In Praise of Panama

1948Panama's_flagOur friends in the Better Together campaign, the various Unionists and Britnats have a rather unfortunate tendency to denigrate other countries. Alistair Darling is particularly prone to this tendency. The most recent case is the prominence given to Panama as an example not to follow. As Unionists line up to assure us there will be no currency union between an independent Scotland and rUK, the option of Scotland just using the pound has surfaced as a possible alternative. Only to be dismissed in sneering terms by the likes of Alistair Darling. Just look at Panama he screams. Which has no currency of its own, but uses the American dollar. Who would want to be like Panama? It is just some poor, underdeveloped far away country. Or is it?

Well it is pretty far away, straddling the famous isthmus of Panama. But it has become a relatively successful country with much going for it. Panama only became an independent country in 1903, when it declared its independence from Columbia. Much of the pressure for the move to independence came from America, which wanted to build a canal across the isthmus. Which it duly did in 1914 – 100th anniversary coming up in August. Now of course the canal is back under the control and sovereignty of Panama. And the country has used its independence to further develop the canal. By 2015 the expansion of the canal is due to be completed. As both America and China have invested heavily in this project, the result is likely to be a further boost to an already growing economy.

According to the World Bank, Panama’s economic growth over the past decade has been one of the fastest in Latin America with real GDP growth averaging over 8%. This has had a beneficial impact on the well being of Panamanians.  GDP per capita has risen to $10,200, while the poverty rate fell from 48.5% to 27% and extreme poverty declined from 21% to 11%. As regards inequality, this remains relatively high, though it has now declined to 0.52. For comparison the UK stands at 0.40, still a long from the Nordic average of 0.25. So in terms of income, poverty and inequality, Panama is moving in the right direction while good old UK is moving in the wrong direction, with declining living standards and rising poverty and inequality. Unemployment, at 5.7%, is also lower than in the UK, as is the budget deficit, at 2.1% of GDP, while public debt is only 40% of  GDP. If only Alistair Darling could have matched these figures while he was in charge of our finances!

The economic future for Panama looks pretty good too. In addition to the growth that will come from the expansion of the canal, it seems that the country is sitting on top of substantial oil reserves in of all places Darién province. It is estimated that there could 900 million barrels of oil available for extraction, which could raise $20billion in royalties for the country over the next 20 years. So it may be that Scotland and Panama are not that different after all. Both countries are almost the same size in area, Scotland with 78,387 square km is slightly larger than Panama which is 75,599 square km. Scotland also has a slightly larger population with just over 5 million souls to Panama’s just under 4 million. We only need to wait for Alistair Darling to come out with some dire warnings to Panama about the economic disaster that awaits them from all that oil.

Of course the recent interest in Panama is all to do with its currency. Panama does have its own currency, the Balboa, but this is tied 1 to 1 with the dollar and the dollar is recognized as legal tender in the country. To all intents and purposes the dollar is Panama’s currency. There is no currency union, the Panamanians have just always, since independence, used the dollar. Whatever advantages and disadvantages there are to using some other country’s currency, in the case of Panama it does not seem to have held back the country’s economic growth. It is also worth noting that banking is one of the major service sectors in Panama. So perhaps just continuing to use the pound sterling may not be quite such a bad idea as Alistair Darling would like to make out.

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