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Panama Politics May 2019

Panama: Opposition PRD candidate likely to take power on pro-business, anti-corruption platform

The upcoming Panamanian general elections, scheduled to be held on 5 May, will likely see Laurentino Cortizo of the center-left opposition party PRD (Partido Revolucionario Democrático) win the race for the country’s executive office, ousting the ruling conservative Panameñista Party (PP) of incumbent President Juan Carlos Varela from power. Cortizo, like other key candidates, is largely running on a continuation of pro-business policies, meaning that the political outlook for the country should remain stable no matter the electoral outcome. In addition, two of Cortizo’s main policy priorities include the fight against corruption and improving economic competitiveness—notably by investing in education, research and technology—which could positively affect Panama’s long-term growth prospects.

Cortizo is expected to support major economic projects, among them the third metro line of Panama City, the fourth bridge over the Panama Canal and negotiations over a free-trade agreement with China. Moreover, he has pledged to seek changes to the public contracting law to improve the transparency and competitiveness of the bidding process for public works; would likely review the controversial price-control policy enacted by Varela in 2014 to combat high inflation on basic food products; and pay back debt owed to state suppliers worth an estimated USD 1 billion to help reactivate the economy.

Meanwhile, Cortizo’s policy proposals for education and technology revolve around two main axes. First, he plans to bring up public investment in science, technology and innovation from an estimated 0.16% of GDP currently to 1% by 2024, as well as improving teacher training and creating a venture capital fund to finance university projects in science and technology. Second, he aims to create a “Bank of Opportunities” to provide access to credit for small businesses and entrepreneurs, and to modernize the Colon Free Trade Zone in order to boost its attractiveness to firms and take advantage of the development of e-commerce.

Looking ahead however, progress on any proposed reforms will crucially hinge on whether the new government can secure a legislative majority, which would likely require forming a coalition. In addition, the fight against tax evasion—in the spotlight since the Panama Papers—will likely be a pressing issue for the incoming administration, despite some recent progress earlier this year with the passage of a tax evasion law.

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