Despite its impressive economic growth and status as a high-income country, Panama remains one of the most unequal countries in the world. Nevertheless, the country has made significant strides in reducing poverty and closing social gaps, positioning itself favorably to continue advancing towards building a more equitable society.
What actions can Panama take to foster a more equitable society?
In October, we commemorate the International Day for the Eradication of Poverty, a moment to reflect on how countries, especially in a region like Central America, where 37% live with incomes below the poverty line of $6.85 per day (PPP 2017), can work to build more inclusive societies.
The upcoming World Bank report, titled "Panama: From Growth to Prosperity," prepared in collaboration with the government, including the Ministry of Economy and Finance (MEF) and the National Statistical Office (INEC), highlights both the achievements and challenges the country faces on this path.
Achievements and Progress
It is undeniable that Panama has experienced economic growth far above the regional average, resulting in a significant reduction in poverty. In 1989, half of the population lived in poverty. Today, that figure has been reduced to one in ten. This progress is remarkable; however, growth has not meant prosperity for all.
Inequality: Panama's Achilles' Heel
Despite these advances, inequality remains the country's Achilles' heel. In the comarcas, 76% of the population still lives in poverty, according to 2023 data. The World Bank report identifies that the disparity in income-generating capacity, the limited capacity of the fiscal system to redistribute wealth, and exposure to natural disasters associated with climate change are key factors that perpetuate inequity and affect the poorest households.
Recommendations to Advance Towards a More Equitable Society
To address these challenges, the report proposes a strategy based on three pillars:
Closing Territorial and Ethnic Gaps: There is a huge urban-rural gap. Nearly half of the households in the comarcas lack access to essential services such as electricity, potable water, and sanitation, and educational attainment remains very low compared to urban areas. It is essential to prioritize public investment in the most lagging areas, improve access to basic services, and promote economic opportunities in rural areas. Additionally, it is necessary to strengthen social assistance programs. Although recent actions in infrastructure development and social programs have laid a solid foundation, a more robust and targeted approach is required.
Promoting Human Capital and the Creation of Productive Jobs: Human capital in Panama is one of the lowest compared to countries with similar incomes. Only 16% of middle school students achieve minimum competencies in mathematics. Improving education and job training, as well as removing barriers to education access for the most vulnerable groups, is crucial to increasing productivity and improving job quality. The government has made progress in expanding educational coverage and strengthening technical training programs, but challenges remain.
Strengthening Household Resilience to Natural Threats: Panama is highly exposed to natural disasters such as floods and droughts, with floods being the most recurrent natural risk. According to the report, the most severe floods can affect up to 18% of the population. Although Panama has improved its disaster response capacity, the poorest communities remain the most affected. It is essential to develop more robust and adaptive social protection policies and identify the households most exposed to disasters. In the medium term, investment in critical and resilient infrastructure will be necessary.
Call to Action
Panama has demonstrated that sustained economic growth can generate positive changes in society. However, by addressing disparities in income generation, improving human capital, and strengthening resilience to natural disasters, Panama can move from growth to shared prosperity. This is the path to a fairer and more equitable Panama, where growth benefits everyone sustainably.
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