Labor Market:Panama vs. Costa Rica

Joyce Kwan

Nicoll Zapata

Costa Rica

Capital: San Jose

Population: 4,133,884

Language: Spanish (official), English

Ethnic groups: white (including mestizo) 94%, black 3%, Amerindian 1%, Chinese 1%, other 1%

Reference from www.cia.gov

Panama

Capital: Panama

Population: 3,242,173

Language: Spanish (official), English 14%

Ethnic group: mestizo (mixed Amerindian and white) 70%, Amerindian and mixed (West Indian) 14%, white 10%, Amerindian 6%

Reference from www.cia.gov

Economic Overview

Costa Rica

GDP: $55.95 billion

Labor force: 1.9 million

note: this official estimate excludes Nicaraguans living in Costa Rica

Unemployment rate: 5.5%

Panama

GDP: $29.14 billion

Labor force: 1.5 million note: shortage of skilled

labor, but an oversupply of unskilled labor

Unemployment rate: 7.2%

Economic Overview

Currency: Costa Rican colon (CRC)

Exchange Rate: Costa Rican colones per US dollar 519.53 (2007) 511.3 (2006) 477.79 (2005) 437.91 (2004) 398.66 (2003)

Currency: balboa (PAB); US dollar (USD)

Exchange Rate: 1 balboas per US

dollar

Economic Environment: Costa Rica

Costa Rica's basically stable economy depends on Tourism

Ecotourism Agriculture electronics exports

Immigration from Nicaragua 1990’s: Immigration Boom 6% of the population of Costa Rica

300,000-500,000 Nicaraguans estimated (legally and illegally)

Increasing concern for the governmentSocial welfare system

Mostly unskilled labor

Costa Rica: Inflation

Inflation rate (consumer prices): 9.3% 2nd highest in Latin America lack of maintenance and new investment in

infrastructure over 740,000 (18%) people below the poverty line just over 227,000 (5.5%) unemployed

Reducing inflation remains a difficult problem rising import prices labor market rigidities fiscal deficits.

Economic Environment: Panama

Service sector accounts for about 80% of economic activity Operating the Panama Canal Banking Colon Free Zone Tourism

Economic growth expected through Panama Canal expansion project (2007-2014) Double Canal’s capacity Economic activity in Panama

Canal’s infrastructureLogistics and financing of international shipping

Economic Environment: Panama

U.S. is Panama’s largest trading partner U.S.

exports 39.8% imports 27%

Costs Rica exports 4.5% imports 4.7%

In December 2006 Panama negotiated a free trade agreement with the U.S. Tariffs and barriers on trading goods and services Trade between the U.S. Promote economic growth

Fully dollarized economy since 1904. Explains low inflation

Inflation Rates

0.0%

1.0%

2.0%

3.0%

4.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007

Panama

United States

Rise in Inflation rate due to the increase of petroleum prices

Recovery of the international economy due to 9/11 influenced an increase in

inflation

Economic Environment: Panama

Labor Market Sectors

Costa Rica

PanamaAgriculture

15%

Industry18%

Services67%

Services64%

Industry22%

Agriculture14%

Costa Rica: Employment Unemployment has dropped & new

jobs are created construction boom increase in exportation increase in foreign investment increased consumption motivated

by an overall 9.3 percent increase in salaries.

Lowest unemployment in all of Latin America and the Caribbean 6% (2006) 4.8% (July 2007)

Women unemployment in Costa Rica 8.2% (2006)6.8% (2007) Disadvantage: making up 55% of

the country’s unemployment Overall higher level of education

than men Average salary paid to women is

26% lower.

0200400600800

100012001400160018002000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total

Men

Women

Panama: Employment Situation

Capital intensive sectors have led GDP growth in Panama Shortage of skilled workers

Inequality between men and women in the labor market

Agriculture and manufacturing lack competitive advantages to sustain large-scale workforces

Panama - GDP

0.0%

2.0%

4.0%6.0%

8.0%

10.0%

2000 2001 2002 2003 2004 2005 2006 2007

Employment by Gender

0%

20%

40%

60%

80%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Men

Women

Costa Rica vs. Panama

Unemployment

0.0%

5.0%

10.0%

15.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007

Panama

Costa Rica

Costa Rica: Hourly WagesCategory Minimum Hourly

Wage (Per Hour)

Non skilled workers

$1.85

Semi skilled workers

$1.95

High school level technicians

$2.10

Specialized workers

$2.30

College technicians

$2.80

Bachelor’s degree $3.45

Advance degree $4.15

Panama: Hourly Wages

Sector Minimum Hourly Wage (Per Hour)

Agriculture 2.60 Balboa/hr

Manufacturing 2.20 Balboa/hr

Construction 1.90 Balboa/hr

Utilities 4.90 Balboa/hr

Hotels and Restaurants

1.40 Balboa/hr

CAFTA

Country Date

El Salvador March 1, 2006

HondurasNicaragua

April 1, 2006

Guatemala July 1, 2006

Dominican Republic

March 1, 2007

Costa Rica October 1, 2008

Panama Pending

Potential Benefits of CAFTA for Costa Rica

Companies from around the worlddirect investment to the region creating jobs

Country Investor Investing Job creation

El Salvador Brazilian shoe manufacturer

$3.5 million 400 during the 1st year

El Salvador Saturn, GM

$2 million in auto components

500

Nicaragua International Textile Group

100 million 8,750

Thank You