What’s Happening In Panama?

You thought it was only Sri Lanka, Italy, The Netherlands, the UK, and of course a dozen other countries where there is unrest and civil protest. But you forgot about Panama. To be fair, this is a small nation and has been rarely in the spotlight since the days of the infamous General Noriega back in the 1980s.In the last weeks, this unique and welcoming central American nation has been experiencing serious upheaval but the events have been eclipsed by other news elsewhere occupying global attention. For the people of Panama however, the situation is so grave that it has forced them en masse onto the streets.

The unrest began back in early July and was led by schoolteachers protesting against sharp increases in the cost of living. The teachers, however, were soon joined by other groups including student unions, Indigenous rights groups, and organized labor.The initial demonstrations all focused on anti-inflation measures but as the weeks have passed the protesters have forged a more general set of demands that include calls to crack down on government corruption and systemic changes to the political system.

Panama, Expat Paradise

It's not so long ago that Panama was seen as a safe haven for wealthy retirees fleeing the high-tax zones of North America and Europe. While Costa Rica occupies the minds of many northern citizens looking to flee south, Panama was an up-and-coming contender for the ultimate getaway from northern tax regimes. Everyone is aware of Panama's status as an off-shore tax haven, but in recent years, regular citizens looking to stretch their pension dollars and occasionally their euros have been moving to the Central American nation as a better option. The image of Panama as a hub for drug trafficking, dictatorial rule, and even military invasion was, at last, becoming a relic of the past.

In its place, there was a calm country, filled with welcoming people, relatively low crime rates, and a tax regime that favored both the wealthy and middle-class pension-aged ex-pat. Like much of the world, however, these plans began to go off the rails when a certain respiratory issue caused the world to go into a state of lockdown. Hardly an economy in the world escaped harm in the ensuing dollar and euro printing tsunami that took place. Add to this the compounding effect of logistics and supply chain issues, and a small open economy like Panama has begun to feel the pinch more than most.

The real state of Panama
 

The inflation rate in Panama for May 2022 was 4.2%. This may not sound much compared to other countries. The inflation rate for the United States in May was over 8%. But that was for the entire year, not just the month of May. Add to this that most governments will tend to play down issues like this and leave out key contributing factors and you have the possibility that the rate for May in Panama may actually have been a good deal higher. The unemployment rate in the country currently stands at about 10%. For the other 90%, we can expect that for many wages are low and others are underemployed.
The Protests
 

Protestors in Veraguas have been blocking the Pan-American highway which is the access route for approximately 80% of the country's fresh fruit and vegetables. The net effect has been a severe shortage of these foodstuffs throughout the country. Food stalls stand empty, produce rots on the back of trucks, and food shortages are becoming a real issue of day-to-day concern for many. In response to the widespread shutdown of economic activity, current leader President Laurentino Cortizo announced a plan to reduce the cost of fuel to $3.25 per gallon. In June of this year, it reached a peak of $5.20, but despite the sharp cut, it was not enough to end the protests.

The Endgame

Initially, the government chose to ignore the protesters and instead crack down on their movement with repressive measures. The strategy was doomed to failure. The US embassy issued a "situational awareness" warning for its citizens in Panama as the unrest became more widespread and occasionally violent. Canada issued a similar warning to its citizens a day later. Like most Latin American countries their large and powerful neighbors to the north play a disproportionate role in their economies. The state remains an area of key geopolitical interest for the United States with its importance as one of the world's main shipping routes.

While mining is an important source of revenue and employment, many argue that the profits have never really penetrated down to the local economy and that the damage to the environment outweighs the benefits. In many other parts of the world, mining contracts and indigenous rights tend to come into conflict and Panama is no different. Whatever the final resolution turns out to be, compromises are sure to be made on all sides in order to avoid a Sri Lanka-style turn of events.