Panama: Growing pains
Despite having its role in the national economy minimised over the past 50 years – partially a consequence of the emergence of new economic activities – Panama’s agriculture sector has a significant role to play if the country is to meet its goal of sustaining 6-9% annual economic growth and creating 860,000 new or better jobs by 2020.
Indeed, the Ministry of Economy and Finance’s (MEF) Strategic Economic Plan 2010-14 has identified the development of the agriculture sector as one of four growth engines – the other three being logistics, tourism and financial services – that will be crucial to driving economic progress. According to the Ministry of Agricultural Development’s (MIAD) Strategic Plan 2010-14, the following development priorities for the sector have been identified: ensuring food security, restructuring productivity, increasing commercialisation, promoting rural development and modernising public institutions.
The agriculture sector employed about 255,300 people, or 16.4% of the country’s active workforce, as of August 2011, although it accounted for only an estimated 2.9% of GDP at year’s end, with the sector’s production valued at $683.5m, according to data from the Panama National Statistics Institute (INEC). After the sector experienced a 10.1% fall in 2009, it has managed to bounce back, posting modest growth of 1.8% in 2010 and a more robust 3.8% growth estimated for 2011.
Primary crops are banana, coffee, maize, rice, sugar cane and soybeans, although during the past decade tropical fruits, such as mango, pineapple and orange, have grown into noteworthy contributors to the sector.
A key element for agricultural development is the expansion of irrigation and energy infrastructure to support new projects and expand existing production capabilities. Figures from the MEF indicate that some $1.6bn has been invested in constructing dams and irrigation channels recently, including the $200m Santa Maria irrigation system (18,000 ha), the $200m La Villa Dam (10,000 ha), the $140m Barú irrigation system (6500 ha), $165m San Pablo Dam (8500 ha) and the $105m Peralas Dam (3000 ha).
The MEF’s strategic plan also calls for the construction of a “cold-storage chain”, with improved roads, distribution centres, secondary collection centres and facilities for final delivery to decrease shipment times and minimise production losses due to spoilage. Current sites being examined include David and Aguadulce as pilot distribution centres, Darien and Los Santos as potential collection centres, Santiago and Changuinoia as secondary collections centres, and Panama and Colon as final distribution sites.
Improvements to the road network are also currently underway, with 54% of the Ministry of Public Works’ road investment budget devoted to rural provinces such as Chiriquí ($60.3m), Veraguas ($42.7m), Los Santos ($41.1m) and Herrera ($40.6m).
However, improved infrastructure will go only so far in streamlining production and efficiency within the sector. To create larger economies of scale to successfully meet its goals, MIAD may need to consolidate production, potentially through the promotion of cooperatives or possibly even some form of agrarian land reform.
According to data from INEC, the production scale of Panama’s farmers has actually decreased in the past decade. In 2001 there were 83,270 producers (one-third of the country’s total) working on parcels of land smaller than .10 ha. This figure increased during the first decade of the new millennium to 88,675 producers in 2011, bringing the percentage up to 36%. Many of these producers are in fact subsistence farmers that suffer from a lack of proper access to financing and training, two areas MIAD has identified in its strategic plan.
Improving the livelihood of small rural farmers will go a long way to eradicating poverty and ensuring the nation’s food security – two key objectives of the current administration. As the nation’s largest employer, the agriculture sector’s nominal contribution to the national economy is low. With over one-third of the country living in poverty – many of who reside in rural areas – agricultural development will likely have the greatest social impact of the MEF’s four economic drivers. Now that a new set of objectives and priorities has been set, the sector is poised to once again become a major economic contributor.