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Anonymous asked in Social ScienceEconomics · 1 decade ago

What is the origin of Panama's stagnant economy?

Panama (In the 18th century) was bustling with gold and silver set to be delivered to Spain. What led to it's skyrocketing inflation and poverty rates? Thanks.

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  • aona
    Lv 7
    1 decade ago
    Favorite Answer

    Panama, since the famous Portobelo fairs at the beginning of the seventeenth century, has been identified in every sense of the word as a transit country, first the Spaniards in colonial times, made huge profits on the route Transisthmian, toward and from Peru and exploit its huge gold and silver mines, using the territory of the isthmus as a transit area for all these riches.

    These Hispanic settlers, never paid any taxes to operate, and what little remained, fell into the hands of speculators (mostly Spaniards), crooks and bad traders. The importance of Panama was such that some Spaniards were in the region and engaged in large-scale livestock to feed and supply all of these colonists and conquerors, who toured the area, consumed fresh beef. Tanning leather and sold them. They also developed greatly poultry. Bred horses, goats and pigs. There are indications that sold fruits and vegetables, to European travelers. That was the importance that Panama was at that time

    When Panama became independent from Spain in 1821, longing for the dream of Simon Bolivar, voluntarily joined to New Granada, which later became Gran Colombia. There never was concerned at the southern destination of Panama, were limited to controlling the path Transisthmian, which was the shortest way to get from one ocean to another.

    Interoceanic Railroad came through the gold mines in California, 1850 to 1855. The interest of United States was to build this railroad across the Panamanian territory, was an Immense success for the country, which still remained attached to Colombia, however, only Colombians were eligible for receive what the Americans paid to use the route, is correct to say that some Panamanians Spaniards descendants benefited of this boom , but poverty and misery in the country continued to rise.

    There were attempts to Panamanians illustrious, who ruled the territory looking for a greater benefit from these great masses of money circulating, but could not do more to pressure the Colombian government. When the boom fell down and United States built its railway from coast to coast, on its territory, lost interest to continue using the interoceanic Railroad across the country.

    So, came the French Canal and the impact of this great project predicted that the country would benefit more than ever, but the same class and wealthy Colombians minority of the country, took advantage of all that money that went by that work. Instead of hiring workers in Panama, was brought Afro-Caribbeans and Chinese, apart the Europeans who amazed by what Ferdinand DE Lesseps had done in the Suez Canal, however, they have expecting the same success with the Panama Canal.

    The scandal emerged from the French company, by corruption and mismanagement of resources and everything returned as before, but misery and poverty of the common Panamanian increased substantially with the news that the black Afro-Caribbean and Chinese survivors of the diseases, epidemics, and yellow fever, have settled in Panamanian territory.

    Then came the twentieth century, in 1903 when Panama seceded from Colombia, assisted by United States, none of that was free, because was signed The Panamá Canal Treaty which gave to United States in perpetuity a specific territory, because this country, would do this project, the Interoceanic Canal, as it is known at present. The sad thing is that no Panamanian signed that document and that injustice continued until the late 70's with the new Canal treaties.

    My friend i tried to be brief, to explain your question, I hope you've grasped the idea and understood, why Panama is still a country where there is a vast difference between rich and poor, and the reason that manifests itself by the very poor distribution of wealth. The rulers of the moment just wanted to benefit the investors, entrepreneurs, with huge tax breaks, with the excuse that generate wealth and recruited many more Panamanians.

    Meanwhile you may noticed, that this situation continues to be replicated with large projects being made in the country. The same situation repeats itself, the tax exemptions and inadequate fiscal policy continues to favor the richest millionaires and foreign investors, and hits hard to the middle class, professionals, small businesses, independents.

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  • 1 decade ago

    Panama has a broken down rule of law, strict labor regulations that hinder employment growth, and price controls that deminish economic incentives

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