Panama Canal

(Image: Anderson Gu)


Latin American Tiger: Can Panama Get Expansion Right?

By Christopher Sabatini and Rebecca Bintrim

In World Politics Review, AS/COA’s Christopher Sabatini and Rebecca Bintrim examine whether Panama can become an economic giant as it struggles to overcome a legacy of political corruption.

For the past decade, Panama’s economy has been roaring. With GDP growth averaging 8.24 percent from 2003 to 2013, Panama’s economy looked more like that of the so-called East Asian Tigers than many of its neighbors, particularly to the north, and the comparison to Asia does not end there. As the government moves to widen the Panama Canal to accommodate wider shiploads and makes massive investments in infrastructure, including ports and the first-ever subway in the capital city, Panamanian authorities have proclaimed that they want to be the Singapore of the Western Hemisphere—the region’s main logistical hub.

While in terms of investment outlays, growth of the financial sector and overall GDP growth, that ambitious goal certainly seems possible, the question is whether politics—and in particular corruption—will ultimately drag down a country that on the surface, at least, seemed to be doing all the right things.

President Juan Carlos Varela, elected on May 4, seems intent to try to turn the page on the corruption, cronyism and autocracy that marked the term of his predecessor, Ricardo Martinelli, as it has much of Panama’s history since its U.S.-sparked independence from Colombia in 1903. Indeed, the election that unexpectedly gave Varela the presidency became a referendum on the nepotism of the Martinelli administration. Martinelli’s handpicked successor, Jose Domingo Arias, ran with then-First Lady Marta Linares de Martinelli as his running mate under the governing Democratic Change (CD) party, opposed by Varela and the minor Panamenista Party (PPA) in coalition with a number of small parties grouped together under the banner The People First (EPP).

Even just a month before the May election, Varela—who had been vice president under Martinelli, but was effectively pushed out as the president jockeyed to run for a second time—was a long shot. But Martinelli’s ham-handed attempts to retain power, along with the mounting examples of collusion between the state and the private sector—the latter including many members of Martinelli’s family—in the awarding of lucrative construction contracts, fueled a rejection of the Martinelli cronies’ attempt to cling to power....

Read the full article in World Politics Review.