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Panama is currently experiencing the worst civil unrest seen in the country in roughly three decades. Over the past few weeks, thousands of people, including teachers, students, construction workers, and Indigenous groups, have taken to the streets to protest the high cost of living in the country. Protesters have blocked roads and most critically, the Pan-American highway, Panama’s main highway. They demand that the government respond to the rising inflation and reduce food and fuel prices. The protesters’ grievances are certainly credible – inflation in Panama has hit 4.2%, the highest since 2013. This has altered the costs of many basic necessities in the country. Fuel prices, for instance, have increased 47% since the start of the year, jumping from $3.73 USD per gallon in January 2022 to $5.75 USD in July 2022.

Seemingly indifferent to these economic hardships, members of the ruling party of Panama’s parliament were caught on video in early July celebrating the new legislative term with $340 USD whisky bottles. Such apathy to what people have been enduring has further intensified the protests and made people also demand political reforms and the end of corruption. 

Now entering their fourth week, the protests in Panama have been framed by most news sources as a temporary phenomenon in contrast to the country’s otherwise positive economic situation. Panama is often referred to as an economic success story in Latin America, thanks to its mining, construction, retail, and tourism industries. Between 1990 and 2019, the country witnessed an annual economic growth at an average of 5.9%, the fastest in the continent. Last year, moreover, Panama’s gross domestic product (GDP) grew 15.3%. So Panama, unlike other countries in the region or across the world, is supposedly a beacon of relative prosperity. However, the protests are evidence of a deeper truth – that Panama’s economy has long been structured to benefit the elite few, while the people suffer.

The Bigger Picture Behind the Protests in Panama

While addressing the nation recently, President Laurentino Cortizo said that the situation in Panama has been “caused by the effects of the pandemic and the consequences of the conflict in Ukraine.” Part of what Cortizo said is true. The pandemic, for example, has resulted in a short-term contraction of Panama’s GDP and increased its fiscal deficit and poverty. However, Panama also suffers from other long-standing problems, such as poverty. 

Despite the economic development the country has been achieving for several decades, poverty remains a prevalent problem in Panama. In 2019, there were nearly 500,000 Panamanians living under $5.5 USD a day, and another 52,000 people living on $1.9 USD a day. Poverty is especially observed in rural areas, which are largely populated by Indigenous communities. While income inequality is an important reason why rural populations are poor, the government’s social expenditure in these areas is also insufficient to help people live decently. 

To a good extent, the government invests some of the wealth the country generates in urban areas, something seen in the skyscrapers, subway, waterfront skyline, and other projects in Panama City. Due to such investments, urban populations have relatively more access to education and jobs and enjoy a better standard of living. 

In rural areas, by contrast, the government’s social spending has been low for years. Rural areas, especially where Indigenous peoples live, are left out of the country’s economic prosperity, with many people being deprived of equal access to education, job opportunities, healthcare, clean water, and other resources. This social inequality has made 95% of the Indigenous population in Panama live in poverty. Given this overwhelming poverty, it is undoubtedly clear why Indigenous groups are taking part in the protests in Panama and demanding far-reaching changes.

Unequal Opportunity

Unemployment, furthermore, has aggravated poverty and weakened people’s ability to pay for basic necessities like food and fuel. The current unemployment rate in Panama is around 10%, which is 8% lower than it was in 2020 due to COVID-19. However, in a country whose population is only 4.4 million, this is an incredibly high rate, meaning that there are 440,000 people without jobs and struggling to make ends meet. 

The high unemployment rate in Panama is partly attributed to the lack of investment in the education system. Many schools in Panama, especially those in rural areas, have poor infrastructure and a lack of qualified teachers and learning materials. These schools do not offer students with the skills and experiences they need to find jobs and thrive, leading many companies to prefer hiring older people. Consequently, unemployment is notably high among Panama’s youth, with one-sixth of people aged 20-24 being unemployed. 

There is also the issue of corruption, which is chronically instilled in every branch of government. The famous Odebrecht scandal case, for instance, revealed that officials in successive Panamanian governments from 2004 to 2019 received a total of $100 million USD in bribes from the giant Brazilian construction company Odebrecht in exchange for contracts. This is just one case of the long-standing corruption in Panama. According to the United Nations Office on Drugs and Crime, Panama loses around 1% of its GDP  – $520 million USD –  to corruption every year.

These problems show that, contrary to what is perceived about Panama, the economic situation is already dire for many people. And the soaring living costs have compounded these problems, thereby driving people to take to the streets and demand change.

How Has the Government Reacted to the Protests in Panama?

Cortizo initially responded to the protests by reducing the price of fuel to $3.95 USD per gallon and imposing a cap on the prices of ten food items, including white bread, canned tuna, and rice. On July 17, the president agreed to further cut fuel prices to $3.25 USD. Yet these measures have not proven effective. Many demonstrators have contended that the price cuts did not adequately meet their demands and therefore chose to continue protesting.

The Need for Systemic Change

The situation in Panama is getting worse. The protests have turned into clashes with the police forces in Panama, with little to no details on how many people were injured or arrested. But videos circulated on social media show the police firing tear gas, something the protesters responded to by throwing stones and car tires. 

Moreover, the Pan-American highway’s closure by the protesters has interrupted the supply of electricity, food, and medical products, causing severe shortages. In Darien province, electricity is being rationed, with 7,000 families receiving only 11 hours of electricity a day. Market stalls have also been empty of food. 

In a recent development, the government and some protest leaders met on July 21 to find ways to satisfy protesters. “I have absolutely no doubt that through a sincere and respectful dialogue, we can reach viable solutions,” stated Cortizo. These talks have been relatively fruitful so far. The government announced on July 27 that it will regulate the cost of 72 food items with the goal of decreasing the price of the basic food basket by 30%. 

Such efforts provide a sense of hope that the unrest in the country could end soon, with Panamanians possibly getting what they have asked for. Yet, reducing fuel and food prices should not be the most that Cortizo and his government do but the beginning of concrete measures dedicated to combating more complicated, entrenched problems like economic inequality, poverty, unemployment, and political corruption. Only then can many Panamanians’ demands be met. 

Edited by Esmé Graziani

Osama Alshantti

Osama is the executive director of Spheres of Influence. He holds a B.A. in Political Science from the University of British Columbia. Osama's academic and journalistic work focuses on various issues in...