Panama Investor Blog

Study finds disparity between spending, learning

Here are some interesting statistics regarding education costs in Panama. Having raised three children through the system here I can add some further data regarding private institutions. The average private school tuition for elementary in the interior is about $90 a month. In Boquete there are 4 private schools charging about this amount or a little more. As this story points out, improvements in the educational system are challenging and most people know that it is the teacher unions that cause most of these challenges. Being state run they have no intensive to improve or bring in new ideas. But having a choice as we do in Boquete of 4 schools to choose from keeps all of the private schools on their toes. With public eduction eating up 18% of the state budget getting the unions de fanged should be a priority for this new administartion.

Excerps from La Prensa: Panama spends an average of $1,228 on each student in the public school system, according to a study by the consulting firm Goethals and an economic audit under the leadership of Mary Echarte, an analyst at the Latin American Economic Research Foundation.

That figure was far above those reported by the Ministry of Education (Meduca), whose spokesmen said that the country spends about $760 annually on every elementary and middle school student, and roughly $450 on kindergartners and preschoolers. Data on high school students was not available.

“We still do not have statistics for 2008,” reported the Meduca press office. “This is the official data from 2007.”

Meduca was allotted $ 968.2 million in budget funds this year, or 17.5 percent of the total state budget, of which $799 million goes toward operating expenditure and the remaining funds are designated for special programs.

This year, Panama is investing in education about 6 percent of its 2008 gross domestic product (GDP), researchers pointed out that those funds are not spent in an effective manner, impeding improvement to the quality of education received by the 700,000 students nationwide.

The study noted that state spending per pupil is higher than the monthly tuition fees and in many private schools, where the scholastic experience is often superior to that found in public schools.

Public payroll shoots up

I always find it interesting to stumble on statistics that are not usually readily available like growth in government payroll and the size of government in relationship to the size of the governed. You can tell a lot about a country by looking at these kinds of numbers.

Excerpts from LA Presna Tuesday:

Even as it has asked a number of departments to cut expenditures, the state increased its payroll by 10 percent in the first quarter of 2009 as compared to the same period last year.

Those costs went from $117.4 million in the first quarter of 2008 to $130.1 million in the first quarter of 2009, according to the latest report of the Comptroller.

Not surprisingly, the number of staff members also increased, from 160,775 employees in the first quarter of 2008 to 164,742 in the same period of 2009, an increase of 2.5 percent.

The total salaries do not include special allowances, 13th month payments or overtime. The roster of government employees also excludes those who work for the Panama Canal Authority, firefighters, municipal employees and those on short-term, professional contracts.

According to the report of the first quarter of 2009, 67 percent of the employees served in the areas of education, public health and safety. These employees accounted for 70 percent of the salaries.

Panama School Year Delayed

Okay, there was good news about the recently completed infrastructure projects in Chiriqui.  As I mentioned, the development of key infrastructure is critical to growing a country's economy.

However, investment in infrastructure is not the only element needed to have a thriving economy.  Investment in a country's people is as important, if not more so, than roads and bridges.  As this article points out, Panama clearly needs to make education a higher priority.

Excerpt:

Panamanian education authorities might be forced to reprogram the beginning of the 2009 school year after delays in school repair works.

However, the delay in executing the works determined that only a little over 50 percent of the areas to be used in the school year would be ready before April 13.

Read more here

Panama health care example

I regularly receive emails from readers asking about the quality and cost of health care in Panama. God forbid you need emergency care, but if you do, Panama is a good place to be if you need to visit the hospital. This morning I received an email from a friend that shows a typical example of what you might expect. If you have ever had the misfortune of having to need emergency care in the U.S. this should come as a pleasant surprise. Thanks for sharing Clyde.

A report on Santo Tomas Hospital
Posted by: "Clyde Jenkins"
Sat Nov 8, 2008 6:25 pm (PST)
My experience with gall bladder surgery at Santo Tomas Hospital.

On Monday morning the 28th of October my gut was so distended and I was
having such excruciating pain that my novia took me to Santo Tomas
Hospital. The first day there is somewhat of a fog as I was hurting so
bad. It turned out that I was passing some gall stones and my pancreas
was inflamed and I had to have my gall bladder removed, but they had to
wait to get my pancreas stabilized first. After 5 days of constant IV
feedings with antibiotics, pain killers and all those other goodies they
fill you up with, they did the surgery on Saturday at 2:30. The
surgery, a laparoscopy which is done without cutting the abdominal wall,
but with 4 small incisions for the light, camera and tools, was done
under general anesthesia and lasted a little over an hour. I was
released from the hospital at noon on Monday, feeling quite well. The
cost for this whole procedure was an outrageous $746. Just joking
folks.

What did I get for that $746? Let me break it down.

First, the exam room and admission cost me $2.00 And then I had
about every blood test imaginable, about two dozen in all during the
week I was there. Add in a lot of medication and the total
miscellaneous charges came to $54.00. These by the way were all
itemized and were paid for up front.

There was $300 for general surgery which included the hospital room
for 8 days, 2 cat scans, 3 x-rays, an ultrasound, two doctors exams per
day and at least 20 IVs with all the goodies. None of the $300 was
itemized so I can't break it down for you.

The realiity of education in Panama

This week two articles about the poor level of education in Panama have come out that I beleive are important for investors to be aware of. Education is the key to success for the country and any business venture that must depend on local employment. The first came out Friday about the overall level of high school education. Here is a quote;

"High school students attending both public and private schools are graduating with the equivalent of a seventh grade level education, according to a study sampling more than 30,000 students around the country." The article goes on to say how this affects students when they go on to higher education. Study finds high school education deficient.

What I find even more troubling is the attitude of the population toward their educational system. In an article that come out today it tells of a survey of how the Panamanian population view their system.

"Despite having ranked poorly in assessments by organizations such as Unesco, a study by the Inter-American Development Bank shows that 73 percent of Panamanians surveyed said they are satisfied with the public education system." System satisfies majority

On the surface this indicates that the Panamanian people are foolish and will put up  with the sub pare performance of their children which I find highly unlikely. As a parent with children in local private schools I find that parents want their children to have greater opportunities that can only come from high quality education and they even go so far as to pay for private schools if they have sufficient funds to do so. The quality of the teaching staff in public schools are such that most kids find it easier to cheat and the teachers look the other way to get more children through the system with reasonably high marks. When it comes down to doing the work in the real world, it is a different story.

We employ 70 young people in our resort and all come with high school education and a number with college degrees. There are a few exceptions, but most high school graduates are really at an elementary school level. College degrees put them at high school graduate levels of North American schools. It is an unfortunate system of government protectionism that will keep the cycle of low educational levels perpetuated. The "college grads" go on to be teachers and the level of education continues to go down instead of up.

No matter what new plan or curriculum they try it will not work because the teachers unions will not allow any outsiders to teach in the country and they would not want the low paid jobs if they did. Unfortunately, the only way to break the cycle is to do just that.

World Bank loans $75 m for Health and Education

It is a shame that such a blessed country must borrow money to provide these basic services to its people, but I would rather see the debt going towards the basics that are so needed rather than white elephants that continually get most of the borrowed funds. Capital Finance reports that the government has borrowed $75 million from the World Bank to "Improvement of Performance and Equity in Health" which will have three components that include protection for vulnerable populations, strengthening the network of services for protection in the field of health and strengthening the ability of stewardship of the Ministry of Health.

They go on to say that In implementing this program is expected to provide free care to 70% of pregnant women, 95% of children under one year to complete vaccination schedule for that age, 80% of children aged 6-36 months who suffer from malnutrition Moderate and severe tracked, and 80% of diabetic patients with hypertension captured in the primary care level.

You can read more about this program here.

Troubling numbers regarding education in Panama

An article from this morning's La Prensa hits home about the challenges that Panama faces as it struggles to find a labor force to build all the grand projects planned. In a recent study of Latin countries, Panama ranked last in a number of academic areas. With education levels so dismal, how can the people be expected to compete in the market. What is so frustrating is the fact that Panama is a relatively rich country with a small population, but Instead of investing in their greatest assets, the government continues to invest in mega projects that only exasperate the problems. If I were king........

Excerpts:

Moreover, between 30 and 70 percent of Panamanian students in third through sixth grade earned failing scores in subjects such as science, mathematics and Spanish.

Pedro Ravela, a consultant with United Nations Educational, Scientific and Cultural Organization (UNESCO), considered the test results a “serious” concern, since lacking these basic skills significantly reduces a student’s ability to acquire knowledge in other areas during their scholastic career.

Some 13,000 Panamanian students participated for the first time in the Segundo Estudio Regional Comparativo y Explicativo (Serce), along with students from 15 other countries in the region, including one Mexican state. Panamanian students ranked among the last places in most of the areas assessed. The highest scores for reading were earned by students from Argentina, Chile, Colombia, Costa Rica, México and Uruguay, and Nuevo León, México.

Panama’s low ranking, however, is not as telling as the fact that many Panamanian children leave the third grade barely able to read, commented Ravela.

Read the whole sorry story here at La Prensa

Tight labor pool may derail economic boom

If over development or speculation doesn't slow down Panama's growth, the lack of unskilled labor sure will. I have written about this subject a number of times, but now it is starting to affect the economy in a way few would have expected just a few years ago. There are not enough plumbers, electricians, office workers etc. to handle the growth according to this article in La Prensa today. I employ directly about 200 people now and have employed up to 450 people at a time here in Panama and I have formed some strong opinions about this matter. Here is what I would do if I were king.

First and foremost is poor elementary and secondary schools. Poorly paid teachers who are inadequately skilled and a school culture where cheating is considered to be a class of its own. In a place where anything can be purchased, it comes as no surprise that students take the easy road to graduation. Only private schools and foreign higher education do a service to the students and their families, but that  comes at a very high price few can afford.

Second is the labor laws which favor the employee to such a degree that you may as well just pay the demands of the worker if he takes you to court, which he inevitably will do. The cost of labor is high when you consider the low level of skill and productivity, month long vacations, 16 sick days, 16 paid holidays along with a 13th month paid each year. Don't forget the indemnification when the employee leaves or is fired. Then there is the  costs of having layers of people looking over one another's shoulder to keep them working and honest.  Go into any store n Panama and lok at how many people it takes to just buy something. These are all layers of controls a business must have to stay in business.

Third is the immigration system and the  "protect our turf" attitude of the "professional" organizations in the country. The more skilled you are the less likely you will be able to work here if you are from another country. I know of highly skilled people who would like to work and teach their skills that cannot because of the arcane laws of the state.

What to do? Start by spending real money on real education. Hire foreign teachers from Asia and other countries where the standard of education is proven and where cheating and corruption are frowned upon. Revamp the entire labor code and make it a level playing field where good workers are paid well and loafers are punished. Get rid of minimum wages and let the free market decide what is fair pay. With labor in high demand good workers can claim top dollar. In a small country with such a small labor pool they should welcome anyone with skills that can teach others their trade. Open the doors wide to all comers with proven education and skills. An apprenticeship program needs to be implemented where skilled labor is teaching unskilled and the worker and the company are being paid to teach. The Panamanians will learn fast what it takes to compete in the world market. Many will sink but many more will prosper.

Here are some excerpts from the article; A study by the firm Goethals Consulting has found that 80 percent of mid-level and senior management positions in the country are held by people who studied outside of Panama.

The low quality of public elementary and secondary education, as well as the shortcomings of the country's universities, have adversely affected the performance and productivity of their graduates, the study concludes. “There are also problems of attitude and self-esteem that Panamanians must overcome if we really want to be more competitive,”

The current labor shortage has been exacerbated, in part, by the fact that demand has exceeded supply in many sectors.

According to the ANRH, many companies are currently facing problems finding accounting and billing personnel, engineers, technicians and bilingual staff.

The study also highlights the shortage of plumbers, cabinet makers, electricians, masons and painters.

Marvin Castillo, vice president of the Cámara Marítima de Panamá, said that the sector is experiencing a severe shortage of skilled laborers, such as welders and mechanics.

Retirees ask for benefits hike

As this article points out, many of the 170,000 people receiving pensions in Panama are having a difficult time managing on the amount the government pays out. As the cost of everything continues to increase, there will be increased demand  for the government to do something about it. This can only mean an increase in pensions or  subsidies, either of which switches the burden on to the folks that are still working. Of course the working class are having a tough time making ends meet as well. The article points out that the last $30 increase made for those making under $500 a month  cost "the government" 13 million dollars. That means about 36,000 of the 170,000 make less than $500 and the balance make more.  According to a second article below, the pension payment are about $840 million a year and running a deficit of about $70 million or about one months payments. This deficit was expected to be eliminated by the social security reforms of 2005. My bet is the contibutions by employers are poised to increase again.

La Prensa

A group of retirees met with President Martín Torrijos yesterday to ask him to increase the country's pension benefits to keep up with rising inflation.

Rafael Medina, a spokesman for the Confederación Nacional de Jubilados y Pensionados, said that many of the country's 170,000 retirees can't afford to feed themselves because of rising costs.

"We want to index pensions to inflation or to find a similar financial solution that will alleviate this situation," Medina said.

He called for an increase of between $20 and $50 for all pensioners, and not just those earning less than $500 per month.

Last year, the Caja de Seguro Social (CSS) approved an increase of $30 a month in benefits for retirees earning less than $500 a month. That measure is expected to cost the CSS an additional $13 million a year.

Medina said they are aware that the CSS is not in a position to make another adjustment to the pension payments, so his organization approached the president.

Torrijos said that his office would seek a solution "within the financial realities of the government."

Seniors received some measure of relief from high prices when the government approved a 20 percent discount on the purchase of medicine.

 

Panama #1 in Top 5 Medical Tourism Destinations

The Nuwire Investor  has a great article on medical tourism ranking Panama at the top spot.

Excerpt:
1. Panama

Panama offers significantly lower costs for medical procedures just south of the U.S. border. Costs, on average, are 40 to 70 percent lower than costs of similar surgeries in the U.S., according to a report on medical tourism published by the National Center for Policy Analysis (NCPA) last November. Although costs for medical procedures are generally higher compared to those of Southeast Asian countries, travel costs from the U.S. to Panama are considerably lower.

Panama is a relatively “Americanized” country and an attractive place for both regular tourists and medical tourists to visit. Panama City is a relatively safe and modern destination; the U.S. dollar is the country’s official currency, and many of the physicians are U.S.-trained. Consequently, U.S. patients are less likely to experience a high degree of culture shock when seeking care in Panama.

Medical tourism should have a positive impact on Panama’s economy, which relies heavily on the services industry. The medical tourism industry can also help to utilize Panama’s labor force of approximately 1.5 million people, which has a surplus of unskilled labor, according to the CIA World Factbook.

In general, Panama has shown commitment to improving its economy in fostering trade relations with the U.S. Rather than participate in Central America Free Trade Agreement (CAFTA), Panama independently negotiated a free trade agreement with the US in December 2006.

Finally, Panama presents a wide range of opportunities for real estate investments as well as investments in the service and tourism-related industries. For more information on investing in Panama, please read our previous article, Investment Opportunities in Panama.

Read the rest of the story at Nuwire