These days Panama is experiencing a state of turmoil never seen since the return of democracy in 1989. In July, hundreds of thousands of Panamanians —indigenous, educators, workers, health personnel, students— took to the roads from one end to the other the country to protest the cost of living and corruption.
The demonstrations were festive: the tamboritos, the congo dances, the afros, the peasant songs, infected the middle layers who called for banging saucepans in the capital.
A vibrant sample of anger macerated in three decades of exclusion and institutional precariousness, which has just come to the surface.
And that has given birth to another milestone: an unprecedented negotiation between the Government and dozens of social movements that has lasted almost two months and is expected to conclude with the start of a new phase,
Of course, the Canal country is no exception when it comes to receiving the impact of an inflation that today affects almost all countries on the continent, and that in recent months has put the indigenous communities of Ecuador, the drivers of Mexico City or the farmers of Peru.
But, due to its peculiarities, Panama has become a kind of paradox: the dollarization of more than a century (the longest in the world), which attracted large foreign capital, ensured a certain stability and contributed to sustained growth at exceptional rates for 30 years. years, did not guarantee a better life or public services for the majority of the population.
And it has the hands of the authorities tied, who do not have the tools to deal with inflation.
Although in the last three decades Panama has been the envy of its peers in the region due to its growth rates (which have reached up to 15% per year), this wealth has remained in the macroeconomic numbers and in a few hands. : It is the third most unequal country in Latin America, the most unequal region on the planet.
80% of the Gross Domestic Product (GDP) is concentrated in two cities in the interoceanic zone;
it comes from the Canal itself and from a handful of related activities, such as free zones, the financial sector, and construction.
Today, the richest 10% get 37.3% of national income, almost 13 times more than the poorest 40%.
And, like almost everywhere, the statistics hit Afro-descendants, women and the rural population harder.
In the comarcas, for example, 90% of its inhabitants live in poverty.
This strip of land with just four million inhabitants moves tons from one ocean to another and connects 144 sea routes, but it only has one road that connects the country.
The concentration of public investment in the richest geography, the meager percentages of items such as education and health in the public budget, the low social profitability of public investment and problematic tax collection, led to a frightening inequality.
The global ingredient of 2022, inflation, ended up blowing up the pressure cooker.
In the capital, striking teachers and people from the Ngobe indigenous group protested on July 28 over the high cost of living.Arnulfo Franco (AP)
"Salaries are artificially low and education is lousy," says Panamanian economist Felipe Argote, "a determining combination for wealth to be concentrated in a few hands."
Guillermo Chapman, former minister and the brain behind the growth boom of recent decades, has said that Panama pretends to be a market economy, but it is a “crony” capitalism where the Executive distributes concessions through special laws and power oligopolies.
Maribel Gordón, an economist, academic and leader of the social movements that staged the protests, also points to the unfair tax collection: “Business evasion is 60% in income tax and 33% in ITBMS [Transfer Tax]. of movable tangible assets and the provision of services],
The pandemic made everything worse.
"The management was terrible, small and medium merchants went bankrupt and the bank still calls them every day," says Argote.
Furthermore, the government increased the public debt and allocated the bulk of expenses "in hiring public sector employees that has not translated into improvements in people's quality of life," says Carlos Morales, credit risk analyst at Fitch Ratings.
The debts accumulated for three decades, now shaken by more cases of corruption and state indolence in one of the longest closures on the continent, finished imploding in July, just when prices climbed as much as anger.
The dollar factor
Protected by its century-old dollarization, Panama got used to relatively low inflation, explains Morales.
This changed when global supply chains and fears of a recession in international markets triggered fuel prices: “The price of gasoline in Panama, which directly affects the population, doubled between the beginning and the middle of the 2022″.
Without a doubt, the decision to make the dollar the national currency has paid off, Morales points out: "It gives confidence in the currency, limits capital outflows and provides macroeconomic stability."
In the case of Panama, he says, "this is one of the factors that attracts investment to the country since there is no exchange risk in investments, but there is also the negative and that is that you lose monetary policy."
Unlike the central banks in Latin America that began raising their interest rates to contain the rise in prices, Panama depends on the Federal Reserve in the United States, the bank that issues dollars.
“That room for maneuver is lost by a dollarized country, so fiscal policy becomes more important, because it is the only tool the government has to mitigate economic shocks,” says Morales.
When it comes to fiscal policy, Panama has become increasingly dependent on debt for financing.
"Before the pandemic there was already widespread discontent, with several parallel crises - of inequality, representativeness and trust, of public resources - but the covid brought with it one of the worst recessions and the sources of discontent resumed," explains the political scientist Claire Nevache.
Panama's GDP plummeted 18% in 2020, one of the deepest falls in the world.
In 2021 the rebound was 15% and the International Monetary Fund estimates that growth this year will be 7.5%.
All this ended in the historic protests of July, which gave birth to an unprecedented union of social organizations and their negotiations with the government, which have been going on for almost two months now.
A crisis that places the country before the opportunity to face the deep changes that the situation demands, but also before structural limits.
On July 21, teachers blocked the Pan-American highway in La Pesa, during a protest against the high cost of gasoline.Arnulfo Franco (AP)
The dialogue
The protests began in July in the province of Veraguas with a warning from educators: “The people are tired of so many blows in the streets.
We don't want dizziness."
The government responded with the stick, the boot and the pepper spray of the police force.
The next day, teachers' unions began a three-day strike.
It was the beginning of a popular deed that lasted all month and ended in another milestone: three groups that emerged from the union of dozens of social movements managed to seat the government in a Single Dialogue Table in another province, Penonomé.
There, in a negotiation that has lasted more than 50 days, they reached partial agreements on eight issues that include food, medicine, health, education and corruption.
And they unleashed the fury of business sectors.
The business associations tried to undermine the process by questioning the leaders sitting in the negotiation.
As soon as the dialogue began, they went out in successive conferences to ask for a place to debate issues that are of national interest.
"Without the private sector, the agreements at the Dialogue Table will be counterproductive for everyone," warned the president of the Chamber of Commerce, Industry and Agriculture of Panama (CCIAP), Marcela Galindo, in a statement.
The crisis of credibility also reaches them.
A survey by the International Center for Political and Social Studies (CIEPS) showed that 79% of the citizens consulted believe they are governed by "a few powerful groups for their own benefit."
This is the trend in Panama: there are high levels of mistrust in all institutions (the National Assembly has 84.2%, the judiciary 75.9% and political parties 87.5%) and the levels of interpersonal mistrust are frightening ( 74.2% think that people are "never or rarely trustworthy").
The only one that maintains acceptable levels is the Church, whom the government appointed as mediator of the dialogue.
The agreements achieved fuel subsidies and the freezing of certain foods, a reduction in the price of medicines and an increase in investment in education to 6%, among others.
Not all of them are fulfilled.
Many businessmen are reluctant to abide by price controls and others have taken the agreements to court.
There are those who maintain that the measures do not solve the underlying problems, something that the social referents themselves recognize but consider necessary to provide respite in the current crisis.
"We put our finger on the problem, in the sense that we said where is one of the causes of the high cost of living: a structure that generates extraordinary profits for businessmen, high cost for citizens and low return for the producer," said Maribel Gordón .
A woman waves a flag of the National Single Union of Workers in the Construction and Similar Industries during a day of protests against the government on August 18, in Panama City (Panama). Welcome Velasco (EFE)
After the first phase of the dialogue between the Executive and the representatives of the three groups that led the protests, a new proposal emerged: that of a "national, inclusive and participatory table", which includes businessmen and civil society.
Discursive violence and a smear campaign threaten to undermine the next phase.
“Those businessmen who claim to defend the free market are in practice a staunch defense of the oligopolistic structure,” said Gordon.
And he added: "We are ready for a debate facing society in the next stage, which will be controversial because the exclusionary model of Panama is under discussion and there are opposing positions on that."
They are groups that do not trust each other but neither do they believe in the third actor: the Government, which should mediate, analyze and agree but seems incapable of doing so.
"The Dialogue Table is not a source of solutions, but it is a means of breaking with a status quo that is totally exhausted," said Guillermo Castro, a researcher at the Latin American Council of Social Sciences (Clacso) and the City of Knowledge Foundation.
Now comes a new stage, which could be an orderly transition to a next phase of dialogue or a complete disaster.
In any case, "there is a level of convergence around the need to modernize Panamanian capitalism to order the house," adds Castro, who lamented that the National Assembly has been "totally incapable of processing the political conflict that the country has" .
The crisis scenario, with its causes and possibilities, is clear.
"The question is whether we want to be honest with ourselves and go to the root of the problems," says Champman.
That is the opportunity and the challenge of the Canal country.