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Tourism, Key to Fight Poverty in Panama’s Rural Areas

November 22, 2012


Buses called Red Devil are very distinctive in Panama.

Banco Mundial

  • The country attracts visitors not only for its natural beauty but also for its cultural heritage.
  • Tourism sector represents 6 percent of the economy.
  • A study recommends stimulating the production of typical products, especially in indigenous and rural communities.

Panama is more than the Canal. In the past few years, the country has become one of the main tourist destinations in Central America, especially for the European and the US markets. According to World Tourism Organization, the first nine months of 2012 the country received 1.5 millions of visitors, almost 7 percent more compared to the same period last year. Panamanians authorities hope that 2012 ends with more than 2 million tourists.

The country attracts tourism not only because of its wonderful coasts and vast biodiversity, but also for its rich cultural heritage. But, what is the impact of this activity in the reduction of poverty in Panama?

A World Bank study reveals that the tourism sector – which contributes with at least 6 percent of Panama’s gross domestic product – could have a key role in the fight against poverty by becoming a source with great potential to contribute to the country’s economic growth.

“Benefits to the poor from the tourism development don’t depend as much on the type of tourism, but on how the tourism economy is structured”, say Irina Klytchnikova, Senior Economist in the Sustainable Development Department of the Latin America and the Caribbean Region, and Paul Dorosh, Division Director of the Development Strategy and Governance Division in the International Food Policy Research Institute (IFPRI).

" Growth of the tourism sector can be a major new source of off-farm income in rural and in some indigenous areas, resulting in a significant decline in rural and indigenous poverty. "

Irina Klytchnikova y Paul Dorosh

Authors of “Tourism sector in Panama: regional economic impacts and the potential to benefit the poor”

According to the study, Panama has traditionally been characterized by a “dual” economy with high inequalities: a rapidly growing urban sector based on exports and services from the canal and the free trade zone, and the poor urban areas and rural areas, where agriculture is the main source of livelihood and poverty is high, especially in the indigenous areas.

Authors reveal that “only an 8% of Panama’s population live in the indigenous areas, but 90 percent of the population in those areas live in extreme poverty”. The Ngobe-Bugle community is the largest group and their culture and means of living are being threatened. They live mainly in Bocas del Toro (bordering Costa Rica) and Chiriqui provinces, two of the main tourist destinations.

The study also shows that “growth of the tourism sector can be a major new source of off-farm income in rural and in some indigenous areas, resulting in a significant decline in rural and indigenous poverty.”

This reduction can occur through several channels: employment creation, higher wages, and access to newly provided infrastructure and community services developed as part of the tourism area.

But the authors warn that tourism growth can also have adverse social and ecological consequences if poor and indigenous communities do not participate in the design of the strategy. It is “particularly acute in Panama because of the already high inequality and environmental sensitivity of the growing tourist destinations in the proximity of the Mesoamerican Biological Corridor (MBC)”.

The study recommends to accurately measuring the flows of tourist expenditures to provinces and to the indigenous comarcas, and their impact in of these in local employment and wage levels. Also, it is important to stimulate production and availability of quality handicrafts and artisan products, and give small agricultures connectivity to access the markets.