The government of Juan Carlos Varela has developed a habit for slogans. Sadly, though, so far the population has perceives precious little concrete benefit from the many announcements of
multimillion public works projects in the making. To many, the current government has become known for its many "orders to proceed", rather than its actual execution.
According to the economics and finance ministry (MEF), there are currently 2,885 projects under development, adding up to a cumulative value of approximately $4.5bn. However, their real economic impact is hardly perceived by the population. This may be down to the fact that the government is in reality accounting for projects that were planned under the previous administration.
Such is the case, for instance, for the Metro Lines 2 and 3, which only this year secured actual financing from the Japanese government.
The same applies to the enlargement of the Panama Canal, which ironically President Varela had initially opposed. His government now plans to spend a substantial amount of money for the inauguration event later this month.
Other massive public work projects the government has announced have come in for heavy criticism for allegedly benefiting the president's political allies. Such is the case of a $1.15bn project for electricity production which was awarded to AES, a company linked to Stanley Motta, President Varela's principal campaign donor. The contract awarded to Gas Natural Altantico has a 10-year tenure.
The government is also investing $500m in the urban renovation of the city of Colon, whose port generates a substantial economic activity that is, nevertheless, controlled by just a handful of
businessmen.
In spite of such massive investment programme, critics argue that the real benefit to the poorest is not palpable. According to economist Juan Jovane, the government is failing to tackle the crisis
which has hit public healthcare, education as well as food production. “We are witnessing a failed administration, because if you look across the board, there is a massive economic deceleration" he denounced, adding that "we are lucky for grow at 4.5% this year”.
According to the Panamanian Chamber of Commerce, Industry and Agriculture (CCYA), the government has been “moving extremely cautiously to avoid upsetting a population already concerned with a slowing economy, multiple scandals and a poor public administration”.
Local lawyer Maribel Cuervo de Paredes put it plainly: "the government seems really had to struggle to go beyond the simple planning phase". Promises to build new schools, a cancer specialist hospital in Chiriqui Province as well as children hospitals in Arraijan and Panama Norte, have yet to see the light of day.
According to former economics and finance minister Frank de Lima, the growth path the country was on could have supported more productivity-boosting public investment. And yet, of the $19bn the government claims will be invested over the next three years, much is going into public housing and transport. Additionally, many projects have been hit by allegations of corruption and favoritism of political allies in contract adjudication.
To make matters worse, the international scandals that have hit the country this year have badly shaken foreign investors' confidence. In 2015, Panama received just over $5bn in foreign direct investment. This amount is unlikely to be equaled in 2016, in the wake of the Panama papers scandal, as well as the investigation of their Waked business empire by the U.S. Treasury department.
Economist Felipe Chapman shared his concern about the damage to the reputation of the country that the scandal caused by disgraced law firm Mossack Fonseca has inflicted. The latter is allegedly
at the centre of international money laundering and tax evasion activities through offshore companies it created. The scandal is likely to have real repercussions on international banking relations.
According to Fernando Cebamanos, representative of the FAD party, the scandals will also be felt by the lower echelons of society, through fewer employment opportunities as well as lower wages.
