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USAID Information:
External Links:
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Panama
The Development Challenge: Panama remains on a path that lacks the impetus to achieve sustainable
economic growth and development. Its dual economy consists of a progressive modern sector and a
traditional rural sector. Slow economic growth, double-digit unemployment, and a highly skewed income
distribution characterize Panama’s poor socioeconomic performance. Around 28% of Panamanian
households (37% of the population) live in poverty; of these, more than 12.3% live in extreme poverty.
The economic and social wellbeing of many Panamanians, particularly those in the lower income bracket
and those living in poverty, will worsen without sustained economic growth. Panama is currently in the
process of transforming its education system. Although many of its education indicators are among the
best in Central America, substantial inequalities in access to and quality of education remain. This
situation adversely affects labor force productivity.
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The overall performance of the Panamanian economy is tied to the Panama Canal and the Panama
Canal Watershed (PCW). Availability of sufficient water to operate the locks system is a key factor for
ensuring continued effective operation of the Panama Canal. Massive deforestation has reduced the
forest cover in the Panama Canal Watershed and, in the process, eroded its river valleys and lakeshores.
Increasing rates of population migration into the watershed, with concomitant urbanization and increased
economic activity, threaten the Canal’s environmental sustainability. The PCW is increasingly vulnerable
to agricultural and industrial pollution, siltation, and sedimentation, which reduce the storage capacity of
the lakes that serve as the Canal’s water source.
The organization of Panama’s judicial system is complex, involves numerous players, and is beset with
many problems. Corruption is pervasive among the three branches of government and grudgingly
accepted by many in the Panamanian private sector as a cost of doing business. Foreign investors
perceive the legal system as working to the benefit of insiders. The judicial system, which is viewed as
slow and cumbersome, has a substantial backlog of civil and commercial cases. In addition, the
corrupting influence of the narcotics trade undermines local institutions, spawns violence and
lawlessness, distorts the economy, and discourages legitimate investments.
It is in the U.S. national interest to ensure that Panama develop the capacity to sustainably manage and
protect the Panama Canal Watershed. An effectively operating Canal facilitates world maritime commerce
and ensures rapid transit of U.S. military vessels between oceans. Sustainable rule of law and anticorruption
measures will help increase investor confidence in Panama and attract more foreign direct
investment, making it a more stable partner. Improved development and alternative sources of income in
the Darien Province will stem the flow of illicit drugs into the United States and contribute to regional
stability.
The USAID Program: FY 2004 and FY 2005 are transition years for the USAID program in Panama. In
FY 2004, USAID will provide final year funding under the current bilateral strategy for the Panama Canal
Watershed Strategic Objective. Unless unforeseen circumstances change the present situation, USAID
will conclude the Darien Community Development Program, a short-term program under the Andean
Regional Initiative, with final funding in FY 2004. Upon approval of a new Panama Country Plan under the
Central America and Mexico (CAM) Regional Strategy, USAID plans to continue Panama Canal
Watershed and justice reform activities. The Data Sheets provided below cover the two objectives for
which USAID is requesting FY 2004 funding to complete activities under the current strategy, and two
new objectives under the CAM Regional Strategy. USAID is also continuing activities under the justice
reform special objective, which will be closed out in summer 2004; however no new funding is requested
for these activities.
Other Program Elements: In addition to the bilateral program, the Central America Regional Program
(G-CAP) and the Office of Regional Sustainable Development in the Bureau for Latin America and the
Caribbean (LAC/RSD) manage programs in Panama. G-CAP programs expand Central American
participation in global markets, improve environmental management in the Mesoamerican Biological
Corridor, and enhance Panama’s capacity to respond to the HIV/AIDS crisis. Activities include technical
assistance, pilot demonstrations, training, alliance building, financial strengthening, and policy studies.
Initiatives include: a Development Credit Authority project supporting clean production by small- and
medium-size enterprises; Global Development Alliances promoting certification and increased production
and sales of environmentally-friendly products; creation of a regional fire and pest prevention and
mitigation network; development of a regional remote sensing network to monitor carbon emissions from
changes in land use and forest cover; and modeling of potential future climate impact for uses in decisionmaking
concerning climate change vulnerability, adaptation, mitigation, and sustainable development. In
addition, G-CAP is funding short-term technical assistance to small producers to help them offer
consistent quantities of high quality Panamanian coffee for domestic and export markets. This project
improves business practices and provides market linkages that increase the competitiveness and
sustainability of this important industry in Panama. LAC/RSD, through its Parks in Peril program, mitigates
threats to conservation in the Amistad Biosphere Reserve. Management and oversight of the Peregrine
Fund, which repopulates harpy eagle populations in the Panama Canal Watershed, is now under the
purview of the USAID bilateral program in Panama.
Other Donors:
USAID is the major donor active in the PCW region. The Japan International Cooperation
Agency (JICA) provides assistance to the Government of Panama and non-governmental organizations
(NGOs) in the PCW that is complementary to, and coordinated with, USAID’s efforts. JICA is supporting
the establishment of a training center that provides environmental education and awareness training in
forestry and agro-forestry techniques, and providing technical assistance to pilot communities in the PCW
to improve environmentally-friendly agricultural production.
Beginning in FY 2004, the Inter-American Development Bank (IDB) plans to assist the Government of
Panama to strengthen its institutional management and implementation mechanisms in support of
community environmental mitigation efforts, with particular focus on the PCW. The IDB also supports
conversion of destructive agricultural practices to environmentally friendly productive activities in the
PCW. In addition, the IDB is helping the Government of Panama implement an integrated development
program with important environmental elements in Darien Province. The IDB is the lead donor supporting
a major Government of Panama effort to improve the criminal justice system, and has helped strengthen
the Center for Mediation and Arbitration of Commercial Disputes at the Panamanian Chamber of
Commerce.
The Food and Agriculture Organization of the United Nations (UN) assists the Ministry of Agricultural
Development in its implementation of land use changes in the rural eastern region of the PCW, measuring
the socioeconomic impact of these changes. Emphasis is on community participation and on
environmental and socioeconomic sustainability. This effort is expected to lead to the development of a
20-year program with possible funding from the World Bank. The UN International Fund for Agricultural
Development supports a sustainable rural development effort in Darien Province with emphasis on
indigenous communities in the area. The UN facilitates coordination among other donors in Darien by
sharing its extensive database. The USAID effort to strengthen selected communities in Darien
complements both the IDB and UN programs.
The European Union supports a modest program to assist the Government of Panama in implementing a
program of free legal services for poor pre-trial detainees.
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