Panama’s canal expansion may drive further decline in nation’s poverty rates

Spectators watch as the Neopanamax cargo ship, Cosco Shipping Panama, makes its way through Gamboa, Panama, June 26, 2016. (AP Photo/ Arnulfo Franco)

Panama opened the $5.4 billion expansion of its shipping canal Sunday, as thousands of onlookers celebrated the completion of the long-delayed project. President Juan Carlos Valera has promised to dedicate future revenue from the project to fight poverty in the country, even as people in the region surrounding the canal live amid the worst conditions in Panama. It remains to be seen whether the money would truly benefit the poor, when past canal revenue passed them over.

“As Panamanians, we all feel very proud of this great work, but we will feel more so when we succeed in eliminating poverty and inequality once and for all, ensuring that the economic contributions of our expanded channel reach all corners of the country, with the vision of the State, transparency and equality,” Varela said at the canal expansion’s official opening Sunday.

The expansion triples the size of ships that can pass through the canal, allowing the country to host 98 percent of the world’s shipping. Analysts say the canal’s annual cargo volume should double over the next decade, according to Voice of America, meaning that the tiny Central American country could triple the $1 billion in annual shipping fees it currently collects.

But although the century-old canal sees more than 14,000 ships pass through its locks every year, strong economic performance has not always translated into widely shared prosperity.

Comparing Panama’s national income distribution to that of some other countries in the region – such as Guatemala, which has some of the worst poverty, malnutrition and maternal-child mortality rates in the region; and Venezuela, a country now drowning in the worst economic recession in its history – Panama seems to have a grip on its poverty rate. Coupled with the fact that the country’s poverty rate was reduced by 10 percentage points from 2006 to 2012, Panama’s poverty problem can now be easy to overlook.

In reality, poverty remains pervasive in Panama, with 23 percent of the overall population living at or below the poverty line, and the steady decrease in poverty should be able to continue. As is common across Latin America, the extreme poverty rate differs widely by region, ranging from below 4 percent in urban areas to 27 percent in rural regions of the country.

The trend is even more dramatic in indigenous territories, where the poverty rate is higher than 70 percent, according to World Bank statistics, with extreme poverty above 40 percent. In these regions of Panama, lack of services, particularly access to water, sanitation and health care continue to be a constraint.

Ironically, the people living next to the multi-billion-dollar canal itself, such as those in the coastal city of Colon, suffer from some of the worst economic conditions in the country.

“We have this canal that brings so much to our country, but here, we only have problems,” 37-year-old Colon resident Alejandro Del Cid told NPR. “No water, bad electricity and no jobs.”

Panama has surged ahead with steady economic growth for more than four decades, but the city of Colon has fallen behind. On the eastern edge of the city, a single row of houses sits in squalor, in shocking contrast to the canal and adjacent to the U.S. military base Coco Solo, the birthplace of Sen. John McCain.

We’re surrounded by millions of dollars, because there are three ports, and we live in misery. This is misery. This is misery,” said Georgina Providence, 52, in an interview with Univision. The canal is irrelevant to them, she added, because they don’t receive any of the $1 billion that leave the Panamanian treasury.

The canal’s new expansion project will face some challenges, among them economic uncertainty, technical barriers and a heated debate over billions in cost overruns. Still, the expansion is rightly being celebrated as a success for Panama – some 15 thousand waited hours to witness the first ship cross the canal’s expansion – and will be even more so if it helps bring prosperity and equality to Panama.

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Lisa Nikolau

Lisa Nikolau is a Madrid-based reporter for Humanosphere, covering gender equality, indigenous rights and poverty in Latin America and worldwide. Find her on Twitter at @lisanikolau, email lisa.nikolau@humanosphere.org or see her latest work at www.lisanikolau.com