Panama is home to one of the most exciting economies in the Americas. Bordered by Costa Rica and Colombia, the country is considered the ‘link’ between Central and South America, and thanks to its location, benefits from a great deal of investment both locally and internationally.
Home to more than four million people, the country has a growing economy, and in the past couple of years, has enjoyed an economic boom. It’s now considered one of the fastest growing and best-managed economies within Latin America, with a GDP of almost $64 billion, and GDP per capita at a healthy $15,313.
Whether you’re a Panamanian or you’re looking to expand into the territory and take advantage of its growing economy and growing middle-class citizenship, there is a lot that you need to think about. In this article, we share with you the changing employment environment within Panama and show you how to take advantage of these changes to grow your business internationally.
Panama Canal expansion transformed businesses
One reason why the employment market has seen such change in recent years is that of the ongoing Panama Canal expansion project, known in Spanish as the ampliación del Canal de Panamá. The project, which was completed in 2016, doubled the capacity of the Panama Canal by adding a new lane for ship traffic, new sets of locks, and widened and deepened channels.
Proposed more than ten years ago, the project was designed to make Panama a ‘First World’ country, and work began after a referendum just months later. In just 20 months of operation, the Panama Canal Authority saw an additional 3,000 New Panamax cross the canal, bringing with them new jobs, imports, and opportunities for businesses and individuals in the country.
According to the Panama Canal Authority, more than 35,000 jobs were created during the ten-year construction of the project, with the majority of the labor being done by Panamanians. Once the project was completed, however, these skilled contracted workers were left without employment, increasing the country’s unemployment rates and causing some workers to leave the country to look for opportunities elsewhere, whether that be on rigging or construction. Earlier in the year, construction workers went on strike to negotiate increased pay and rights.
For businesses like yours, there is still a great number of skilled construction workers in the country without employment. If you’re thinking about expanding into the territory and work within the industry, then you’ll have a pool of top talent that’s ready to take on a new challenge.
International growth is on the up
Foreign direct investment in Panama has been on the rise for a number of years, with figures between 2016 and 2017 rising from $4,494 million inward flow to $5,319 million inward flow. Panama is one of the top recipients of foreign direct investment in Central America, in part thanks to investment freedoms. In short, commercial operations are subject to transparent rules and regulations, making it easy for businesses to expand within the territory without significant questioning or challenges. Another reason why the country is so popular for foreign investment is that it offers customs and tax advantages, being part of the Colón Free Trade Zone. What’s more, the country is in a strong geographical location, bridging the gap between Central and South America, and it runs off of a dollarized economy, reducing the costs of transactions.
The country’s top foreign investors are from the United States, Colombia, South Africa, the United Kingdom, and Switzerland, however, investors from around the world have been known to work within the territory. For businesses of all shapes and sizes, Panama remains a popular choice, so much so that they decide to work with organizations that help incorporate company Panama based. In simple terms, having a legal entity within the country further reduces costs and allows for more affordable transactions and exporting to other territories around the world.
Unemployment is rising in the country
Despite a growing economy, Panama has seen an increase in unemployment in the past couple of years, with the government launching a new portal to connect skilled workers to registered companies in real time. The site currently lists more than 32,000 candidates with 320 vacancies.
Unemployment within the country has risen from 4.2% in 2012, up to 6.1% in 2017. Businesses considering expanding into the country should consider this a positive, as it means they will be able to secure the very best talent and choose from a wide range of candidates, without having to offer salaries or compensation packages above the industry average. For office workers, the minimum wage within the country is around $252.00 USD, significantly less than the average US office worker salary of around $30,000. Of course, salaries depend on experience and the industry you work in, but generally speaking, Panama is a country with highly affordable labor.
When looking to hire within the country, you should consider the benefits of working with a PEO (also known as a Professional Employer Organisation) who will be able to assist in the recruitment and management of your staff. PEOs are beneficial to businesses looking to expand into the country, as they mean you do not have to register to become a legal entity within the country, and instead, you can rely on a ‘middle man’ who will employ talent on your behalf.
With a growing economy, new opportunities in manufacturing and agriculture, and access to an affordable employment market, you should be able to grow your business in Panama without much trouble. But with more Western brands understanding the benefits of an expansion into new territories across Latin America, you must act fast if you want to get ahead of the competition and cement your position within the country. Whatever you decide to do, be sure to do your research, take your time, and put people at the heart of your business. Good luck.
Seasoned Business and Investment Professional in Latin America. Craig Dempsey is the CEO and Co-Founder of a leading multi-national group, that specializes in the provision market entry and back office services in the Latin America. Craig holds a degree in Mechanical Engineering and a Masters in Project Management. Craig is also a veteran, having served as an Australian military officer on numerous overseas missions and also a former mining executive with experience in various overseas countries.