180 million gross tons of cargo, the registry brings in $60 million in registration fees and about the same amount in indirect resources (lawyers, insurance, naval mortgages, etc.).
Hell or Heaven?
From flags of convenience to banks, it's just a short step to the world of tax havens... Panama is a first-rate banking and financial center. Its Banking Centre, created in 1970 when petrodollars were plentiful, is home to around a hundred international banks. The world's4th-largest banking center has developed thanks to the use of a stable and reassuring currency, the US dollar, since 1904, and to strict rules of confidentiality and "territoriality": only profits made on Panamanian soil are taxed, not those made abroad and transferred to the country. This is a tax haven, one of the most opaque in the world. 350,000 companies benefit from Panamanian banking secrecy. But you don't win every time... On April 3, 2016, a large-scale tax evasion scheme put the country under the spotlight: the Panama Papers revelations! Billionaires, heads of state, football stars and other celebrities from all over the world are singled out by the revelations of the International Consortium of Investigative Journalists (ICIJ). 370 journalists from 76 countries and 109 media analyzed 11.5 million confidential documents leaked by Mossack Fonseca, a Panamanian law firm specialized in setting up offshore companies. To avoid taxes or launder money, wealthy individuals and criminal organizations of all kinds have turned to this firm, which specializes in domiciling fictitious companies in tax havens. The documents detail information on over 214,000 offshore companies, including the names of their shareholders. This was followed by investigations around the world and the country's return to the blacklist of tax havens. While at home, people were able to denounce a cabal of the world's major powers against Panama, the scandal only added to the scourge of major corruption that has plagued the country for decades. No más Corrupción! the subject regularly makes the headlines, sometimes involving the highest political echelons. In recent years, two former presidents of the Republic, Ricardo Martinelli and Juan Carlos Varela, have been put on trial for multi-million dollar bribes and money laundering via shell companies. And heads roll with each new election...
Social challenges to be met
There's money in Panama, lots of it, more and more! But only for some. One of the continent's most stable and dynamic economies masks deep social inequalities. The country regularly ranks among the ten most unequal in the world. 80 families account for more than 40% of the country's wealth, and one in four inhabitants lives below the poverty line, with one in eight destitute. Poverty is most acute in rural areas, particularly in Amerindian communities: 80% of comarcas inhabitants live on less than two dollars a day, and have great difficulty gaining access to education and healthcare.
The Covid-19 pandemic and its economic consequences have not helped matters, with a recession that reached almost 18% in 2020. Containment was among the strictest and longest in the world, throwing hundreds of thousands of people into destitution. Half the population works informally, i.e. without any help or compensation for being confined and unable to go out to work. The year 2022, marked in Panamá as elsewhere by a significant rise in the price of basic necessities, was shaken by an unprecedented wave of protests, the product of a series of institutional, economic and social factors to which the center-left government was not sufficiently attentive. Industrial and construction workers' unions, farmers, fishermen, students, teachers, health professionals, indigenous movements, etc., took to the streets en masse to make a wide variety of demands, both short-term and structural: lower fuel and medicine prices, better working and education conditions, anti-corruption measures, constitutional reform... Protests were eventually heard after the intervention of church authorities, acting as mediators. In the end, the government's various commitments in the social sphere were recorded. All that remains now is to implement them..
Tourism to be relaunched
Tourism, a major generator of jobs and foreign currency, has enormous potential in Panama, and travellers will be able to see for themselves! The "land of the canal" has long been confined to business tourism, with the main attraction being the Colón free zone, banks, shopping malls and casinos. The capital's hotels still rely heavily on businessmen who come to sign contracts or attend conferences, and who take the opportunity to shop in the ultramodern malls. Large-scale tourism projects only really began in the 2000s, with the redevelopment of the Canal Zone land ceded back by the Americans and the arrival of salsa legend Rubén Blades as head of the Tourism Authority. Buoyed by tax incentives, the sector grew with strong foreign investment until the subprime crisis (2007-2008). It has stagnated in recent years, except in certain regions such as Bocas del Toro, or in specific areas such as medical tourism or baby boomers: panamá, traditionally geared towards Latino and North American tourists, is increasingly attracting Europeans, with more and more air connections and tourism campaigns promoting the country's natural riches and Amerindian cultures rather than casinos and shopping malls. There's a great deal to play for when you consider the success of neighbouring Costa Rica and Colombia, whose assets are similar, and where tourism has exploded in recent years...
