Republic of Panama
República de Panamá
CAPITAL: Panama City
FLAG: The national flag is divided into quarters. The upper quarter next to the staff is white with a blue star; the upper outer quarter is red; the lower quarter next to the staff is blue; and the lower outer quarter is white with a red star.
ANTHEM: Himno Nacional, beginning "Alcanzamos por fin la victoria" ("We reach victory at last").
MONETARY UNIT: The balboa (b) of 100 centésimos is the national unit of account. Panama issues no paper money, and US notes are legal tender. Panama mints coins of 0.05, 0.10, 0.25, 0.50, 1 and 5 balboas which are interchangeable with US coins. b1 = $1.00000 (or $1 = b1) as of 2005.
WEIGHTS AND MEASURES: The metric system is official, but British, US, and old Spanish units also are used.
HOLIDAYS: New Year's Day, 1 January; Martyrs' Day, 9 January; Labor Day, 1 May; National Revolution Day, 11 October; National Anthem Day, 1 November; All Souls' Day, 2 November; Independence from Colombia, 3 November; Flag Day, 4 November; Independence Day (Colón only), 5 November; First Call of Independence, 10 November; Independence from Spain, 28 November; Mother's Day and Immaculate Conception, 8 December; Christmas, 25 December. Movable religious holidays are Shrove Tuesday and Good Friday.
TIME: 7 am = noon GMT.
The Republic of Panama, situated on the Isthmus of Panama, has an area of 78,200 sq km (30,193 sq mi). Comparatively, the area occupied by Panama is slightly smaller than the state of South Carolina. The Canal Zone (1,432 sq km/553 sq mi), over which the United States formerly exercised sovereignty, on 1 October 1979 was incorporated into Panama, with the United States retaining responsibility for operation of the Panama Canal and the use of land in the zone for maintenance of the canal until the year 2000.
Panama extends 772 km (480 mi) e–w and 185 km (115 mi) n–s. Bordered on then by the Caribbean Sea, on the e by Colombia, on the s by the Pacific Ocean, and on the w by Costa Rica, Panama has a total boundary length of 555 km (345 mi), of which 2,490 km (1,547 mi) is coastline.
Panama's capital city, Panama City, is located where the Panama Canal meets the Gulf of Panama.
Panama is a country of heavily forested hills and mountain ranges. The two principal ranges are in the eastern and western sections of the country, and a third, minor range extends southward along the Pacific coast into Colombia. The eastern Cordillera de San Blas parallels the Caribbean coastline, while the Serranía de Tabasará ascends westward, culminating in the Barú volcano (3,475 m/11,401 ft), formerly known as Chiriquí. Between these ranges, the land breaks into high plateaus, ridges, and valleys. The Panama Canal utilizes a gap in these ranges that runs northwest to southeast and averages only 87 m (285 ft) in altitude.
Panama has more than 300 rivers, most of which flow into the Pacific, with only the Tuira River in Darién Province of any commercial importance. Both coasts of the isthmus have deep bays, but the Gulf of Panama is especially well provided with deepwater anchorages. Panama also has more than 1,600 islands, including the Amerindian-inhabited San Blas Islands in the Caribbean (366) and the Pearls Archipelago (Archipiélago de las Perlas) in the Gulf of Panama (over 100). Its largest island is the penal colony Coiba, which is south of the Gulf of Chiriquí.
Panama rests upon the Caribbean Tectonic Plate near its convergence with the Cocos, Nazca, and South American plates. The same motion of these plates, which created the Isthmus of Panama, continues to cause frequent tremors and earthquakes in the region; most of these are of low magnitude and cause little damage.
Panama is tropical, but temperatures vary according to location and altitude. The annual average temperature on both coasts is 29°c (81°f), and it ranges from 10° to 19°c (50 to 66°f) at various mountain elevations. There is little seasonal change in temperature, with warm days and cool nights throughout the year. Humidity is quite high, however, averaging 80%. Rainfall averages 178 cm (70 in) in Panama City and 328 cm (129 in) in Colón. The period of lightest rainfall is from January to March.
Most of Panama is a thick rain forest, with occasional patches of savanna or prairie. On the wet Caribbean coast, the forest is evergreen, while on the drier Pacific side the forest is semi-deciduous. Species of flowering plants total over 9,900 and include the national flower, the Holy Ghost orchid. Mammals inhabiting the isthmus are the anteater, armadillo, bat, coati, deer, opossum, peccary, raccoon, tapir, and many varieties of monkey. Reptiles, especially alligators, are numerous along the coasts. Bird life is rich and varies according to the presence of migratory species. Fish abound, with the Pacific coast being a favored region for sport fishing. As of 2002, there were at least 218 species of mammals and 302 species of birds throughout the country.
Soil erosion and deforestation are among Panama's most significant environmental concerns. Soil erosion is occurring at a rate of 2,000 tons per year. During 1990–2000, the annual average rate of deforestation was 1.6%. Air pollution is also a problem in urban centers due to emissions from industry and transportation. In 2000, the total of carbon dioxide emissions was at 6.3 million metric tons. Pesticides, sewage, and pollution from the oil industry cause much of the pollution.
Agencies with environmental responsibilities include the Ministry of Health and Ministry of Rural Development. The Smithsonian Tropical Research Institute, in Balboa, conducts studies on the conservation of natural resources.
According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 17 types of mammals, 20 species of birds, 7 types of reptiles, 52 species of amphibians, 17 species of fish, 2 species of invertebrates, and 195 species of plants. Endangered species include the red-backed squirrel monkey, tundra peregrine falcon, spectacled caiman, American crocodile, and four species of sea turtle (green sea, hawksbill, olive ridley, and leatherback).
The population of Panama in 2005 was estimated by the United Nations (UN) at 3,232,000, which placed it at number 130 in population among the 193 nations of the world. In 2005, approximately 6% of the population was over 65 years of age, with another 29% of the population under 15 years of age. There were 102 males for every 100 females in the country. According to the UN, the annual population rate of change for 2005–10 was expected to be 1.8%, a rate the government viewed as too high; it was addressing the relatively high fertility rate with family life and sexuality education programs in primary and secondary schools. The projected population for the year 2025 was 4,239,000. The population density was 43 per sq km (111 per sq mi).
The UN estimated that 62% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 2.31%. The capital city, Panama City (Panamá), had a population of 930,000 in that year. Other major cities and their estimated populations include Colón, 187,705; and David, 112,000.
Immigration and emigration have been roughly in balance in recent years. In the 1990s, there were 61,400 foreign-born persons in Panama, of which 13,644 were Colombians. In 1999, the United Nations High Commissioner for Refugees (UNHCR) urged Panamanian authorities to take a more flexible approach toward Colombians who arrived after February 1998 and were under a Temporary Protection plan. The total number of migrants in the country in 2000 was 82,000. In 2004 worker remittances were $231 million. In 2004 there were 1,608 refugees in Panama and 271 asylum seekers. In 2005, the net migration rate was an estimated - 0.86 migrants per 1,000 population. The government viewed the migration levels as satisfactory.
The racial and cultural composition of Panama is highly diverse. According to recent estimates, about 70% of the inhabitants are mestizo (mixed Amerindian and white) or mulatto (mixed white and black); 14% are Amerindian and mixed (West Indian); 10% are white (mostly Europeans); and 6% are Amerindian. There is also a Chinese community of about 150,000. The indigenous tribes include the Embera-Wounaan, Ngobe-Bugle, and the Kona, all of which reside in tribal-led reservations within the country. The Bri-Bri and the Naso are smaller tribes found near the Costa Rica border.
Spanish, the official language of Panama, is spoken by over 90% of the people, but English is a common second language, spoken by most Panamanian professionals and businesspeople. The Amerindians use their own languages. Many Panamanians are bilingual.
At the last census in 1998, an estimated 82% of the people were Roman Catholic; 10% were evangelicals; and 3% were unaffiliated with any religious group. More recent, but unofficial, estimates suggest that the Catholic population is declining in favor of the evangelicals, which may account for up to 20% of the population. Mainstream Protestant groups include Lutherans, Southern Baptists, and Methodists (United Methodist and the Methodist Church of the Caribbean and the Americas). There are small groups of Latter-Day Saints (Mormons), Seventh-Day Adventists, Jehovah's Witnesses, Episcopalians, and other Christians. Buddhists, Jews, Muslims, and Baha'is also had small communities. Panama is home to one of the world's seven Baha'i Houses of Worship.
Although Roman Catholicism is recognized by the constitution of 1972 as the majority religion, it is not designated as an official religion of state and religious freedom, as well as separation of church and state, are guaranteed. The Panamanian Ecumenical Committee is a nongovernmental group that encourages interfaith dialogue and charitable service.
Motor vehicles transport most agricultural products. In 2002, there were 11,592 km (7,203 mi) of roads, of which about 4,079 km (2,534 mi) were paved, including 30 km (19 mi) of expressways. The principal highway is the National (or Central) Highway—the Panamanian section of the Pan American Highway—which runs from the Costa Rican border, via Panama City and Chepo, to the Colombian border. The 80-km (50-mi) Trans-Isthmian Highway links Colón and Panama City. Panama's rugged terrain impedes highway development, and there are few good roads in the republic's eastern sections. In 2003 there were 266,900 registered passenger cars and 171,800 commercial vehicles.
As of 2004, there were a total of 355 km (220 mi) of standard and narrow gauge railway lines, all government-run. Of that total, narrow gauge accounted for 279 km (174 mi). The Panama Railroad parallels the canal for 77 km (48 mi) between Colón and Panama City. Other lines connect Pedregal, David, Puerto Armuelles, and Boquete and unify Bocas del Toro Province.
In 2005, the Panamanian merchant marine registered 5,005 ships of 1,000 GRT or more, totaling 122,960,929 GRT. Most of the ships are foreign-owned but are registered as Panamanian because fees are low and labor laws lenient. International shipping passes almost entirely through the canal ports of Cristóbal, which serves Colón, and Balboa, which serves Panama City.
Panama is a crossroads for air travel within the Americas. As of 2004, there were an estimated 105 airports, 47 of which had paved runways as of 2005. The most widely used domestic airline is Compañía Panameña de Aviación (COPA), which also flies throughout Central America. Air Panama International serves passenger traffic to the United States and South America. Internacional de Aviación (INAIR) is an international passenger and cargo carrier. Panama has two international airports: the largest, Tocumen International Airport is in Panama City; the smaller, Omar Torrijos International Airport, is 19 km (12 mi) east of Panama City. In 2003, about 1.264 million passengers were carried on scheduled domestic and international airline flights.
The Panama Canal traverses the isthmus and is 82 km (51 mi) in length from deepwater to deepwater and is part of the nation's 800 km (497 mi) of navigable internal waterways. The great technical feat involved in constructing the canal was to cut through the mountains that span the region, dam the Chagres Lake, and then design and build the three sets of double locks that raise and lower ships the 26 m (85 ft) between lake and sea levels. The first passage through the canal was completed by the S.S. Ancon on 15 August 1914. As of 1 October 1979 when the US-Panama treaties went into effect, the canal was administered by the joint Panama Canal Commission, on which the United States had majority representation through the end of 1989. The United States turned over complete control of the canal to Panama on 31 December 1999. The canal takes ships of up to 67,000 tons. An oil pipeline across the isthmus was opened in 1982 to carry Alaskan oil. Its capacity is 830,000 barrels per day. The Bridge of the Americas across the canal at the Pacific entrance unites eastern and western Panama as well as the northern and southern sections of the Pan American Highway. Panama, the United States, and Japan have commissioned a $20-million study to search for alternatives to the canal. The feasibility of building a new canal at sea level was to be examined. Alternatively, the Panama Canal Commission has indicated its intention to increase the width of the Gaillard Cut (Corte Culebra), since larger ships are restricted to one-way daylight passage due to the narrowness. Panama also plans to consolidate the ports of Balboa on the Pacific and Cristóbal on the Caribbean into a single container terminal system.
The isthmian region was an area of economic transshipment long before Europeans explored it. It was also the converging point of several significant Amerindian cultures. Mayan, Aztec, Chibcha, and Caribs had indirect and direct contact with the area. The first European to explore Panama was the Spaniard Rodrigo de Bastidas in 1501. In 1502, Columbus claimed the region for Spain. In 1513, Vasco Nuñez de Balboa led soldiers across the isthmus and made the European discovery of the Pacific Ocean. Despite strong resistance by the Cuna Amerindians, the settlements of Nombre de Dios, San Sebastián, and, later, Portobelo were established on the Caribbean coast, while Panama City was founded on the Pacific coast. In 1567, Panama was made part of the viceroyalty of Peru. English buccaneers, notably Sir Francis Drake in the 16th century and Henry Morgan in the 17th, contested Spanish hegemony in Panama, burning and looting its ports, including Panama City in 1671.
From the 16th until the mid-18th century, the isthmus was a strategic link in Spanish trade with the west coast of South America, especially the viceregal capital of Lima. In 1740, the isthmus was placed under the jurisdiction of the newly recreated viceroyalty of New Granada.
Panama declared its independence from Spain in 1821 and joined the Republic of Gran Colombia, a short-lived union of Colombia, Venezuela, and Ecuador, founded in 1819. In 1826, it was the seat of the Pan American Conference called by the liberator, Simón Bolívar. When Gran Colombia was dissolved in 1829–30, Panama still remained part of Colombia. Secessionist revolts took place in 1830 and 1831, and during 1840–41.
The discovery of gold in California in 1848 brought the isthmus into prominence as a canal site linking the Atlantic and Pacific oceans. After the French failed to build one in the 1880s, they sold those rights to the United States for $40 million. The United States then negotiated the Hay-Herrán Treaty with Colombia in 1903. After Colombia refused to ratify the treaty, Panama seceded from Colombia and, backed by US naval forces, declared its independence on 3 November 1903. Panama then signed a canal agreement with the United States and received a lump sum of $10 million and an annual rent of $250,000. The Hay-Bunau-Varilla Treaty (1903) granted the United States in perpetuity an 8-km (5-mi) strip of land on either side of the canal and permitted the United States to intervene to protect Panamanian independence, to defend the canal, and to maintain order in the cities of Panama and Colón and in the Canal Zone.
The United States intervened to establish order in 1908—while the canal was under construction—and, after the canal had opened to traffic, in 1917 and again in 1918. In 1936, however, the United States adopted a policy of nonintervention, and in 1955, the annuity was raised to $1,930,000.
During the postwar decades, the question of sovereignty over the Canal Zone was a persistent irritant in Panamanian politics. On 9 January 1964, riots broke out in the Canal Zone as Panamanians protested US neglect of a 1962 joint Panama-US flagflying agreement. On the following day, Panama suspended relations with the United States and demanded complete revision of the Canal Zone treaty. Thereafter, Panama sought sovereignty over the Canal Zone and the elimination of the concept of perpetuity on any future arrangement. Diplomatic relations were restored in April, but negotiations went slowly thereafter.
The Panamanian government turned to dictatorship in October 1968, when National Guard Brig. Gen. Omar Torrijos Herrera deposed the elected president and established a dictatorship.
Final agreement on the future of the canal and the Canal Zone came on 7 September 1977, when Gen. Torrijos and US president Jimmy Carter signed two documents at OAS headquarters in Washington, DC. The first document, the Panama Canal Treaty, abrogated the 1903 Hay-Bunau-Varilla accord, recognized Panama's sovereignty over the Canal Zone (which ceased to exist as of 1 October 1979), and granted the United States rights to operate, maintain, and manage the canal through 31 December 1999, when ownership of the canal itself would revert to Panama. Panama would receive a fixed annuity of $10 million and a subsidy of $0.30 (to be adjusted periodically for inflation) for every ton of cargo that passed through the canal, plus up to $10 million annually from operating surpluses. The second document, the so-called Neutrality Treaty, guaranteed the neutrality of the canal for "peaceful transit by the vessels of all nations" in time of both peace and war. An additional provision added in October denied the United States the right of intervention into Panamanian affairs. The treaties were ratified by plebiscite in Panama on 23 October 1977 and, after prolonged debate and extensive amendment, by the US Senate in March and April 1978. When both treaties came into force in 1979, about 60% of the former Canal Zone's total area immediately came under Panama's direct control, including 11 of 14 military bases, the Panama City-Colón railway, and ports at both ends of the canal.
The Torrijos regime was populist, with a wide appeal to the neglected lower and lower middle classes of Panama. Moreover, Torrijos established nationalist credentials by standing up to the United States and demanding recognition of Panama's positions on the Canal Zone. Torrijos resigned as head of government in 1978 but continued to rule behind the scenes as National Guard commander until his death in a plane crash on 31 July 1981. Over the next few years, the National Guard, now renamed the Panama Defense Forces (PDF), came under the influence of Gen. Manuel Noriega.
On the civilian side, Aristedes Royo was elected president by the Assembly in October 1978, and was later forced out of office in July 1982. His successor was the vice president, Ricardo de la Espriella, who resigned in February 1984, just three months before scheduled presidential elections. In those elections, the economist and former World Bank official Nicolás Ardito Barletta, the military's approved candidate, won a close victory over former president Arnulfo Arias Madrid (running for the fifth time), in an election marked by voting irregularities and fraud. Barletta soon lost the confidence of the military and was forced out in September 1985. Vice President Eric Arturo Delvalle assumed power.
By 1987, Noriega had been accused by close associates and the United States of falsifying the 1984 election results, plotting the deaths of prominent opposition leaders and Gen. Torrijos, drug trafficking, giving aid to the Colombian radical group M-19 and Salvadoran rebels, and providing intelligence and restricted US technology to Cuba. Opposition forces, including the Roman Catholic Church, intensified and the government responded by banning public protest. The US Senate approved legislation cutting off aid to Panama in December 1987. In February 1988, following indictments of Noriega in US courts for drug trafficking, President Delvalle announced Noriega's dismissal. Noriega refused to step down, and the Legislative Assembly voted to remove Delvalle from office and replace him with Manuel Solís Palma, the minister of education. Delvalle went into hiding, and Panama entered a two-year period of instability and conflict.
Noriega also had problems within the PDF. Dissident military leaders, with either tacit or direct US approval, attempted coups in March 1988 and in October 1989. Unable to rely on the loyalty of the PDF, Noriega created his own paramilitary force, called the "Dignity Batallions," which were nothing more than freelance thugs called in at the dictator's whim. Domestically, Noriega suffered from a lack of support. In March 1987, a general strike occurred for several weeks. Emboldened by US efforts to remove Noriega, opposition forces coalesced, even as the government became more repressive. In elections held in May 1989, opposition candidates scored overwhelming victories, forcing Noriega to annul the elections and rely on intimidation and force.
Finally, the United States was engaged in a series of moves calculated to bring down the Noriega regime, which eventually led to a showdown. In March 1988, President Ronald Reagan suspended preferential trade conditions and withheld canal-use payments. In April, Reagan froze US-held Panamanian assets and suspended all private payments to Panama. Negotiations to allow Noriega to step down dissolved in May, when Noriega refused to abide by an agreement between the United States and Noriega's assistants. The administration of President George H. W. Bush continued pressure on Noriega, but itself came under criticism for its inability to resolve the problem. Finally, in December 1989, Noriega played his final card, declaring war on the United States and ordering attacks on US military personnel.
President George H. W. Bush responded quickly, ordering the US military into Panama. The troops remained for a week, delayed when Noriega sought sanctuary in the residence of the Papal Nuncio. Noriega surrendered and was returned to the United States for trial. Immediately, the Panamanian Electoral Tribunal declared the 1989 elections valid and confirmed the results. Guillermo Endara became president, Ricardo Arias Calderón first vice president, and Guillermo "Billy" Ford second vice president. Legislative elections were confirmed for most Legislative Assembly seats, and in January 1991 a special election filled the remaining seats.
Under President Endara, Panama made some strides toward economic recovery, but these were only impressive because the situation under Noriega had become so desperate. Politically, Endara lacked nationalist credentials, especially since he was installed by US military might. His administration was widely criticized for the continuing poor economic conditions.
In May 1994, a new president, Ernesto Pérez Balladares, was elected in the country's first free and fair elections since 1968. His opponent, Mireya Moscoso, entered political life in 1964 when she worked on the campaign of Arnulfo Arias, whom she eventually married. After Arias's death in 1988, Moscoso returned to Panama, where she formed the Arnulfista party, named for Arnulfo Arias. Balladares's Democratic Revolutionary Party (PRD) was closely associated with the Noriega dictatorship but the new president identified himself with the populist Torrijos regime. The years of Pérez Balladeres's rule were characterized by a multiparty cabinet that included several members who publicly denounced former dictator Manuel Noriega. Peréz Balladeres set in motion various economic reforms and continued close collaboration with the United States to implement treaties regarding the eventual turnover of the Panama Canal to Panamanian rule (which occurred 31 December 1999). A law ratified in 1997 created the Canal Authority to administer the Canal after the United States relinquished control. Though Pérez Balladeres worked to pass a referendum to allow his reelection, it failed.
Presidential campaigns ensued. The PRD, with its majority in congress, campaigned fiercely with its candidate Martin Torrijos Espino, son of the late dictator. The main opposition was the Arnulfista Party. Its candidate, Mireya Moscoso (who is the widow of Arias) swept the elections on 2 May 1999. Moscoso thus became the first woman to take the office. After having run in 1994 and lost to Pérez Balladeres), Moscoso defeated Torrijos in what was considered a fair election: 75% of the country's 2.7 million citizens voted. Moscoso took office on 1 September 1999.
As the end of the decade neared, the country prepared for the withdrawal of the US military on 31 December 1999, under the terms of the Panama Canal Treaty. Moscoso officiated, with former US president Jimmy Carter, at the formal ceremony where the United States relinquished power over the Canal. The Panama Canal was officially handed over to Panamanian rule on 31 December 1999; this marked an end to 80 years of US occupation. Though the accompanying ceremony took place a week prior to the historic date due to potential complications with millennium celebrations, the significance was nonetheless grand. The ceremony included King Juan Carlos of Spain and several Latin American leaders. Carter, who began the process to grant Panama control over the waterway more than 20 years prior under a treaty with then-president General Omar Torrijos, signed over the United States rule. President Bill Clinton declined invitations to attend the ceremony. The celebrations that ensued were overshadowed somewhat by concerns from US conservative politicians that the canal will not be secure in Panamanian hands. However, President Clinton pledged continued collaboration with Panama to ensure the canal's security.
In 2004, on a strong "zero tolerance" anticorruption platform that called for increased transparency, Martin Torrijos won the presidency, and his PRD party won a majority in the National Assembly over the Panameñista (formerly Arnulfista) party. After his inauguration in September of that year, he created a broad coalition of labor, religious, and civil society, as well as government leaders to form the Anti-Corruption Council to crack down on the corruption endemic to previous administrations.
Since regaining control of the canal, Panama has experienced difficulties turning the canal into an engine for economic growth. The economy expanded by less than 3% in 2001 and 2002, but GDP increased to approximately 4% in 2004 and 6% in 2005. Despite being the country with the highest per capita income in Central America, roughly 40% of Panamanians live in poverty.
Under the constitution of 1972, Panama is a republic in which the president, assisted by a cabinet, exercises executive power. Reforms adopted in April 1983 changed the election of the president from an absolute majority of the National Assembly of Municipal Representatives to a direct popular vote, and a second vice president was added. The president and the two vice presidents must be at least 35 years of age and native Panamanians; they serve for five years and are not eligible for immediate reelection. For the 2009 national elections the executive branch will be reduced to including only one vice president. The constitution was ratified to reflect these changes in 2004.
Legislative power is vested in the unicameral Legislative Assembly, which replaced the National Assembly of Municipal Representatives in 1984. The 78 members are elected for five-year terms by direct popular vote. However, as per the 2004 constitutional changes, assembly membership will be capped at 71 representatives for the 2009 elections. Regular sessions are from 11 October–11 November annually, and special sessions may be called by the president. Suffrage is universal for Panamanians 18 years of age or over. The next national elections were scheduled to take place 3 May 2009.
The 1972 constitution conferred extraordinary decision-making powers upon the commander of the Panama Defense Forces (PDF), who was allowed to participate in sessions of all executive and legislative organs, to direct foreign policy, to appoint Supreme Court magistrates, and to appoint and remove ministers of state, among other responsibilities.
The PDF was subsequently converted into a civilian group called the Public Forces. Following a purge of PDF senior officials, the Public Forces were placed under the cabinet-level Minister of Government and Justice.
Personalities rather than ideological platforms tend to be the dominating force in Panamanian politics. The traditional political parties were the Liberals and the Conservatives, and their differences lay initially in the issue of church and state power. More recently, parties tended to be coalitions of the many splinter groups that had formed around local leaders. Military interventions frequently led to the banning of political parties. Such interruptions have led to an extremely splintered party system, which held together only insofar as they opposed the military regimes.
The coalition that came to power in 1990 consisted of President Endara's Arnulfista Party, led by Dr. Arnulfo Escalona, the National Liberal Republican Movement (MOLIRENA), led by second vice president Guillermo Ford; and the Christian Democratic Party (PDC), led by first vice president Ricardo Arias. Subsequently, Arias broke from the coalition, and the PDC, which held a plurality of seats in the Legislative Assembly, became the leader of the opposition.
With the election of Ernesto Pérez Balladares to the presidency in May 1994, the Democratic Revolutionary Party (PRD), which had been closely linked to the country's former military regime, was returned to power, as part of a coalition that also included the Liberal Republican Party (PLR) and the Labor Party (PALA). This coalition gained effective control of the National Assembly as well as the executive branch.
Although the PRD was defeated with the election of Mireya Moscoso in 1999, in 2004 the PRD came back with a victory fueled by a much-awaited anticorruption campaign, and a coalition with the Popular Party (PP). The other six constituted political parties are the former Arnulfista party of the Partido Panameñista (PA), MOLIRENA, Democratic Change (CD), Solidarity Party (PS), National Liberaly Party (PLN), and the Liberal Party (PL).
Panama is divided into nine administrative provinces, each headed by a governor appointed by the president, and one Amerindian territory. The provinces are subdivided into 67 municipal districts, each of which is governed by a mayor and a municipal council of at least five members, including all that district's representatives in the National Assembly. There are 511 municipal subdistricts in all.
Judicial authority rests with the Supreme Court, composed of nine magistrates and nine alternates, all appointed by the president (subject to approval by the Legislative Assembly) for 10-year terms. The Supreme Court magistrates appoint judges of the superior courts who in turn appoint circuit court judges in their respective jurisdictions. There are four superior courts, eighteen circuit courts (one civil and one criminal court for each province), and at least one municipal court in each district.
At the local level, two types of administrative judges—corregidores and night (or police) judges—who hear minor civil and criminal cases involving sentences under one year. Appointed by the municipal mayors, these judges are similar to Justices of the Peace. Their proceedings are not subject to the Code of Criminal Procedure and defendants lack procedural safeguards afforded in the regular courts.
The constitution guarantees a right to counsel for persons charged with crimes and requires the provision of public defenders for indigent criminal defendants. Trial by jury is afforded in some circumstances.
The 1996 amendment to the constitution abolished the standing military and contains a provision for the temporary formation of a "special police force" to protect the borders. The Judicial Technical Police perform criminal investigations in support of public prosecutors. The constitution also provides for an independent judiciary; however, the judiciary is susceptible to corruption.
The legal system is based on the civil law system. Panama accepts the compulsory jurisdiction of the International Court of Justice with reservation.
The Panamanian Defense Force disappeared with the US intervention in 1989. The National Police Force numbers approximately 11,800 members, supported by a maritime service (estimated at 400 with 39 patrol boats) and an air service (400 staff, 12 aircraft, and 34 utility helicopters). In 2005, Panama's defense budge totaled $158 million.
Panama is a charter member of the United Nations, having joined on 13 November 1945, and participates in ECLAC and several nonregional specialized agencies, such as the FAO, IAEA, the World Bank, the IFC, UNESCO, UNIDO, and the WHO. Panama is also a member of the Inter-American Development Bank, G-77, the Latin American Economic System (LAES), the Latin American Integration Association (LAIA), the OAS, the Association of Caribbean States (ACS), and the Río Group. Panama is also a part of the Central American Parliament (PARLACEN). The nation is part of the Nonaligned Movement.
In environmental cooperation, Panama is part of the Basel Convention, Conventions on Biological Diversity and Whaling, Ramsar, CITES, the London Convention, International Tropical Timber Agreements, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on the Law of the Sea, Climate Change and Desertification. The nation is also a part of the Central American-US Joint Declaration (CONCAUSA).
Panama depends largely on its privileged geographical position: the economy is based on a well-developed services sector, including the Panama Canal, banking, insurance, government, the transPanamanian oil pipeline, and the Colón Free Zone. The Panama Canal and the monetary regime anchored in the use of the US dollar as legal tender spurred the rapid development of the service economy which offset markedly unfavorable terms of trade. The unique monetary system played a significant role in the creation of an International Banking Center and the Colón Free Zone.
Whereas many countries were characterized by a growing protectionism in the late 1940s, Panama launched the Colón Free Zone (the world's largest free zone, with Hong Kong as the largest free port). Panama also earned substantial rents through the construction of the trans-Panamanian oil pipeline and by the licensing of the Panamanian flag to merchant ships from around the world.
The economy generated annual growth of more than 6% during the period 1950–81. However, economic growth stagnated to 1.9% annually over 1977–87, caused by the aftermath of the second oil shock and the debt crisis. In the early 1990s, Panama rebounded from an excruciating recession brought about by a US embargo and subsequent military invasion. The US objective was the capture of General Manuel Noriega, who had installed puppet governments and was responsible for an increase in drug trafficking and money laundering. After Noriega was captured, extradited and condemned at a Miami federal court, Guillermo Endara assumed office. Nevertheless, his administration was widely criticized for not fulfilling Panamanians' hope for a rapid and bountiful recovery.
In May 1994, Armando Perez Balladares was elected president. The economy continued to grow, but at a slower pace during the first half of the 1990s. Panama's main engines of economic growth (the Panama Canal, the Colón Free Zone, and International Banking Center) continued to lose competitiveness in the context of an open economy throughout the world. The Balladares administration responded in 1996 with a solid program of economic reforms. These included the privatization of two seaports (Cristóbal and Balboa), the promulgation of an antimonopoly law, the renegotiating of foreign debt with commercial banks, the privatization of the electricity and water companies, and a banking reform law. These economic reforms were accompanied with the recovery of the majority of traditional sectors, with the exception of the construction sector.
Between 1988 and 1998, the economy grew at 5% annually. In 1999, Mireya Moscoso was elected to the presidency. She did not intend to privatize the few remaining state enterprises, and wanted to raise protectionist tariffs to help local farmers, but membership in the WTO forbade this action. In December 1999, in accordance with the 1977 Panama Canal Treaty, the Panama Canal and all American bases were returned to the Panamanian government, comprising 364,000 acres and estimated to be worth $4 billion. Real GDP growth fell to 3.2% in 1999 (down from 4.4% in 1998) and then to 2.5% in 2000. A major cause of the slowdown was a decline in foreign direct investment (FDI), which had run at about $1.3 billion in 1997 and 1998, but fell to $.65 billion in 1999 and $.60 billion in 2000. Real GDP growth fell to 2.5% in 2000.
In 2001, growth declined further as declining export demand and a dramatic drop in tourism following the 11 September 2001 terrorist attacks on the United States were added to declining domestic demand. Real GDP annual growth fell to 0.3% in 2001, and is estimated to have reached only 1.2% in 2002. Inflation has been held in control, falling from 1.5% in 1999 to 0.3% in 2001, and estimated at 0.8% for 2002. Unemployment remains in double digits, reaching 14.4% in 2001. In 2001 Panama was removed from both the United States and the OECD lists of noncooperating countries on money laundering, having been certified as compliant with 23 of 25 Basel Core Principles by the IMF Offshore Financial Center Module II assessment in August 2001. However, in 2002 and 2003, Panama remained one of 23 countries on the US list of major illicit drug producing and/or drug transit countries.
The economy expanded by 7.6% in 2004, up from 4.3% in 2003; in 2005, the GDP growth rate was estimated at 5.5%, while the GDP per capita, at purchasing power parity, reached $7,300. Most of this growth has been fueled by export-oriented services, and the construction boom, which in turn were backed up by tax incentives. The inflation rate was fairly stable and at 0.2% in 2004 it did not pose a major problem to the economy. The unemployment rate was modest in 2005 (8.7%), and as such was not a key concern for the government.
The US Central Intelligence Agency (CIA) reported that in 2005 Panama's gross domestic product (GDP) was estimated at $22.2 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $7,300. The annual growth rate of GDP was estimated at 4.3%. The average inflation rate in 2005 was 2.5%. It was estimated that agriculture accounted for 7.6% of GDP, industry 17.9%, and services 74.5%.
According to the World Bank, in 2003 remittances from citizens working abroad totaled $85 million or about $28 per capita and accounted for approximately 0.7% of GDP. Foreign aid receipts amounted to $30 million or about $10 per capita and accounted for approximately 0.3% of the gross national income (GNI).
The World Bank reported that in 2003 household consumption in Panama totaled $8.07 billion or about $2,703 per capita based on a GDP of $12.9 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 4.9%. In 2001 it was estimated that approximately 22% of household consumption was spent on food, 18% on fuel, 14% on health care, and 4% on education. It was estimated that in 1999 about 37% of the population had incomes below the poverty line.
In 2005, Panama's workforce was estimated at 1.39 million. As of 2003, the services sector accounted for 65.2% of the labor force, with 17.51% in agriculture, 17.2% in industry, and 0.1% in undefined occupations. Panama's workforce is marked by an abundance of unskilled laborers, but a shortage of skilled workers. The unemployment rate rose from 11.8% in 1985 to 17% in 1990, and then declined to 13% by 2000. In 2005, the unemployment rate was estimated at 8.7%.
In 1999, Panama had over 250 unions with about 80,000 private sector members, organized into 48 federations and 7 confederations. The province of Panama is where more than two-thirds of the total number of unions are found. About 10% of the workforce was unionized as of 2001. The Confederation of Workers of the Republic of Panama, formed in 1963, is an affiliate of the ICFTU, and the National Center of Panamerican Workers is affiliated with the WFTU. Strikes are permitted, and collective bargaining is widely practiced.
The law provides for an eight-hour day, a six-day week, minimum wages, a month's vacation with pay, maternity benefits and equal pay for women, and restrictions on the employment of minors. The minimum wage ranged from $0.80 to $1.50 per hour in 2001. All employees are entitled to a one-month annual bonus in three equal installments, two of which the worker receives directly and one of which is paid into the Social Security Fund. The law prohibits children under the age of 14 from working, but child labor continues to be widespread.
About 9.3% of the total land area was classified as arable in 2003. Farming methods are primitive, and productivity is low. The best lands are held by large owners. Agriculture contributes about 7% to GDP and accounted for 34% of exports in 2004.
Panama is self-sufficient in bananas, sugar, rice, corn, and coffee, but imports large quantities of other foods. Bananas are the leading export product and the banana industry is an important source of rural employment; exports were valued at $108.2 million in 2004, about half destined for the German market. In 2004, crop production (in tons) included sugarcane, 1,650,000; bananas, 525,000; rice, 296,000; corn, 80,000; and coffee, 8,700.
The Panamanian livestock industry produces sufficient meat to supply domestic demand and provides hides for export. Most cattle and hogs are tended by small herders, and dairy farming has expanded in recent years. In 2005 there were 1,600,000 head of cattle, 272,000 hogs, and about 14 million chickens. Milk production in 2005 was reported at 187,000 tons. Panama imports a substantial amount of its dairy needs (powdered milk, butterfat, and cheese), primarily from New Zealand.
The offshore waters of Panama abound in fish and seafood, and fisheries are a significant sector of the national economy. There is freshwater fishing in the Chiriquí River and deep-sea fishing along the Pacific and Caribbean coasts for amberjack, barracuda, bonito, corbina, dolphinfish, mackerel, pompano, red snapper, sailfish, sea bass, and tuna.
In 2006, the fish catch totaled 229,652 tons, as compared with 131,514 tons in 1986. The main commercial species caught that year were Pacific anchoveta (78,618 tons), Pacific thread herring (55,730 tons), yellowfin tuna (28,694 tons), and skipjack tuna (11,474 tons). Exports of fish products were valued at nearly $412.3 million in 2003.
Forests cover about 39% of the country's area but have been largely unexploited because of a lack of transportation facilities. Nearly all forestland is government-owned. Hardwood, particularly mahogany, is produced for export in Darién and along the Pacific coast in Veraguas. Abacá fiber, which is obtained in Bocas del Toro and is used in the making of marine cordage, is a valuable forest product. Approximately 30% of Panama's natural forests are still unused. The average annual deforestation rate was 1.6% during 1990–2000. In order to protect and preserve native forests, the National Association for the Conservation of Nature has begun a vast reforestation program. Production of roundwood was 1,372,000 cu m (48.4 million cu ft) in 2004, 89% used as fuel wood.
Panama had a small-to-moderate mineral sector, with known deposits of copper, manganese, iron, asbestos, gold, and silver. Construction materials were a leading industry, including cement, clays, lime, limestone, and sand and gravel. There was no recorded gold or silver production from 2000 through 2003, nor was there any copper output that year. Salt, produced by evaporation of seawater at Aguadulce, was a major mineral product. Output was in 2003 was estimated at 23,000 metric tons. Cement production in 2003 was estimated at 770,000 metric tons in 2003.
Panama has no proven reserves of oil, natural gas, or coal, nor any oil-refining capacity. As a result, the country is totally dependent upon imports to meets its fossil fuel needs.
In 2002, Panama's petroleum imports, including crude oil, averaged 88,980 barrels per day, of which 28,000 barrels per day consisted of crude oil. Demand for refined oil products averaged 76,580 barrels per day. Refinery output that year averaged 19,790 barrels per day. However, in that same year, Panama closed its sole refinery. As a result, the country must import all of its refined petroleum products.
There were no recorded imports of natural gas in 2002, although Panama did import 50,000 tons of hard coal that year.
Panama had a total installed electric capacity of 1,260,000 kW in 2002, of which conventional thermal facilities accounted for 51.3% of capacity, with hydroelectric dedicated capacity accounting for the rest. Production of electric power that year totaled 5.162 billion kWh, of which 34.4% was from fossil fuels, 65.2% from hydropower, and the rest from other renewable sources. Consumption of electricity in 2002 was 4.786 billion kWh.
The performance of Panama's industry as a whole was negative during the 1980s, but garnered a 7% growth rate during the 1990s. Construction, manufacturing, mining, and utilities together accounted for 17% of GDP in 2000, but industrial activity decreased by 1.5% that year. The government and the private sector have invested large amounts in the construction of ports, roads, and bridges. Thus, the production of construction-related materials and finished wood products have all risen considerably in recent years. Construction activity itself rose 7.5% in 2000.
Limited by a small domestic market, Panamanian manufacturing represents around 8% of GDP. Growth in production reached an average 1.1% annually between 1978 and 1988, rising to 5.4% between 1988 and 1998 due to an import-substitution high tariff regime that ended in 1998. Manufacturing of mainly nondurable goods consists principally of food-processing plants and firms for the production of: alcoholic beverages, sugar, ceramics, tropical clothing, cigarettes, hats, furniture, shoes, soap, and edible oils. Other manufactured products include clothing, chemicals, cement, and construction products for domestic consumption.
Panama has potential to further develop its mining industry. The country has one oil refinery with a production capacity of 60,000 barrels per day. The government's privatization program was largely complete as of 2002.
The industrial production growth rate in 2005 year was 3.5%, lower than the overall GDP growth rate and an indicator that industry was not an economic growth engine. In 2005, industry accounted for 17.9% of the GDP and was bested by services—which comprised 74.5% of the economy; agriculture was the smallest economic sector although it employed more people than the industrial sector. Panama currently suffers from a shortage of skilled labor, but has an oversupply of unskilled labor.
Although the shipping technology of the Panama Canal is owned and operated by the United States, technicians from the United States who operated the canal's facilities were replaced gradually by Panamanian personnel before the canal was officially turned over to Panama. The National Academy of Sciences of Panama (founded in 1942) advises the government on scientific matters, and the National Research Center (1976) coordinates scientific and technological research. The Smithsonian Institution has had a tropical research institute in Balboa since 1923. The University of Panama, founded in 1935 in Panama City, has faculties of agriculture, medicine, sciences, dentistry, nursing, and pharmacy. Santa María La Antigua University, founded in 1965 at El Doradom Panama, has a department of technology and natural science. The Technological University of Panama, founded in 1984 at El Dorado, has colleges of civil, mechanical, industrial, electrical, and computer-science engineering. The Nautical School of Panama, founded in 1959 at Paitilla, offers courses in nautical engineering. In 1987–97, science and engineering students accounted for 29% of college and university enrollments. The Museum of Natural Sciences, founded in Panama in 1975, is concerned with natural history and the fauna of Panama and other countries.
In 2001, spending by Panama on research and development (R&D) totaled $68.432 million or 0.37% of GDP. Of that amount, foreign sources accounted for the largest portion (55.1%), followed by the government sector (32.8%). Business accounted for 10.2%, with higher education and nonprofit organizations at 0.6% and 1.2%, respectively. In that same year, Panama had 95 researchers and 213 technicians engaged in R&D per million people. In 2002, Panama's high technology exports totaled $1 million, or 1% of its manufactured exports.
About 65% of the total national sales of consumer goods occurs in Panama City. The cities of David, Colón, Santiago, and Chitre sponsor nearly all of the rest. Marketing and distribution are generally on a small scale, with direct merchant-to-customer sales. Some wholesalers also act as retailers. Many shops in Panama City and Colón sell both native handicrafts and imported goods. Luxury items are generally untaxed in order to attract tourist sales. There are also US-style variety stores. In rural districts, agricultural products and meat are sold at markets. A 5% value-added tax (VAT) applies to most goods and services.
The usual business hours are 8 am to 5 pm, Monday through Friday; and 8 am to noon on Saturday. Government offices are open weekdays from 8:30 am to 4:30 pm, Monday through Friday. Banking hours in Panamanian urban centers are generally from 8:00 am to 3 pm, Monday through Friday, and most banks are open on Saturdays from 9 am to 12 noon.
The leading agricultural export—mainly controlled by foreigners—is bananas, followed by shrimp. The decline in exports of almost 11% from 1997 to 1998 can be explained by quotas imposed on banana exports by the EU (bananas represent nearly one-fifth of all exports). Light industry exports (clothing and manufacturing textiles) have been increasing due to the free trade zone; but competition from Mexico starting in 1996 and the reduction of protective tariffs in 1998 stunted growth. All of Panama's main export
|(…) data not available or not significant.|
commodities are foods, including bananas (19%), fish (18%), shrimp (10%), sugar (2.6%), and coffee (2.1%).
In 2005, exports reached $7.4 billion (FOB—free on board), while imports grew to $8.7 billion (FOB). In 2004, the bulk of exports went to the United States (50.5%), Sweden (6.6%), Spain (5.1%), the Netherlands (4.4%), and Costa Rica (4.2%). Imports included capital, food products, and petroleum products, and mainly came from the United States (33.3%), Netherlands Antilles (8.1%), Japan (6%), Costa Rica (5.7%), Mexico (4.6%), and Colombia (4.2%).
Panama's adverse balance of trade is largely made up by invisible foreign exchange earnings from sales of goods and services in the Colón Free Trade Zone and from the Panama Canal. Nonetheless, Panama has had one of the highest amounts of goods and services export earnings in the region, relative to GDP. A strong services sector and foreign direct and financial investments have usually offset large merchandise trade deficits. In addition, Panama's debt traditionally trades with less volatility and a lower risk premium than most other Latin American issues.
The US Central Intelligence Agency (CIA) reported that in 2001 the purchasing power parity of Panama's exports was $5.9 billion while imports totaled $6.7 billion resulting in a trade deficit of $800 million.
The International Monetary Fund (IMF) reported that in 2001 Panama had exports of goods totaling $5.88 billion and imports totaling $6.71 billion. The services credit totaled $1.82 billion and debit $1.14 billion.
Exports of goods reached $8.8 billion in 2004, up from $7.6 in 2003. Imports increased from $7.4 billion in 2003 to $8.4 billion in 2004. The resource balance was consequently positive in both years, improving from $171 million in 2003 to $395 million in 2004. The current account balance was negative however, reaching
|Balance on goods||-1,092.0|
|Balance on services||1,262.6|
|Balance on income||-819.9|
|Direct investment abroad||…|
|Direct investment in Panama||791.5|
|Portfolio investment assets||-59.3|
|Portfolio investment liabilities||139.6|
|Other investment assets||464.1|
|Other investment liabilities||1,310.5|
|Net Errors and Omissions||228.1|
|Reserves and Related Items||154.5|
|(…) data not available or not significant.|
-$408 million in 2003, and -$274 million in 2004. Foreign exchange reserves (including gold) reached $1.1 billion in 2004, covering more less than two months of imports.
Panama was considered the most important international banking center in Latin America in the late 1980s. In 1970, 28 banks operated in Panama's international banking center; by 1987 there were 120, with assets of nearly $39 billion. Liberalized banking regulations and use of the dollar made Panama one of Latin America's major offshore banking centers.
Since 1983, the year of the onset of Latin America's financial crisis, the Panamanian banking sector has contracted, both in number of banks and total assets. In 2001 there were about 85 banks in Panama, holding $38 billion in total assets. Fifty of the banks in Panama have general licenses, 25 banks have offshore licenses, eight foreign banks have representative offices, and two banks are government owned. The National Bank of Panama (Banco Nacional de Panamá—BNP), founded in 1904, is the principal official (but not central) bank and also transacts general banking business. Banking activities are supervised by the National Banking Commission (Comisión Bancaria Nacional—CBN).
The balboa is fully convertible with the dollar at a fixed rate of 1:1. The government cannot, therefore, implement a monetary policy. Most monetary developments are exogenously determined by the balance of payments.
Panama's banking center has allegedly been the main money laundering point for proceeds from international drug-trafficking. In March 1994, it was decreed that persons entering Panama had to declare money or financial instruments in excess of $10,000. For deposits and withdrawals in excess of this amount from local banking institutions, a form had to be completed, providing details about the person carrying out the transaction. In 1998, a banking law was enacted in order to modernize the banking system and increase government supervision. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $1.3 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $9.4 billion.
Panama's international stock exchange, the Bolsa de Valores de Panama, began operations in June 1990. In 2003, there were a total of 94 listed companies. Companies rarely issue stock on the stock market and investment is small because of a 10% withholding tax. Panama's Central de Custodia de Valores (Panaclear) began operations in November 1996. A rating agency began operations in early 1997.
There were about 41 national insurance companies in Panama in 1997. Domestic companies include the General Insurance Co., the International Insurance Co., and the International Life Insurance Co. For a firm to qualify as a national insurance company, 51% of the capital must be Panamanian. In Panama, third-party automobile liability and workers' compensation are compulsory insurance. Only the government provides workers' compensation, as it is a part of the social security scheme. All firms must be approved by the Superintendency of Insurance. In 2003, the value of all direct
|Revenue and Grants||3,041||100.0%|
|General public services||808.3||27.5%|
|Public order and safety||195.6||6.7%|
|Housing and community amenities||107.5||3.7%|
|Recreational, culture, and religion||39.2||1.3%|
|(…) data not available or not significant.|
insurance premiums written totaled $388 million, of which nonlife premiums accounted for $261 million. Panama's top nonlife insurer in 2003 was ASSA, which had gross written nonlife premiums of $44.8 million, while the nation's leading life insurer, Aseguradora Mundial had gross written life insurance premiums of $48.1 million.
Panama does not issue its own currency; US dollar notes circulate as the paper currency. Panama's local currency, the balboa, established in 1904, is issued only in coins. One balboa equals one US dollar.
The US Central Intelligence Agency (CIA) estimated that in 2005 Panama's central government took in revenues of approximately $3.4 billion and had expenditures of $3.9 billion. Revenues minus expenditures totaled approximately -$533 million. Public debt in 2005 amounted to 73.2% of GDP. Total external debt was $9.859 billion.
The International Monetary Fund (IMF) reported that in 2001, the most recent year for which it had data, central government revenues in millions of US dollars were 3,041 and expenditures were 2,934.4. Government outlays by function were as follows: general public services, 27.5%; public order and safety, 6.7%; economic affairs, 6.0%; housing and community amenities, 3.7%; health, 18.0%; recreation, culture, and religion, 1.3%; education, 16.2%; and social protection, 20.6%.
As of 2005, Panama's corporate tax rate stood at a flat rate of 30%. However, companies not declaring any dividends during the tax year are subject to a minimum dividend tax of 4% of taxable income, minus the income tax. For companies registered in Panama's tax-free processing zones (TFTZs), which are modeled after the long-standing Colón Free Trade Zone (CFTZ), a much-vaunted 0% rate is applied on all profits arising outside of Panama. The 0% corporate tax rate goes with an exemption from all export and import duties on reexports. Companies in TFPZs have tax liability only for sales within Panama's fiscal jurisdiction which, by statute, can make up no more than 40% of their business. Capital gains are generally taxed as income and at the corporate rate. Interest income and royalties are subject to withholding taxes of 15% and 30%, respectively.
Personal income tax in Panama, as of 2005, was taxed according to a progressive schedule that has a top rate of 30%. Dividends received by individuals are subject to a 10% withholding tax on nominative shares, and 20% if issued to the bearer. There are targeted deductions for mortgage interest, loans to pay school fees, medical expenses, health insurance, and donations to charity among others that reduce taxable income for individuals. Gift taxes depend on the amount, unless the gift was between linear descendants, in which case, the gift is tax-exempt.
The main indirect tax is Panama's value-added tax (VAT) with a standard rate of 5%, and a reduced rate of 0% applied to basic foodstuffs, trade and medical services. Tobacco-related products are subject to a 15% excise tax, with alcohol subject to a 10% rate. Other levies include license fees, stamp and education taxes, and property taxes. Property improvements are tax-exempt for the first five years.
Panama imposes tariffs ranging of 0–15% on most manufactured goods. A 3% rate is applied to industrial equipment, industrial production inputs and raw materials. Agricultural inputs, agricultural machinery and agricultural chemicals pay no import duties. However, automobiles are subject to a 15–20% duty, while dairy products and rice are subject to duties of 40% and 50%, respectively. There is also a 5% value-added tax (VAT) on imports.
Panama has a free port in the Colón Free Trade Zone, the world's second-largest free trade zone, where foreign goods enter without going through customs. Goods may be stored, assembled, processed, or repackaged for sale or shipment to another country free of duty. Panama is a part of the Caribbean Basin Initiative and has bilateral preferential trade agreements with Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua, and the Dominican Republic. The country also has special arrangements with Mexico, Colombia, and Chile.
Increased private sector investment and inflows from lending agencies should offset lower public expenditure and help to stimulate economic growth. The government sold the electricity generation and distribution utilities in 1996. In addition, the government partially sold the telephone company. The United Kingdom's Cable and Wireless bought a 49% stake in INTEL, the national telecommunications monopoly. Privatization of the state water utility was put on hold in 1998 due to violent protests. Other parastatal sales included the transisthmian railroad, both canal ports, two sugar companies, a casino, a cement company, a fruit company, and a horse racetrack.
The government encourages industrialization by granting special tax concessions to new enterprises and imposing protective duties on competing foreign manufacturers. The Industrial Development Bank, equivalent to the US Small Business Administration, promotes small industries and facilitates credit on a longterm basis. A 1986 law on industrial incentives grants industrial investors a wide range of benefits, the foremost of which is tax exceptions that vary according to whether all or part of the output is earmarked for the export or domestic market.
In 1997 and 1998, annual inflows of foreign direct investment (FDI) peaked at almost $1.3 billion a year. Total FDI reached 40% of GDP in 1998. In 1999, as sovereignty over the canal was transferred from the United States to Panama, FDI flows declined by more than half, to $652 million in 1999, $603 million in 2000, and $513 million in 2001. Major investors include the United States, the United Kingdom, Mexico, and Taiwan. The majority of foreign investments in Panama are in the transport, storage, services, and communication sectors.
In 2003, total capital inflows reached $792 million (or 5.72% of the GDP), up from $98.6 million in 2002. Most of the investments went to Colón Free Zone businesses and banks.
The Panamanian economy is the most stable and among the most prosperous in the region. But the economy is highly segmented between its dynamic, internationally oriented service sector and the domestically oriented sector, which is beset with policy-induced rigidities and low productivity. About 14% of the labor force is unemployed despite the preponderance of services in the economy, low growth of the economically active population and relatively slow rural-urban migration. The protected poor performance of the economy has impeded job creation and contributed to high poverty levels and income inequality.
Despite Panama's relatively high per capita income, distribution of the wealth is highly skewed and had become progressively more evident in the 1990s. In 1979, the poorest 20% of the population received 4% of income; in the early 1990s that share had plunged to 2%, leaving Panama with one of the most unequal distributions in the hemisphere. The government's strategy for mitigating poverty and inequality rests primarily on reviving sustainable growth; its economic program emphasizes reforms that will mitigate the bias against employment creation (unemployment surpassed 14% in 2002), increase agricultural productivity, and reduce the high cost of the basic consumption basket.
In 2000, the International Monetary Fund (IMF) approved a 21-month, $85.5-million Stand-By Arrangement with Panama, to support the government's economic reform program. Economic growth slowed in the early 2000s, due in part to the global economic downturn, and weak domestic demand that resulted from the completion of large investment projects and a decline in bank credit to the private sector. The government in 2002 invested in infrastructure projects and strengthened the banking system.
The economy expanded at healthy rates in 2005, due to strong world trade growth, and good performance in the primary sectors. By 2006 and 2007 this trend was expected to dampen following a slower world trade growth.
The Social Security Fund, established by the government in 1941, provides medical service and hospitalization, maternity care, pensions for disability or old age, and funeral benefits. Retirement is set at age 62 for men and age 57 for women. This program is financed by an alcohol tax, in addition to employee and employer contributions. Employed women receive 14 weeks of maternity leave at 100% pay. Compulsory workers' compensation legislation covers employees in the public and private sectors. This program is funded entirely by employer contributions.
Despite constitutional equality, women generally do not enjoy the same opportunities as men. While Panama has a relatively high rate of female enrollment in higher education, many female graduates are still forced to take low-paying jobs. Women's wages are, on average, 30% lower than those of men. Women also face sexual harassment in the workplace, although it is prohibited by the Labor Code. Domestic violence remains a widespread problem. Convictions for domestic abuse are rare; victims generally choose counseling over prosecution. The Ministry of Women, Youth, Family, and Childhood was established to focus national attention on social issues affecting women and families. In 2004, child labor and trafficking in children continued.
Indigenous peoples in Panama are increasingly demanding more participation in decisions that affect their land. Semiautonomous status has been given to some tribal groups. Despite these provisions, many indigenous groups feel that existing reserves are too small. Human rights abuses include prolonged pretrial detention, poor prison conditions, and internal prison violence.
Public health services are directed by the Ministry of Health, whose programs include free health examinations and medical care for the needy, health education, sanitation inspection, hospital and clinic construction, and nutrition services. Health care expenditure was estimated at 7.3 % of GDP.
In 2004, Panama had 168 physicians, 48 dentists, and 152 nurses per 100,000 people. In 2000 there were close to 2,000 beds in public hospitals at the national, regional, and municipal levels.
Proceeds from a national lottery support state hospitals, asylums, and public welfare. Assistance has been received from such organizations as the World Health Organization, the US Institute of Inter-American Affairs, the Pan American Sanitary Bureau, the Institute of Nutrition of Central America and Panama, and UNICEF.
During the first two decades of the 20th century, when the Panama Canal was being built, the major health threats were yellow fever, malaria, smallpox, typhoid, dysentery, and intestinal parasites. Through the efforts of Col. William Crawford Gorgas, a US military surgeon and sanitary officer, malaria was controlled and the yellow fever mosquito was virtually eliminated. In the early 2000s, the principal causes of death were cancer, heart disease, cerebrovascular disease, pneumonia and bronchopneumonia, enteritis, and diarrhea.
Col. Gorgas pioneered in providing Panama City and Colón with water and sewer systems; in some areas of Panama, poor sanitation, inadequate housing, and malnutrition still constitute health hazards. In 2000, 87% of the population had access to safe drinking water and 94% had adequate sanitation. However, in the same year, 18% of children under five years old were considered malnourished. The government of Panama is currently increasing distribution of vitamin A capsules to populations with high risk of vitamin A deficiency, mostly the Indians in the western region of Panama. Immunization rates for children up to one year old were: tuberculosis, 99%; diphtheria, pertussis, and tetanus, 95%; polio, 99%; and measles, 92%. Polio, measles, and neonatal tetanus were at extremely low numbers during 1994. Goiter was present in 13.2% of school-age children.
As of 2002, the crude birth rate and overall mortality rate were estimated at, respectively, 18.6 and 5 per 1,000 people. The infant mortality rate in 2005 was 16.73 per 1,000 live births. Maternal mortality was 70 per 1,000 live births in 1998. Average life expectancy in 2005 was 75 years.
The HIV/AIDS prevalence was 0.90 per 100 adults in 2003. As of 2003, there were approximately 16,000 people living with HIV/AIDS in the country. AIDS and pneumonia were the only communicable diseases among the ten leading causes of death in Panama.
Housing in urban areas has been a permanent problem since US construction in the Canal Zone brought a great influx of migrant laborers into Colón and Panama City. The government-established Bank of Urbanization and Rehabilitation began to build low-cost housing in 1944, and by 1950, it had built more than 1,500 units to house 8,000 people near Panama City. A 1973 housing law, designed to encourage low-income housing construction, banned evictions, froze all rents for three years, and required banks to commit half their domestic reserves to loans in support of housing construction projects. By the early 1980s, however, the shortage of low-income housing remained acute, particularly in Colón. A construction boom in the early 1980s was mainly confined to infrastructure projects and office space.
In 2000, there were 793,732 dwellings units nationwide with an average of 3.6 people per dwelling. Though most homes are made of brick, stone, or concrete blocks, about 4% of the total housing stock was made of straw and thatch.
Education is free for children ages 6 through 15. Primary school covers the first six years of compulsory studies. Secondary education has two stages, each lasting three years. At secondary, vocational, and university levels, fees may be charged for the development of libraries and laboratories. The academic year runs from April to December.
In 2001, about 50% of children between the ages of four and five were enrolled in some type of preschool program. Primary school enrollment in 2003 was estimated at about 100% of age-eligible students. The same year, secondary school enrollment was about 63% of age-eligible students. It is estimated that about 97.5% of all students complete their primary education. The student-to-teacher ratio for primary school was at about 24:1 in 2003; the ratio for secondary school was about 16:1. In 2003, private schools accounted for about 10% of primary school enrollment and 14.5% of secondary enrollment.
The leading institution of higher education, the state-run University of Panama, was founded in Panama City in 1935. A Catholic university, Santa María la Antigua, was inaugurated in May 1965, with an initial enrollment of 233. In 2003, about 43% of the tertiary age population were enrolled in some type of higher education program; (32% for men and 55% for women). The adult literacy rate for 2004 was estimated at about 91%.
As of 2003, public expenditure on education was estimated at 4.5% of GDP, or 7.7% of total government expenditures.
The National Library of Panama, located in Panama City, was founded in 1892 as Biblioteca Colón and reorganized as the National Library in 1942. It is a branch of the Ministry of Education's public library system and has over 200,000 volumes. There are more than 40 other public libraries and branches. The National Archives, established in 1924, contain historical documents, books, and maps, as well as administrative papers of government agencies and a judicial section with court records. The Biblioteca Pública Morales has 280,000 volumes, while the Simón Bolívar Library at the University of Panama has holdings of over 267,000 volumes. The Smithsonian Tropical Research Institute in Balboa has 44,000 volumes.
The Instituto Panameño de Arte, founded in 1964, displays excellent collections of pre-Columbian art. Newer museums in Panama City include the Museum of Nationhood (dedicated in 1974); the Museum of Colonial Religious Art (1974); the Museum of the History of Panama (1977), which exhibits documents and objects of historical value; and the Museum of Panamanian Man (1976), with archaeological, ethnographic, and folkloric displays. Panama City also hosts the Museum of Contemporary Art, the Afro-Antillean Museum, the Museum of Natural Sciences, the Postal Museum, and the Anthropological Museum Reina Torres de Arauz. The Museum of History and Tradition of Penonome is in Cocle.
The Instituto Nacional de Telecomunicaciones (INTEL) operates Panama's telephone and telegraph systems. In 2003, there were an estimated 122 mainline telephones for every 1,000 people. The same year, there were approximately 268 mobile phones in use for every 1,000 people. Telegraph cables link Panama to the United States, to Central and South America, and to Europe.
In 2004, there was one government-owned educational television station. The same year, there were 8 television stations and 120 radio stations that were privately or institutionally owned. In 2003, there were an estimated 300 radios and 191 television sets for every 1,000 people. The same year, there were 38.3 personal computers for every 1,000 people and 62 of every 1,000 people had access to the Internet. There were 149 secure Internet servers in the country in 2004.
There were five major daily newspapers in 2004. With their estimated circulations, they were: El Siglo, 42,000; Crítica Libre, 40,000; La Prensa, 40,000; La Estrella de Panama, NA; and El Panama America, 40,000. The constitution provides for freedom of speech and the press, and the government is said to respect these rights in practice.
The cooperative movement in Panama is limited. Producers' organizations are small, local, uncoordinated groups concerned mainly with practical education in techniques to improve production. The Chamber of Commerce, Industry, and Agriculture is in Panama City. There are some professional associations, including the National Medical Association.
National youth organizations include the Student Federation of Panama, the National Scout Association of Panama, and the YMCA. There are several sports associations organizing amateur competitions for such pastimes as baseball, tennis, squash, and track and field.
There are several associations dedicated to research and education in health and medicine, including the National Cancer Association and branches of Planned Parenthood. The Panama Association of University Women promotes career and education opportunities for women. Kiwanis and Lion's Clubs have programs in the country. There are national chapters of the Red Cross, UNICEF, and Habitat for Humanity.
Travel facilities within Panama are good; Panama City and Colón are only one hour apart by road or rail. In addition to the Panama Canal itself, tourist attractions include Panama City, beach resorts in the Pearls Archipelago and San Blas Islands, the ruins of Portobelo, and the resort of El Valle in the mountains. Water sports, tennis, golf, and horse racing are popular. Nature treks and historic tours also attract visitors to Panama. Citizens of the United States and Canada need only a valid passport and tourist card to enter Panama. Other foreign nationals are required to have a valid passport, and either a visa or tourist card; both card and visa are valid for up to 90 days.
The government encourages tourism through the Panamanian Tourist Bureau. In 2003, about 534,000 tourists arrived in Panama, with about 88% of travelers from the Americas. That year there were 16,766 hotel rooms with 33,532 beds and an occupancy rate of 44%. The average length of stay per visit was two nights.
In 2005, the US Department of State estimated the daily cost of staying in Panama City and Colón at $186.
Outstanding political figures of the 19th century include Tomás Herrera (1804–54), the national hero who led the first republican movement, and Justo Arosemena (1817–96), a writer and nationalist. The international lawyer Ricardo J. Alfaro (1882–1971) and the rector of the University of Panama, Octavio Méndez Pereira (1887–1954), were well-known Panamanian nationalists. The most important political leader of the 20th century was Omar Torrijos Herrera (1929–81), who ruled Panama from 1969 until his death and successfully negotiated the Panama Canal treaties of 1979 with the United States.
Important poets were Tomás del Espíritu Santo (1834–62), nationalist Amelia Denis de Icaza (1836–1910), Federico Escobar (1861–1912), Darío Herrera (1870–1914), and Ricardo Miró (1888–1940). Panamanian-born José Benjamin Quintero (1924–1999) was a noted stage director in the United States. Narciso Garay (1876–1953) founded the National Conservatory of Music and served as a foreign minister. Harmodio Arias (1886–1962) was the prominent owner of the newspaper El Panamá-America. Leading Panamanian painters include Epifanio Garay (1849–1903), Roberto Lewis (1874–1949), Sebastián Villalaz (1879–1919), and Humberto Ivaldi (1909–47). Noteworthy among Panamanian athletes is the former world lightand welter-weight boxing champion Roberto Durán (b.1951); the former baseball star Rod (Rodney) Carew (b.1945) is also of Panamanian birth.
Panama has no territories or colonies.
Buckman, Robert T. Latin America, 2005. 39th ed. Harpers Ferry, W.Va.: Stryker-Post, 2005.
Cadbury, Deborah. Dreams of Iron and Steel: Seven Wonders of the Nineteenth Century, from the Building of the London Sewers to the Panama Canal. New York: Perennial, 2005.
Calvert, Peter. A Political and Economic Dictionary of Latin America. Philadelphia: Routledge/Taylor and Francis, 2004.
Guevara Mann, Carlos. Panamanian Militarism: A Historical Interpretation. Athens, Ohio: Ohio University Center for International Studies, 1996.
Health in the Americas, 2002 edition. Washington, D.C.: Pan American Health Organization, Pan American Sanitary Bureau, Regional Office of the World Health Organization, 2002.
Major, John. Prize Possession: The United States and the Panama Canal, 1903–1979. New York: Cambridge University Press, 1993.
Zencey, Eric. Panama. New York: Farrar, Straus, and Giroux, 1995.
COPYRIGHT 2007 Thomson Gale