In its recent column titled “Critical Aspects for Cultivating Trust,” which was published in La Cámara Opina, the Chamber of Commerce, Industry, and Agriculture of Panama (CCIYAP) underscores the necessity of enhancing the country’s appeal for foreign direct investment (FDI). The article conveys a dual message, one of optimism and caution. On the positive side, it highlights a substantial improvement in the Panamanian Consumer Confidence Index (ICCP) in March 2023 compared to January, reflecting a heightened sense of optimism among the populace regarding the future economic prospects of their households.
However, the Chamber also raises concerns about declining private investment, the government’s outstanding debt to suppliers exceeding $1.4 billion, an education system that doesn’t align with the realities of the country’s labor market, a significant reduction in FDI levels, and inconsistency in the messages conveyed to the international investor community.
CCIYAP is troubled by the fact that FDI hasn’t surpassed $2 billion in the past two years, despite reaching figures exceeding $4 billion before the pandemic. Furthermore, it emphasizes that for the country to truly benefit from such investments, it should consistently reach an annual FDI inflow of $5 billion.
In contrast, several other countries in the region have made substantial progress. In February 2023, Mexico announced a historic record of $3.447 billion in FDI in tourism for 2022, tripling the levels of 2019 ($1.091 billion) and doubling the previous historical peak in 2017 ($1.645 billion). Meanwhile, the Dominican Republic recorded an FDI flow of $3.802 billion in 2022, surpassing 2021 levels by 22.57%, 2019 levels by 25.85%, and setting a new record compared to 2017 ($3.5 billion, a 6.5% increase).
Additionally, 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. The arrival of 40 new investments in Costa Rica is particularly noteworthy, doubling the achievements of 2017 and 2018, as well as the confidence and reinvestment of 61 multinational companies in the country.
On a positive note, there have been significant improvements in the labor prospects of consumers. While the average monthly number of new labor contracts processed 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 surge in confidence can be primarily attributed 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), as well as a noticeable psychological effect, especially in sectors that generate substantial employment, such as commerce, industry, construction, and other service sectors. These sectors had experienced high levels of labor instability.
The Chamber emphasizes that the labor crisis in Panama is not due to a shortage of jobs but rather a crisis of trust. In 2017, the Ministry of Labor and Labor Development (MITRADEL) processed 445,000 new labor contracts, while in 2022, this number reduced to 240,000 contracts, marking a decrease of 205,000 contracts in five years. Formal employment was created in sectors with investment, 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 linked to lower levels of private investment.
As a result of the pandemic, the private sector lost 407,000 formal jobs, with 364,000 lost in 2020 alone, and 43,000 suspended workers did not regain their positions. This represents 47% of all pre-COVID-19 formal private jobs. Recovering these jobs will require substantial investment and rekindling confidence that investing in Panama is a sound business decision. The time to take action is now. COBRE PANAMA, MINERIA COBRE; FIRST QUANTUM COBRE PANAMA, MINERIA COBRE; FIRST QUANTUM COBRE PANAMA, MINERIA COBRE; FIRST QUANTUM
