Panama lived a 2018 marked by an economic slowdown in the pre-election year

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  • Wed, 12/12/2018 - 08:27
Panama lived a 2018 marked by an economic slowdown in the pre-election year
  • Telemetro.com

By Giovanna Ferullo

Panama experienced a 2018 marked by an unexpected economic slowdown, registered in the middle of a confrontation between the Executive and the Legislative just one year before the general elections in the country.

Panama seemed to resume the path of growth after the rebound of gross domestic product (GDP) in 2017, when the indicator was 5.4%, but a one-month strike in the most important construction sector led to a fall of 2018 estimations from 5.6% to around 4%.

Economists agree that in addition to the strike, the strong dollar, the current currency in Panama, affected sectors such as tourism, including the chronic anemia of the production of the field and a drop in direct foreign investment (IED), which reached 13.2% in the first quarter of the year.

The economic situation had its impact on the unemployment rate, which rose to 6% last August, the most recent official data, which was an increase of 13.3% over the same month of the previous year.

The administration of Panamanian President Juan Carlos Varela, local economists and the International Monetary Fund (IMF) have predicted a much more dynamic 2019 thanks to the expected start of operations of a large copper mine with an investment of 6,300 million dollars.

The project, known as Cobre Panamá and owned by Canadian First Quantum, must start in the first months of 2019 despite a ruling by the Supreme Court against the law that guaranteed the mining concession in 1997, which does not affect it, according to the criteria of the company.

The economic improvement will also come from the start of major infrastructure works such as the fourth bridge over the Panama Canal, with an investment of 1,420 million dollars and by the consortium formed by China Communications Construction Company LTD and China Harbor Engineering Company LTD.

It is the first major public project in charge of companies in China, a country with which Panama established diplomatic relations in June 2017 precisely with the prospect of increasing exports and attracting large capital from the Asian giant.

In this context, Chinese President Xi Jinping made an historic official visit to Panama at the beginning of December, in which 19 agreements were signed, in addition to another twenty signed in the last year and while both countries negotiate a free trade agreement.

"Panama welcomes Chinese companies to finalize investment projects in Panama and establish regional headquarters (...) both parties will continue to encourage their financial institutions to establish subsidiaries in order to expand financial services networks, and will increase interbank cooperation and in terms of financial regulation," reads a joint statement signed by Varela and Xi.

China’s new status prompted a call for consultations from the United States representative in Panama, which until now seems only a tug on the ears of the main trading partner of the Central American country in all areas.

The thunderclouds in the economic sphere included the difficult relation between the Executive and the Legislative after the rupture of a so-called "governance pact", a scenario that prevented the appointment of new magistrates of the Supreme Court throughout the year, a figure that the country has been carrying since 2017.

The lack of consensus led to unprecedented situations in this constitutional period (2014-2019) as the non-legislative approval of items for various state institutions and the return, twice, of the draft budget for next year, which was finally approved.

The political situation has been linked to the fact that the different parties have been defining their offer for the general elections of May 2019 in which, according to the tradition of the young Panamanian democracy, the opposition always wins.

The pre-electoral environment has also been shaken by the case of former President Ricardo Martinelli (2009-2014), summoned for oral and public trial for alleged illegal wiretapping and fraud, a case that he claims as an invention of Varela, his great political enemy, and for which the prosecution requests a punishment of up to 21 years in prison.

Martinelli has faced up to now in preventive prison this process, since he began in the Supreme Court, that developed all the instruction phase soon to transfer it to an ordinary court.

But the confinement did not prevent the former president from obtaining a candidacy for a deputy in party primaries and also seeking to run for mayor of Panama both independently - for which his allies are collecting signatures - and for his divided Democratic Change party, which has promised that box on the ballot of May 2019.


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