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
[email protected]

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 .

Protect the Goose That Lays the Golden Eggs

Eduardo Morgan is a well known and respected attorney in Panama and he is also a fellow blogger. He posts some interesting story's about Panama from the viewpoint of a patriot and conservative. In the excerpt below, he argues against  the statements made by U.S. ambassador to Panama, Barbara Stephenson, that came out in Wikileaks regarding the Tocumen airport being a hub for money laundering. He makes some valid points and also a brief defense of the tourism authority manager Salo Shama. I am meeting with Shama next week and will post regard his side of those allegations. You can view Eduardo Morgans blog here.

Excerpt: I allude to this experience in light of the assertions by the U.S. Embassy regarding the laundering of drug money in Panama’s Tocumen Airport. It is absurd to think that travelers coming from, mainly, the Caribbean, and South and Central America, are full of drug money, since the $600 billion generated by the drug trade is produced at the sites of consumption, i.e., in the United States. Drug money flows from north to south: from the U.S. to Colombia, Bolivia, Peru, etc. Drug dealers are not so dumb as to move large amounts of cash by plane from a U.S. airport (with strict controls). Narco-dollars are used for imports and exports, for example, the so-called black market for Colombian pesos and the cash purchases of mobile goods like cars and helicopters. This is documented by FinCEN, a U.S. government agency, on its website. Our hub is no different from London’s or Amsterdam’s, and neither are the duty-free shops managed by successful entrepreneurs who have long been engaged in this business.

Be sure to read the entire post here.

What the IRS wants to know about you

Although much of the information on the Sovereign Society's website is to entice you into becoming a member or signing up for paid services they also provide a wealth of free information that I believe is invaluable. Much of the information  is targeted at U.S. citizens who in many cases are not aware of all the draconian measures the U.S. government is regularly instituting to keep tabs on its subjects. This particular link  provides some timely information for those U.S. citiznes living in Panama, especially with the tax information exchange agreement being implemented in the near future. Dual Citizen Panamanians should also take heed of this information as being a U.S. citizen has some significant drawbacks. There are still areas that one can invest without having to report and it is spelled out clearly at their website.

Here are some excerpts:

Reporting Laws You MUST Know

Whether you’re a U.S. citizen or resident, or a foreigner doing business in the United States, here’s what you need to know about reporting your offshore investments.

The Bank Secrecy Act effectively ended bank secrecy in the U.S. It requires you to file a report each year acknowledging any “foreign bank, brokerage, or ‘other’ financial accounts” you hold.

There are three separate reporting requirements:

1. You must acknowledge foreign accounts with an aggregate value exceeding $10,000 each year on Schedule B of your federal income tax return.

2. June 30 is the deadline for filing a Foreign Bank Account Report (FBAR) form with the U.S. Treasury. This form – cryptically named “Form TD F 90-22.1″ – gives the Treasury a bird’s-eye look at any foreign bank, brokerage or other financial account you held during 2010.

3. If you hold more than $50,000 of assets outside the United States, a special reporting regime has gone into effect, and it could apply to your 2010 tax returns. A law passed in 2010 requires Americans to file a new IRS form along with their income tax return that discloses any foreign financial assets valued more than $50,000. The IRS recently released a draft copy of the form (Form 8938), but it’s not clear whether the additional disclosure will apply to 2010 tax returns. I’ll know more about this requirement soon and will discuss it further down in Panama.

These reporting obligations apply to any American. The tax penalties for failing to comply are draconian! You could end up paying a $10,000 fine per unreported account. Far worse, if you “willfully” fail to file the FBAR form, you face fines up to $250,000, five years imprisonment…or both. Penalties are doubled if you violate any other U.S. law. Failure to file the form authorized in the 2010 law may be punished with a $50,000 fine.

New Panama Canal Video from PBS

Last night PBS featured a new video about the construction of the Panama canal and it is very well done. You will learn many things you probably did not know if you have not read Panama Fever or Path Between the Seas. According to the historians in this video, the construction of the Panama canal was instrumental in making the U.S. into the super power it is today. You can view the entire 90 minute video on the PBS website or click the video below. Enjoy!

 

 

Watch the full episode. See more American Experience.

 

Copa adds three new destinations

Copa continues to expand and starting June 2011 it will open three new destinations to the cities of Toronto, Canada; Porto Alegre, Brazil and Nassau, Bahamas.

Copa Airlines, subsidiary of Copa Holdings, SA {NYSE: CPA} announced that from June 2011, in order to offer more options to passengers, it will increase daily flight frequencies to various countries in its extensive route network, it will offer more convenient schedules and will open three new destinations to the cities of Toronto, Porto Alegre and Nassau.

"With the opening of these new destinations and increased frequencies from our Hub of the Americas in Panama City, Copa Airlines continues to expand coverage and reaffirming its leadership in Latin America and the Caribbean, offering more international destinations than any another hub in Latin America," stated Pedro Heilbron, president of the airline.

Heilbron also said, "The Hub of the Americas remains the most effective and convenient connection in the continent and the increase in frequencies of our flights will allow us to significantly improve daily arrival and departure schedules, so to continue to offer better connectivity and more options as well as frequent flights and connections throughout the day - even up to six connecting flight options for some markets."

 

Panama President Panders for the FTA

A public relations piece appeared today from the President of Panama urging the U.S. House Ways and Means committee to act on the free trade agreement that has been languishing for so long under the Obama administration. Along with the expected "Panama is great theme", the president also makes reference to the Tax Information Exchange agreement as another carrot Panama has committed to in order to get the FTA. If you recall, the TEA was negotiated and sighed by both parties in November, but not yet ratified by the Panama Assembly. I believe they are waiting to see if Panama gets the FTA, in which case there will be many who hope they don't. The agreement basically throws everyone who bought into Panama's promise of privacy under the bus for a Free Trade agreement that many don't see the benefit of for Panama. See my take on this here.

Here is the press release.

Statement by President Ricardo Martinelli on House Ways & Means Hearing on Panama Trade Agreement

WASHINGTON, Jan. 25, 2011 /PRNewswire-USNewswire/ -- The following is a statement by President Ricardo Martinelli on House Ways & Means Hearing on Panama Trade Agreement:

"I extend my thanks to the Members of the U.S. House Ways & Means Committee for giving the Panama Trade Promotion Agreement priority attention by holding a hearing so early in the new Congress.

"As the rest of the world's economies struggle with the global recession, Panama's economy is not only humming along – it's practically roaring. The IMF estimates that Panama will have the fastest growth rate in the Latin America and Caribbean region by 2015. The policies my administration is implementing and the improvements we are undertaking will create prosperity for our people and deliver on the promise of Panama.

"These same policies also make the Trade Promotion Agreement with the U.S. an even better deal than ever before for both countries. The $13.6 billion infrastructure investment plan we are implementing now will create incredible opportunities for American firms once the TPA is approved to compete in selling everything from heavy equipment to engineering services.

"Because of Panama's growing prominence as a global leader in trade and logistics, TPA would also create new opportunities for U.S. companies – especially small and medium enterprises -- that usually only export to one country. Through a TPA with Panama, these American firms could have access to an entire region through Panama's logistical network and free zone legislation. Panama's strategic position could become a platform for American firms to reach many other countries and markets with no tariff barriers.

"Late last year, Panama also signed a Tax Information Exchange Agreement with the U.S. to further demonstrate our commitment to transparency and global financial standards – and to do what is necessary to make this Trade Promotion Agreement a reality.

"I strongly urge Congress and the president to follow-up on this important hearing by passing the U.S.-Panama Trade Promotion Agreement as soon as possible. As a long-standing friend, ally and trading partner of the United States, we believe doing so would be a vital tool for saving and creating jobs in both countries."

Distributed by HDMK, LLC on behalf of the Republic of Panama.  Additional information is on file at the Department of Justice, Washington, D.C.

 

GOP Proposal to Eliminate OECD Funding

Even though this has not yet happened, the fact that it is a top priority of the GOP makes it newsworthy IMO. The OECD does everything possible to hamper competition between countries on taxes and to eliminate your individual rights to privacy. These unelected non-taxed bureaucrats need to be eliminated and de-funding them is the way to go about it.  Be sure to watch the video below.

Here is more on the matter from the Center for Freedom and Prosperity.

(Washington, D.C., Friday, January 21, 2010) The Center for Freedom and Prosperity congratulates the Republican Study Committee for defunding the Organization for Economic Co-operation and Development (OECD) as part of its Spending Reduction Act. The act lists $2.5 trillion in savings over 10 years, including the $93 million annual subsidy to the OECD.
 
In recent months, CF&P has made defunding the OECD one of its top goals and asked the Republican Study Committee to defund the statist bureaucracy. This was part of a multi-pronged effort to increase awareness of the OECD's destructive policies, which featured coalition efforts, congressional meetings, the production of studies, and also a video highlighting 6 key reasons to halt US funding of the OECD:
 
1) promotion of a value-added tax in the US; 2) pursuit of an anti-tax competition agenda seeking to establish a global tax cartel; 3) endorsement of failed Keynesian  spending in the US; 4) advocation of unpopular Obamacare policies; 5) call for more US spending on everything from welfare to foreign aid; and 6) support of global taxation on carbon emissions and financial transactions.
 Link:  http://www.youtube.com/watch?v=oVr8R41nZJU
 
"We are delighted that Congress is now taking seriously our call to stop wasting taxpayer money on this corrupt, failed bureaucracy," said CF&P President Andrew Quinlan. "We now urge all members of Congress to side with the interests of taxpayers over those of European bureaucrats," he concluded.
 
Originally created to promote economic cooperation and trade among developed countries, the OECD for decades played a benign role, collecting statistics and publishing studies. Beginning in the 1990s, however, the Paris-based bureaucracy started to pursue a policy agenda to advance the interests of the European welfare states that dominate the OECD's membership.
The United States provides almost one-fourth of the OECD's funding - far more than any other nation - yet the Paris-based bureaucracy constantly works against the interests of U.S. taxpayers.

  

For additional information:
Andrew Quinlan can be reached at 202-285-0244, [email protected]
Dan Mitchell can be reached at 202-218-4615, [email protected]

Investors bailing out of Muni bonds

Things are unfortunatly taking a turn for the worst in most municipalities in the U.S. as the sale of municipal bonds have stopped and those holding them are bailing out. No wonder with the number of municipalities under water with bloated pensions and debt from over spending during the heyday of the housing bubble. With tax receipts dramatically falling municipalities are desperate for cash to pay salaries and many are cutting much needed services such as police and fire department personnel. How long will people within these communities go along with higher crime while the public servants with six figure pensions live high on the hog at their expense? Well, if the muni bond redemption's continue at their ever escalating rate, we won't have too long to find out. Unemployment unfortunately brings increased crime and it all comes together to spell disaster at the community level. This is a most interesting article from Financial-Planning.com

Excerpts:

Investors have withdrawn $25.3 billion — a sum that exceeds the gross domestic product of Panama — from municipal bond mutual funds the past nine weeks, according to Lipper FMI. Funds that report their figures weekly posted a net outflow of $1.51 billion for the week ended Jan. 12.

Municipal funds are now reporting outflows at a rate of $3.25 billion a week, based on the four-week moving average. That’s well above any pace seen before the latest series of redemptions in the $478 billion municipal fund industry.

The spate of outflows has fund managers scrambling to sell municipal bonds at a time when dealers are already worried about the willingness of retail investors to digest long-term tax-exempt paper, breeding considerable volatility and weakness at the long end of the yield curve.

 

200 Countries, 200 Years, 4 Minutes

This is really a great video and unlike many I post that show how bad things are, this one shows that over time, most countries have advanced dramatically over the last 200 years when it comes to logentivty and wealth. I love statistical data, especially when it is a flow data chart as shown here. I think you will really enjoy this.

 

David Airport Status

There is a great deal of infrastructure investment going on in Chiriqui these days with the new four lane highway to Boquete well under way and the expansion of the airport in David. I flew out of the airport this past week and was told by some of the administrators that the renovated runway would be ready by the end of this month. In addition the foundation for the new terminal is nearly complete. Here is an article from La Prensa regarding the latest news on the subject.

Machine translated

Malek airport expansion progresses

 The work will enable the arrival of ships capable of carrying up to 300 passengers and improve the conditions and service.

TERMINAL. TERMINAL. Trabajos de ampliación en el aeropuerto Enrique Malek. Extension work at the Enrique Malek Airport. ESPECIAL PARA LA PRENSA/Teófilo González 1495734 SPECIAL TO THE PRESS / Teófilo González 1495734

 TEÓFILO A. GONZÁLEZ  David, Chiriqui
[email protected] [email protected]

 The remodeling and expansion of facilities Enrique Malek International Airport in the city of David progressing despite excessive rains late last year.

The rehabilitation and expansion of the airport terminal and runway Enrique Malek develop at a cost of 27 million 478 thousand 845 U.S. dollars.

 Sources from the Civil Aviation Authority (CAA) reported that the first phase (taxiway) was finished and is expected later this month will be delivered the second phase corresponding to reinforcement, sealing cracks and prenivelación of the main runway.

La tercera fase o extensión de la pista avanzaba en un 14% hasta el pasado 22 de diciembre, cuando se habían vertido 20 mil metros cúbicos de material selecto; y la cuarta fase o edificio adyacente de la terminal avanza en un 20%. The third stage or extent of the track progressed by 14% until Dec. 22 when they had poured 20 thousand cubic meters of material selected, and the fourth phase or adjacent to the terminal building by 20% advanced.

 The work awarded through competitive bidding to the company Riva Argentina SA, in mid-2009, allow for the arrival of ships capable of carrying up to 300 passengers and will significantly improve conditions and services of the airport.

 The Civil Aviation director, Rafael Barcenas, said the Enrique Malek airport expansion and construction of new airport terminals in Columbus and central provinces will serve as a hub to the national economy, mainly on the exploitation of tourism potential within the country.