PANAMA — a Caribbean country with the U.S. dollar as its national currency, which is the daily passage of thousands of tons of goods between the two oceans — has now reached its third week of massive protests, the most significant in decades. The core question is, what is the reason for such an event?
The key to understanding the origin and magnitude of these protests is in the emergence of the financial crash caused by the pandemic, (when global governments imposed Draconian restrictions on mobility).
The virus finally spread all over the globe, and lockdowns led millions of people to the most ignominious poverty and hunger. Medium-sized companies and especially small ones simply ended up in bankruptcy. The fanciful thesis of “virtual work” wasn’t effective, as it applies largely to bureaucratic and/or administrative jobs.
In the case of Panama, following the gradual lifting of restrictions, the country was never the same again, as thousands no longer had their companies or jobs. At the same time, inflation was added with greater force in fuel, food, and medicines, a problem that Panamanians are not used to dealing with since their commercial operations are fundamentally governed by the U.S. dollar.
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This was the scenario that ignited this collective unrest in early July (when thousands of Panamanians initially took to the hot streets of Panama City to protest against the high price of gasoline). Protests were mainly against the high price of food and medicines; but indigenous people also demanded the eviction of settlers from their “ancestral territories”, hospital workers demanded improvements in hospital staffing and salaries and teachers requested better salaries. In crude, wide sectors of the Panamanian society rose to demand from the government an integral improvement of their living conditions.
Initially, centrist President Laurentino Cortizo (who came to power in 2019) barely managed to reduce the price of gasoline from $3.95 a gallon to $3.25 a gallon. Cortizo also called for negotiations with teachers’ unions, with whom he had a first agreement, but they later considered it insufficient and are still protesting.
Amid the crisis, the Panamanian scenario was technically anarchic, as the government unilaterally broke off the dialogue and did not attend the last appointments of the negotiations. The demonstrators radicalized, imposing indefinite and nationwide strikes. Roads were blocked by protesters with eventual clashes with police authorities.
We are witnessing the socio-economic scenario of the post-Covid world, the times of the direct consequences of quarantines and closures that took place throughout 2020, and the future doesn’t look any better. First, the U.S. economy is clearly facing a recession, which together with the Russo-Ukrainian conflict—a war that will be prolonged— predicts a gloomy fate.
The challenge for the governments of the region will be to prepare their administrations for the strong economic shock of a global macro-crisis that is just around the corner. Otherwise, we will all become Sri Lanka.
Fortunately for the Panamanian government, Cortizo reached an agreement with the protest leaders on July 25. Among the most important measures were the reduction of gasoline prices and the reduction of 30% in the prices of 72 basic food products and hygiene items. These measures will be implemented through price fixing, tax reductions, and subsidies, thus bringing peace back to the streets of Panama. This, however, is on a provisional basis, since it will depend on the government’s ability to comply with its agreement.