Here is a great article from the Inter-American Dialogue with some experts on President Varela’s plans for Panama and challenges that he will face.

Panama’s new president, Juan Carlos Varela, will be sworn into office today. What are the major economic challenges confronting Panama’s new president? What do his cabinet choices so far say about his plans? Will he be able to fulfill his campaign promises to maintain public investment, tackle rising food prices and clean up corruption in public works contracts?

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Juan Sosa, president of the U.S.-Panama Business Council and former Panamanian ambassador to the United States: “Some of the challenges that President Varela will confront include maintaining economic growth, dealing with increased public debt, updating an education system to not only continue generating jobs but well-paying jobs, reinvigorating and making the agricultural sector more competitive, controlling the rising cost of living and closing the gap between the rich and poor, among others. One of the most difficult challenges will be changing the way of doing politics with more dialogue with civil society and insuring governability despite being the third party in Congress. The presidential transition is only eight weeks long. The president-elect has devoted this time to carefully choosing his cabinet, made up of professionals with experience and knowledge. Members of his cabinet seem fully supportive of the government program he proposed during the election, which gives priority to social, environment and personal economic issues. Varela’s style suggests that he will provide the direction he wants his government to go but will seek consensus with his cabinet and not behave in an autocratic manner. Varela ran a very disciplined and consistent campaign. This suggests that he will pay attention to his campaign promises. In the period of transition he has given indications that he will channel energies to controlling the cost of living and having a more transparent government. This is a refreshing style that bodes well for the future.”

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Joydeep Mukherji, senior director of Latin American sovereign ratings at Standard & Poor’s in New York: “Varela has to manage a decelerating economy, new social pressures and the need to strengthen the rule of law. His party has only 12 seats in the 71-seat Congress. Hence, much depends on his ability to negotiate with other parties to get legislation through Congress. Panama’s economy grew more than 8.5 percent on average in the past 5 years but may grow 7 percent in 2014 and dip to 6 percent in the next 3 years. Rapid growth, along with near full employment, has contributed to inflation. Slower economic growth in the future, along with a recent cut of $2.6 billion (over 2015-18) in the government’s revenue estimate from the Panama Canal, could pose fiscal challenges. Lower revenues could undermine the effectiveness of Panama’s sovereign wealth fund (FAP), designed to insulate the economy against shocks. Based on new projections, the fund is not likely to receive any money from the Canal without changes in fiscal policies and the FAP law. Varela will have to balance the need to maintain investment and growth while meeting demands from a more affluent population increasingly concerned about issues such as income inequality, public services, corruption and the environment. Many people perceive that the quality of life has not risen in line with GDP in recent years. Poverty has declined impressively but…” MORE