PANAMA CITY, Panama – Its border region with Costa Rica has always been somewhat of a forgotten frontier for Panama, left to develop at its own languid pace with the occasional injection of government capital.
Roads went unpaved, border issues went unfixed and the area remained an untapped resource, as the country’s bustling metropolis to the south became Central America’s “Miami.”
Panama was wrapped up in its prospects at sea. Stationed as the crossroads of the Western Hemisphere, the little country of 3.3 million people enjoyed a steady stream of income from its 51-mile canal, a cash influx Panamanians invested in the capital city at the expense of outlying areas.
And there was little interest in building ties with its Central American neighbors.
“For (Panama), there was no benefit in being more integrated with Costa Rica or any other Central American country,” said Gerardo Muñoz, an international relations professor at the National University (UNA). “The canal was a great force in making them look north (to the United States and Europe) for their foreign relations instead of sideways (to Central and South America).”
But trends toward globalization and a desire to modernize the rest of the country have pushed Panama to zero in on its relations with Costa Rica.
By improving the Pan-American Highway, tapping into Costa Rica’s tourism industry and creating cross-border employment opportunities, the official thought was that perhaps the quality of life in Panama’s rural zones could begin to reflect that of the commercial centers of the canal.
In 2007, the two countries signed a free trade agreement and, despite an imbalance of trade that favors Costa Rica, Francisco Alvarez De Soto, Panama’s vice-minister of international trade negotiations, calls it a success.
The agreement complements a long list of other projects that support further integration, including efforts to increase development, to connect electrical systems and to replace the bridge over the SixaolaRiver, connecting the Caribbean coasts of the two nations.
“This would be the first time that both countries implement a project like this,” said Carla Morales, Costa Rica’s vice minister of Planning, referring to the bridge. “What it implies is an important (moment in) coordination on the part of each country.”
But integration efforts don’t stop with infrastructure and free trade. A newly formed Permanent Bi-national Commission is looking to improve immigration processes, making it easier for seasonal workers to cross borders for agricultural jobs and expediting border crossings in Paseo Canoas, the border crossing near the Pacific Ocean. Today, it can take up to four hours just to pass over the imaginary line that separates the two countries.
There’s also the hope that more development and greater attention to the border zone will stem drug and human trafficking, said Costa Rican diplomat Edgar Ugalde, during a meeting with his Panamanian counterparts in March 2009.
Slow March Toward Partnership
For two countries that always have characterized their relationship as “good,” some wonder what has resulted from more than 100 years of diplomatic relations.
Tico political analyst Luis Guillermo Solís blames the sluggish march toward bilateral development not on Panama, but on Costa Rica, which has clamped down its borders, opening them for a mere 12 hours daily and limiting movement across country lines.
“Costa Rica is not like this just with Panama,” he said. “It’s also been an issue with Nicaragua. Our neighbors have generally been more willing (to cooperate) than we have.”
Yet Solís is perplexed as to why joint infrastructure projects, such as the new bridge at Sixaola and the linkage of electrical systems, haven’t happened sooner.
“There is no objective reason why these projects have not been completed,” he said. “For Costa Rica, entering into the Panamanian market is a wonderful business opportunity.”
And it may seem like a one-way street in favor of Costa Rica, as the country’s trade has grown exponentially over the past few years and Panama has sunk into a trade deficit.
C.R.-Panama Trade: Who benefits?
According to comparative statistics from the Central American Secretariat of Economic Integration (SIECA), Costa Rica’s trade surplus with Panama doubled between 2007 and 2008, reaching $168.8 million in 2008 (data from 2009 is not yet available) and it has grown nearly four-fold over the past five years.
“The balance of trade is in favor of Costa Rica. They have definitely taken advantage of the free-trade agreement,” Panama’s De Soto said.
But Panama is already seeing benefits, such as access to Costa Rica’s telecommunications and insurance sectors and the installation of Panamanian banks in Costa Rica.
De Soto said trade relations remain “very important” due to the complementary nature of the economies of the two countries.
“We are definitely stronger in services and investment, and Costa Rica is stronger in terms of agricultural, industrial and manufactured goods,” De Soto said.
Solidifying relations between the two countries also will allow Panama to tap into Costa Rica’s burgeoning tourism industry.
With an estimated two million visitors each year, Costa Rica’s success in tourism has been the envy of other countries in the region.
One such effort to link the two countries was the creation of flights between San José and Bocas del Toro, Panama, in 2006.
Costa Rican Tourism Minister Rodrigo Castro said at the time of the inaugural flight, “I’d say that it’s been in the past five or six years that (we have) really committed to … the integration (of Central America) as a multi-destination” (TT, Jan. 2006).
Another step towards strengthening relations has been Costa Rica’s lobbying efforts to include Panama in the European Union-Central American Association Agreement.
In a January meeting, Costa Rican Foreign Trade Minister Marco Vinicio Ruiz told European diplomats, “We think it’s very important that Panama is included. It’s one of the most vigorous economies in the region, and its inclusion would strengthen Central America.”
In the long run, while the numbers don’t support him at the moment, De Soto said, “We believe [the free-trade agreement with Costa Rica] will be very good.”
Picking Up the Pace
More than 15 months after the trade agreement took effect, the two countries are seeing progress in other areas.
Costa Rica expects to complete the final phase of an electrical connection in July, and Panamanians have secured funding to begin work on the bridge over the SixaolaRiver.
“I think we are going to start to see things happen. We are already seeing evidence of it,” said Solís, pointing to the construction of a coastal highway designed to improve transportation to Panama and to the July deadline for a linkage in electricity.
“It took a while, but both countries are beginning to realize the potential of improved integration,” he added.
Only on www.ticotimes.net: The Tico Times speaks to Foreign Trade Minister Marco Vinicio Ruiz about the first year of the free trade agreeement with Panana.
Ongoing C.R.-Panama Projects
– A new bridge over Río Sixaola. Costa Rica covers 65 percent of design and construction costs and Panama covers 35 percent.
– A project regarding the management of integrated ecosystems at the Río Sixaola will be presented in March or April.
– A connection of the electrical systems as soon as July 2010. Panama has completed its part, and Costa Rica is in the process of finalizing the installation of transmission lines between Moín and Sixaola.
– A meeting between local leaders with the aim of improving infrastructure, to be scheduled in April.
– An effort to organize immigration documentation for seasonal workers, especially for the Ngäbes Buglé, an indigenous tribe in Panama.
Costa Rica and Panama –Pura Vida versus Big City
Costa Rica has developed tourism on both its Atlantic and Pacific coasts, bringing in an average of around two million tourists during the past three years. And, although the narrow isthmus country of neighboring Panama also is lined with beaches on both coasts, the tourism climate there is significantly different.
“In Panama, there is just not the history of foreigners living at the beach,” said a businessman who has hotels in Costa Rica and developments in Panama. “It was never an option like it is in Costa Rica. The roads are undeveloped and terrible, service is poor and you’re lucky if restaurants are open on weekends. Tourism in Panama is simply big-city tourism. It’s been that way forever.”
According to the Tourism Authority of Panama (ATP), 1.56 million tourists visited Panama in 2009, spending an estimated $2.38 billion while in the country.
According to Salo Shamah, general administrator for the ATP, Panama sees “quality tourists” who pass through the country, most of whom come to visit the Panama Canal or the Bocas del Toro islands off the Caribbean coast, near the Costa Rica-Panama border. Panama City hotels, with capacities of more than 100 rooms, claimed a 64 percent occupancy level in 2009.
The hotel operator who spoke with The Tico Times on condition of anonymity, also said a large percentage of tourists who visit Panama City are potential real estate investors. With the allure of the Colón Free Zone, a tariff-free zone along the Panama Canal, as well as the low cost of living, Panama City attracts expats from around the world.
“The population makeup in Panama City is entirely different than in any other city in Central America,” he said. “There are Chinese, Indians, Pakistanis, United States citizens, Europeans, people from all over the world benefitting from the canal and the cheap living costs.”
According to the Costa Rican National Statistics and Census Institute (INEC), the most accurate indicator to determine cost of living expenses can be found in the inflation rate.
The inflation rate for Costa Rica was only 4.05 percent in 2009, but that represented the lowest measured rate since 1971. In 2008, the inflation rate in Costa Rica, which measures the fluctuation in the consumer price index, rose by 13.9 percent.
In Panama, the inflation rate was only 2.4 percent in 2009, down significantly from the 8.7 percent mark in 2008.
“From what I’ve seen, the cost of living is about 40 percent cheaper in Panama than in Costa Rica,” the tour operator, who has lived extensively in both countries, said. “Cars, real estate and products such as clothing and accessories go for much cheaper in Panama.”