Reuters forgets something in Panama political risk analysis

Reuters published its FACTBOX- Key political risks to watch in Panama today, and it's worth a read, but they're overlooking a major risk factor for anyone who wants to do business in Panama or even retire here.

In its story, Reuters lists a number of political risks to watch:

Signs of Martinelli continuing to assert himself and seeming intolerant of dissent could make investors nervous.

Martinelli taking any steps toward trying to change the constitution to permit a president to hold consecutive terms.

Expanded public spending and infrastructure projects.

Government deficits exceeding 2 percent of GDP.

New inflationary pressures.

As unemployment continues to fall, the government will face more pressure to ease immigration to keep prices under control.

Buyers walking away from condo investments, shredding contracts and losing deposits.

High vacancy rates on apartments that have already been built and with most units already sold.

Increasing volume of drug-related violence in the cities and frontier hinterland.

A growing number of targeted labor programs that try to feed specific industries but do not raise education standards overall.

Liberalized immigration policies not keeping pace with the demands of expanding service industries.

However, what we miss here is the abysmal state of the legal system in Panama and the lack of political will to change that. For years now, if not decades, various organizations have strongly criticized Panama's legal system for its corruption, lack of professionalism, it being subject to political influence, its bad organization and slowness (see for example here and here and here and here and here).

Despite strong criticism and solutions volunteered by civil society, none of the governments since 1989 have made significant changes, and this policy of looking the other way is being continued by Martinelli. Under the current president, spending on law enforcement is going up rapidly - without notable results - but at the same time Panama spends not even half of what neighbor Costa Rica does (in % of budget) on the court system, such as it is.

Ordinary business disputes are routinely converted into criminal cases in Panama where justice is simply for sale. Lawyers and judges are, with few exceptions, slow and unprofessional and recently it was established that most lacked basic reading skills and couldn't write coherent texts.

As a result, a contract in Panama isn't worth the paper it's written on, as two foreign corporations recently found out. We're sure that inflation is important to keep an eye on, but that to us seems like a major risk.