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Despite Panama's relatively high-income per capita, poverty remains pervasive. The distribution and magnitude of poverty varies significantly by geographic area, but it is most extreme in the rural and indigenous areas. Disparities in education cause most of the poverty, malnutrition, and inequality. This report on these and other issues of poverty in Panama was prepared as a result of a collaborative process between the government and the World Bank. The process was established to build capacity for, and ownership of, the analysis in the government. The objectives of the report are as follows: - to assess the extent and determinants of poverty, malnutrition, and inequality in Panama; - to examine the impact of government policies and spending on the poor in key sectors; and - to outline priorities and steps for translating broad principles for poverty reduction into action.