Caribbean & Central America - October 2024

Panama’s President José Raúl Mulino is forging ahead with plans to overhaul the state social security system Caja de Seguro Social (CSS), which is running a huge deficit and providing poor service to patients.

In a 20-minute televised address to the nation on 12 September, Mulino highlighted numerous problems with the CSS, such as delays in surgical treatment, a lack of medical supplies to carry out operations, and the “inhumane” treatment of patients. Mulino, who took office on 1 July, also said that the growing deficit at the disability, old age, and death benefit system (IVM) of the CSS, which reached US$673.5m at the end of 2023, needed to be addressed urgently, and that a backlog of 19,350 surgical operations demonstrated that “the system [had] collapsed” with the delays in treatment “bordering on criminal”. 

In his first televised address as president, Mulino said the CSS was in “a terminal state” but could be saved by means of “a structural reform” that would modernise services through digitalisation, “end the rampant corruption that is reigning” and remove cronyism and the influence of party politics from the system. During his morning press conference on 19 September, he again criticised what he called a “mafia” that has become embedded in the CSS. 

As for solutions, Mulino has announced the launch of a new unified procurement system, ‘Compra Única’, between the health ministry and the CSS, which he said would help address a lack of medical supplies. On 8 August he announced a multi-sector dialogue to come up with proposals to improve the system, which had its first meeting on 16 September, and announced that Dino Mon, an actuary, would become the new director general of the CSS from 1 October. Mulino has also emphasised that the CSS would not be privatised, a proposal which would likely spark social unrest, and ruled out raising the retirement age, which would also be politically unpopular. Indeed the need to strengthen the CSS (without privatising it) was also a demand of protesters who staged massive social unrest in 2022, sparked by the cost of living.

Setting up a dialogue with key sectors may be a smart way to head off potential protests, but fixing the issues with the CSS will not be easy as its problems are longstanding and solutions have evaded previous governments. However, the problems risk coming to a head during Mulino’s time in office, and international credit ratings agencies Fitch, Moody’s, and Standard & Poor’s have all mentioned the CSS as a contributing factor in recent downgrades, upping the pressure to steady the ship.

Concerns have also been expressed by the International Monetary Fund (IMF) which said that “action must be taken” to address the deficit in the CSS’ defined benefit in a statement in June. The Fund added that the CSS will “run out of resources in late 2025 and faces deficits in the order of magnitude of 1.5%-3.0% of GDP annually during the coming years.” This will add to budgetary pressures caused by the closure of the massive Cobre Panamá copper mine in December 2023, which accounted for around 5% of GDP.

Looking ahead, Mulino has set a deadline of 31 October for reform proposals to be submitted. After this, the government will send a bill to the legislative assembly, which will hold extraordinary sessions in November and December in an attempt to pass new legislation as quickly as possible. Nonetheless, Mulino may find it difficult to get the bill through without major concessions given the fact that his right-of-centre Realizando Metas (RM) party holds only 14 of 71 seats in the unicameral legislature.

Economy picks up

Panama’s GDP grew by 2.5% year-on-year in the second quarter of 2024, according to figures released by the national statistics institute (Inec) on 16 September. The economy grew by a meagre 1.8% in the first quarter, the lowest quarterly growth since the coronavirus (Covid-19) pandemic. Economic growth in the second quarter was driven by construction (+6.3%), agriculture (+3.1%), retail (+4.6%), and hotels and restaurants (+10.3%). The manufacturing sector contracted by -3.2%. The economy grew by 2.2% year-on-year in the first six months of 2024.