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Working in Panama
Find out how to get a job and work in Panama
Panama’s economy has one major asset: The Panama Canal. The 77-km long canal connecting the Pacific and the Atlantic Ocean provides numerous employment opportunities for people in Panama. InterNations GO! has compiled some useful information for expats interested in working in Panama.
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Employment in Panama
A high percentage of the local workforce in Panama are indeed employed in businesses directly or indirectly linked to the Panama Canal. The Canal doesn’t only provide employment and business opportunities, but it also injects millions of dollars from toll revenues into the national economy. In fact, every article on Panama’s economy should dedicate a special section to the Panama Canal, so here we go.
The Panama Canal
Finished in 1914 by an US Army Corps of Engineers, the Canal has changed Panama’s fortunes forever. The whole Canal Zone used to be under US sovereignty, but in 2000, Panama regained complete control. Expansion works on the Panama Canal started in 2007, thus boosting the economy through major investment, construction and infrastructure projects. In combination with the US-Panama Trade Promotion Agreement signed in 2011, the Canal expansion (to be completed in 2015/16) is set to significantly benefit the people of Panama.
It hardly comes as a surprise that Panama has established itself as a hub for maritime transportation. The Canal provides people working in the trade, transportation and logistics industries with direct access to one of the world’s major shipping routes. Given that the country has the largest merchant marine fleet in the world, it is no surprise either that a high percentage of people working in Panama have links to the shipping industry in one way or another.
The four modern container ports alone ensure employment for a significant number of people. Manzanillo International Terminal, Colón Container Terminal, the Port of Cristobal Container Terminal, and the Port of Balboa Container Terminal are all managed by world class operators with international staff.
An Economic Overview
Panama’s economy on the whole is modern, stable, and one of the fastest growing economies in Latin America. The country’s stable investment climate is helped by the fact that the US Dollar has been legal tender in Panama for over a hundred years. Inflation is low and the local currency, the Balboa, is tied to the US Dollar. In 2013, Panama reported a GDP real growth rate of 8.4%.
The unemployment has remained stable in recent years, and was estimated at 4.5% in 2014. The total workforce is currently counted at 1.563 million, out of a population of 3.6 million.
Due to its key location, the country has a well-developed services sector with large numbers employed in Panama’s banking, commerce, tourism and trading sectors. All in all, the services sector accounts for nearly 83% of the GDP and employs about 65% of the workforce. With only 19% of employees working in Panama’s secondary sector, the country’s industry is maybe not the place to look for expats– except maybe the construction industry, which is booming on the back of tourism and the Canal expansion.
Agriculture accounts for about 17% of the labor force, but only for about 3% of the GDP. However, agricultural produce such as bananas, coffee, sugarcane, and shrimp are among the country’s main exports and thus contribute significantly to the economy.
Tourism in Panama
Tourism also holds a special place in Panama’s economy and provides lots of jobs. Two big cruise ship terminals ensure a continuous flow of tourists into the country: the Cristobal Cruise Terminal and the Colón 2000 Cruise Ships Terminal.
There are various economic incentives both for investors and contractors working in Panama’s tourism industry, e.g. Special Tourism Zones in various parts of the country offering tax incentives and exemptions. As a result and due to increased demand, people working in Panama’s real estate industry have developed several new tourism destinations in the past years.
Europe is one of the key areas for promoting Panama as a tourist destination. Especially foreign retirees looking to spend their old age pensions in the country are targeted by PR folks working in Panama’s tourism industry.
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Key Business Areas in Panama
After a general economic overview, let’s look at some of Panama’s key business areas – both in geographic terms and in terms of investment and business opportunities for expats.
Panama’s CFZ and EPZs
In addition to Special Tourism Zones, Panama has several Free Trade and Export Processing Zones, plus the Panama Pacifico Special Economic Area offering tax and migratory incentives.
The Colón Free Zone (CFZ), located near the Atlantic entrance to the Panama Canal, is the second largest duty-free zone in the world after Hong Kong and the largest free trade zone in the Western Hemisphere. It is undoubtedly one of the biggest driving forces of the economy of the entire country, with several thousand companies operating in the zone. Companies in the CFZ are exempt from income taxes.
Export Processing Zones (EPZs) are particularly popular with manufacturers due to tax-free benefits and exemptions from license and custom duties. Outside these zones, tax incentives in the form of Industrial Promotion Certificates are also available to investors in manufacturing, agro-industrial concerns, and marine resource transformation, among others.
The Ciudad del Saber (City of Knowledge), another special zone on former Canal Zone territory, is a center for innovation and knowledge exchange combining business, research and studies. It attracts international companies through income tax exemptions and other benefits. The City of Knowledge website is also an excellent place to look for jobs with companies in the area.
Expat Destination Panama City
Panama City, the capital and largest city of the Republic of Panama, naturally attracts most foreigners moving to Panama. The City of Panama has a population of just under one million, with a metropolitan area population of 1.6 million.
The city is located at the Pacific entrance of the Panama Canal and is thus a hub for commerce, trade and shipping activities, but also for tourism and international banking. The banking sector is fairly stable; some even consider Panama the largest international banking center outside of Switzerland. With most of Panama’s businesses and commercial premises located in the city and its metropolitan area, Panama City generates more than half the country’s GDP.
Panama City is connected to the rest of the world through the Tocumen International Airport, the largest and busiest airport in Central America. The nearest port facilities are in Balboa.
Colón and David
Panama’s second and third largest cities respectively are located in different corners of the country. Colón is a seaport on the Caribbean coast, at the other end of the Panama Canal opposite Panama City. Its borders include the former Canal Zone towns of Cristobal, Rainbow City, Margarita, and Coco Solo. Colón’s main attraction for expats and foreign investors is the Colón Free Zone. The city itself suffers from high unemployment, poverty and crime rates as a result of serious economic and social decline brought about by the military dictatorship between 1968 and 1989.
David, on the western Atlantic coast near the Puerto Rican border, is a relatively affluent city with a population of less than 100,000 in 2011. It is the agricultural supplier for the country and serves as a commercial and financial hub for the province of Chiriquí. Most national banks and some international banks such as HSBC have offices here.
As one of the most industrialized cities in the country, David is also a center of manufacturing and heavy industry. It is served by the Enrique Malek International Airport and attracts significant numbers of tourists thanks to its nightlife and entertainment, an excellent cuisine and good shopping facilities.
Business Opportunities in Panama
The 5.3+ billion USD Canal expansion provides various business opportunities for foreign investors and managers in the area. We have listed a few areas of interest below:
- procurement related to the daily operations of the Canal, such as provisions, equipment, material, construction, consulting, etc.
- concessionaire services to the ports (materials, maintenance, repair, power, water, fuel, food, banking, telecommunications)
- ship owner’s services (ship and container repair and maintenance, servicing of vessels)
- logistics and cargo industries
- security consultants, trainers, providers
- financial consulting
In addition to these opportunities arising in the maritime sector, Panama’s economy has potential in various other sectors, such as:
- information and telecommunication technology
- chemicals and pharmaceuticals
- power and renewable energy
- electricity generation, transmission and distribution
- food and drink
- construction and infrastructure
More Job Opportunities in Panama
While the business and work opportunities listed on the previous page are mainly for specialists in their fields or high-ranking managers in international firms, there are, of course, other job opportunities as well. However, a non-managerial post in a business which does not benefit from tax and immigration incentives by the Panamanian government has two distinct disadvantages: Even if you manage to get a work permit for it (a hurdle not to be underestimated), the job will not earn you very much money. We have nevertheless listed a few possibilities below. For more information on visas and work permits for Panama, please see our article on moving to Panama.
Non-Managerial Job Opportunities
Basically, you have three general options: You could become an English teacher, a translator or a real estate agent.
Language Jobs in Panama
If you have any type of teaching qualifications or higher education degree and your native language is English, you may be able to find work in a private school or a language school. Although this is not going to make you rich, it will probably leave you with enough free time to give private lessons on the side to supplement your income. Many well-to-do Panamanian families will pay good money for someone to tutor their children and prepare them for English exams.
If you speak Spanish, it will be a lot easier for you to find a job in any case. One of your options would be to work as a translator or interpreter for one of the many foreign or Panamanian businesses which are operating internationally. There is also a lot of call center work available. As in any other country, working in a call center is far from glamorous, but it could be a viable option if you are simply accompanying your partner and have no career options in Panama.
Real Estate Jobs in Panama
Panamanian real estate is booming – both private persons and businesses from abroad are interested in purchasing real estate in Panama. Therefore, a lot of real estate agencies are looking for English-speaking agents to deal with their international clients. Quite a few expats who have chosen this career do not work for a Panamanian company but as independent professional service providers. You will need to create a shell company with a Panamanian bank account, but this can often be easier than getting a work permit.
Finding a Job in Panama
The key thing to remember is that you’re much more likely to find a job with an international company located in one of the special economic or free zones than with a domestic one. This is because multinational corporations are not bound by the 10% rate when it comes to hiring foreign staff at management or executive level. Some global corporations with regional headquarters in Panama are, among others, Adidas, AES, Caterpillar, Hyundai, Maersk, Mars, Nestlé, SABMiller, and Western Union.
If you’re looking for a job in Panama from your home country, it might be a good idea to keep an eye on the websites of these or other big corporations with branch offices in Panama. Alternatively, consult the website of the City of Knowledge, which is where many international businesses are located. Your Chamber of Commerce is a good point of reference if you are looking for contact details of businesses from your country operating in Panama.
Everything that probably goes for the job search in your country of residence is true of Panama as well. Networking, for example, is very important, especially in expat circles. The Internet is, of course, a great source of information where you can consult recruitment agencies, online job sites, but also the online editions of Panamanian newspapers. However, the newspapers are more likely to advertise jobs with local businesses, especially the Spanish daily papers such as La Prensa, La Estrella, etc. There are some online English-language newspapers, such as The Bocas Breeze in Bocas del Toro or The Panama News, but they do not have a jobs section.
Panama: Taxation and Working Conditions
Now let’s look at some of the practical issues involved when it comes to working in Panama: tax rates and working conditions, and a few useful tips on business etiquette in Panama.
Corporate Income Tax in Panama
All Panamanian source income is subject to income tax, whether you are an individual or a corporation. This applies to branches of foreign companies as well as to Panamanian companies. The fixed tax rate for companies is 25% of net taxable income.
An alternative minimum income tax calculation can be used, by which the 25% rate is applied to the net taxable income that arises after deducting 95.33% from the gross taxable income. Small businesses benefit from a calculation over a combination of the personal and the corporate tax rate, although they cannot apply for the alternative calculation if their gross taxable income is less than 1,500,000 USD.
A franchise tax is payable by all foreign and domestic companies registered in the Public Registry, even if they are not doing business in Panama. All industrial or commercial businesses that must have a license to operate are also subject to an annual license tax of 2% of the company’s net worth. In the Colón Free Zone, the rate is reduced to 1%.
The fiscal year in Panama normally corresponds to the calendar year. Tax returns and payments are due by the end of the third month after the end of the fiscal year.
Individual Taxation in Panama
At the time of writing, tax rates for individuals were as follows:
- An annual net income of up to 11,000 USD is tax free.
- A 15% income tax rate applies to all income exceeding 11,000 USD, up to 50,000 USD.
- On all income exceeding 50,000 USD, a 25% rate applies; the first 50,000 USD are taxed with 5,850 USD.
Panama has recently concluded double taxation treaties with some countries in order to fight its reputation as a tax haven.
Working Conditions in Panama
As mentioned above, salaries and wages in Panama are not particularly high. Even if you are in a management position in a big corporation, you are unlikely to get rich. However, you are also unlikely to be over-worked any time soon.
Standard business hours in Panama are from 8am to 5 or 6pm, which normally includes a rather long lunch break between 12 and 2pm. You are entitled to 30 days of paid vacation pro rata in addition to 13 public holidays. Your employer can request you to work on a public holiday, but it means you are entitled to double pay for that day.
It is quite normal for people working in Panama to mix their personal and their professional life, so don’t expect to be able to draw a strict line between them. You may be asked out by your colleagues, you may meet their families. This should not make you feel awkward. As a woman working in Panama, you should take special care to include your colleague’s partners in dinner invitations or other business socializing events.
Women who come from Western and Northern European or North American countries may have some difficulties adapting to Panamanian gender conventions. Gender equality is not writ large in Panamanian business life, and while the number of women working in Panama is on the increase, you are unlikely to find many women in leading positions.
Business Etiquette in Panama
Doing business in Panama is unlikely to make you feel out of your depth. Just to be on the safe side, however, here are some business etiquette guidelines:
- Punctuality: It is not the end of the world to be late. However, while your Panamanian business partners may turn up late to a dinner or delay a scheduled meeting, you shouldn’t – at least not at your first meeting. Panamanians know that other nationalities may be less flexible with regard to time and will therefore expect you to be on time. However, always reconfirm the time and place of a meeting, especially if it has been arranged a long time ago.
- Hierarchies: These are very important in Panama and are often based on education and title of the person you are dealing with. If you have an MBA or PhD, do not hide it, for neither will your Panamanian contacts. Instead, they will expect you to address them with their correct title.
- Dress code: You should always dress conservatively and take care of your appearance. The heat is no excuse for slovenly dress, short sleeves or – heaven forbid – short trousers.
- Gifts: Business gifts are not expected and are not the norm in Panama. It’s best not to give any.
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