Panama Investor Blog

Panama's unemployment rate

Panama has come a long way since my arrival to its shores in 1997. As I recall, employment was officially in the teens and things were looking worse with the upcoming American pullout with the canal treaty. Wow, have things changed. Official unemployment is around 6.7% and the reality is that there is a great challenge in finding qualified personnel. I don't see this being alleviated any time soon as more business is on the way, the canal construction is well underway and more hotels will be opening requiring hoards of service people. The real challenge for Panama is skilled labor and the only way I see this will change is to open up immigration to skilled labor for other Latin American countries. This will help to bring the level of service up dramatically as these new imports will train Panamanain's. If nothing is done the labor problem will become acute and businesses will look elsewhere for a larger skilled labor pool.

Machine translated from La Prensa;

Roberto González Jiménez
roberto.gonzalez@prensa.com

To analyze unemployment in Panama is to pass on a road full of paradoxes.  The economy has begun to grow at rates as in Asia, but the official unemployment rate is just barely reduced. Meanwhile, companies talk of the lack of skilled labor and cannot even find drivers to work in the new urban buses.

 Although the country exceeded the international economic crisis without major problems, growing by 3.2% in 2009 and in 2010 regained the momentum after the crisis with a growth rate around 7%, unemployment declined only slightly in the last year .

According to the latest data from the Comptroller General of the Republic, the unemployment rate was 6.5% in August 2010, a level similar to a year earlier (6.6%).

The Household Survey also shows that the participation of the population in the labor market recorded a decline compared to August 2009, from the rate of 64.1% to 63.5%.

According to statistics from the Ministry of Labor and Workforce Development (Mitradel), in 2010 there were 334,766 labor contracts, only 1269 more than last year.

Apart from having a larger population of slightly more than 15 years (46,723 persons), how can we understand this apparent contradiction?

 "This explains how we are growing," says Rolando Gordon, professor of the Faculty of Economics, University of Panama, who argues that the fastest growing segment in the country is transportation, storage and communications, "activities to compete using technology, but not many jobs. "

Sectors such as manufacturing or agriculture, which create jobs, have grown only marginally.  "We should encourage the growth of other sectors that create jobs," he advised.

 Yet workers missing

While unemployment figures do not reflect a sharp decline, there are sectors of the economy that can not fill their job demands.

 In the hotel, for example, is quite difficult to find qualified bilingual people ", argues Sara Pardo, president of the Panamanian Association of Hotels. The gap between the worker and the job is in education and training.  "In the end it all comes back to the same," he laments.

However, not only are there unfilled needs for highly qualified personnel.

Recently, the Minister of Presidency, Demetrio Papadimitriu, acknowledged they were having trouble recruiting all the staff needed to work on the Metro Bus, which offers a fixed wage and social security registration, two conditions that should be attractive an economy where informality rate is 42%, according to 2009 data.

 Is there no work or no desire to work and follow in the formal economy?

 Gordon argues that not everyone who is in the informal sector wants to be like that.  "Many can not find work.  Many would switch to the formal sector. "

 It also stresses that "perhaps the rate of 6.5% unemployment is disguised as busy as we are expecting of those that sells a rose in the Central."

 The context

 Although unemployment fell  between 2009 and 2010, expands the perspective for the last decade, it is observed a drastic drop.

 According to data from the Economic Commission for Latin America and Caribbean (ECLAC), urban unemployment rose from 15.3% in Panama in 2000 to 7.9% in 2009.

 In the region as a whole, there was also a downward trend, but not as pronounced.

 The urban unemployment rate rose from 10.3% in 2000 to 8.1% in 2009.  And by 2010 estimated to be completed in 7.5%, a reflection of economic recovery.

 However, the ECLAC warns that "indicators of recovery does not ensure a decent job growth" and that the region, like the rest of the world, faces the challenge of transforming the way they produce to develop sustainable economies in the long term .

Skilled manpower a big challenge for Panama

With over $13 billion in government infrastructure programs in the works, it is becoming more obvious to everyone that Panama does not have the necessary work force to accomplish its goals. And of course if government is having problems, so is the private sector. As this article points out, there is a real shortage of skilled workers and it will become more acute each year as these projects gain momentum. Fortunately the president sees the problem and says we must open up the country to foreign workers. The unions won't like it and neither will many entrenched Panamanians, but it is the only solution and one that will benefit the country in many more ways than just filling a job position. Panamanians need to work with skilled workers from other countries in order to learn new skills. They also need to see how performance is rewarded with higher salaries and benefits. This is the only way I see Panama able to build the bright future that lies ahead.

MINERVA BETHANCOURTH
mbethancourth@prensa.com

The pace has been injected into state infrastructure investments could be damaged by the lack of skilled labor to build, management and manage the ten projects that are underway or about to start simultaneously.

According to the ambitious government estimates, contained in a report that contains 34 projects, some on wheels and other procurement-undated 34 000 direct jobs generated in the coming years.

The project will require more workers is the construction of the first Metro line, which should employ some 3 000 people from 2011 to 2013.

The scenario is complex, considering that 2011 is the year "spike" in regard to employment generation product of the construction of the third set of locks of the Panama Canal. For this work, it required 6 000 748 people.

According to analysts and experts in the labor market, the number of people trained not grow on par with the works, and it is likely that by 2013 demand will exceed supply.

The director of consultancy Insight Economy, Jovany Morales, estimated that from next year there will be a "bottleneck" and that 2014 will be a critical year.

Ricardo Martinelli administration is no stranger to this reality and, quietly, begin to say in forums and meetings with entrepreneurs that if the country lacks the necessary personnel should import people from abroad.

The amount of labor may increase as new projects up for tender, as the Financial Tower or the amphitheater in the area of Amador.

However, it would be wrong train workers only in the area of construction, because this business is cyclical and volatile.

Last October, Manpower Panama presented the results of the Talent Shortage Survey 2010, which found difficulty in finding workers.

38% of employees in Panama has difficulty filling key positions within their organizations.

In Panama, the most difficult to fill jobs are: technicians, sales managers, secretaries, personal assistants, administrative assistants and administrative support personnel, and accounting and finance staff.

Luis Fernando González, regional manager of Manpower and the Dominican Republic, said she is seeing a recovery in employment in many parts of the world, but where space is available, employers have difficulty filling.

The problem is not the number of potential candidates, but the lack of talent because not enough people with the skills required in the right place.

The matter is compounded, since employers are looking for a specific skill set and are less willing to preventive contracts. In the case of Panama that could see it coming, to set a target investment of $ 13 billion 600 million in five years.

Gringo Bashing in Costa Rica?

This article is written by an American businessman who lives and works in Costa Rica and appears on Insidecostarica.com. Over the years the Costa Rican government and the tico's have begun to take Americans and the economic benefits they bring for granted. Where tico's once were welcoming and desirous of Americans to come visit and live there, it seems there is a growing anti-American sentiment at worst and gringo gouging at the cash register at best. As this gentleman points out, if Americans quit coming to Costa Rica, their economy would be devastated. I think this same sentiments could apply to Panama although I don't believe North Americans make up as much of the overall economy in Panama as they do in Costa Rica.

By John Holtz*

Just how dependent are we, in Costa Rica, on the economic well being of the United States and its population? I'm not convinced that Costa Rica really knows the answer to that question and perhaps does not care too much.

Maybe economic ignorance is a good thing since the US economy and most Americans are on the emotional cusp of deep depression brought on by way too many conflicting, contradicting expert opinions and figures drowning out the much needed feelings of optimism for the future.

We are told that at least 60% of all tourists who come to Costa Rica are from the US and that is a lot.

In a land where facts tend to conflict, I have heard 30,000 and up people have come from the US and live here but the records show as of March 31, 2010 only about 13,795 or so are in CR legally. But, they do spend a lot of money and they do invest heavily in Costa Rica. **

In total, the estimated amount of legal expats in Costa Rica is 346,956 from all over the world. That´s about 8% of the population. **

Thanks to the Spanish language newspaper, La Nación, we learned that CR´s growth for 2009 was not 2.2% as advertised but rather -1.8% and that is a shocker. Costa Rica´s deficit of trade jumped an astounding 86% for the 1st seven months of this year and make no mistake about it, the United States is CR´s number one customer.

The unrealistic and perplexing dollar – colon exchange rate is making CR products, the cost of living and services priced out of most international markets and there is no relief in sight. None at all! (Just try and get a straight answer as to why!)
Of investments, Americans are at the top of that list and they heard very few complaints from the nationals who held up the “Costa Rica For Sale” sign high above their heads during the boom years.

Costa Rica has survived for many, many years from the milk of the United States and it has been fairly easy with nifty slogans like “Pura Vida”, “Switzerland of Central America,” “Military Free”, “First Democracy”, “No Artificial Ingredients” etc. to attract Americans.

But, during the last several years the tits of mother America have gone dry and it looks like they will stay at just a dribble for more years to come. Perhaps many if you believe some economists.

Even Costa Ricans who work in the US and remit money home have had a dramatic drop from 2.3% of the CR GDP in 2007 to only 0.3% in 2009.

It is impressive the estimation of CANATUR and ICT who are paid well to pump only sunshine of these millions of tourists who are crowding the airports every day. However, According to a report on Canal 7, the average stay per tourist has dropped from 14 days in 2007 to just 10 or 11 days in 2010. None of those experts interviewed took a shot at how much money was typically being spent each day and even during the Costa Rica two week school break, hotels were only 46% full and restaurants mostly empty.

Having been touted as inexpensive, Costa Rica is being marketed as a good place to retire and live on the cheaper side of life. At least that´s what the real estate and tour agencies now promote. Sorry to bring in a little reality, however, it is expensive living in Costa Rica unless you are willing to make serious changes in life style plus you might wish to buy a gun.

In 2006 until 2008, while pieces of Costa Rica were being sold off, prices skyrocketed for everything from property to food stuffs because there were buyers on every airplane that landed and they have not come back to earth since then.

But now with American inbound cash flow slow to none, I am finding that Costa Ricans are not as warm in their welcome as when we had lots of money to spend.

Recently and too often, I have heard and read the time honored clichés more than I want: “Yanqui Imperialists”, to “Gringos Go Home” and even “Kill the Gringos” in Spanish language blogs and newspapers. Especially in response to the US sending ships and patrols to root out the drug traffickers at the invitation of the Costa Rica government. (Don´t blame Gringos, blame yourself for voting not once but twice and making the invitation in the first place.)

So Ticos, my advice as a businessman, is to drop this Gringo Bashing stuff! It´s not getting you anywhere.

Stop invading our hotel rooms, our homes, and our cars. Stop over charging us for everything and anything plus don´t even think about adding more taxes than we already pay in Costa Rica. And while you are at it, give us some efficient security, okay?

And if Costa Rica would rather ride the big horse to Beijing, may Zorro ride with you because the country will need a swift sword of justice on her side.

This is a new day and possibly the start of a new “norm” where Costa Rica will need to adjust and learn to compete on the open market for both tourist money and foreign investments in general.

Most of all, if Costa Rica wants foreign money she needs to embrace expats and should very much include them into the policy making process instead of keeping them outside the decision making loop. Only citizens should vote. That´s a given. But expats need to be heard because without them, there ain´t no economy, and “That´s a fact Jack” (Movie “Stripes” Bill Murray).

Costa Rica, think about the negative economic and social impact if expats did indeed pack their bags and took their money out of the country.


*John Holtz is the Executive Director of the Center for the Studies of Modern Management www.modernmanagement.org and can be reached at: jrh@modernmanagement.org.

**Source: Dirección General de Migración y Extranjería

Foreigners can now stay in Panama 180 days on tourist visa

Over the last few years there has been a lot of controversy on the length of stay allowed under the tourist visa. The last administration even shortened it to a maximum of only 30 days which created major problems with real estate sales of vacation properties. Although never fully explained, the government finally relented under pressure and allowed the 90 day stay which had been the normal time allowed under previous administrations. Now the Martinelli administration has changed the visa to allow for 180 days which in my opinion is a very wise move. Why would you want to restrict peoples ability to spend money in the country by forcing them to leave for 3 days and then return for another 90 day stay. Lets just hope the police and immigration officials are well informed of this new provision.

New Panama National ID Card

Panama has always had a national ID card they call a cedula and according to a recent article in Tradingmarkets.com Panama will be getting new ones made by 3M that are apparently more hi-tech and difficult to forge. They will even have one for us foreigners living in the country. It is amazing how often Panama authorities check your ID to be sure you are in the country legally and how in the U.S. many are opposed to the checking of ID as an infringement of our rights. I hear Americans complain about being stopped and checked for their ID here in Panama and I initially found it to be distasteful, but with the problems brought about by illegal immigration both here and in the U.S. I am more inclined to believe it is a necessary evil in this crazy world we live in.

Jul 29, 2010 (M2 EQUITYBITES via COMTEX) --

Diversified technology company 3M (NYSE: MMM | PowerRating) announced on Wednesday that its 3M security Systems Division has been awarded a contract to produce a new Panama national ID card.

3M said that it has created a new centralised personalisation facility in Panama, including all necessary equipment, and will provide the materials to produce half a million cards per year.

In addition to the national ID card, the Electoral Tribunal of Panama also contracted 3M Security Systems to produce minor ID cards and foreigner ID cards.

The one-year contract with 3M also gives the Electoral Tribunal the option to extend it through 2015.

Under the contract, financial details of which were not disclosed, 3M Security Systems will print and deliver sheets of Teslin-based card material pre-printed with a number of security printing features, the most notable of which is 3M Colour Floating Image Security Laminate.

3M's new centralised personalisation facility in Panama will provide 3M personalisation software, printers and high-speed die-cutting and laminator equipment.

In addition, 3M will also provide operational training support and maintenance.

3M Security Systems has been a supplier of personalisation materials and equipment systems for Panama's national ID card production since 2003.

How about an "educated and experienced" immigration visa?

An article in La Prensa today highlights the difference between executive salaries and  those of government officials in Panama. One thing that I consider a tribute to this administration is that many of the ministers and vice ministers are businessmen who are making a fraction of what they make in the private sector operating their businesses. They work in government because they want to make a difference during their term and then go back to their private sector jobs a soon as their term is up. This is the way politics should be IMO. In previous administrations you had only a few ministers with qualifications other than having helped get the president elected. They wanted the power and popularity, but did little of substance.

But this administrations ministers see significant challenges at lower levels than ministers and vice ministers. It is hard to attract talent when  the private sector offers two to three time the salary and benefits. I do understand the challenges of trying to accomplish great things when talent is so limited in a small country like Panama.

The solution may just come down to a form of educated and experienced immigration visa. If there were more talent available the cost of talent would not be as high. There are millions of talented unemployed around the world who would probably welcome a challenge working for a government in a foreign land.

minerva bethancourth
mbethancourth@prensa.com mbethancourth@prensa.com

  The Government needs to attract talent from the private sector to develop many of the projects he plans to run.

  However, one of the main obstacles to attract specialists and professionals who thrive in the private sector is the low wages paid in the governmental sphere.

 The minister of Economy and Finance Alberto Vallarino is aware of the situation.  In a talk recently he expressed some frustration with the need to attract talent from the private sector to develop the work contained in the investment program, valued at $ 13 billion 600 million and the wage gap that exists.

  Of the 14 ministers that the current government has more than 50% comes from the private sector, therefore, are used to a rhythm and different working method is practiced in the machinery of government.

  There are even a lot of brain drain from the Government, just over wages, a source said.

  A review of the return of some ministries offers a view on the wages earned in the government, and helps to establish comparisons with the fees that are charged on private enterprise.

  Within the high charges in the governmental sphere, we see the post of minister and deputy minister, who enjoyed a salary of 3 thousand dollars and 3 thousand 500 dollars, not including the fees of which are another component in the salary.

 Extrapolating these jobs to a private company, where higher charges are the manager and his senior executives, salaries ranging from 5 thousand dollars and 18 thousand U.S. dollars, according to a market survey conducted by the firm KPMG. The wage gap is significant, making it difficult to recruit private practitioners in government.

  However, jobs related to the area of technology, engineering and special projects within the government reflect higher wages to the median wage in the central government, which is located at $ 738, according to the report template to February of this year.

According to Linnet Jessica Benitez, manager of Advisory Services of KPMG People, no doubt that wages in the private structure influence in attracting talent.

  Another aspect to consider, according to Benitez, is that private enterprise tends to provide other cash benefits for executives, such as annual increases in productivity or performance bonds (which range between 16% and 25% annual compensation).  They also offer profit sharing, fringe benefits, life and hospitalization insurance, provision of car, pay union membership or professional associations and social clubs.

 "When you consider all of the executive compensation package (ie salary plus benefits in cash and in kind), it becomes even more evident the difference between a sector and the other," he reflected.

  Regional manager for Central America and Dominican Republic Manpower, Luis Fernando González, not only affects wages to attract staff of the private sector, but other factors such as work environment, teamwork, training and development.

  It is therefore necessary to reinforce the work done in different sections of the Government with professionals from business, to gain experience and improve business areas that are experiencing a climate of motivation, organization teamwork , adherence to standards and policies.  Both private business and government management stem from different angles.

While the company seeks to maximize profit, the State must strive for the best development and welfare of citizens in various aspects, such as economic, educational and health fundamentally sentenced Tom Rodriguez, economic analyst with the National Competitiveness Centre.

 The general government budget for 2009 entered in the line of personal services, including worker-employer share of Social Security Fund, about 2 thousand 168 million dollars and generated a payroll of 516 173 thousand employees in the public sector.

Panamanian skill levels not expected to improve

The message came through to me loud and clear last year when I interviewed the minister of commerce. He said, "we have many issues we will tackle, but the Panama labor code is not one of them!" Like most businessmen in Panama, both he and I realize that the labor code in Panama is what really holds it back from making true advances in the skills of its work force, which is truly the future of the country. An article in La Prensa on Saturday was about Panama business leaders bringing up the matter to the minister of labor and getting a similar response as I did. You can't really blame the administration for not wanting to touch this hot potato. Labor unions would revolt and there would be violent demonstrations against any changes that would allow Panama to become more competitive in the world market place. After all, to allow foreigners to fill the many  lacking skills  may force Panamanians to improve their own skill level, and we can't have that. Best to keep things as they are and not rock the boat!

From La Presna;

MINERVA BETHANCOUTH
  mbethancourth@prensa.com

  Authorities from the Ministry of Labor and the Immigration Service have held meetings with business demand to increase the standing of foreign workforce.

  The Union of Industrialists of Panama days ago raised the need to ease immigration rules because they need manpower in certain disciplines.

  However, the director of the Ministry of Labor Employment, Samuel Vargas, warned that changing the rules on hiring foreign staff would change the Labor Code, a fact which is not covered now.

  He said that the issues raised in meetings with the private sector are related solely to expediting the time to get permits to work in the country.

  The director of the National Immigration Service, Maria Cristina Gonzalez, said to be respected Panamanian labor and enforce the rules that stipulate the hiring of foreign staff.

GE decides against Panama

Panama may have the geographical advantage for Latin America but from an education point of view it is sadly lacking, which is costing it more than just jobs. GE had seriously looked at Panama for a new logistical center but due to inadequacy of human resources has decided to open in Chile. Canal Expansion. metro's and new airports are all great, but without education of the locals and opening up immigration to teachers from outside the country, it is only show without substance for the people. The job creation by big projects is only temporary during construction and then what? 

Machine translated from La Prensa

The multinational General Electric (GE) ruled out to install in Panama a center for export of software and services to serve its customers worldwide because the lack of qualified personnel in new technologies in the country.

 This project would have required the efforts of  a 1500 engineers and computer scientists who have mastered English.  An application that the Panamanian market could not satisfy.

Panama could not even score a goal with three years to hire and train workers, and reducing by 50% the number of engineers who were fluent in English, and give assurances that the installation would prove successful, GE assured sources of La Prensa.

At the option of Panama, GE also contemplated hiring Costa Rican staff, but the company realized that the number of foreigners employed would be too high, something that does not fit their policies, whicch are more directed toward local recruitment.

  Moreover, it would far exceed the 10% foreign personnel that can be hired by firms established in Panama.

  Since the company pointed out that the decision was taken when the Panamanian government was in transition, they could not negotiate a special labor regime for the project. GE ultimately decided on Chile, one of the options being considered, and last August, GE, UST Global and its partner Chilean officials announced at the Palacio de la Moneda in Santiago the installation of the center.

  ICT Strategy

  Human capital development in information technology and telecommunications (ICT) is one of the priority objectives of the ICT National Strategy in Panama 2008-2018.

The National Secretariat for Science, Technology and Innovation (Senacyt) and the Panamanian Chamber of Information Technology and Telecommunications (CAPATEC) launched the second phase of implementing the strategy.

  This stage, which runs this year, has a budget of 1.2 million dollars, of which 80% (960 thousand dollars) will be provided by Senacyt and 20% by private enterprise.

The Panama Entrepreneur Visa

Panama's commerce minister, Roberto Henriquez, this week announced a new loan structure for small Panamanian entrepreneurs. Although I am sure this will be a most welcome capital flow into micro business here in Panama, few Panamanians  have the needed business experience to make a success of a new enterprise that would truly bring innovation and benefit to the country. Yes, they can open more mini supers, kioskos and taxis, but these will do little to help Panama advance into the first world. Here is what the commerce minister has in mind.

"The bank will be the third component of "Proyecto Impulso" ("Stimulus Project"), and will begin operations with $25 million in capital. The announcement was made by Roberto Henríquez, Commerce and Industries minister, who will present his plan to the Executive Cabinet."Henríquez explained that 90% of the country's companies are classified as micro and small. This is why this bank will be focused on granting credit solutions to this sector of the economy", reported Prensa.com.

My fellow blogger, Matt Landau, wrote a post this week that I believe could be a key to Panama's future social and economic well being. He calls it the Panama Entrepreneur Visa and if adopted could bring tremendous talent, ideas and money to the country. Instead of, or in addition to this micro financing plan, how about considering Matt's Entrepreneur Visa? I have posted it here with his permission. You can read more of his work at The Panama Report.

Matt Landau January 3, 2010

I come from a place where some of the biggest, most successful companies were started by immigrants. From Katz's Delicatessen to Google, stories of smart, motivated entrepreneurs who emigrated to the U.S. and found a better life linger around every neighborhood corner. And while American visa laws and immigration agents aren't exactly known for their hospitality, they do shed an interesting light on how cosmo-obsessed Panama has the potential to grow in a truly international way. "Entrepreneurs drive America's economy, accounting for the majority of the nation's new job creation and innovations. Self-employed individuals who have no paid employees operate three-fourths of U.S. businesses. Further, America's 25.8 million small businesses employ more than 50% of the private workforce, generate more than half of the nations GDP, and are the principal source of new jobs in the U.S. economy." - ODEP, U.S. Office of Disability Employment Policy

It's no secret that entrepreneurs and small business owners are, collectively, the driving force of innovation and economic progress in many countries. While everyone is motivated by their own set of private and professional agendas, the common drive is to fill niches then make money. From the first time I visited Panama, there flowed an air of creativity and innovation: this sense that if you picked the right function and you did it well, great success was just around the bend. The infrastructure was growing and Panama appeared to be in search of ideas, innovation, talent, and organization.

But there was (and is) only one little hitch. Ask any entrepreneur nowadays in Panama what the most difficult obstacle is to deal with and the answer is united: immigration. Visionaries like these can usually see through the little hurdles - the red tape, the cultural nuances, the fact that nothing gets done on time - because that's what entrepreneurs do. But for small business owners, immigration in Panama is an extremely hard obstacle to overcome. Not only are visas difficult to obtain for oneself, but the ability to import skilled laborers is virtually impossible.

The potential to make a profit in Panama supplies a huge incentive for entrepreneurs to come up with new and better ideas: thus the giant explosion in new corporations created over the past five years. There is - and will be more and more amidst a recession and tightening immigration policies elsewhere in the world - a mad dash to bring in the world's skilled foreigners. How can Panama position itself most attractively on that competitive buffet of options?

No one can argue that importing educated people to create jobs and build wealth might be bad for the economy. Chile, for instance, is throwing its doors wide open, offering a permanent visa to entrepreneurs, paying them up to $30,000 to visit the country and another $30,000 to start a business. In some cases, the Chilean government will even pay for office rent for the first five years. Read Chile Wants Your Huddled Masses, Your Tech Entrepreneurs.

A potential problem with such a visa in Panama would be the fact that the Republic's government historically hasn't done well with...let's say...turning down bribes which are inevitable to nuanced immigration. This type of backdoor policy could just lead to more people buying their way in, and more corruption. There's also the question of how the government determines who qualifies as a legitimate entrepreneur - not to mention if the visa-acceptee fails miserably in his promising start-up. [Please use the comment section below to submit your suggestions on how Panama's government could qualify entrepreneurs for an entrepreneur visa and what effects this might have on development.]

All the potential downfalls withstanding, the prospect for an entrepreneur visa in Panama is not outlandish. Just as Chileans call their country a "land of immigrants," Panama too is a nation that has historically utilized the aid of foreigners to accomplish monumental tasks. It's now a time for realizing the expertise that exists (and that can be taught) within its borders, then opening doors to bring in the best and the brightest abroad: to continue Panama down its road of economic and development breakthroughery. Entrepreneurship needs to have a place on Panama's immigration agenda: it belongs alongside retirees and pensioners as the very alluring building blocks of a sustainable nation.

See here for a similarly proposed visa in the U.S.

Panama's fear to compete

I have written occasionally on the idiocy of restricting foreigners from working in Panama. Jaime Raul Molina has written an article regarding the subject that discusses these issues in more detail. I think you will find it a good read. Jaime  is a lawyer in Panama specialized in Commercial Law."

Our fear to compete

Jaime Raúl Molina

 

We in Panama have a series of artificial barriers created by legislative action, that make it extremely difficult for businesses in the country to hire the services of highly qualified foreign employees.  This, instead of benefitting Panamanian workers as is the declared intention, results in a reduced competitiveness for Panamanian businesses in a global marketplace.

 

A Mistaken Economic View

 

The view above expressed is a labour policy based on an economic fallacy, that sees job positions as a pie of fixed size, and that the least people there are to share the pie, the greater the specific portions will be for each one.  A zero sum game, in sum.  However, in a globalized marketplace, it is competitive advantages what makes businesses and economic actors more competitive.

 

But this in turn requires the company to be able to employ the technology, personnel and resources that are more apt for each of the stages in the value-creating process.  Just as a business cannot be competitive in our modern world if its clerks lack computers and appropriate software, and instead have to work with manual files and mechanic typing machines, well, in that same manner no business can become really competitive if it is not permitted to hire the best professionals, technicians and capable people available in their respective areas of competence.  This, necessarily, implies the capacity to hire foreigners, for just as the New York Yankees (as well as all good franchises in the Major League Baseball) have understood, the best players some times are foreigners.

 

But, what about protecting the work of Panamanians?

 

The argument most commonly put forth in defense of labor protectionism is that if it were permitted to hire, for example, a foreign Architect, there is a Panamanian Architect that has been left unemployed as a consequence.  But this is a simplistic zero-sum game calculation that does not apply to the real economic world.  It is similar to that businessman who, when evaluating a possible investment in labor-saving equipment, only takes into account the cost of the piece of equipment, and ignores the likely increase in productivity that the machine may bring about.  As nothing is free, if every entrepreneur thought in that manner, no one would ever invest in productivity-enhancing technologies. 

 

In Panama we have had experiences in which hiring of foreign employees in a specific economic activity were broadly permitted for a given period.  One of the best examples is that of the banking sector, an activity that, when the door was opened to the hiring of foreigners, many sounded the alarm (like today), in the sense that Foreign employees would displace Panamanians and that this would result also in worsened employment conditions for those Panamanians that managed to keep their jobs. 

 

But exactly the opposite happened.  The International Banking Centre was thus born, something that would not have happened if international banks had not been permitted to hire foreign executives the way they were.  In those times, the rule for the international banks that came to Panama was to hire foreigners for the top executive positions.  However, as the years went by, those same banks began to increasingly trust executive roles to Panamanians.  Today, the vast majority of the executive positions in the banking sector are occupied by Panamanian nationals.  And the banking sector has become one of the most competitive, and with the best salaries in the country.

 

 

The same could take place with many more economic activities.  If it were permitted that any business, local or foreign, hired freely those persons that it deems the most qualified for the position in question, independent of that person’s nationality, more companies will start to come and set foot in Panama than have done so heretofore. 

 

We don’t want the best

 

Work of foreign professionals in Panama is extremely restricted.  In the first place, an enormous number of professional activities require the person to be a Panamanian national.  Professions like Medicine and Law are just two examples.  The absurdity is such that, if a Nobel Laureate, say, in Physics or Medicine, wanted to come to Panama to live and take a teaching position at the University of Panama, he could not do so.  The reason is that to be a professor in said university, you have to be a Panamanian national.  This is equivalent to shoot your own foot, as while the Americans made the atomic bomb with the participation of European scientists that had run away from the nazi, fascist and communist tyrannies, here in Panama we pretend that there is no single area of human knowledge in which anybody is better than us Panamanians.  We thus renounce to benefit directly from the best brains in the world in their respective disciplines.

 

Note that I use the United States of America as the benchmark here.  The reason is simple: that country has conquered the economic, scientific and military power of the world, precisely because Americans do not have strategic policies based on professional or economic chauvinisim.  Much on the contrary, while Hitler was expelling from Europe everybody who was not from his invented pure Arian race, the United States of America was receiving with open arms all those brilliant brains from Europe that were running away from fanatic nazi persecution.  On the questions of which of these policies is more advantageous in the long term, one has only to look at who ended up being the victor in World War II. 

 

The Labor Code

 

Apart from the prohibitions of practising certain professions to those who are not Panamanian nationals, the other activities that in principle are not prohibited to foreign nationals, are in practice severely restricted by the Labor Code and other related pieces of legislation.  The Labor Code allows, in theory, any business to hire specialized foreign personnel in certain circumstances.  Nevertheless, it sets a long list of requirements and conditions to be met that end up making this very cumbersome and limited. 

 

The basic restriction is that any in any business enterprise, all foreign employees as a whole cannot constitute more than 10% of its payroll, both in headcount and in salaries.  This last piece is the most absurd part of the restriction, as it is evident that the interest from any company in hiring foreigners and bringing them to the country to work is disproportionately directed towards filling positions that require high professional or technical qualifications, which in turn implies that those positions tend to be ones with high salaries relative to the rest in the company.  In this context, to require that the total salaries and benefits paid to foreign nationals within the company does not exceed 10% of all salaries and compensations paid to the whole of the company’s employees, ends in the real percentage of foreign employees in any one company allowed by the law, being much lower than ten percent. 

 

Conclusion

 

Panama wants to be a first world country in terms of economic development, specifically in the areas of commerce and the provision of services, historically our areas of strength.  In many aspects, Panama is indeed much closer to first world countries than to other countries in the region.  But we will never be able to become one in full right until we abandon our fear to compete in all markets, including the labor market.