While it is true that the Panama Canal was economically revolutionary for the Americas, its construction came at great expense to those who built it and to the nation of Panama. During construction, thousands of workers died under untenably harsh working conditions, with Black Caribbean workers being four times more likely to die than their white counterparts. Additionally, the canal remained a holdout of what arguably constitutes American imperialism for many decades: insistent on pocketing the toll money for itself as long for as long as possible, the United States did not hand back ownership of the watercourse to Panama until 1999. 

Since 1999, the canal has been of great benefit to Panama and remains the largest contributor to the country’s GDP. However, Panama’s being denied ownership of the canal for nearly a century is an all-too-familiar tale of US economic interests curtailing the development of Latin American economies, from the era of banana republics in the early 20th century to American support for regime change across the region throughout the Cold War to keep leaders aligned with the United States in power. Estimates suggest that at Panama’s expense the canal made the U.S.’ economy 4% larger by 1940. This suppression of the nation’s economic potential is one historical factor to blame for the country’s regionally high income inequality, as without control of the largest economic asset within its borders for decades, structures for sharing economic gains broadly amongst Panama’s populus were not developed. 

While Panama is the current and rightful owner of the canal, it inherited the environmentally precarious project at a time when the impacts of climate change on rainfall patterns began to threaten waterways worldwide. In August 2023, the canal faced a severe emergency when a backlog of over 150 ships accumulated due to the canal dropping to concerningly low water levels. While news coverage of the issue peaked in September when its effects were only beginning to show, low rainfall has continued to impact the Panama Canal, as climate change has increased the volatility of El Niño, a routine weather phenomenon that affects water patterns and rainfall levels in the Pacific and adjacent Latin American countries.

In response to these changes, officials have had to take drastic measures. Due to persisting droughts, by Feb. 1, 2024, the Panama Canal Authority will cut the number of ships allowed to pass through the canal by half. Levels of water this low are unprecedented. 2023 marked the first year the PCA had ever been forced to cut the number of ships passing through.

The crisis in Panama is poised to cause major global economic repercussions. Holiday shopping has been cited by articles among major news outlets in the United States as a key victim of delays. However, that stands as negligible compared to upheaval in global trade capacity and potential rises in commodity costs engendered by delays among the canal’s largest users, especially grain and oil. Volatile commodity costs tend to hurt poorer consumers and low-income countries more severely. 

Especially given the most recent increases in grain and energy prices due to the Russia-Ukraine war, a delay-stricken Panama Canal has the potential to exacerbate already-difficult global economic circumstances. Higher shipping costs could also worsen inflation initially caused by shipping delays to the COVID-19 pandemic, further increasing global economic woes. 

The Panama Canal is not the only major global waterway that has been challenged by environmental hindrances. Egypt’s Suez Canal was faced with similar troubles in March 2021, when low visibility from particularly strong dust storms and high winds caused the super-large cargo ship Ever Given to veer off course and run aground for six days, delaying billions of dollars worth of trade. Although unusually high spring tides aided refloating teams in ungrounding the vessel, future ships may not experience such strokes of luck and could be stuck for longer periods of time. While dust storms are endemic to the desert region around the Suez Canal, climate change is intensifying their severity and frequency. As such, these emergencies illustrate that climate patterns are posing an increasingly severe risk to global shipping routes. 

These canals are indispensable for modern global shipping and the economy at large, as well as the economic vitality of Panama and Egypt and their citizens via billions of dollars in governmental revenue. While these countries were able to take control of the massive assets and economic benefits reaped from the canals successfully back from exploitative Western control, the same economically hubristic and dangerous instincts that built them have come back to haunt their host countries in the form of climate disaster. Not only do cargo ships have a drastic environmental impact, as they are estimated to emit more greenhouse gas than all but five of the world’s nations, but their increasingly larger production sizes compound the likelihood of crossings through these precarious waterways becoming more susceptible to environmentally-induced delays. 

The only solution is to stop the negatively reinforcing cycle that is challenging these waterways in the first place, which means completely reforming global shipping patterns and the shipping industry to become more sustainable, such as building more environmentally friendly ships. This is but one part of the puzzle of how modern trade and excessive goods production comes at the expense of the environment and lower-income countries. Focusing on meeting the basic needs of the world’s population, rather than driving unfettered goods production at the expense of the global climate, is essential in regards to reforming the global economy. Otherwise, consumers, canal-hosting countries, and the global economy risk facing massive economic upheaval in the face of these emerging challenges to major canals. 

In 2020, Eastern Europe’s response to the pandemic was a loosening of monetary policies to support citizens and protect against short-term economic loss, which ultimately led to higher inflation and an increased cost of living. Out of the whole continent, Eastern Europe has been impacted the most; while it used to be known for countries with lower living costs compared to the rest of Europe, the cost of living in Eastern Europe is now almost comparable to Western European countries. 

After the Russian invasion of Ukraine, Eastern Europe saw a sharp decrease in retail sales, skyrocketing food and energy prices and higher rent, all of which have cut significantly into families’ incomes. Hungary, a small, landlocked country bordering Ukraine and the EU country with the highest rate of inflation, saw the most severe inflation rates it has seen in decades following the invasion, rising more than 20% year after year from January 2021 to December 2022. 

How is this crisis impacting the average Eastern European citizen?

Low-income families are paying around double for groceries, electricity and gas compared to upper-middle and wealthy families in Eastern Europe. This results in worse economic gaps between low and high-earning families. Food prices have also risen faster in Hungary than any other country in the EU, rising over 45% from 2022 to 2023, with Slovakia in second place at 29%. 

Meat products, once considered a staple in the Eastern European diet, are now a luxury for many. Bottled water, milk, eggs and bread now cost 72-80% more than they did in 2021– a staggering difference when compared to the average monthly income of Hungarians, which is 554,540 forints (about $1,631 USD). A dozen eggs can now cost as much as 858 forints (about $2.34 USD); this is not currently a sustainable price point for the average Hungarian. In Hungary, many families like to vacation in Lake Balaton, a world-famous vacation destination that European citizens flock to every summer for its warm temperatures and beautiful landscapes. 

When I visited Hungary this July, I was shocked by the cost of food. Cheese was somehow more expensive in Hungary than in the United States and what I would have considered affordable in Hungary the last time I was there was no longer affordable. According to my Hungarian family members, as well as other Hungarians I met during my time there, fewer and fewer people are able to travel for vacation to other countries or even within Hungary.

The risks of inflation rates remaining this high are many, including consumers buying fewer things, having to find a second or third job, finding alternatives to using gas and having less disposable income, which in turn negatively impacts Eastern Europe’s economies. According to the European Commission, Hungary’s GDP growth fell from 4.6% in 2022 to a mere 0.5% in 2023, and unemployment rose from 3.6% in 2022 to 4.2% in 2023. Experts predict that Hungary will be able to recover in 2024 with forecasted disinflation and a tightening of monetary policy. Hungarians should expect a decrease in inflation to 7-8% by December of this year, according to Hungary’s Finance Minister Vargás. The IMF predicts a low 0.3% GDP growth in Poland for 2023, 2.4% in Romania and -0.3% in Lithuania. 

The Israel-Palestine war will affect not only the Middle East’s economy but Eastern Europe’s as well; the cost of oil has already risen but will expect to recover unless Iran is sanctioned by the West for its support of Hamas. With no end in sight for the Russia-Ukraine war, rippling global conflict, lower consumption and economic activity and climate disasters such as wildfires and heat waves, the next couple of years will be difficult for Eastern Europeans. 

It is an irrefutable fact that the measuring and cultivating of socioeconomic development and subsequent poverty reduction for emerging countries is a continuous challenge composed of numerous complex facets. When a choice is made by a state to focus on one aspect of development, another pressing issue is, in turn, frequently neglected. Nonetheless, several economically and developmentally upcoming countries have implemented policies that brought about successes and improvements to the country in question. 

In today’s polarized world, the interdependence between states and their governments about successful and failed cases is crucial to the perpetual development of other countries looking for similar improvements. 

Within the category of necessary improvements, gender inequality has gained an increasingly large role in the discussion of social and economic development. The disparity poses a continuous challenge for women pursuing professional careers — be it a different pay rate, the prevalent lack of opportunity in employment or an underlying social structure that prohibits their integration in the workforce. In an economy where not all resources are allocated properly, a welfare loss to society occurs since resources are being employed inefficiently. This model illustrates the global society’s shortsighted view on women.

While several countries with high rates of gender inequality around the world have displayed significant progress in their inclusion of women in society, most still have a substantial way to go in order to, not only empower their women, but also improve their general economic and social development. According to a United Nations analysis of their annual Gender Snapshot Report of 2022, “If change continues at its current rate, our analysis shows that gender equality will remain unrealized for centuries to come.”

This is due to the fact that while the economic impact of day-to-day tasks is indeed difficult to measure, providing an answer as to why they are usually unaccounted for, an estimate of 10-60% of GDP is composed of unpaid female labor such as “cooking, cleaning, fetching food or water, and caring for children and the elderly,” according to the IMF. 

When this analysis is taken to a local level, an extremely positive correlation between the proper, paid employment of women in the labor force and a country’s economic development is brought to light. 

A country that serves as an example globally for female empowerment is Brazil. In 2021, Brazil was deemed Latin America’s fourth most unequal country. Yet, amid presidential administrations, several leaders have shown continued efforts to improve the country’s conditions through the empowerment of women, among other initiatives. 

The implementation of such projects began in the early 2000s.

Specifically, in 2003 President Lula da Silva introduced the Bolsa Familia Project (BFP),”a nationwide Conditional Cash Transfer (CCT) programme managed by the relevant local administration within a federal infrastructure.” Financed by the World Bank and the Brazilian government, Bolsa Familia began as a form of monthly transfer payments sent out to families contingent on their household composition and income. A culmination of several types of previously existent but not enforced forms of governmental assistance, such as the Bolsa Escola (School Aid) Bolsa Alimentação (Food Aid), Cartão Alimentação (Food Voucher), and Auxílio-Gás (Gas Auxiliary), the program intended to “improve the efficiency and coherence of the social safety net and to scale up assistance to provide universal coverage of Brazil’s poor.” In the program’s outset, to be eligible for the payment, the family’s total monthly income per capita was required to be lower than R$218, the equivalent of approximately US$40 at the time. 

In specific efforts to empower females in the extreme poverty situations supported by the BFP, the CCT’s were given to the female head of the household at the beginning of every month. Furthermore, they were expected to be monitored for the proper spending of the transfers such as on children’s education, women’s prenatal health, and other household expenses. Not only did this condition allow for more conscious decisions to be made with the money provided, but it also encouraged the female management of assets, increasing the total female economic power in Brazilian society. 

At the time of the project’s conception, several feminists speculated that the direct transfer of the money to female figures would induce more of a burden on women. The sustained argument was that male companions would feel threatened by the growing female empowerment, placing women in a vulnerable position rather than a superior one. 

Yet, the strategy was meticulously calculated — “Our research shows that the money empowers women. In many cases, it’s their only source of income, so it means they are less dependent on their husbands, more likely to share in decision-making, and have higher self-esteem,” recounts Tereza Campello, Brazil’s former social development manager. Accordingly, as of 2010, 54% of the Bolsa Familia recipients were women, and in 2013, 93% of family households across the country were considered to be headed by women. 

Years later, the Bolsa Familia remains internationally renowned for its success in lowering poverty, increasing education and decreasing the gender inequality gap in the country. In 2013, the project was already accountable for “up to 25% of Brazil’s reduction in inequality and 16% of the drop in extreme poverty,” according to a case study conducted by the Women Deliver Organization. Furthermore, statistics drawn directly from the World Bank point out that Brazil’s population under extreme poverty percentage declined from 9.7% to 4.3% over the 10-year period. The change in the extreme poverty percentage by nearly two-fold may be traced back to the wide range of benefits brought by the Bolsa Familia such as healthcare, education and general improved support of critical living standard conditions such as electricity and sanitation. Yet, a significant element in that improvement is the passage it opened for women to push themselves, and their children, out of that reality — a positive externality to Brazilian society as a whole. 

As a leader of the Global South, Brazil set high fiscal policy standards for fellow developing countries that need an immediate remedy in order to improve poverty, social inequality and gender inequality, all of which’s improvements perpetuate fundamental economic growth. 

Bolsa Familia has served as a model for the implementation of similar CCT programs in over 40 countries, bringing recognizable advancements to countries such as Chile, Turkey, Indonesia, Morocco, South Africa, Mexico and others. Moreover, in virtue of its admirable progress officially recognized since 2010, Brazil became a host to frequent visits from over 120 delegations across the globe who traveled to learn about the project. 

 Nevertheless, the substantial improvements accomplished through the BF remain minor when it comes to gender equality and overall poverty reduction in the country. As Maria Da Paz says, “the changes in the moral and cultural order are slow,” despite life still being “better than it was five years ago.”

As brought to light in a recent study conducted by UNICEF, approximately 32 million Brazilian children live in poverty, a number representing 63% of the country’s youth. If that is not enough, the Brazilian government has announced that in the first semester of 2022 alone it has received and attended to more than 31 thousand reports involving domestic violence against women.

While the success story of Bolsa Familia allows for optimistic approaches to socioeconomic development for countries attempting to improve their current situation, Brazil itself serves as an example that despite this huge success there is still a long path ahead in order to reach even greater improvements in the same goals targeted by the program. Hence, the BFP must serve as a reminder to other developing countries searching for improvement as a potentially implementable model, yet must be frequently amended in order to achieve full efficiency in its objectives realistically and in a timely, stable manner. 

Ecuador is one of the many Latin American countries still suffering from the economic repercussions of the pandemic. Protesters claim Ecuador’s center-right government has done little to remediate the country’s economic situation as poverty and unemployment rates continue to skyrocket.

Ecuador’s indigenous communities — which CONAIE estimates make up 25 to 30% of the population — have been left particularly vulnerable as the cost of living grows nationwide. The country’s farmers, many of whom are indigenous, are forced to pay more for everyday items while receiving less for their agricultural products, allege protestors. Across the country, working-class Ecuadorians are seeing no increase in wages despite transportation, food and fuel rising in cost.

In a list of demands including price cuts on diesel and gasoline, controls on the price of food, and a commitment to invest in public healthcare and education, CONAIE called on the Ecuadorian government to make significant changes in support of its working-class citizens. In response, the government — led by conservative president Guillermo Lasso — declared a state of emergency in six provinces, including in the capital Quito.

Displeased with the government’s refusal to negotiate on CONAIE’s terms, protestors continued to block key roads and highways, causing shortages of food and fuel throughout Ecuador. Violent clashes with the police resulted in the deaths of several protestors and members of law enforcement, compelling CONAIE to demand the “demilitarization” of Ecuador as a precedent for negotiation talks.

Lasso and his administration remained wary of CONAIE, accusing the group of using the country’s economic situation as an excuse to overthrow the government. CONAIE, an organization powerful enough to have ousted three Ecuadorian presidents in the past, has certainly demonstrated the extent of their national influence. Protestors in the Amazon have succeeded in stopping more than half of the country’s standard oil production while the government claims that the tens of thousands marching on the streets of Quito have cost the economy more than fifty million dollars every day.

As CONAIE maintained its blockade, many in the Ecuadorian government sought bureaucratic measures to end this conflict. On June 20th, Ecuador’s parliament voted 81 to 56 in favor of the government pursuing dialogue with the protestors. Lasso refused to remove the upscaled military and police presence in Quito — stalling any chance at peace talks. On June 24, after the protests had persisted for two straight weeks, a group of opposition lawmakers began to push for the removal of President Lasso, taking advantage of the assembly’s constitutional right to unseat a president during a time of national unrest.

Lasso’s relationship with the national assembly was already strained after criticism of his weak response to the growing rate of violent crime in Ecuador. Though Lasso initially polled well after his election in 2021, his approval rating dropped from 75% to 38.5% from September 2021 to May 2022. Having lost the full confidence of his government and people, all eyes were on the Ecuadorian present as he sat down on June 27 for the preliminary talks with CONAIE president Leonidas Iza.

The concessions that Lasso had made so far — a 10-cent per gallon price cut on gas and diesel prices, subsidies on fertilizer, debt forgiveness, and the partial demilitarization of areas of Ecuador — cost the government another $600 million in addition to the $500 million Lasso claims the economy has already suffered across various sectors. Still, Iza says it’s not enough. The Indigenous activist and leader reaffirmed that CONAIE would not stop the demonstrations until all its demands were met, including assurance that prices of food, gas, and transportation become affordable for all Ecuadorians.

Lasso responded by calling Iza an “opportunist” and publicly refused to continue any negotiations with Iza, though Lasso later stated that the government was still willing to resolve the situation through peaceful dialogue.

Meanwhile, Ecuadorian lawmakers put forth a vote of no confidence into motion. Though the vote failed, it revealed the shaky grounds on which Lasso’s authority stands: his presidency survived by only 12 votes.

Lasso, unable to come to satisfactory terms with Iza and desperate to prove his authority amidst movement towards impeachment, decided to take a more aggressive approach against the protests. The president declared a month-long state of exception in four provinces — Quito excluded — to protect the country’s oil and fuel supply as well as food and medicine.
Finally, on June 30th, the protests came to an end as Iza and government minister Francisco Jimenez, with the help of a mediator, reached a deal. The two agreed that the price of gas and diesel would be lowered by 15¢ and assurances were made that oil exploration and mining activity be limited to protect Ecuador’s protected areas. Under these conditions, which the government is required to meet within 90 days, CONAIE concluded the national strike which shut Ecuador down for 18 days, proving to the world the political power of Ecuador’s Indigenous peoples.

But currently, the company faces over $300 million in debt and has over 800 unfinished projects, leaving hundreds of thousands of people uncertain if they will have new homes. To put this into perspective, Russia, as of 2020, had roughly $257 billion in national debt. 

The company’s aggressive ambitions led to ballooning debt as it attempted to expand its brand at an expeditious rate by borrowing large amounts of money to finance projects. And while this issue is not entirely new, it has gotten to a point where Evergrande is currently restricted from borrowing more money due to crossing all three lines of the Chinese government’s borrowing system. 

The “three red lines” policy curbs borrowing to ensure that the real estate sector has financial liabilities. And since the company finds itself in a deep hole, unable to pay investors, suppliers or workers — which has led to the complete halt of the majority of its projects — it has been cut off from borrowing. 

“Toughly up to one-third of Chinese developers could experience financial distress in the next 12 months because of the weak demand for housing and the crackdown by Xi Jinping’s government on what it regards as the industry’s reckless ‘borrow and build’ model,” The Guardian reports.

How did a Chinese property giant end up buried in a mountain of debt? Two factors may explain the crash and burn of Evergrande: the crackdown on China’s private companies and the stagnant nature of China’s property market.

Mattie Bekink, the China director of the Economist Intelligence Unit, states that Evergrande’s rise and fall “is the story of the deep [and]structural challenges to China’s economy related to debt.” 

China is well known for its top-down economic system, and especially under President Xi Jinping’s government, state crackdowns on private companies have become extremely common. For instance, Dalian Wanda, another multinational conglomerate, was forced to downsize in 2018 due to heavy borrowing and accumulating debts. 

These efforts led to a crackdown on Evergrande’s borrowing practices. The company then began trying to sell shares of its assets but failed to attract buyers or investors due to forced suspension on ongoing projects and construction. Additionally, the property market in China is declining with significantly less demand for housing. But this is more than a housing issue; data shows that the decline in this particular sector is in line with other metrics of the Chinese economy. 

Beijing held meetings with Evergrande executives to get their debts in order. The issue at hand, however, is that the government has yet to intervene to prevent any volatility. If anything, Chinese authorities have been less willing to step in, and instead, lean toward overseeing a company’s collapse in order to mitigate the national debt crisis. 

Analysts suspect that Hui Ka Yan, the founder of Evergrande, has contributed millions of dollars of his personal wealth and has disposed of private assets to sustain the company’s operations. On Sept. 14, Evergrande also hired Houlihan Lokey, an investment bank and financial services company that has advised the infamous Lehman Brothers. Despite the consideration of all feasible options, nothing is certain and there has been no “material progress” in terms of selling shares to prevent the company’s collapse. 

This problem also ties into the lack of transparency plaguing Chinese companies and conglomerates. Companies often struggle with their images and the accessibility of reliable information. 

The global financial market and foreign investors should be worried about this crisis. 

Banking regulators in China claim that Evergrande will undergo a controlled collapse, in which case the financial market will not be impacted on a global scale. While this crisis will largely impact China’s economy, foreign investors are beginning to turn their backs on the company to adverse effects.

The domino effects of this issue are still unclear. However, analysts will be closely following China’s banks, foreign and domestic investors and shareholders and national suppliers to see how the crisis unfolds.