Strike in Panama: Progress and Challenges in the Negotiations with the Government

By Gustavo A Maranges on August 4, 2022

“Enough of the high cost of the basic food basket” photo:

After several weeks of strikes and highway blockades, on July 21st, the Panamanian government decided to cooperate in the solution to the current political and social crisis in the country and initiated a dialogue with the representatives of the organizations leading the national strike. The government delegation is headed by Vice President Jose Corrizo and Labor Minister Doris Zapata. Meanwhile, the protesters were represented by the United People for Life Alliance; the National Organized People’s Alliance, and social leaders of the Ngöbe-Bugle community.

Panama’s President Laurentino Cortizo was forced to negotiate under pressure from the relentless protesters in the streets, who threatened to extend the strike if the government did not agree to dialogue on at least 8 basic issues. So far, the negotiations have progressed, although not without disagreements over basic issues.

Four out of the eight urgent issues have been settled, namely reduction of fuel and medicine prices, increasing the number of products in the basic market basket and reducing its cost, as well as increasing public investment in education. The remaining four points are currently being discussed, and agreements on them should be reached this week.

Regarding the education sector, the Panamanian government committed to investing up to 6% of the Gross Domestic Product (GDP), equivalent to over US$1.1 billion until 2024 a 36% increase. This budget will be employed to settle long-overdue payments to teachers and improve infrastructure and build new schools. The sectors will be affected the most will be primary and high school levels, where 1,200 rancho classrooms will be replaced by better facilities. This measure prevented the continuation of the strike by Panamanian teachers and the resumption of classes last Monday.

Fuel price was reduced up to US$3.25 per gallon. The state committed to subsidizing $0.53, which does not apply to government cars or luxury yachts. Initially, the measure will be in effect for the next three months, but representatives of the demonstrators are seeking to extend it for up to 6 months, as there are no signs of fuel prices remaining stable in the next three months.

Freezing fuel prices will curb the increase in the basic food basket, which was reduced by 30% (US$80), while 50 new products were added out of the 69 demanded by the protesters. The measure should be implemented without harming domestic producers, whose sales should be subsidized by the state if they were to be affected.

The correction of drug prices, as well as the increase in the transparency of governmental mechanisms for their distribution, was accepted while a side-negotiation is currently underway to choose those medicines whose price and distribution should be most urgently reviewed.

Other key points for the well-being of Panamanians are currently in negotiation, such as the reduction of the electricity price, corruption and government transparency, revision of the Social Security Fund, and the establishment of other intersectoral dialogues to continue negotiations on 32 other issues raised by the protesters.

Progress has been made so far, but the temporality of some measures or the government’s ability to regulate the private market are elements that jeopardize a real improvement. During the negotiations, the government has always opposed regulating the profit margin of intermediaries in the basic goods trade, which is a clear sign of where the limits of a neoliberal administration are. Likewise, it is important to analyze the government’s attitude towards the people’s situation, especially in the poorest sectors.

The current package of measures is not the result of the executive’s will to stop the erosion of people’s living conditions but the result of the protesters’ continued pressure. In other words, the government was forced to give these social benefits.

Moreover, its hesitation to initiate a dialogue and its unwillingness to cooperate in the beginning only changed when the situation was unsustainable for the economy, which came to a near standstill, and corporations began to suffer losses that put their financial stability at risk. In this context it is not unreasonable to distrust the current administration when it comes to enforcing and overseeing these measures, because by their nature they will look for ways to back slide on the agreements.

On the other hand, the dollarization of the Central American country’s economy is a threat to the results achieved so far. The government cannot establish a monetary policy that contributes to the solution to the crisis, since it has no control over this issue. Inflation could rebound at any time, and if salaries and pensions are not indexed, the scenario in the medium run could be the same as before the strike.

This is one of the essential matters that has not been discussed, and the government does not seem open to doing it. The wage increase is an issue that neither the corporations nor the government, both present at the negotiating table, want to address. There are two main reasons for this. First, employers are afraid of seeing their profits fall. Second, the government is determined to apply the shock measures recommended by the International Monetary Fund (IMF). These include the dismissal of over 27,000 government workers to reduce public spending.

The massive firing of workers in a country where 50% of the working population works informally is a measure that, beyond reducing the state’s capacity, may cause serious troubles for thousands of families. This, together with the agreements with the IMF, which demand the application of neoliberal policies and freezing the salaries, are essential issues that must be solved urgently if a real improvement is the goal. Otherwise, six months would be enough to erase the efforts of thousands of demonstrators.

For a neoliberal government, it is more comfortable to comply with IMF demands instead of focusing on controlling corruption or tax evasion or implementing a fiscal reform to redistribute tax burdens. Demanding these deeper reforms depends on the unions and protesters, which should get the most out of this moment of unity.

Once again, it is clear that, in 2022, neoliberalism has very little to offer, especially when it comes to Third-World countries. Understanding that spending efforts on temporary solutions does not guarantee anything, in the long run, is an essential step toward building fairer and more equitable societies but what is really needed is a fundamental change to the system. would

Source: Resumen Latinoamericano – US