How Tourism Can (and Does) Benefit the Poor and the Environment - A Case Study from Panama

Tourism is one of Latin America's
fastest growing industries, outranking remittances and even
drugs in many countries as a source of foreign exchange. But
the impact of tourism on the poor and on the environment
remains under debate. Certainly many suspect that tourism
does more harm than good, damaging the environment and
leaving the poor worse off while shipping profits overseas.
But few have actually analyzed the impact of tourism on the
economy of a developing country. In this En Breve, Irina
Klytchnikova and Paul Dorosh describe a study on the
economic costs and benefits of tourism which they carried
out as part of a country environmental assessment in Panama.
As a country marked by a 'dual economy', Panama
shares with other Latin American countries a fast growing,
modern urban sector side by side with impoverished rural and
peri-urban populations. Tourism has been growing in Panama
and contributes somewhere between 6 and 9 percent of gross
domestic product (GDP). More importantly, Klytchnikova and
Dorosh found that as a sector, tourism has large multiplier
effects on the Panamanian economy and has the potential for
significant benefits to the poor and to the environment. But
tourism's poverty benefits are neither automatic nor
ubiquitous. They depend on where and how supply chains are
structured and on the way tourists spend their money. This
'En Breve' presents the results of an assessment
of the tourism sector based on a top-down model. The results
bode well for tourism in Panama, and could be a model for
analysis in other Latin America and the Caribbean (LAC) countries.