📊 Panama's Development Catch-Up
Attempting to measure Latin America's progress, the lack thereof, or even reversals of fortune.
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Economic Growth 📈
What does it mean to converge? According to the Cambridge Dictionary:
"to move toward the same point and come closer together or meet."
In economic terms, that "point" is full development, so convergence is sometimes used to measure how far the developing world has come to catch up to a developed nation, the United States.
Although not a perfect metric by any means, GDP per capita convergence or GDP per capita relative to the US can give us insight into Latin America's progress, the lack thereof, or even reversals of fortune.
In the case of progress towards this convergence, Panama is the region's prime example. Thanks in great part to the Panama Canal, the country has matured into a prominent global trade and financial hub.
"The economy of Panama is based mainly on the tourism and services sector, which accounts for nearly 80% of its GDP and accounts for most of its foreign income."
This service-based economy has led Panama's GDP per capita (adjusted for inflation and local purchasing power) to approach almost half of the US's. That's the closest any regional economy comes by a wide margin.
Now, what if we look at this same metric over time? It then becomes apparent which countries have marched on or fallen behind. Panama also stands out through this historical lens—its GDP per capita relative to the US has nearly doubled since 1980.
The Dominican Republic is also worth noting; it went from 19% to 32% in the same period.
Before discussing the negatives, it's worth emphasizing that this is a tricky metric in which to advance. After all, an increase means that a country kept up with the economic growth of the largest economy on Earth.
In 1980, Venezuela's GDP per capita was 63% that of the US. It was well ahead of any Latin American country today. Now, it sits second to last. There's no way to sugarcoat it: Venezuela remains one of the worst tragedies of our region.
As Latin America continues to navigate this era of technological and globalization breakthroughs, leaders need to look to Panama and the DR and ask: what exactly are these nations doing right?
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Comment of the Week 🗣️
Elie-Charles Youssef speaks of a metric we didn’t consider when looking at VC investments — the number of transactions. Is it possible that yes overall money has gone down but the number of companies invested in or acquired has not? From our chart about the slowdown of VC funding on LinkedIn.
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