IN 1989 Panama was essentially a failed narco state run by a corrupt military dictator; it was the quintessential banana republic, infamous for corruption and criminality.

Fast-forward to 2015: Panama is now heralded as the Singapore of the Americas, with exceptional economic growth, a vibrant democracy, and aspirational leadership.

How did this happen just next door? And if Panama could rescue itself from the abyss, then why hasn’t Jamaica been able to do the same over this period? What are the governance lessons that can be learnt from our neighbour, and how can we accelerate the learning curve on the path to national prosperity?

Following the US invasion in late 1989, Panama’s constitutional government structures were restored with painstaking bipartisan effort, and a slow but steady process of institutional reform began to take shape, replacing the old state structures marked by crony capitalism.

In 2004, Martin Torrijos, son of the legendary Colonel Omar Torrijos, who led a military coup in the 1960s that broke the oligarchy’s stranglehold on power, was elected to an order and transparency mandate; Forming an independent Anti-Corruption Council, he led a technocratic government with a zero-tolerance policy towards lawlessness and corruption.

He was succeeded in 2009 by Ricardo Martinelli, a billionaire businessman with a clear vision for Panama’s rightful place on the world stage; this vision was shared with the electorate through a plebiscite for their approval of the US$7-billion Canal expansion works, and medium-term public investment projects were developed through discourse with the wider society.

Torrijos and Martinelli were both agents of change with compelling national agendas and the political will to effect truly transformative progress. Importantly, they communicated their aspirations for the nation and recognised that investments in human capital, institutional capacity, and world-class infrastructure could propel their country to regional prominence.

The pulse rate of a people

The results are astonishing by any standard. In 1990, Panama’s GDP was about US$6 billion, while Jamaica’s was about US$5 billion. By comparison, Panama’s GDP today is about US$47 billion, while Jamaica’s is about US$14 billion, reflecting average annual growth rates of 6.0 per cent and 0.6 per cents respectively, over the past ten years.

Growth rates matter because they are an effective index of the quality of life expectations for a nation. Economic growth is more than a political slogan or technical mantra; it is the pulse rate of the people.

The societal costs of a no-growth economy are chilling, if you live in Jamaica versus living in Panama, then you are:

— 2.5 times more likely to be murdered

— 2.5 times more likely to contract AIDS

— definitely earning 60 per cent less income

— 29 per cent more likely to die as an infant

— at least four times more likely to be unemployed

Without meaningful, sustained economic growth, a nation’s pulse gets weaker. The usual IMF patient prescription entails bitter medicine that only shrinks the body without providing the essential nutrients for full recovery. Demographic challenges posed by a young population and scarce state resources only compound the problem.

Slow growth means fewer jobs, limited opportunities, and most dangerous of all, diminishing hope. Without hope for the future, despair gives way to anger, alienation, and desperation. In this toxic soup, indiscipline, crime, and corruption thrive and become endemic; society is further shredded by these cancers, and a bunker mentality prevails along the entire income spectrum.

It is hard to believe that within a generation, Bob Marley’s inspirational, often radical message of One Love and Get Up, Stand Up would be replaced by a dissonant debauchery masquerading as music; just as it is equally difficult to understand how a nation that prides itself on heroic achievements on the world sporting stage still cannot muster the resources to ensure the competitive integrity of its athletes. When did we lose the plot?

More importantly, how do you fix the seemingly unfixable? Where do you start, and with what tools? Let’s take a brief history lesson from the Panama model. Some would say that Panama inherited the Canal and that has made all the difference to the story, but Jamaica also had bauxite, a tourism industry, a wealthy diaspora, and much more — yet has proven itself unable to fully emerge from the miasma of debt, devaluation, and decay.

The lesson is one of governance. Despite the huge economic strides and a spate of successful mega projects under the Martinelli Government, perceived corruption amongst the political elite became a hot public issue. The new Varela Administration put a five-year, US$20-billion public works investment programme on pause for a year while it actively pursued criminal investigations against dozens of state actors, many from powerful families.

It wasn’t a popular measure because of the prior expansionary momentum, but it sent a cautionary signal, both to Panamanians and the wider world, that in Panama justice was as important as economics, and public integrity was most important of all.

Indeed, anti-corruption probes led to President Martinelli’s self-imposed exile in Miami, as his lawyers fight corruption and illegal surveillance allegations, while the former national security director is in preventive detention in Panama City on related charges. The Varela Administration has some major game-changing projects of its own, but its policy priorities also embrace the expansion of social services, reduction of income inequality, criminal justice reform, and educational initiatives.

Anti-corruption czar

Panama’s political system isn’t perfect, but it’s their anti-corruption and transparency efforts that really count. Equitable governance is a leadership prerogative — change must be effected at the head of the stream in order for there to be any public trust in the state or confidence in its vision.

Can you imagine an ant-corruption czar in Jamaica with independent investigation and arrest capabilities, bringing charges against the former political and security directorate and marching them off to GP for preventive detention pending trial?

Or could you possibly conceive of a national referendum on the environmental and economic impact of a logistics hub with full financial disclosure and civic oversight? The Panama Canal expansion was a public debate that engaged the nation, the financing for which was a taxpayer event requiring their consent. It was not just a deal done at Cabinet level without a public mandate.

How about a red carpet programme to attract and integrate skilled intellectual capital from around the world? Panama’s “Friendly Nations” programme has made it easy for many thousands of aspiring families from 48 nations to obtain residency and start businesses in recent years.

By contrast, imigrating to Jamaica is no picnic, even for seasoned expats, and the state process cannot be remotely described as friendly.

Holistic policy incentives for new business investment? Some two hundred multinationals have established their regional HQs in Panama since the enabling legislature and infrastructural backbone was implemented in 1995, bringing new technology, capital, and energy with linkages to local sectors providing skilled jobs and bright futures for young Panamanians.

That’s not the same as Heineken buying D&G, or C&W buying Flow, or hotel investors pouring massed concrete beside fragile reef systems and atop stressed aquifers.

Criminal justice reform? In Panama, for non-felony events, one can file a Denuncia against another person or entity and have the matter adjudicated within weeks. Offences against the person are often dealt with through personal restitution rather than mandatory imprisonment.

Commercial justice reform? Panamanian law recognises an independent Arbitration Council for the settlement of contractual disputes without the need for any formal court action, resulting in resolutions within several months rather than many years.

Jamaican leaders past and present have been guilty of political myopia, equating national investment activity with real economic productivity and prioritising short-term deliverables (more rooms, more jobs, more taxes); meanwhile, massive, game-changing initiatives or concepts are viewed as suspect challenges to the socio-political status quo.

As a result, an irrational attachment to both a defunct currency and an ossified bureaucracy remain dangerous impediments to real growth; capital investment is continually cut or deferred while state overheads inexorably grow and social services inevitably decline.

In Panama, strong and visionary leadership united behind an aspirational agenda engaged with the nation, established social cohesion, and focused on economic facilitation and governance reform. This fostered an enabling business ecosystem, which in turn attracted and embedded sustained human and financial capital flow. The accelerator effect took hold and the results have been dramatic.

Jamaica’s economic malaise is so deep and entrenched that today’s incremental efforts will only yield anaemic results tomorrow. Iron-willed political leadership and accountable governance remain essential but absent prerequisites for meaningful social and economic progress.

Fixed-term limits and electoral cycles, enforcement of public order and safety, wholesale reform of the commercial justice system, massive programmed reductions in state payrolls, fast-paced dollarisation, steep negotiated debt haircuts, simplification of the tax code, and major immigration incentives are corollorary measures that could help redirect the Jamaican economy towards a growth path subject to a newfound political will and a national call to action.

Meaningful initiatives like ganja decriminalisation, acceleration of tourism incentives, engagement with the diaspora, and fierce struggles between the new and the old guard in both parties offer a glimmer of hope for the future. But new public paradigms must take root — time is of the essence, and every vote counts, because an absentee electorate lacks the moral authority with which to speak truth to power.

Twenty-five years ago, in the post-Noriega morass that was Panama, few could have predicted that it would fast become an international business centre with iconic architecture and a cosmopolitan culture.

Conversely, few would have imagined that save for some empty highways, mammoth hotel enclaves and a new phone system, Jamaica would remain much the same: still bereft of vision, a people divided, and a nation devalued.

It is interesting to note that in America, another highly indebted country with politically paralysed governance and deep societal divides, rampant outsiders of both parties are campaigning on platforms of radical change, gaining remarkable traction and framing a new debate. But where are the Jamaican outliers? Who will defuse the debt bomb? Who will crush the crime? Who will call their own to account? Who has the courage to dare to be Jamaica’s Torrijos?

In this article, we focused on the systemic foundations of macro economic growth. In the next, we will explore regional investment trends and focus on the micro-economic elements that power Panama’s growth trajectory.

Roger Brown is the founder and managing director of Panama-based Risk Control S.A., which provides investment advisory, asset protection, and offshore financial services to international clients. Through Professionally Panama, its business concierge platform, Risk Control also provides custom corporate, health, and hospitality services.