December, Panama, madness, road rage, traffic jams, inconsiderate drivers, emotional intelligence, cutting off, blocked intersections, blocking intersection

December Madness: Road Rage

Unfortunately, we are back in that time of  year when Panama’s road rage escalates and the traffic jams just seem to be crazy!  Everyone that has a car is out and about, and there does not seem to be a single day where there aren’t any traffic jams.  Obviously, Panama’s traffic in the central business district is pretty bad all year round – but December is nightmarish.

Every year, we see the government make the Corredor Norte & Corredor Sur (toll highways) free for some of the December period (often December 7 or 8 – Mother’s Day; and then again for Christmas – one year they made it free from the 19th to the 23rd!).  This is because some 2 million cars transit through Panama City every week.

It was so bad in 2016 that the Government changed the working hours of public offices so that they would leave work earlier and be able to get home before the worst of the traffic.  Hopefully this year it will be repeated, and we will see some employers offering alternative working hours to their staff to accommodate the Christmas traffic.

Road Rage

In Panama, all year round, it’s quite common to find drivers aggressively jumping queues, blocking intersections (even with the traffic cop directing the traffic), honking, flashing their lights, and speeding up to block you out as you try to change lanes or merge.  But this inconsiderate driving in bad traffic conditions seems to get worse in December.

What is essential to realise – while you cannot change or control how others respond & react in the traffic – you can control yourself! You can choose how you are going to view the problems around December traffic and stress.

Emotional Intelligence

Emotional intelligence – something that many times appears to be sorely lacking in Panama – is the capacity to perceive, access & manage yourself and understand others.  It’s quite similar to empathy – with the added bonus of being self-aware.

It’s important to note – this is not intellectual.

This is intelligence.

It refers to our ability to learn – to continually change and adapt the information we had and then choose to respond differently.  One of the biggest challenges with emotional intelligence is that there is communication between the emotional and rational centres of our brain – and they occur at different speeds.

The lymbic system, which receives and processes a stimulus (leading to an emotional response), actually receives and processes faster than the neocortex (rational brain).  So, inevitably, we react emotional BEFORE we have had a chance to think.

road rage, just breathe, count to 10, Panama traffic, traffic jams, Christmas traffic, Costa del Este, Corredor Sur, Corredor Norte, Calle 50, Vía España, malls, Altaplaza, Multicentro, Multiplaza, Albrook

So, while it’s true that Panama needs to come up with new solutions to the December madness that leads to the road rage in the first place – there’s also a place for self-regulation!

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In  my ideal world of PanUtopia, all driver’s ed courses would include the following education:

  1. Pause & count to 10 —
    1. The brain struggles to process more than one thought at a time.  So you cannot count to 10 AND be thinking about why you are so mad at the other person.
    2. This allows the anger and emotions to dissipate until you can engage the rational brain
    3. Don’t take this frustration home with you – release & let go before you walk in the door!
  2. Engage your brain – think & visualize the consecuences of how you are planning to respond
  3. Practice empathy – recognise that they are driving in their own circumstances
  4. Defensive driving – not simjply driving according to the rules, but awareness that others might not be following the rules. It’s better to be safe than to be right.
  5. General education about timeliness – if there’s always bad traffic in Panama (and we all know that there is) – always calculate your travel time to the worse possible scenario, so that you are always on time.  It’s not the traffic’s fault you are running late.

Solutions

So, let’s really talk solutions to this December madness.

More public transport

I would love to see Panama actually start planning and announcing public transport options during the peak traffic.  To know that during the December traffic, there will be buses running more often than during the rest of the year.

And I would like to see Panamanians using public transportation more during the Christmas period:

  • metro
  • buses
  • Uber/taxi
  • Pedestrian

Carpooling

I would love for Panama to simply do away with their not-so-well and not-so-brilliant carpooling legislation! Who would think that legislating carpooling would actually work?

The problem is that in other countries a police officer will not pull you over in the morning traffic to find out whether the person(s) travelling with you in the car are friends/family or an officially carpooling which is registered… they will simply be glad for less traffic on the road.  However, in Panama, the taxis and transport unions are so strong, that they have made it impossible for anyone to give a neighbour or co-worker a lift to work – because apparently that’s unfair competition with the public transport sector!

Who in their right mind thought that this was a good idea?

If we want to address the traffic nightmare, we need to accept that maybe, perhaps, a neighbour will ask you for petrol-money!  And that’s okay.  It’s one less car on the road.  It’s not an illegal taxi service!

Changed working hours

In past years, the government has changed public offices working hours in December, in order to alleviate the congestion at peak hours.  This means that public officials were getting out of work by 3.30 p.m., allowing them to be home before 5.00 when the rest of private enterprise was getting off work.

More TV time – educational videos

I would love to see the transport authorities / police spend money on educational videos!

  • how to use a roundabout (circular intersections  – rotaries – what do you call them?)
  • reminder that a passing lane is for “passing” – go back into the right lane if you are not passing
  • give me a comedy about the rudeness of queue jumping
  • pet peeve – teaching drivers NOT to block intersections – don’t move forward into an intersection until it’s clear to exit.  And give this education, especially, to the traffic cops that are directing traffic.  Yes – even if you are directing traffic, there’s still no reason to allow ANY car to block the intersection!
  • tailgating versus defensive driving
  • purpose & uses of indicators – maybe another tongue-in-cheek comedy routine

But really – be safe as you are out there driving in the December madness.

Remember – while you have no control over how others are driving – you are 100% responsible for your own responses.  How will you choose to drive this December?

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Panama, traffic jams, car, cars, transport, network, train, metro, bus, buses, quality, life, work, employment, jobs, commute, commuting, driving, riding, stuck

Traffic jams

It’s 4.44 a.m. and I am awake with my hot chocolate. This, for me, is quite a normal time to be awake and up.  But that’s just my body clock – that loves getting up hours before dawn to welcome the day!  I love the quiet morning – no interruptions – just to sit and write.

Most Panamanians, however, have a waking time similar to this – with alarm clocks and a commute that I do not envy!  One friend tells me she leaves home before 5.50 a.m., otherwise she will be stuck in traffic for 2 hours.  If she leaves before then, it only takes 30 minutes.  So, she gets to work at 6.30 a.m. every morning!  But it’s better to be at work than stuck in traffic for hours!

Another lady in my office leaves home (Chorrera) every day before 5.20, so that she has a “hope” of getting on the unlicensed buses (known here as bus pirata), because at least then she can come with air-conditioning and sitting down.   All in order to get to the office before 8.00 a.m.  Most people that live in Chorrera are awake at 4.00 a.m. to get to work by 8.00 – to me that is simply unimaginable!

It’s quite normal for a Panamanian to spend 4 to 5 hours a day stuck in traffic on their way to and from work!  Imagine the quality of life they could have if they could recover 3-4 hours a day!

While it’s true that the Metro train runs from Los Andes to Albrook Mall in 20 minutes, that’s only a partial solution to Panama’s commuting problem!  Panama has built suburbs in three directions:

  1. Los Andes / Milla 8 / San Miguelito
  2. Tocumen / Pacora / 24 de diciembre
  3. Arraijan (pop. 300,000)  / Chorrera (pop 200,00)

Of these three areas, the current metro line only services the first of these.  The second metro line – under construction but “almost finished” will cover Tocumen, 24 de diciembre & Pacora – but will not actually go to the airport!  So, for now, we can forget about the option of coming into the airport and just catching the metro home!  Once again, I see no plans for any parking at the final station.

And the third line of the metro – that will take care of commuters from Chorrera & Arraijan, is still in planning phases – with the largest part of the plan being the bridge across the Canal for the train & more traffic.  Chorrera and Arraijan used to be in the same Province as Panama City – until the populations grew so much, that the west side of the bridge was divided off into a new province: Panamá Oeste.  Chorrera is now the capital of that province!  But it doesn’t “act” like a provincial capital in many ways.  It continues in its role of sleeping & housing satellite for Panama City.

As Ursula Kiener stated earlier this year in a tweet – building 20 bridges across the Canal isn’t going to solve the problem – the issue lies with having Chorrera & Arraijan simply as dormitory cities.  We need to start developing the rest of the country and creating jobs there.

But even if I look at New Zealand – and their commuting problem for Auckland’s central business district – is it really all that different? Twelve KM from New Lynn to CBD in about an hour – which is half the distance that commutes have from Tocumen or a third from Chorrera (34km) into Panama City’s CBD.

Panama attempts to solve the commuting issue by having all of the lanes of the Interamerican highway coming INTO town from 4.00 to 8.00 a.m. – meaning that if you want to go out of Panama City, you take the Puente Centenario!

Basic culture – driving:

And that’s without even talking about the traffic in downtown Panama City!  Unfortunately, Panamanians do not appear to have learned the basics of how to handle intersections – exacerbating the traffic jams and frustration for other drivers.

What’s worse — you watch the traffic cops telling drivers to pull up over the intersection while they wait in line… doing nothing to help in the education of drivers who are respecting an intersection.

 

Pet peeve # 2 – Panamanians do not seem to have learnt the correct way to use a roundabout!  Panama would be a slice closer to Utopia, if every driver would just follow the simple etiquette and rules for using a roundabout.

Part of the solution lies in a complete education of Panamanians regarding regard to the driving rules – not driving on the shoulder and creating a third lane when there are only two, not driving down a one-way street the wrong way to avoid the queue in the other street, and respect for fellow drivers.  Everyone is heading the same direction – getting to work.

Transport solutions

Public transport

The options in Panama at the moment are limited:

  1. Buses, including metro buses & “piratas” – referring to the unlicensed buses that run daily (who when they are deemed illegal actually protest and block the roads)
  2. Metro system – line 1 – running North-South – only available at the moment from San Isidro to Albrook Mall
  3. Taxis – which used to be relatively safe and comfortable – are now often not air-conditioned and people are concerned about their safety
  4. Uber & other apps – a better option, as long as you have a credit card for payment, since they are phasing out cash payments (although in today’s headlines – this is being extended again)
  5. Walking
  6. Cycling

I don’t know anyone in Panama that would cycle to work – especially since upon arriving at work they would need somewhere to shower.  The heat & humidity of the tropics does not make this a cool morning ride to work – and the fumes from the traffic are asphyxiating!  Not to mention the complete lack of cycle-friendly cars that would push you off the road in their angst to get to work “on time”.

Uber & taxis are certainly not options for a long commute – such as from Chorrera or Pacora, because they would break a hole in your pocket if you did that daily!

And so commuters are left only with walking (fine for short distances as long as there isn’t a tropical downpour), buses or their private vehicles.

Car-pooling or ride sharing

Car-pooling would seem like one obvious solutions to Panama’s public transport crisis more than one person travels in a car, and prevents the need for others to have to drive  themselves. Ride-sharing reduces each person’s travel costs such as: fuel costs, tolls, and the stress of driving.

While to me it may seem crazy – Panama prohibits carpooling or ride-sharing to work – unless you’ve registered for it!  The taxis and public transport didn’t want people to be able to do this, because they said that the driver would charge others for the ride (i.e. gas money) and that was taking money out of the pocket of public transport.

Really?

Seriously?

Would you LOOK at the transport problem that Panama has?

And you want to legislate carpooling & ride-sharing so that it’s done properly???

While every other country simply has a rule that there are carpooling lanes (i.e. if there are two or more people in a car they get a special fast lane) – Panama is sitting here complaining about the traffic problem without really solving it!

Rant over.

Parking for at Metro Stations

One of my pet peeves is the LACK of parking at the final metro stations – I’m talking Pacora (when they finish line 2), San Isidro (out past Los Andes) and whatever the plans are for the last station in Chorrera.  I understand that there is no parking at the station on Vía España or even San Miguelito’s “La Gran Estación”.

But I don’t understand the lack of planning of not ending the final station with a car park, so people can drive to the station, leave their car and hop on the train! So you don’t want to have security looking after the cars? Put a sign up – “leave cars at your own risk”.

But the reality of Panama’s situation – especially in a country where it rains 8-10 months of the year – people need a way to get from their home to the train station.  How do we expect commuters to get from their homes (often in suburbs and gated communities) to the train station to start the commute? They are not going to pay a taxi and most likely not going to walk 3 km to the train station!

Implementing solutions

While I agree that it would be fabulous if some of the companies and jobs were available in Chorrera, rather than everyone commuting into Panama City – I don’t realistically see that happening within the short term.

Headquarters for multinationals are already “out of town” – in the sense that they are not central business district – either in Panama Pacifico, ciudad del Saber or Costa del Este. Processing zones are constantly being developed in Don Bosco, Tocumen and Transistmica – areas which are highly industrial and strategically located for logistics between Colon and the airport.

But Panama needs to find that perfect mix between investing more heavily in public transport (buses, not just the metro) and offering commuters options of how to get from their homes onto the public transport network.  They need to make sure that walking to a bus stop is actually an option, not an obstacle course.  I am constantly amazed at how sidewalks simply “end”, leaving you in the middle of an overgrown or muddy patch of mire.

There has been a lot of criticism these last two years about how the walking infrastructure (foot paths & walkways) has taken away what little parking there was in the central business district.  Not to mention the horrendous flooding that badly planned and executed works have caused!  The current river flowing down Vía Argentina each time it rains has become a sad parody of  wake-boarding!

That aside – if we really want to improve the quality of life for Panamanians – we need to accept that public transport is what will provide that.  This means more trains & a metro system that allows people to get home within 30-40 minutes, rather than 2 hours, more buses (especially shorter routes that go through neighbourhoods) and taxis or Uber.

If we are going to go with more public transport – Panama needs bus stops that actually keep the water out when it’s raining – not tiny little roofs for a spring shower!  And the public foot paths need to be walkable – rather than dangerous obstacle courses!

Building more roads (corredores or bridges across the Canal) will not solve the problem – this requires a change of culture & expectations.  And this means – the solution will take a generation to re-educate!

So – when do we start?

 

Renewable energy in Panama

Introduction:

Panama is blessed with an abundance of sunshine and rain, allowing it to entertain renewable energy sources as the sole source of it’s electric supply.  Nonetheless, it continues to depend on a couple of carbon-based plants for its electrical demands, and the local energy authorities are under fire for proposed taxes and charges on solar power producers.

In late May, the headlines regarding the ASEP decision were all along these lines:  “While the rest of the world looks to consume and produce clean energy, the Panamanian Government – through ASEP – is trying to PUNISH anyone who installs solar panels or other clean energy generators in their homes or businesses.”  

Mientras el mundo apunta al mayor consumo y producción de ENERGÍAS LIMPIAS, en Panamá el Gobierno Nacional —a través de la ASEP— busca CASTIGAR a las personas que instalen paneles solares u otros generadores de energías limpias en sus hogares o negocios. #COMPARTEpic.twitter.com/JR0sC2bzgd

— ClaraMENTE (@ClaraMENTE507) May 26, 2018

At the beginning of June, ASEP opened the dialogue, indicating that they did not intend to penalise those who had solar panels for personal consumption, but that they were looking to ensure that anyone that was connected to the electrical network and infrastructure was paying appropriately for the infrastructure, and not simply getting a free ride simply because they principally had solar panels or other self-generating systems.  There was also criticism because of the pricing suggested out the outset for those who were generating more than they needed and were feeding this excess into the general network.  This ignores, in part, that since February of 2017, Panama has had its first commercial solar power plant “Central Fotovoltaica Bugaba“.

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The National Energy Plan – 2015-2050

In April 2015, the Panamanian Government published the 2015-2050 National Energy Plan which sought to place a new focus on solar and wind sources, rather than the traditional sources of hydro and carbon generators.  By 2050 it is hoped that Panama will rely, 70% on renewable energy (primarily wind & solar).  The move away from hydroelectric power comes after serious confrontations with indigenous groups and communities over the devastation and changes to the ecosystem.

For example, if you have a quick look at the following video, you can appreciate the Tabasará river during a normal rainy season (before the hydroelectric plant was built).

The two videos that follow are during the construction of the power plant on the Tabasará river, where you can appreciate the devastation down-river to the entire ecosystem and the change that this has generated for all of the communities that depend on the river.  Obviously, the videos of the construction are during the dry season, rather than rainy season (so it is no longer a raging river in full flood), but as you will see in the second video, the communities downstream from the project were left with almost stagnant water.

The communities also denounced and complained that they were being displaced from their homes and communities. Obviously, this had economic repercussions for these communities, as they lose their farm lands.  Even those who previously used the river for rafting and outdoor adventures during the dry season have said that they have totally closed down the Tabasará option and have had to find other rivers for rafting and adventure.

In a similar manner, Nata & Aguadulce were left without a drinking water supply when the local hydroelectric plant shut off their access to water during the summer of 2016, because the 2015 rains were not enough to fill up all of the reserves.

Support for private solar panels

In 2016, the ASEP took steps to support and promote solar panels in homes and projects.  At this time, ASEP promised users that they could reduce their consumption by 50% or even up to 100% through the installation of solar panels on the roofs of their homes or businesses.  Nevertheless, there were requirements for this, which involved the local electric companies:

  1. approval by the competent authorities (fire brigade, city council)
  2. design of the system and technical details regarding output and capacity, and all of this with
  3. a letter to the electric distribution company, requesting the installation of a bi-directional metre.

The electric company was then to install the bi-directional metre, (not to be charged to the consumer) which would compensate the output and input, measuring the net usage of the client of electricity and that produced by their system.  In these cases, the homes were not installing batteries or storage units, as the excess of their production was pushed back into the system for usage by others in the network, and then they consumed electricity when their solar system was not producing.  These were not stand-alone or self-sufficient units.

Regulation of self-production

Later in 2016, the ASEP informed that it might consider a limit of 500kW for residential production of solar power and then (after consulting the public and users) notified that it would not be doing so, but rather it would be leaving that to each homeowner to decide what production and consumption they required.

Is it really worth it?

Costs in 2016-2017 were still prohibitive – for a home consuming 500kW hours/month, the cost of installation would be approximately $9,800.00, which meant that the investment would be paid off in about 7-8 years. In 2018 we see the costs for a home consuming 400kW hours/month having installation costs of $4-5,000, almost half of the cost for 2016!  However, as many of those living in Panama know, our electric bills are quite high, so as those costs of installation come down (which they have over the past 24 months), solar power becomes more attractive as a residential alternative.  This is especially the case with those companies that are providing a 25-year guarantee on their panels!

Throughout 2017, ASEP continued to promote solar power for residential use, touting the benefits of being able to hook into the distribution system and get paid for any over-production.  And so we now (Feb 2018) find Provivienda (one of Panama’s real estate developers) offering a subdivision in Arraijan in which all homes come with their solar panels installed and connected to the system. This subdivision is expected to be completely self-sufficient to the needs of each home.

The regulations provide that where the consumer is using no more than they are producing (and supplying into the network), then there is no charge to them. Where their solar plant provides more electricity than what they have consumed, then they can expect to receive a payment from the electric company for up to 25% of their consumption (but no more).  So, for example – you produce 500kW/hours, but you only consume 400 – you will get paid on that 20% extra that you produced.  You consume 500kw/hour and you only produced 400 – you will have to pay the electric company for the consumption!

Commercial projects:

Smaller companies have already begun to invest in solar power plants, for commercial purposes, such as “Central Fotovoltaica Bugaba“.  2017 say some 72.4MW come online and 2018 some 78.8MW are expected to receive their commercial licenses and approvals for production.  For 2019-2021, a further 200MW have provisional licenses to build and come online.  There are already mini solar plants in Azuero, Llano Sánchez and Chiriqui.  If with all of these projects, they generate the estimated 383MW (with an investment of $422M over this period 2017-2021), this would be more than the production of Fortuna (which produces 300MW and is the largest in Panama so far).  The issue for Panama is the rainy season, because this brings down production to almost 20-40%, with a higher production during the dry season.  Therefore, most of the solar farms are located in the “arco seco” – the “dry arch” – in the Azuero Peninsula.

Wind Farms

Anyone who has driven out to Penonome from Panama City has appreciated the wind farm on the left-hand side of the highway.  As of March 2018, construction of a second windfarm in Cocle is under way, this one in Taobré.  This wind farm will have 20 Vestas turbines and 2 substations, and is expected to be built in 22 months.

Changes in Public Bids

Roll forward to February 2018 – and the ASEP announces that all bids for energy projects “from now on” will be on an equal footing – with no special exceptions being given for clean energy.  That means that the gas / thermo plants (such as those in Colon) will be competing cheek-to-cheek with solar and wind farms.  It would seem that this gives the thermo/carbon/gas projects an upper-hand as they are less capital intensive.  But the ASEP assures that this is not the case, because they will have to quantify and provide a bond covering the possibilities of contamination. So, while a solar plant will have a low contamination factor, the gas or thermo plants will have to adjust theirs costs to include for accidents and liabilities.

And then…

Roll forward to May 27, 2018, and everyone is in an uproar because it seems that ASEP now wants to start TAXING residences and businesses that have installed solar panels (connected into the system and producing energy for the system). On May 27th, they indicate that they are considering an “additional charge” to anyone that has solar panels on their home or business.  However, they didn’t go into what this “additional charge” was, which caused a massive back-lash as I mentioned at the very beginning of this article.

Given the reaction from the public and from conservation groups, ASEP took a step back, defending itself with “you didn’t understand what I said”.  They never did quite clarify what it was that they had said!  On the 1st of June, this then rolled into “we are not going to make any decisions on this until we have reached a consensus with all of the parties involved”.

Eventually, what came out was the following explanation:  if you have solar panels and are self-sufficient but you are still connected to the network, the distributor must have available at any and all times enough electricity for your home/business.  So, let’s say you need 400kW hours/month – they must produce enough for that.  But, since you have your solar panels, you aren’t actually using it and are not paying for it.  They want to charge for having it available to you, but you not using it!

Putting a tax on the sun

The reaction from some of the players (particularly owners of companies installing solar panels) was that the government was looking to put a tax on the sun!  Others point out that this clearly is a dis-incentive towards clean energy and favors the production of cheap oil/gas-based thermo electricity, rather than making the long-term investment into solar panels and self-production.  If the government wants private persons and companies to make the capital investment into solar power, then they cannot consider putting an additional tax on it.

The ASEP justifies their proposal as being simply a charge on those who are producing energy and pumping it into the network (and getting paid by the electric company for this).  But that’s not what they said they were going to tax. I’m still waiting for the dust to settle (maybe after the world cup fever has subsided next week), to find out what ASEP has really decided or whether the “let’s reach a consensus” is underway.

Reaching Utopia

With a new Metro line being finished in 2019, more electricity will be needed to run that! More buildings = more air-conditioners running. In a country in which 35% of the electricity goes towards air-conditioning, maybe it’s time for Panama to look not only at how it produces electricity, but how it can reduce wastage or improve geothermal covering of buildings to harness the energy!

Maybe it’s time to explore alternative options like turbines that create electricity simply from moving traffic (of course, that would mean that Panama’s traffic would need to move!).
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There are few voices (and even less articles) discussing the alternatives for the central business district, hotels and banks to contribute to the solution to the needs over the coming years.

  • There are many options for windows on buildings to generate electricity through special coverings.
  • There are green buildings, which are growing more plants to battle CO2 emissions.
  • There are options for paint and finishing on buildings which will assist in making them cooler and not using as much electricity and air-conditioning.

But there is so much to learn and there are no tax incentives for businesses to make these capital expenditures on long-term returns.

If there are less than 250 residences in all of Panama (in 2018) with solar panels, can I really expect that people will be forward thinking about what we need to do in order to work towards a solution?

Panama, business, money, entrepreneur, business index, economy, doing business, starting a business, economic indicators, ideal business environment, import, export, fintech, incubators, assistance

Panama’s money stories – the way forward

Ranking and Index: doing business in Panama

One of the difficulties that I see on the way forward, is that Panama is not the easiest country in which to set up a business (locally) and run it.

Panama scores a low #54 in “economic freedom” according to the Heritage.org, having a score of 67.0 – because of drops in property rights and government integrity (corruption).  On the other hand, the Fraser Institute and the Economic Freedom Network place Panama for 2017 at #30 in Economic Freedom.  Forbes lists Panama as #64 in “Best Countries for Business“.  Unfortunately, economic growth has depended on debt-financed infrastructure projects, while the economy has depended heavily on transportation and logistics services.

One of the biggest problems with all the infrastructure development and spending is the burden this creates on tax payers.  General government gross debt accounted for 39% of GDP in 2017, with a fiscal deficit of 3.1% (up substantially from 2% in 2016). That said, amazingly enough the IMF estimates Panama will have the highest per capita GDP in Latin America – USD 25.712 – in 2018.

That said, Panama continues to have the fastest growing economy in the region: our well-developed services sector accounts for over 75% of GDP.   Before the crash of 2008, Panama has the highest growth rate in Latin America (close to 11%) – with real estate prices and speculation leading the rush.  Since 2013, the GDP has slowed from previous levels of 6-8%, and following on from the #PanamaPapers scandal the banking and corporate services sectors have diminished considerably.  The services which continue to contribute to GDP include logistics, banking, the Colon Free Zone, insurance, container ports, tourism and offshore services to a lesser extent.

Unfortunately, Panama dropped (2016-2017) on the global entrepreneurship index from 32.2 to 26.1, and in the innovation index ranks also #63.  In human development, Panama also ranks similarly at #61.  Likewise, in the knowledge economy index, we come in at #64.

Having looked at these indexes, it is interesting to see how well Panama is moving with respect to FinTech, blockchain and the implementation of these technologies. As Panama seeks to leave behind the shroud of “shady deals” and “Panama Papers”, the Ministry of Economy & Finance has announced an initiative to regulate FinTech, blockchain, sandboxes, crypto-currencies, and crowd-funding enterprises.

Development of the Fintech industry in Panama

Bitcoin, blockchain, fintech, crypto, currency, FinTech, disruption, innovationUnbeknownst to most people, Panama is on the list of countries that are friendliest to Bitcoin and crypto worldwide!

Panafintech is the Panamanian Association of Fintech, who so far have organised five blockchain and fintech events.  Back in 2017 they organised an event for 300 people from banking and finance, to discuss blockchain – its scope and application.  It was at this event back in 2017 that Cryptobuyer announced that it was moving to the City of Knowledge and that it would be developing Blockchain Academy Latam.

Blockchain Academy offers training not only to developers and entrepreneurs, but also for financial institutions (such as banks), organizations, schools and the government.  It also offers a bootcamp in which it is possible to learn about cryptocurrencies, industry, mining, Blockchain, opening a digital wallet and other applications of the technology.

blockchain-3212312_1280Cryptobuyer is unique in Panama, offering the “Blockchain Academy Panama“, in which it offers training and certification in programming with blockchain, and has its offices in Ciudad del Saber.  Additionally, it has installed Bitcoin ATMS in parts of Panama, such as in Banistmo (since June 2017) and has installed Cryptobuyer Pay in various local businesses (so that they can accept payments in Bitcoin and other currencies).

Cryptobuyer also set up Blockchain Embassy Panama, which opened in 2017.  In addition to offering crypto clothing and merchandise, craft beers, hardware wallets and working space, the embassy also gives cryptocurrency workshops and presentations.

The first large-scale conference on fintech & blockchain was held May 5 & 6th, at Ciudad del Saber, and called “PanamChain“, with Andreas Antonopoulos  as the Keynote Speaker (author – Mastering Bitcoin (O’Reilly Media), speaker, educator) .  This event was organised by Cryptobuyer and Panafintech.

Coming up on May 24th, Panama will host its secondDigital Business Day“, offered by CAPAtec – the Panamanian Chamber of IT, Innovation & Telecommunications.  This is a “Microsoft Experience Day” – about AI, transforming customer experiences, using ChatBots, and “intelligent billing”.

Disruption & change of the market

Fintech additionally has a role to play in Panama’s “offshore industry”. At its simplest, financial technology – or fintech – applies technological innovations to financial processes, products and services. It could easily play a large role in the lucrative business of identity verification, eKYC and fraud detection. This could also directly impact in the banking industry, if Panamanian banks could work out how to incorporate this into their account opening process.

blockchain-3019120_1280Experts in blockchain have shown that banks could easily change their account opening process to a simple 5-step process relying on this system.  Some go so far as to claim blockchain technology could transform international financial transactions in much the way the Internet transformed communications. Of course, on some levels fintech competes with the traditional financial methods of delivering financial services.

Blockchain = distributed ledger technology  – provides decentralized networks that simply record transactions.  So, for example, IBM provides “Blockchain-as-a-service” for banks.  It is interesting to see how the blockchain industry could have helped Panama avoid the #PanamaPapers, as expressed by Otonomos BCC:

Our hope is that a decentralised database, which by its very nature is secure, tamperproof by third-parties and immutable even by its very authors, can be looked at by enlightened regulators around the world. This technological architecture could ultimately become a global, cross-jurisdictional database.
At Otonomos, which represents private company shares on blockchain and makes them programmable, we have engineered a decentralised solution that performs Know-Your-Customer checks at every stage of the ownership chain of company shares, and watermarks the shares with the UBO’s identity.
In addition, Otonomos has architectured our solution with the privacy of end-users in mind. We make public only such information regulators in a specific jurisdiction require to be publicly accessible, whilst masking non-publicly disclosed information.
Finally, we future-proofed our solution by letting third-party verification agents — typically organisations such as banks who by legal mandate from their Government can perform KYC checks -“stamp” people’s KYC at the blockchain level, resulting in a layered verification process in which every check fortifies a user’s KYC.

Nonetheless, it seems that tech giants are much further ahead in disrupting banks, as these lag behind in cloud computing, AI and big data.  Fintechs define the direction of innovation in financial services, but they face a challenge in their ability to scale (something that companies like Amazon or Facebook have already dealt with).  So, for example, Amazon Web Services provides cloud computing for Capital One and Nasdaq.  That’s because of the scope of the transactions that occur on a single day, which small start up fintech companies are not ready to handle.

If what we see internationally occurs in Panama, this means that large banks are acquiring fintech companies and digital banks, as strategic acquisitions – they are simply leveraging the competition to re-establish their leadership in the market.  So, for example, in Panama we have a small crypto-currency that was recently established:  Natan Edu – created by a group of young entrepreneurs, as a payment system in education, to allow payments of online courses.  This was created by Osmar Major and Marcos Pineda (22 and 24 years old respectively).  Will this be swallowed up by bigger players in the market?  Additionally, just this week, DigitalX (the first crypto-currency fund established in Australia) indicated that it is looking at Panama to establish the Latin American financial hub.

Response from the banking sector

Panama’s banking sector, however, has been very cautious in response to fintech, indicating that until it is fully regulated, they simply see the possibilities of further scandals for money laundering.  On this note, Panama’s banking Superintendence issued a notice to banks that the activity of exchange, investment, purchasing, and commercialization of “Bitcoin” or any other crypto-currency is unregulated in Panama.

As a result, some traders were threatened with having their bank accounts closed at local banks for receiving funds from their international crypto accounts!  This seems to be completely contrary to the way it is being dealt with, for example, in the US where Goldman Sachs and Morgan Stanley both announced that they were going to get involved in crypto-currencies.

Nonetheless, we find that Australia (leading with DigitalX), the UK and other jurisdictions have all introduced regulations in order to create the market conditions for development of fintech, blockchain and financial services.  For example, back in 2015-2016 the UK introduced their regulatory framework, working closely with the operators, so that fintech firms could set up.  This involved the Innovation hub (similar to what Panama wishes to do in the City of Knowledge), in which the businesses can understand the financial regulations and how these might apply to their business model.

As with the Innovation Hub in the UK, the City of Knowledge will simply provide guidelines, from which the startup would need to apply for the regulatory approval from the respective agency (possibly the Banking Superintendence or the Securities Commission).  Also copied from the UK is the idea of the “sand box” – where fintech startups can test their financial products and their business model in the market, and then work out the details of regulation as the market develops.

So, as Panama looks to regulate “Specialized Financial Entities”, as it is calling fintech companies, setting up crowd-funding enterprises, incubators and sand boxes, I hope that it doesn’t simply protect the interests of the existing players (like banks), but rather innovates to draw into the country investors, know-how, and entrepreneurs that are looking to build something special from Panama.