Panama

THE REPUBLIC OF PANAMA is the southernmost of the Central American nations. After winning independence from Spain in 1821, Panama united with Colombia but spent the next eight decades trying to divorce itself from the alliance. In 1903, with United States backing, Panama finally seceded from Colombia. Afterward Panama allowed the United States to build a canal that provided a gateway between the Pacific and Atlantic Oceans. In exchange the United States was given sovereignty over a strip of land on either side of the canal.

On September 7, 1977, in compliance with the original agreement, President Jimmy Carter began the process of transferring ownership of the canal and the surrounding area back to the Panamanians despite intense controversy. The transfer was officially complete in 1999. During the interval, the United States helped to remove dictator Manuel Noriega from office. Noriega was subsequently imprisoned in Florida on drug trafficking charges, and the U.S.-backed candidate became president of Panama. Colombian rebel and paramilitary forces continue to make frequent raids in Panama, and concern has arisen over increased incidents of violence and drug and arms smuggling.

Panama's economy is heavily dependent on services, which employ 61.2 percent of the labor force and account for four-fifths of the Gross Domestic Product. These services revolve around banking, the Colón Free Zone, insurance, container ports, flagship registry, and tourism. The agricultural sector continues to be of importance [Page 809]in Panama, employing 20.8 percent of the labor force. An additional 18 percent of the workforce are involved in industry. Panama is facing an unemployment rate of 12.6 percent.

At the end of the 20th century, Panama experienced a temporary economic slump in response to a global slowdown and the withdrawal of remaining U.S. military forces. The government initiated tax incentives and stepped up exports to offset the losses. As part of an ongoing recovery program, the Panamanian government has proposed tax and social security reforms while promoting tourism and negotiating new regional trade agreements. Panama's natural resources, which include copper, mahogany forests, shrimp, and hydropower, also have the potential to boost the economy.

With a per capita annual income of $6,900, Panama is an upper-middle-income nation with severe external debts. It is a country of vast inequalities, with the richest 20 percent of the population holding 60.3 percent of resources while the poorest 20 percent live on 2.4 percent of resources. Panama is ranked 56.4 percent on the Gini Index of Human Inequality. To some degree, Panama has been successful in reducing poverty in the past. Between 1983 and 1997, for instance, the level of poverty was reduced from 46 to 37 percent. During that same period, extreme poverty fell from 28 to 19 percent.

Nevertheless the poverty rate remains at 37 percent, exacerbated by regional and cultural disparities. It is estimated that rural poverty may be twice as high as that in urban areas. Women and children are disproportionately affected by poverty, as are peasants and agricultural workers. Approximately 26.5 percent of Panamanians are extremely poor, and one-fifth of the population is malnourished. Around 17.2 percent live on less than $2 a day, and 7.2 percent live on less than $1 a day. Panama enjoys a high to medium standard of living in relation to other countries in the Latin Ameri-can/Caribbean region.

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