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Traditionally stable Panama sees financial crisis, crippling inflation, and mass protests

Panamanian anti-inflation protests intensified this week as protesters continued to block key transportation routes causing food and fuel shortages and prompting the government to make some concessions, the FT reports. Panama has long been insulated from the economic ups and downs of its neighbors by its peg to the dollar, but the weeks-long protests are showing the country’s strong growth performance hides increased inequality and the erosion of living standards for much of its population.

In response to the protests, which began in late June, the government has reduced fuel prices, frozen prices of a dozen basic goods, and restrictions on expenses and foreign travel by government workers, and proposed to reduce the state payroll by 10%. However, an increasingly diverse group of teachers, students, construction workers, and indigenous groups rejected the measures, demanding further price cuts and subsidies. Reminiscent of the spring’s protests in Peru, the diversity of the street coalition has made placating protesters nearly impossible.

The protests have caused considerable disruption. A blockade of the Pan-American highway has disrupted distribution of some 80% of the country’s fruits and vegetables and all of the goods shipped from the Panama Canal to the rest of Central America. Long-term commodity subsidies and hits to growth risk further increasing government debt, which has already risen to more than $40 billion, up 19.1% since 2019.

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