Panama Spent 7% of GDP on Security: Does it Add Up?

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Panama, one of the most peaceful countries in Central America, reportedly spent about 7 percent of its GDP on preventing and dealing with violence last year, far less than its neighbors. However, expanding gang presence and police corruption threaten to undermine Panama’s recent and undeniable security gains.

Panama spent $4.5 billion on violence containment in 2013, representing 7.4 percent of the country’s GDP, according to the 2014 Global Peace Index (GPI) (pdf), published by Australia-based think-tank the Institute for Economics and Peace.

The think-tank defined “containment costs” as any economic activity related to the prevention and consequences of violence against people and property.

Curiously, Panama’s spending on violence as a percentage of GDP paled in comparison to some other Central American countries. Honduras spent nearly 20 percent of its GDP on violence containment last year, while El Salvador (14.5 percent) and Guatemala (8.7 percent) also outpaced Panama, which has no standing army. 

The GPI’s index also ranked Panama as the second-most peaceful country in Central America, behind Costa Rica, and the 57th most peaceful country worldwide.  

The GPI does not calculate violence containment spending prior to 2012, meaning it’s impossible to compare its previous index rankings. However, Panama’s spending on security did increase from slightly under 2 percent of the country’s GDP when former president Ricardo Martinelli was elected in 2009 to approximately 2.75 percent when he left office in 2014, according to a report (pdf) by the Latin American Security and Defense Network (RESDAL) — which used a narrower metric than the GPI to calculate spending costs.

The Ministry of Public Security’s budget is now higher than that of any other state institution, according to Grisel Bethancourt, a journalist who covers organized crime and drug trafficking in Panama.

InSight Crime Analysis

There is evidence to suggest the increased spending on security during Martinelli’s administration likely contributed to reduced levels of violence in Panama. According to the GPI, Panama experienced one of the 10 most dramatic declines in peace levels worldwide in the years leading up to Martinelli’s election in 2009. Nevertheless, the number of murders in Panama dropped nearly 20 percent between 2009 and 2013, and the country’s homicide rate has steadily declined every year since reaching its peak in 2009, when the murder rate was 22.6 homicides for every 100,000 people. 

SEE ALSO: Coverage of Security Policy

Despite the drop in homicides, Bethancourt told InSight Crime that Panama still struggles with one particular security issue: increased gang activity.

Indeed, the lowered murder rate has largely coincided with a proliferation of street gangs in Panama, reportedly growing from 85 criminal groups in 2005 to over 200 in 2013. These gangs — in addition to transnational drug trafficking organization — were reportedly responsible for 90 percent of the country’s homicides last year. Traditionally confined to micro-trafficking operations within Panama, recent reports suggest that some Panamanian gangs are making the leap into transnational drug trafficking by running “oficinas de cobro” — structures that serve as arbiters of drug sales involving Colombian cocaine traffickers. 

Corruption in Panama’s police force also threatens the gains in violence reduction Panama has made in recent years. “There are high-ranking, mid-ranking, and low-ranking members [of the police] involved in organized crime, especially in kidnappings, drug robberies, and drug trafficking,” Bethancourt told InSight Crime. The removal of Mauricio Nelson from his post as sub-commander of the National Police for drug trafficking and embezzlement in 2010 was one high-profile example; and it is not an isolated one.

Notably, Martinelli continually supported the country’s police during his tenure as president. The former president repeatedly raised the salary of police officers, nearly doubling their monthly wages between 2009 and 2012. Martinelli also ordered a presidential decree on his last day in office that pardoned 16 police officers convicted of homicide and other violent crimes. Current President Juan Carlos Varela later revoked the measure, as well as hundreds of other pardons issued by Martinelli.

SEE ALSO: Coverage of Panama

Despite raising police salaries and overseeing a decrease in violence, Martinelli and other ex-officials from his administration remain dogged by accusations of widespread public corruption, sparking massive protests. This may yet cast suspicions on the large amounts of funds put aside for Panama’s security budget, and whether everything was spent properly.

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