In its most recent column titled “Key Factors for Building Trust,” published in La Cámara Opina, the Chamber of Commerce, Industry, and Agriculture of Panama (CCIYAP) expresses the need to increase foreign direct investment (FDI) attraction in the country. The statement, which combines a message of hope and warning, highlights, on the one hand, the significant improvement in the Panamanian Consumer Confidence Index (ICCP) in March 2023 compared to January, indicating increased optimism among the population regarding the future economic prospects of their households.
However, the Chamber also alerts about the decline in private investment, the government’s debt to its suppliers exceeding $1.4 billion, an education system that does not align with the country’s labor market reality, a significant reduction in FDI levels, and the lack of coherence in messages sent to the international investor community.
CCIYAP is concerned that FDI has not exceeded $2 billion in the last two years, despite reaching figures higher than $4 billion before the pandemic. Moreover, it points out that for the country to truly feel the effects of that investment, it should reach $5 billion annually.
In contrast, other countries in the region have made significant progress. In February 2023, Mexico announced that its FDI in tourism reached a historical record of $3.447 billion in 2022, tripling the levels of 2019 ($1.091 billion) and doubling its previous historical peak in 2017 ($1.645 billion). Meanwhile, the Dominican Republic experienced an FDI flow of $3.802 billion in 2022, surpassing 2021 levels by 22.57%, 2019 levels by 25.85%, and setting a new record compared to 2017 ($3.5 billion, a 6.5% increase).
Additionally, the Costa Rican Coalition for Development Initiatives (CINDE) and the Ministry of Foreign Trade (COMEX) announced that Costa Rica attracted 101 FDI projects in 2022, creating 22,000 net jobs. The arrival of 40 new investments to Costa Rica is particularly noteworthy, doubling what was achieved in 2017 and 2018, as well as the confidence and reinvestment of 61 multinational companies in the country.
On the other hand, significant improvements in consumer labor prospects are observed. Although the average monthly number of new labor contracts processed in the first quarter of 2023 is similar to last year (20,000 per month), in January 2023, only 27% of those surveyed in the ICCP expressed confidence in having employment in the next 12 months. This percentage increased to 42% in the March 2023 measurement, representing a 15 percentage point increase in two months.
This remarkable increase in confidence is mainly due to the announcement of the new agreement between the government and Minera Panamá. The breakdown of negotiations in January 2023 generated uncertainty among both the workers and contractors of the mining company, leading many to suspend purchases and hiring until a clearer picture of the situation emerged. Additionally, several loans and bank credit lines remained on hold. The announcement of the agreement had an immediate effect on both aspects (purchases and hiring), as well as a noticeable psychological impact, especially in sectors that generate a significant amount of employment, such as commerce, industry, construction, and other service activities, but have experienced high levels of labor precarity.
The Chamber emphasizes that the labor crisis in Panama is not about the lack of jobs but about trust. In 2017, the Ministry of Labor and Labor Development (MITRADEL) processed 445,000 new labor contracts, while in 2022, this figure reduced to 240,000 contracts (a decrease of 205,000 in 5 years). Formal employment was generated in sectors with investment, such as Mining, Energy, and Education, but 90% of the labor reduction occurred in 4 sectors: Construction (50%), Hotels and Restaurants (19%), Commerce (14%), and Information and Communications (7%), sectors directly related to lower levels of private investment.
As a result of the pandemic, the private sector lost 407,000 formal jobs, with 364,000 in 2020 and 43,000 suspended workers not regaining their jobs. This represents 47% of all pre-COVID-19 formal private jobs. Recovering these jobs will require significant investment and instilling confidence that investing in Panama is a good business. It’s time to act.
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