In its recent column titled “Key Factors for Building Trust,” the Chamber of Commerce, Industry, and Agriculture of Panama (CCIYAP) emphasizes the need to increase foreign direct investment (FDI) attraction in the country. The statement serves as both a message of hope and a warning.
On one hand, the Panamanian Consumer Confidence Index (ICCP) for March 2023 shows a significant improvement compared to the January measurement, indicating increased optimism among the population regarding the future economic prospects of their households.
However, the Chamber also points out the decline in private investment, the government’s debt to suppliers exceeding $1.4 billion, the misalignment of the education system with the country’s job market reality, a considerable reduction in FDI levels, and inconsistencies in the messages Panama sends to the international investor community.
CCIYAP expresses concern that in the last two years, FDI has not exceeded $2 billion, whereas before the pandemic, it was over $4 billion. To truly experience the effects of this investment, the country would need to reach $5 billion annually.
In contrast, other countries in the region have made significant progress. In February 2023, Mexico announced a historical record of FDI in tourism with $3.447 billion in 2022, tripling the levels of 2019 ($1.0914 billion) and doubling the previous record set in 2017 ($1.6454 billion).
In the Dominican Republic, FDI flows reached $3.8022 billion in 2022, surpassing 2021 levels by 22.57% and 2019 levels by 25.85%, setting a new record since 2017 ($3.5 billion).
Meanwhile, Costa Rica attracted 101 FDI projects in 2022, generating 22,000 net jobs. Notably, there were 11 new investments from seven non-traditional countries such as Canada, Chile, and Germany, as well as continued confidence and reinvestment from 61 multinational companies in the country.
Additionally, there is a significant improvement in consumers’ job prospects. Although MITRADEL’s figures indicate that the average monthly number of new labor contracts processed in the first quarter of 2023 is the same as the previous year (20,000 per month), the percentage of ICCP respondents who were confident about having a job in the next 12 months increased from 27% in January 2023 to 42% in the March 2023 measurement, representing a 15 percentage point increase in two months.
This increase in confidence is largely due to the announcement of a new agreement between the Government and Minera Panama. The breakdown of negotiations in January 2023 generated uncertainty among workers and contractors of the mining company, leading many people to postpone purchases and hiring until they had a clearer picture of the situation. Additionally, many loans and bank credit lines were suspended.
The announcement of the agreement had an immediate impact on both purchases and hiring and also had a significant psychological effect, especially in sectors that generate a large number of jobs, such as trade, industry, construction, and other service activities like maintenance. However, these sectors have experienced high levels of labor precarity.
In summary, the labor crisis in Panama is not only about the lack of employment but also about trust. Between 2017 and 2022, MITRADEL processed 445,000 new labor contracts, compared to 240,000 in 2022, representing a reduction of 205,000 contracts in five years. Formal employment was generated in sectors such as mining, energy, and education, but 90% of the job decrease occurred in four sectors: construction (50%), hotels and restaurants (19%), trade (14%), and information and communications (7%), directly related to lower levels of private investment.
As a result of the pandemic, the private sector lost 407,000 formal jobs, including 364,000 in 2020, and 43,000 suspended workers who were unable to regain their jobs. This represents 47% of all private formal jobs that existed before COVID-19.
Recovering these jobs will require significant investment and instilling confidence that investing in Panama is a good business decision. It is time to take action and work towards that goal.
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