IDB warns of persistent inequality in Panama’s economy

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By LatAm Reports Editorial Team

The Inter-American Development Bank (IDB) issued a warning about the persistent inequality in Panama’s economic model, while drawing a map of opportunities to overcome these difficulties.

The multilateral organization pointed out that the rural territories of Panama “are underdeveloped areas and poverty is especially high in the indigenous regions and communities.”

“The so-called success of Panama has been, in a strict sense, the success of its metropolitan area, that is, of the areas that prosper around the Canal, the financial centers and those places where multinational corporations have settled,” he said. the IDB when introducing the Panorama of Panama opportunities report prepared by Rubilú Rodríguez, Juan José Barrios and Tomás Bermúdez.

The document published this February revealed that despite the notable growth that the country has recorded in the last 15 years, there are lags in terms of coverage and quality of education, there are deficiencies in health, there is a lack of more access to some public services such as electricity and water and focused attention on those most in need is necessary.

The IDB created a map of opportunities with three pillars: human development, bases for productivity and institutional modernization. And he proposed measures to make economic growth more inclusive and sustainable.

The diagnosis also reflected that the country known for its economic dynamism in Latin America and the Caribbean now faces the challenge of translating that growth into greater inclusion and sustainability.

Better education for work

In the human development pillar, the IDB report focused on the need to work to improve social protection from early childhood to the elderly, and sustainable housing, as well as provide health with equity and raise the standard of focused education. in training for work.

The organization mentioned that in Panama investment in education is lower than the regional average, approximately 3.3% of GDP in 2021, in contrast to Uruguay where it is 4.4% and Costa Rica 6.3%. Although there is an expectation that by 2024 it will not be less than 7% of the gross domestic product.

It is noted that the workforce does not have the skills demanded by the productive sector and young people do not have sufficient information or guidance on the training offer, employability prospects and possible salaries.

The report also suggests that in terms of employability, the productive sector be involved in the design of curricula, so that they are better oriented to demand, and the co-financing of training programs is encouraged.

“It is advisable to carry out a study on the offer of technical and professional education, its returns and financing alternatives, to guide young people.”

Logistics and energy sector

In the productive area, the IDB focused the study on identifying opportunities in infrastructure issues, developing sectors such as tourism, agriculture and innovation. As well as taking advantage of global economic ties for new business opportunities.

The IDB infrastructure opportunity map for Panama lists three key areas: transportation, energy and information technologies.

In transportation, the IDB proposed that the country can intensify intermodal connectivity through investments in strategic road corridors and secondary networks, prioritizing productive and equity criteria. That is, connect the air, land and maritime logistics axes more efficiently and also integrate it with the rest of the country.

In energy, the IDB maintained that the legal framework must be modernized to promote non-conventional renewable energy technologies and electric mobility, in addition to expanding renewable sources to diversify the energy matrix and electrify rural areas where a percentage of households They do not have electricity.

According to INEC data mentioned by the IDB, only 10.3% of access to the public electricity network is registered in the Ngäbe Buglé region and 8.7% in Guna Yala. While on average 4.8% of homes nationwide lack electricity service.

In the case of Information and Communication Technologies (ICT), the IDB mentioned that priority should be given to the deployment of networks in rural areas, facilitating access to the internet, broadband and connectivity, which in turn will promote services. digital technologies in priority sectors, accompanied by financing for StartUps and technological SMEs. Digitalization can accelerate financial inclusion.

Diversify the tourist offer

The map of opportunities for sectors highlights that in tourism, the offer must be diversified and sustainability promoted. The IDB study mentioned that 58.5% of the rooms and 49.4% of the investments in accommodation are in the province of Panama, while 80% of the attractions are in the interior of the country.

The IDB believes that tourism experiences with great potential should be promoted, such as UNESCO heritage sites and protected areas, rural destinations through agrotourism, community tourism and indigenous tourism.

As well as promoting specialized nature tourism products (avitourism for bird watching, hiking, sports and adventure)

In agriculture, they suggest reviewing price control policies and modernizing institutions, prioritizing agricultural health and adaptation to climate change.

While for innovation, financial services for SMEs, support for research and development, and promotion of sustainable agricultural models and rural associativity are advocated to boost competitiveness and resilience.

The map of opportunities to strengthen global economic ties highlights strategies to increase and attract more foreign direct investment.

In logistics for foreign trade, the IDB emphasized the need for the digitalization of customs procedures, the modernization of port and border infrastructure, and the revitalization of the Logistics Cabinet to improve government coordination and the involvement of the private sector in the Canal economy.

Manage water resources

On water issues, the IDB warned that Panama is in one of the most vulnerable regions to the effects of climate change. Extreme events such as heavy rains, droughts, fires, windstorms, landslides and tropical cyclones have economic, social and environmental impacts. Therefore, the focus must be directed towards adaptation measures.

Therefore, it considers that this is an opportunity to improve the management of water resources to guarantee water for the population and for the Canal.

The IDB mentioned that the integrated management of hydrographic basins is crucial to guarantee access to water in adequate quality and quantity, reducing the rural and indigenous gap in access to this resource.

The agency also recommended considering climate risks in the planning and construction of infrastructure, as well as the protection and restoration of natural ecosystems such as forests and wetlands for adaptation to climate change and the country’s sustainability.