{"id":28341,"date":"2020-03-24T09:03:48","date_gmt":"2020-03-24T14:03:48","guid":{"rendered":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/?p=28341"},"modified":"2020-03-24T09:03:48","modified_gmt":"2020-03-24T14:03:48","slug":"coronavirus-will-impact-panamas-economy","status":"publish","type":"post","link":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/coronavirus-will-impact-panamas-economy\/","title":{"rendered":"How the coronavirus will impact Panama\u2019s economy"},"content":{"rendered":"

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As of March 17, 2020, Panama had more cases of coronavirus (COVID-19) than any other country in Central America, with eighty-six<\/a> confirmed cases. Panama has implemented nationwide policies to combat the spread of the virus and signed a regional agreement to address the pandemic with members of the Central American Integration System (Sistema de la Integraci\u00f3n Centroamericana\u2014SICA). President Laurentino \u201cNito\u201d Cortizo\u00a0 has prioritized citizens\u2019 health over the country\u2019s economy, which in the third quarter of 2019 plunged<\/a> to a near decade low.<\/p>\n

With Fitch Ratings downgrading<\/a> Panama\u2019s rating on March 2020 from stable to negative, and the country still unable to improve its international reputation for transparency\u2014Panama is still listed<\/a> in the Financial Action Task Force\u2019s (FATF) money laundering watchlist\u2014the coronavirus is likely to have severe effects on the Panamanian economy.<\/p>\n

Domestic outbreak and response<\/strong><\/h4>\n

Panama recorded its first case of coronavirus on March 9 and Cortizo announced<\/a> a state of emergency on March 12 after twenty-seven cases were confirmed. Flights from Europe and Asia were halted on March 13 and 14, respectively, and the government has suspended<\/a> classes in public and private schools until April 7.<\/p>\n

As of March 17, seventy-one cases remain<\/a> in home isolation and fifteen are hospitalized. Epidemiologist Xavier S\u00e1ez-Llorens confirmed<\/a> community transmission of the virus in Panama and estimates that by the end of March there will be between 300 and 600 cases, based on what has happened in other countries. With one coronavirus-related death recorded in the country, the mortality rate in Panama stands at 1.16 percent. The World Health Organization\u2019s (WHO) representative in Panama Gerardo Alfaro argues<\/a> that the COVID-19 pandemic in the Americas is in its initial phase and that countries in the region are still \u201cfar\u201d from containing it.<\/p>\n

On March 15, the temporary closure of commercial establishments was decreed throughout the country, except for supermarkets, pharmacies, medical centers, and businesses that sell health products, as well as fuel. Sanctions were also announced on establishments where fifty people gather simultaneously. That same day, Cortizo announced<\/a> the restriction of non-nationals and non-residents into Panama, and that all Panamanians or residents returning to the country will undergo a fourteen-day mandatory home quarantine. On March 17, health vice minister Luis Sucre reported at least one citizen has been sanctioned for breaking quarantine.<\/p>\n

Since the outbreak in Panama, 1,245 tests have been processed at Instituto Conmemorativo Gorgas<\/em>, with only 6.9 percent returning positive results.<\/p>\n

Regional agreement<\/strong><\/h4>\n

On March 11, the presidents of Belize, Costa Rica, Guatemala, Honduras, Nicaragua, Panama, and the Dominican Republic signed a joint declaration in which they committed to preparing a regional contingency plan to combat the pandemic, aimed at complementing national efforts. El Salvador\u2019s Nayib Bukele is the only SICA member who declined to sign the agreement.<\/p>\n

The declaration calls for collaboration between the national health systems of the signatory countries to provide services for suspected and confirmed cases of COVID-19 at border crossings and guarantees the access to healthcare of migrants regardless of nationality.<\/p>\n

In addition, the presidents agreed to maintain international trade operations within the framework of current regional regulations, in close coordination with the customs, health, and immigration authorities in order to limit the damage on the region\u2019s economy. They also pledged to adopt cooperative measures to avoid the shortage and hoarding of basic consumer goods, medicines, medical devices, raw materials, and other necessary goods.<\/p>\n

The Central American Monetary Council (Consejero Monetario Centroamericano\u2014CMCA) will monitor the status of regional economic indicators. Actions are to be coordinated with the Council of Ministers for Economic Integration (Consejo de Ministros de Integraci\u00f3n Econ\u00f3mica\u2014COMIECO) and other sectoral councils in this regard.<\/p>\n

The signatory countries also agreed to streamline efforts so that if needed, member countries can access a $250,000 emergency fund to address the pandemic. In parallel, the Central American Bank for Economic Integration (Banco Centroamericano de Integraci\u00f3n Econ\u00f3mica\u2014BCIE) will provide proposals for financing programs aimed at addressing the economic impacts caused by the pandemic, prioritizing the most vulnerable sectors affected.<\/p>\n

Economic context and implications<\/strong><\/h4>\n

In 2011 and 2012, Panama was<\/a> the fastest-growing economy in Latin America. Between 2006 and 2012, growth exceeded<\/a> 10 percent in all but two years. Under the presidency of Ricardo Martinelli (2009-2014), the economy boomed<\/a> due to the Panama Canal expansion and other large infrastructure projects. Since 2014, however, growth has dropped to 5.1 percent in 2014, 5.7 percent in 2015, 5 percent in 2016, and 5.6 in 2017. Growth for 2019\u2014at 3 percent\u2014marked<\/a> Panama\u2019s weakest economic expansion since the global recession of 2009.<\/p>\n

Panama\u2019s economic slowdown can be attributed to several high-profile corruption scandals, including the so-called \u201cPanama Papers\u201d\u2014when the International Consortium of Investigate Journalists revealed the use of Panama as an offshore tax haven by wealthy individuals and public officials worldwide\u2014the Odebrecht regional bribery scandal\u2014wherein a Brazilian contracting firm paid Panamanian officials and businessmen $59 million in bribes to win contracts\u2014and the political struggle between Martinelli and former President Juan Carlos Varela. To make matters worse, Cortizo announced<\/a> on January 2020 that Varela had left $1.72 billion in debts and unregistered accounts when he left office.<\/p>\n

Panama\u2019s economy\u2014currently precarious and stagnant\u2014depends on infrastructure megaprojects, international trade, and financial services, and is especially vulnerable to external changes. Here are some of the most likely impacts the coronavirus will have on the Panamanian economy:<\/p>\n