Panama: A Central American Singapore?

By Tom Long*

Singapore (left) and Panama City (right) / William Cho and Jim Nix / Flickr / Creative Commons

As a transportation hub, logistics center, and regional financial player, Panama has long been painted by investment bankers and Panamanian politicians as a potential “Singapore of Latin America,” but that vision still seems a way off.  In some respects, Panama’s story has been quite impressive.  For a decade, it has boasted GDP growth far beyond the regional average, even surpassing 10 percent in some recent years.  Unlike many of its neighbors, its dollar-based economy relies on services, not exports of commodities or low-value-added light manufacturing.  Since the 1989-1990 U.S. invasion to unseat General Manuel Noriega, the total size of the Panamanian economy has quadrupled in constant dollars.  It is also different from Singapore in important ways.  Singapore’s approach to planning and public housing might be helpful in Panama City, which has suffered traffic, environmental degradation, and inadequate housing for the poor as a consequence of poorly planned growth.

In other important ways, however, the Panama-Singapore comparison is less apt.

• Singapore is a city, with nearly two million more people than Panama has spread across 100 times the landmass. Urban-rural divides are wide in Panama, with poor delivery of health and education services outside the cities, exacerbating inequality.  A Singapore-style strategy in Panama would leave the countryside behind – and indigenous and Afro-Caribbean populations would benefit much less.
• Differences between the two countries in governance – for better and worse – are profound. The Panamanian people are much freer under the country’s democracy than they would be under a single-party-dominated system like Singapore’s.  In other ways, though, Panama’s governance leaves much to be desired.  Corruption is a massive problem, and watchdog groups highlight weakness in the rule of law, judicial independence, and press freedom.  Projects to expand the Panama Canal and build a capital city subway are over budget and behind schedule, and have suffered from strikes, contract disputes, and questionable bidding practices.  While it may seem easy to blame the corruption on former President Martinelli, who faces criminal charges, the problem has much deeper roots.
• The two countries have very different policies toward education. Singapore invested, and continues to invest, heavily in world-class universities.  Panama lacks these, weakening its ability to compete globally in industries where innovation is key.  While Panama’s primary education has improved, its research and development lags.
• A final difference is where the countries find themselves in their political and economic evolution. Singapore became independent 50 years ago, but it has been only a quarter century since Panama ended its kleptocratic, military rule.  It has been just 15 since the United States officially turned control of the canal over to Panamanian authorities.  The roots of its problems cannot be easily or quickly extirpated.

Panama’s boosters often use the comparison to highlight the areas in which Panama excels – economic growth, unique geography, and infrastructure crucial to global shipping and air transit.  The comparison might be more helpful in highlighting areas where Panama needs to improve.  These include dedicating resources to higher education and R&D, addressing inequality, rooting out corruption, and enhancing political and bureaucratic accountability.  Singaporean scholar Alan Chong argues that Singapore’s attempt to present itself as a model, global city is in part a foreign policy strategy of “virtual enlargement.”  The city-state’s wealth, reputation, and active role in international organizations allow it to “punch above its weight” in Southeast Asia and beyond.  Some chapters of Panama’s recent economic story might be the envy of neighbors with their own canal dreams, but the country will need to focus on governance and accountability if even its logistics-hub strategy is in fact going to deliver shared welfare at home and enhanced influence abroad – let alone become a Latin American equivalent of an Asian Tiger.

March 2, 2015

* Dr. Long is a visiting professor in International Relations at the Centro de Investigación y Docencia Económicas in Mexico City.  He is the author of Latin America Confronts the United States: Asymmetry and Influence, which is forthcoming with Cambridge University Press.