In its recent article titled “Critical Factors for Establishing Trust,” featured in La Cámara Opina, the Chamber of Commerce, Industry, and Agriculture of Panama (CCIYAP) emphasizes the imperative of bolstering foreign direct investment (FDI) attraction in the country. The statement conveys a mixed message of hope and concern. On one hand, it highlights a substantial improvement in the Panamanian Consumer Confidence Index (ICCP) in March 2023 compared to January, indicating a surge in optimism among the population about the future economic prospects of their households.
Nonetheless, the Chamber also raises alarms about declining private investment, the government’s mounting debt to suppliers, a misalignment between the education system and the country’s labor market realities, a significant drop in FDI levels, and inconsistencies in the messages conveyed to the international investor community.
CCIYAP expresses deep concern that FDI has not exceeded $2 billion in the past two years, despite surpassing $4 billion prior to the pandemic. Furthermore, it emphasizes that for the country to fully benefit from such investments, it should reach an annual FDI inflow of $5 billion.
In contrast, other countries in the region have made remarkable progress. In February 2023, Mexico announced a historic record of $3.447 billion in FDI in tourism for 2022, tripling 2019 levels ($1.091 billion) and doubling the previous peak in 2017 ($1.645 billion). Meanwhile, the Dominican Republic recorded an FDI flow of $3.802 billion in 2022, surpassing 2021 figures by 22.57% and 2019 figures by 25.85%, setting a new record compared to 2017 ($3.5 billion, a 6.5% increase).
Furthermore, the Costa Rican Coalition for Development Initiatives (CINDE) and the Ministry of Foreign Trade (COMEX) reported that Costa Rica attracted 101 FDI projects in 2022, generating 22,000 net jobs. Notably, 40 new investments in Costa Rica doubled the achievements of 2017 and 2018, and the confidence and reinvestment of 61 multinational companies in the country.
On the brighter side, there have been significant improvements in labor prospects for consumers. Although the average monthly number of new labor contracts in the first quarter of 2023 is similar to the previous year (20,000 per month), there has been a notable increase in confidence levels. In January 2023, only 27% of those surveyed in the ICCP expressed confidence in securing employment within the next 12 months. By March 2023, this figure had risen to 42%, marking a 15-percentage-point increase in just two months.
This remarkable boost in confidence can be attributed primarily to the announcement of a new agreement between the government and Minera Panamá. The breakdown in negotiations in January 2023 had created uncertainty among workers and contractors of the mining company, causing many to suspend purchases and hiring until the situation became clearer. Additionally, several loans and credit lines remained on hold. The announcement of the agreement had an immediate impact on both fronts (purchases and hiring) and had a noticeable psychological effect, particularly in sectors that generate substantial employment, such as commerce, industry, construction, and other service sectors, which had experienced high levels of labor insecurity.
The Chamber underscores that Panama’s labor crisis is not a result of job shortages but rather a crisis of trust. In 2017, the Ministry of Labor and Labor Development (MITRADEL) processed 445,000 new labor contracts, whereas in 2022, this number dwindled to 240,000 contracts, marking a decrease of 205,000 contracts in five years. Formal employment was created in sectors with investments such as Mining, Energy, and Education. However, 90% of the reduction in employment occurred in four sectors: Construction (50%), Hotels and Restaurants (19%), Commerce (14%), and Information and Communications (7%), all of which are directly tied to lower levels of private investment.
The pandemic led to the loss of 407,000 formal jobs in the private sector, with 364,000 lost in 2020 alone, and 43,000 suspended workers did not regain their positions. This accounts for 47% of all pre-COVID-19 formal private jobs. The recovery of these jobs will necessitate substantial investment and a renewed belief that investing in Panama is a sound business decision. The time to take action is now.
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