Why the U.S. should be happy about Panama

I am in Panama for the second time in seven years, and it certainly is a very different place today. Skyscrapers are sprouting up all over the city and there has been explosive growth here. Constant sunshine, no earthquakes, fabulous location, peaceful Costa Rica to the north and a natural buffer of the Darien region to the south make Panama a stable and peaceful democracy. Americans are not perceived as an alien presence but a welcome partner. To be an American in Panama, especially an American who speaks Spanish, is to feel very, very welcome.

The Embassy estimates as many as 45,000 American citizens down here while the Panamanian government estimates as many as 250,000. One of the reasons for the discrepancy in estimates is that many Panamanians, for legacy reasons, possess U.S. passports and dual citizenship. In short, the U.S. legacy in Panama is obvious. At one point the U.S. had 35 military bases here to protect the canal from Japanese attacks in World War II, but today there are no U.S. bases in Panama. Many of the former U.S. bases have become urban renewal projects similar to the Presidio in San Francisco, and the new U.S. Embassy is built in one of these old sites.

Though this past year Panama’s growth rate was 8.5 percent, services account for over three-quarters of the economy and English is a big need here. There is a shortage of skilled workers, and English is not as strong as it might be, or as strong as many locals think (although many call centers have been built here). The weakness of English in Panama is the legacy of dictator Omar Torrijos, who deemphasized English, going so far as to ban the teaching of English in public schools and stopping an entire generation from learning the language. Anecdotes tell of English teachers at public schools who have a hard time conducting visa interviews with the U.S. embassy in English.

For years, the Panamanians have been stalling building the last piece of the Pan-American Highway through the Darién region, and the U.S. has supported them for a number of reasons — preventing the northward spread of foot and mouth disease, environmental worries, and perhaps other security concerns relating to narcotrafficking.

When I was last here, there were discussions about building an extension of the Panama Canal. The expansion is well underway, and ideally the expanded canal will be up and running in 2014 though more likely this will happen in 2015. You may have heard of the "Panamax" class of boats, but the expansion was needed for the "New Panamax" class of ships. At its narrowest portion, the canal can only run one way at a time right now for the largest ships, but after 2015 it will be able to run both ways at all points. The U.S. administered the canal as a public utility until 1999 and therefore hardly made any money. Today, the Panamanians run the canal like a business and it generates around $1 billion annually in profits for the Panamanian Treasury. This figure will increase considerably after the expansion.

In October, Congress finally approved the Panama Trade Promotion Agreement. It took way too many years under the current administration to sign this agreement. Though it is more a signaling effect, the upshot of this is the elimination of tariffs that were making it difficult for American goods to compete in Panama.

As far as security for U.S. interests in the region, there is little concern here over Hugo Chavez’s influence except perhaps rumors of mischief with labor unions, and there are likewise no murmured concerns about Chinese influence. Nor do there seem to be any agricultural, mineral, or fuel resources that attract the attentions of China. In fact, Panama has kept official relations with Taiwan over China. I also asked about the ownership of Pacific and Atlantic ports through Hong Kong’s Hutchison Port Holdings. It was met with a series of shrugs from U.S. officials and old Panama hands.

The FARC has used Panama’s Darién region as a base of "rest and relaxation" but the current center-right government has taken a notably harder line than in the past. The FARC is almost exclusively interested in drug trafficking here, unlike in Colombia, where the group poses a threat to the state. According to U.S. officials, Panama yearly seizes about 40 tons of drugs in partnership with the U.S. There are also gang problems here but nowhere near the level of trouble that other Central American countries have been having over the last decade or so. Perhaps the biggest challenge to Panama’s future is the weakness of its institutions and the persistent whispers of endemic corruption in the society. If Panama can confront this challenge, it will be on its ways to being as wealthy as the United States.

Two hours by plane to Mexico City, 40 minutes to San José (Costa Rica), less than an hour to Bogotá, and 4.5 hours to Washington. Panama, with a population of 3.4 million, is truly the hub of the region and a great American ally.