In its latest column titled “Key Factors for Building Trust,” the Chamber of Commerce, Industry, and Agriculture of Panama (CCIYAP) emphasizes the need to foster greater foreign direct investment (FDI) attraction in the country. Through this statement, which combines a message of hope and warning, it highlights that 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 warns about the decline in private investment, the government’s debt to its 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.
The main concern lies in the fact that in the last two years, FDI has not exceeded $2 billion, contrasting with the figures exceeding $4 billion before the pandemic. To truly feel the effects of such investment, it is estimated that the country should reach $5 billion annually.
Meanwhile, other countries in the region are making significant strides in this aspect. In February 2023, Mexico announced a historical record in its FDI in the tourism sector, with $3.447 billion in 2022, tripling the levels of 2019 ($1.0914 billion) and doubling its previous record reached in 2017 ($1.6454 billion). Additionally, the Dominican Republic recorded FDI flows of $3.8022 billion during 2022, surpassing 2021 levels by 22.57%, 2019 levels by 25.85%, and establishing its historical maximum in 2017 with $3.5 billion.
As for 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 similar to the previous year (20,000 per month), there is an increase in confidence. In January 2023, only 27% of ICCP respondents had confidence in having a job in the next 12 months, but this percentage increased to 42% in the March 2023 measurement (+15 percentage points in 2 months).
This marked increase in confidence is largely attributed to the announcement of a new agreement between the Government and Minera Panama. The breakdown of negotiations in January 2023 generated concern among workers and contractors of the mining company, leading to a halt in purchases and hiring, as well as the suspension of loans and bank credit lines. The announcement of the agreement had an immediate effect on both aspects, stimulating purchases and hiring, and creating a positive psychological impact, especially in sectors that generate significant employment, such as trade, industry, construction, and service activities.
The labor crisis in Panama is not so much about the lack of employment but 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 5 years. Formal employment has been generated in sectors with investment, such as Mining, Energy, and Education, but 90% of the employment reduction has occurred in four sectors: Construction (50%), Hotels and Restaurants (19%), Trade (14%), and Information and Communications (7%), sectors directly related to the decrease in private investment.
As a result of the pandemic, the private sector lost 407,000 formal jobs, including the 364,000 lost in 2020, and another 43,000 suspended workers who did not regain their jobs. This represents 47% of all private formal jobs that existed before the arrival of COVID-19. Recovering these jobs will require significant investment and instilling confidence that investing in Panama is a good opportunity. It is time to take action.
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