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Panama is one of the fastest growing economies in the Americas

Published on March 21, 2012 by   ·   No Comments

Panama is home to the fastest growing economy in the Americas, last year it expanded by 10.6 percent and this year 7 percent is expected, almost overnight Panama City has changed from a Casablanca-on-the-Pacific to a slice of Manhattan transplanted to the tropics.

The boom is partly thanks to the canal, which Panama took control of in 1999. More than 4 per cent of world trade passes through its locks, with twice that expected when a $5.3bn expansion, begun by the former president, is completed in 2014.

“It will be a game changer,” says Alberto Alemán, chief executive of Panama’s well-respected Canal Authority.

However, President Martinelli, a supermarket tycoon elected in 2009, has gone even further, supercharging economic growth with a $13bn investment programme – equivalent to half the country’s gross domestic product.

“Businessmen get things done,” boasts Mr Martinelli, who takes Singapore, another high-rise tropical success story, as his model.

All this is a welcome rarity in Central America, which is more often associated with drug violence and economic despair. Yet despite the good times and the accolades (Panama was voted The New York Times’ “best place to visit in 2012”), Panamanians are worried – about corruption, the boom’s sustainability and what some see as Mr Martinelli’s “boss knows best” attitude.

In the latest mishap, the Ngäbe-Buglé, an indigenous community, brought the country to a halt by blocking the pan-American highway after the government rushed plans to build a hydroelectric dam and copper mine on their lands. Three died after police were sent in. In the capital, students daubed “Martinelli-assassin” on walls.

Mr Martinelli and his government are accused by some of treating the country like a private company and also of bullying the press. Roberto Eisenmann, founder of the leading newspaper La Prensa, says the paper was hit by a tax audit and $1.5m fine after publishing reports of government corruption. The government has said it was a case of unpaid taxes and denied the accusation.

Mr Martinelli’s approval rating has crumpled to 33 per cent from 73 per cent a year ago.

Officials acknowledge there are problems but say they are the growing pains of a young country and view the future with optimism. After all, Panama meets the golden rule of any successful hub: location.

Shipping remains a crucial industry. But officials also point to multinationals, such as Procter & Gamble and SABMiller, that have made Panama their regional base. There are no tedious visa restrictions, as in Miami. Five submarine-optic cables also pass through the country. Copa, the well-managed local airline, is meanwhile so busy it alone accounts for 4 per cent of GDP.

Uniquely in Latin America, the British, another trading nation, are Panama’s biggest foreign investors, with £8bn committed so far.

“We can’t build warehouses fast enough,” says Henry Kardonski, general manager of Panama-Pacifico, a $600m investment by the property company London & Regional that will turn a former US air base into an industrial park replete with logistics and data plants, and a golf course. Admiring officials from Colombia have visited to see how such “clustering” works.

Panama’s sophisticated banks are part of the answer, with diplomats suggesting the money-laundering business of old has moved on to Ecuador, another dollarised economy. “It’s harder to set up a bank account here than in Miami,” says Nicolas Barletta of Panama’s bank supervisory board.

All this has turned Panama City into a building site. A 70-storey Trump Ocean Club opened last year and a Hard Rock “megapolis” with 1,500 rooms is due in April. Critics say giant infrastructure projects, including a $2bn metro system, make it easy for officials to skim off the top.

If government plans go ahead, a motorway on stilts will be built around the colonial quarters too. The bypass, which has Unesco threatening to withdraw protected World Heritage status, will circle out to sea and link the skyscrapers east of the old town with those to be built on new landfill to the west.

Overblown projects and misdirected investment are part of every boom. In Panama, where government investment alone is worth half of GDP, it appears inevitable. Rather than a carefully calibrated Singapore, the grandiosity of a new Dubai may be rising out of Central America’s jungles instead.

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