The Panama Exception
Panama has high levels of corruption, resource dependency, and a history of military dictatorship. And yet it's been a stable democracy for 33 years. Why? The political parties are stable.
There are a dozen good reasons why Panama should be a backwards, brutal dictatorship. And yet it is an affluent, stable democracy. How has it pulled off this miracle? Among other things, its political parties are strong and stable. This should be a warning to Americans who have weakened their political parties thanks to referendums, direct primaries, and other experiments with direct democracy.
In the three decades since the U.S. invasion that overthrew the dictatorship of General Manuel Noriega, Panama has undergone a remarkable—and largely overlooked—transformation. It has remained a stable democracy and is today one of Latin America's most developed countries. This article draws attention to Panama's rise and highlights several puzzling features: it is a rare case of successful democratization by military invasion; it is one of the world's most unlikely cases of authoritarian successor party regeneration; it is a standout instance of effective resource management by a state-owned enterprise; and it has achieved rapid economic development despite extremely high levels of corruption.
…If Panama's democratic survival has been its greatest political achievement, the country has also maintained a high degree of political stability in other ways. While in recent decades countries such as Bolivia, Ecuador, Peru, and Venezuela have seen their party systems collapse, the Panamanian one has largely remained stable, revolving—especially at the presidential level—around two main parties: the PRD and the Panameñista Party, which was founded in 1931 and served for a half century as the vehicle of populist leader Arnulfo Arias. The former party is nominally left-wing and the latter is usually described as right-of-center, but in practice both are pragmatic centrist parties. In all but one election since the democratic transition, the candidate from one of these two parties has won the presidency. (The exception was the 2009 election of businessman Ricardo Martinelli of the Democratic Change Party. Even this victory, however, was the product of a coalition with the Panameñista Party.)
Panama has also managed to avoid the twin vices of continuismo, when presidents amend the constitution to prolong their tenures, and of "presidencies interrupted," or the premature impeachment or forced resignation of the chief executive amid turmoil.2 While reelection and the occasional elimination of term limits has become commonplace in[End Page 86] Latin America, Panamanians have demonstrated a firm commitment to alternation. When they were asked in a 1998 referendum if the constitution should be amended to allow for consecutive reelection, they opposed it by a two-to-one margin. They have also opted for an opposition candidate in every presidential election since the transition to democracy. And Panamanians have allowed duly elected presidents to govern: Every posttransition president has served a full term.
The case for Panamanian exceptionalism is even more clear-cut with respect to the economy. Panama excels compared not only to Latin America and the Caribbean as a whole, but also to the three countries that are widely considered to be the region's most developed and often described as "exceptional": Chile, Costa Rica, and Uruguay. In 2019, according to World Bank data, Panama's GDP per capita (US$15,728) was well above the regional average ($8,693) and exceeded Chile's ($14,742) and Costa Rica's ($12,670), trailing only Uruguay's ($17,688). In terms of purchasing power parity (PPP), Panama had the highest GDP per capita in the region at $32,768. This was the product of three decades of robust economic growth; the country's GDP expanded at an average rate of 5.9 percent per year between 1990 and 2019. While the "Chilean miracle" is well known, Panama's economy has in fact grown more quickly than that of any other country in the region.