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Panamá – Lo Mejor está Por Venir por Eduardo Morgan Jr.

by Eduardo Morgan Jr. 

December  2007 

In the history of the Republic of Panama, I cannot think of an economic growth level like the one that we are experiencing now. Perhaps during the World War II years, when the population was still very small, something similar could have happened as a result of the many military bases that we had throughout the country and the thousands of American soldiers stationed in Panama. 

The difference is that that growth was evidently artificial and would end at the conclusion of the armed conflict, as it happened indeed. By contrast, current growth is something real and, in my opinion, barely beginning and it will reach the point of turning Panama into the richest country of the Americas. 

Panama’s great wealth is its privileged geographical position and its history as a country of transit, which has influenced the upbringing of its people with a very different mentality from that of the rest of the countries in America. We are a nation that looks at the rest of the world as part of its environment, and that, furthermore, does not believe in violence. 

Armed struggle as a policy for conflict solution ended in Panama with the separation from Colombia, and for more than 100 years there have been neither civil wars, nor political or social revolts. 

After regaining full sovereignty at the end of the American occupation and the withdrawal of their troops, Panama, without that destabilizing external influence, entered a period of full political democracy, guaranteed by the elimination of the army and the safeguarding of its most important asset, the Canal, from the political sways. 

For a complete understanding of why economic development is beginning now, and why we are observing its extraordinary acceleration, we must go back to the 1903 Treaty we executed with the USA which made the construction of the waterway possible, and to the interpretations the power gave to the economic clauses that benefited Panama. The treaty left out of the concession the cities of Panama and Colon — the cities at the both ends of the Canal— and its ports. 

With an interpretation that was evidently absurd, and with the active abetment of the negotiator for Panama, French engineer Philippe Bunau-Varilla, the birth of the Independent Republic had as little as one and a half months, when it left Panama without its ports in its Atlantic and Pacific coasts and both its main cities were turned into “ghettos”, limited to their built areas, eliminating adjacent towns. 

The ad reality was that its geographic position, its only wealth, was sequestered during almost one hundred years. Panama, an isthmus between two seas, and in the middle of the great masses of North America and South America, was effectively cut off from the sea and from any waterway communication. Even until the year 1948, it lacked its own airport and its own aerial communication, and its wireless communications were also in the hands of the USA. 

The loss of that resource reached incredible extremes, such as the exclusion of Panamanians from being able to work in the Canal, the US monopoly of the inter-oceanic waterway, the consolidation of the Colony called the Canal Zone, with its own Government, including Governor, judges, police, and public utilities, with defined borders and even customs offices, to prevent Panamanians from carrying out any business derived from its privileged geographical position and the Canal. 

Panama had figure out how to survive as a State and Panamanians became pioneers of legal instruments required for an emerging globalization of the world economy. From this need arose the first Vessels’ Open Register, the Stock Corporations Law, the Colon Free Zone, among other. From its great weakness came the resourcefulness to survive, and the decision to adopt the dollar as legal tender, linking this to territorial income tax legislation, which allowed the creation of the Financial Center in the 1970s. 

The Torrijos-Carter Treaties of 1977 came into full force on December 31, 1999. On the last day of the last century, the US returned the Canal to Panama, its troops withdrew from the military bases that occupied a large percentage of its banks, and finally Panama owned its own destiny and its great potential wealth. 

We have only to look at the figures in the movement of container transshipment at its ports. From moving less than 20,000 containers in the 1990s, we are now reaching US$2.7m; Canal income, in cash for the Central Government Budget, is over US$700M and it is expected that with the expansion this will exceed US$4B in 2025. 

The development of the former Howard military base on the west shore of the Canal, will practically double the size of Panama City, giving birth to new businesses, such as repair and maintenance of aircrafts. 

Our wealth is our geographical position, as well as its human resources, that is, Panamanians. This is what made possible the Canal and it is this what gives us our total worldwide connectivity. Panama is crossed by several fiber optic cables that provide it better connectivity in the telecommunications matters than any other country; its aerial hub is number one in the Americas; its ports, the most modern and efficient; its territory is outside of the path of devastating hurricanes that periodically desolate the Caribbean and the US East Coast; it enjoys a weather we could catalogue as benign; and an already proven democratic government; and has laws that are friendly to foreign investment, such as the new law regarding Regional HQs. 

The recovery of our geographical position will turn us quickly into the American Singapore. 

A lot may be written on this subject, but the incredible growth of 11.3% is simple to understand. Let us imagine that the oil from Saudi Arabia had been in the hands of another country until the year 2000, and that it had only started to receive its benefits after that year. 

That is what is happening with Panama and it is the reason for my comment that our development, our economic growth, is only just beginning. 

 

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