In its latest column titled “Key Factors for Building Trust,” the Chamber of Commerce, Industry, and Agriculture of Panama (CCIYAP) advocates for the need to increase foreign direct investment (FDI) attraction in the country. Their statement serves as both a message of hope and a warning.
On one hand, the Panamanian Consumer Confidence Index (ICCP) for March 2023 shows a notable 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 suppliers exceeding $1.4 billion, an educational system that does not align with the country’s job market reality, significant reductions in FDI levels, and inconsistencies in the messages the country sends to the international investor community.
The guild expresses concern that in the last two years, FDI has not surpassed $2 billion, whereas before the pandemic, it exceeded $4 billion. Additionally, it highlights that for the country to truly experience the effects of such investment, it would require reaching $5 billion annually.
In contrast, other countries in the region have made significant strides. In February 2023, Mexico announced that its tourism FDI reached a historical record of $3.447 billion in 2022, tripling the levels of 2019 ($1.0914 billion) and doubling its previous record set in 2017 ($1.6454 billion).
Meanwhile, FDI flows in the Dominican Republic reached $3.8022 billion in 2022, surpassing 2021 levels by 22.57%, 2019 levels by 25.85%, and setting a new record since 2017 ($3.5 billion) by 6.5%.
Finally, 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, generating 22,000 net jobs. Notably, there were 11 new investments from seven non-traditional geographies such as Canada, Chile, and Germany, as well as continued confidence and reinvestment from 61 multinational companies in the country.
Furthermore, there has been a significant improvement in 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 the same as the previous year (20,000 per month), the percentage of ICCP respondents who were confident about having a job in the next 12 months increased from 27% in January 2023 to 42% in the March 2023 measurement, representing a 15 percentage point increase in two months.
This increase in confidence is largely due to the announcement of a new agreement between the Government and Minera Panama. The breakdown of negotiations in January 2023 generated uncertainty among workers and contractors of the mining company, leading many people to halt purchases and hiring until they had a clearer picture of the situation. Additionally, many loans and bank credit lines were suspended.
The announcement of the agreement had an immediate impact on both purchases and hiring, as well as a significant psychological effect, especially in sectors that generate a large number of jobs, such as trade, industry, construction, and other service activities like maintenance. These sectors have experienced high levels of labor precariousness.
In summary, the labor crisis in Panama is not just about employment but also 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 five years. Formal employment was generated in sectors such as mining, energy, and education, but 90% of the job decrease occurred in four sectors: construction (50%), hotels and restaurants (19%), trade (14%), and information and communications (7%), directly related to lower levels of private investment.
As a result of the pandemic, the private sector lost 407,000 formal jobs, including 364,000 in 2020, and 43,000 suspended workers who were unable to regain their jobs. This represents 47% of all private formal jobs that existed before COVID-19.
Recovering these jobs will require significant investment and instilling confidence that investing in Panama is a sound business decision. It’s time to get to work!
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