Name: Republic of Panama Population: 3.4 million (UN, 2008) Capital: Panama City Other cities: Colon, David, San Miguelito Area: 29,157 sq miles Currency: Balboa, US Dollar GNI per capita: $5,510 Main exports: Bananas, petroleum products, shrimp, sugar, clothing Language: Spanish, English Religion: Roman Catholic (84%) Life expectancy: 73 years (men), 78 years (women) WB Development Indicators
Panama’s strategic location between two oceans and the engineering marvel of its canal defines this Central American country’s place in the world.
The transit of thousands of ships through this waterway is the country's main engine for economic growth.
President Martin Torrijos, elected in 2004, promised to modernize the Canal to allow it to handle more traffic and larger vessels. The measure was approved in a referendum and work started late 2007.
The expansion project of the Panama Canal boosted the economy, but it has done little to correct the persistent poverty and inequality which affects over one third of the population.
Torrijos also pledged to fight corruption - an endemic problem of previous administrations - but, despite passing a number of laws, few cases have been prosecuted.
A new government
In May 2009, conservative businessman and supermarket magnate Ricardo Martinelli was elected in a landslide victory.
Martinelli, who assumed the presidency on 1st July, has promised to promote free trade, encourage foreign investment and forge ahead with the expansion plan for the Panama Canal.
During his campaign, Martinelli also committed to transforming Panama into a “safer, modern and supportive” nation devoted to improving the living conditions of its population through efficient and accountable governance.
Among the challenges the president will need to address are social inequality, declining revenue from traffic through the Canal, and the country’s reputation as a major transit point for US-bound drugs and illegal immigrants, as well as a haven for money-laundering.
In recent years Panama’s economy has experienced an economic boom, with growth in real gross domestic product (GDP) averaging over 9.5% from 2006-2008. The Panamanian economy has been among the fastest growing and best managed in Latin America.
Like most countries in the region, Panama is feeling the impact of the global financial crisis, which threatens to push back the social advances made in the past few years. However, Latin America and the Caribbean are well positioned to quickly recover from the crisis, especially given an unlikely debacle of the US financial system.
The expansion project the Panama Canal, combined with the conclusion of a free trade agreement with the United States, is expected to boost and extend economic expansion for some time. This presents an historic opportunity to make progress in reducing persistent poverty and inequality.
Despite Panama’s status as an upper-middle income nation – as measured by per capita GDP – it remains a country of stark contrasts. Perpetuated by dramatic educational disparities, over one-third of Panama’s population was living in poverty in 2003 and 16% in extreme poverty.
To broaden the base of potential beneficiaries, Panama needs to further increase private sector competitiveness and improve access to education and health. In addition, greater focus on developing skills and stimulating innovation will be needed.
Challenges
The challenges of reaching Panama’s poorest, however, go deeper. Indigenous communities living in isolated areas are disproportionately more impoverished than the average Panamanian.
In 2003, 98.4% of the indigenous population lived in poverty, while 90% lived in extreme poverty.
To reach these populations, the traditional approach to social assistance, which has relied heavily on universal subsidies, requires rethinking.
The Strategic Vision articulated by the Torrijos administration (2004-2009) responded well to the myriad of development challenges that Panama currently faces. A fiscal reform package and a pension reform, both passed in 2005, form part of an ambitious development strategy.
This strategy emphasized fiscal discipline, transparency and greater efficiency to ensure a sound economic base, as well as to accelerate export-led economic growth, create more jobs and reduce poverty.
To achieve this end, the Torrijos administration prioritized investments in human capital and introduced a flagship targeted conditional cash transfer program, coupled with the continued expansion of pre-school education, primary health care and nutrition and basic infrastructure, especially in poor and indigenous areas.
The newly elected government of President Martinelli has vowed to continue and broaden those key social reforms with the assistance of multilateral financial institutions such as the World Bank.
The Bank and the Government of Panama developed a new Country Partnership Strategy (CPS) (FY08-FY10), which aims to increase the Bank’s involvement in Panama and strengthen the World Bank-Panama partnership.
The new CPS is characterized by a results oriented approach, a strong focus on capacity building, and increased coordination and harmonization with the International Development Bank. It is designed to help the country achieve its poverty reduction and improve income equality targets set out in the Government’s “Strategic Vision of Economic and Employment Development Towards 2009.”
Moreover, the strategy’s timeline of activities is aligned to coincide with the five-year national election cycle and to provide the next administration (2009-2014) with access to immediate support.
In July 2009 the World Bank renewed its support for the new administration vowing to make US$150 million immediately to Martinelli’s government, and to start work on the Country Partnership Strategy for 2010-2013.
In total, the Bank’s portfolio in Panama includes 6 analytical studies and 11 projects to be delivered from FY08 –FY10 for a total of $390 - $465 million in loans. Some examples:
Competitiveness and Public Finance Management Development Policy Loans is the second in the programmatic series that continues to support the Government's program to consolidate fiscal discipline and increase public sector transparency and efficiency, as means for -inter alia- enhancing private sector competitiveness.
The IFC’s role in the Canal Expansion Project (see: Multilaterals Lend $2.3B for Panama Canal) is consistent with one of IFC's strategic priorities in Central America - helping develop physical infrastructure to improve competitiveness and regional integration.
Similarly, the Social Protection (FY08), Health (FY09) and Education (FY09) operations have been critical in helping to design and establish systems to effectively target and monitor the government’s flagship CCT program, Red the Oportunidades.
In addition, ongoing support has been provided in a range of other areas such as water, urban transport, sustainable tourism, land administration and human development, each of which contributes to the Government’s development program.
Since 2004, the partnership between the Bank and the Government of Panama has strengthened. In response to a renewed interest in services offered by the World Bank, the institution, in coordination with the Government, prepared an Interim Strategy Note (ISN) for the Republic of Panama.
The ISN laid out a 24-month program of activities, which has contributed to an improved portfolio performance, a more robust policy dialogue and a rebuilt project pipeline.
As a result of the ISN, in FY06-FY07 several core diagnostic analytical pieces were delivered to the Government, including:
The $60 million Development Policy Loan, supported the implementation of the initial phase of the Government's new development program, as described in its Strategic Vision document, with a focus on restoring fiscal sustainability and improving fiscal transparency and public financial management.
Meanwhile the Social Protection Project provided $24 million to improve the management and operation of the conditional cash transfer program (CCT) to enhance its effectiveness in reaching the poorest and indigenous groups. Additionally, the program provided beneficiaries with an incentive framework to increase their participation in CCT and strengthen the supply of nutrition and child growth promotion interventions in indigenous areas.
Rural Productivity Project supplied $41 million to conserve globally important biodiversity and protected forest, mountain, coastal and marine ecosystems in Panama. And a $32.5 million Water and Sanitation Project was devoted to increase access to sustainable water supply and sanitation services in participating communities.
Panama’s strategic location between two oceans and the engineering marvel of its canal defines this Central American country’s place in the world.
Martinelli, who assumed the presidency on 1st July, has promised to promote free trade, encourage foreign investment and forge ahead with the expansion plan for the Panama Canal.
In 2003, 98.4% of the indigenous population lived in poverty, while 90% lived in extreme poverty.
The new CPS is characterized by a results oriented approach, a strong focus on capacity building, and increased coordination and harmonization with the International Development Bank. It is designed to help the country achieve its poverty reduction and improve income equality targets set out in the Government’s “Strategic Vision of Economic and Employment Development Towards 2009.”
Since 2004, the partnership between the Bank and the Government of Panama has strengthened. In response to a renewed interest in services offered by the World Bank, the institution, in coordination with the Government, prepared an 
RSS