Panama: Economic Growth, Free Trade, and Indigenous Peoples

The map of Central America’s per capita GDP posted last week showed Costa Rica and Panama in the highest category, easily outpacing the other economies of the region. What it concealed is the fact that Panama is the richer of the two countries by this criterion. According to the World Bank, Panama’s per capita GDP (in Purchasing Power Parity) was a bit over $13,000 in 2009, whereas Costa Rica’s was just above $11,000. The Panamanian economy has exhibited solid growth over most of the past decade, reaching annual increases of total GDP of 8 percent in 2007, 11 percent in 2008, and 9 percent even in dismal 2009.

Panama’s recent economic expansion has multiple roots. Banking has boomed in an atmosphere of minimal regulation, low taxes, and strict privacy protections (one recent business report maintains that Panama has “the best banking secrecy laws” in the world today). The use of the US dollar as the country’s official currency has not hurt. Financial wealth, in turn, has given Panama City a striking skyline of high-rises despite its relatively small size (1.2 million in the metropolitan area). Panama also contains the Colón Free Trade Zone, the second largest open commerce zone in the world. Optimism about the future of the Panama Canal has further propelled the economy. Capacity is expected to double when the current expansion project is completed in 2014.

Rising Panamanian prosperity has attracted international attention. In June 2010, South Korea and Panama pledged to build a bilateral free trade agreement. Even in advance of such an agreement, this small country of 3.4 million – the least populous Spanish-speaking nation in the Americas – has emerged as South Korea’s third largest trading partner in the region, trailing only Mexico and Brazil.

Although Panama’s free-trade approach to economic development has brought major gains, the benefits have by no means been spread evenly. Assessed by its GINI coefficient,* Panama ranks 14th in the world for economic inequality. The national poverty rate is nearly 30 percent, almost half of the rural population falls below the poverty line, and roughly a quarter is considered extremely poor. Among Panama’s indigenous population, the poverty rate is over 80 percent.

Indigenous Panamanians, who constitute 6.7 percent of the country’s population, may be economically marginalized, but most of them have an enviable political position. In Panama’s five comarcas indígenas, native groups enjoy considerable autonomy. The oldest, Kuna Yala, was established in 1938, following the largely successful Kuna rebellion of 1925. Kuna Yala is governed by the Kuna General Congress, consisting of one representative from each of the comarca’s 68 communities. Its purview includes tourism, which has experienced considerable success. Kuna Yala has numerous natural and cultural attractions, which the Congress seeks to enhance. The Kuna people are noted internationally for setting up and largely running their own biosphere reserve, known as PEMASKY (Proyecto de Estudio para el Manejo de Areas Silvestres de Kuna Yala).

Despite such generally successful institutions, relations between the indigenous peoples of Panama and the larger national society remain strained. Tensions have recently focused on the Naso people of the northwest, a small group (population 3,500) supposedly governed by its own king. Unlike the larger indigenous nations of Panama, the Naso have no autonomous region. On June 3, 2010, Naso leaders submitted a petition to the American Commission on Human Rights claiming extreme discrimination and focusing on hydroelectric developments in their territory. Their 175-page petition, filed by the Washington DC law firm of Akin Gump Strauss Hauer & Feld LLP, claims that the projects will “probably result in cultural genocide of the Naso, since their culture, spiritual life and existence are threatened by foreign investors motivated only by financial gain (…). Irreparable damage is being done at this time to the Naso community, and must be stopped pending a decision based on the merits of this petition.”

* The GINI Coefficient is one of the most widely used statistical measurement of income inequality; it will be further discussed later this week in Geocurrents.

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