Panama IT Strengths and Weaknesses

Analysis: National IT Strengths and Weaknesses

The IT landscape of Panamá has undergone several important changes in the past five years. Although many significant advances have been made, improvements are still needed in many areas.

Strengths

1. Well Developed Telecommunications Infrastructure: as a result of privatization in 1997, and de-regulation in 2003 the market has changed dramatically. Although there is still a single local service provider, Cable and Wireless, individuals can now choose from different service offerings for their national long distance, and international calling needs. Cable and Wireless has made significant investments in the telecommunications infrastructure since it entered the market in 1997.

2. Increased Government Involvement in ICT Sectors: this year, the government started the introduction of a set of initiatives that intend to improve the ICT landscape of Panamá. The Panamanian government has developed a comprehensive plan, e-panama.gob.pa, that incorporates information and telecommunications technology, focuses on social and economic development, and seeks to increase participation of the population in issues of national importance. The e-panama plan includes e-government, e-education, e-economy, e-health, and e-democracy. This will provide lasting benefits regarding education, infrastructure, and investment incentives.

3. Low Cost of Labor: the cost of labor is much less than in developed countries such as the United States. For example, the monthly salary for a worker in a call center is between $500-600 per month.

4. Incentives for ICT Investments in the Country: the government will soon be formally establishing the Panamá-Pacific Special Economic Area that will provide tax incentives and benefits for ITC companies. Also, special laws have been passed, such as the one regarding call centers, in order to provide incentives for international companies to set up their call centers in Panamá.

5. FDI: FDI figures have increased dramatically in 2003, after experiencing a significant decrease for 2002.

Weaknesses

1. Lack of Trained Workforce: the workforce in Panamá is not trained in ITC specific areas. Also, the lack of individuals that have an advanced command of the English language is a weakness, since the government is trying to attract international companies in the ICT sector, such as call centers and help desks. The government is currently training about 3,000 individuals in advanced English in a time period of three months. This may continue in the future, especially as more companies establish themselves in the Panamá-Pacific Special Economic Area for ICT sector companies.

2. Low Computer and Internet Penetration Rates: Computing and Internet Diffusion are very low, especially when comparing them to countries like Costa Rica. Low computer and internet penetration rates may grow significantly after the e-panama.gob.pa initiatives are implemented.

3. No Domestic Production of Software and Hardware: currently, there is no significant domestic production of software or hardware in Panamá.

4. Legal Environment: there is a general perception of widespread corruption in the country. The legal system is not lacking in laws that protect the business community (such as copyrights and intellectual property), however the judicial system is slow and bureaucratic. Changes in this area are of vital importance if the country wants to be more appealing to international companies seeking to enter a Latin American market.

Source: Cecilia Stoute, INITEB site http://www1.american.edu/academic.depts/ksb/mogit/country.html

Getting a Job in Panama as a Foreigner

This is a frequent question I get. If you google getting a job in Panama, you will read that for foreigners without a work permit finding a job has to do with personal contact as much as (or more than) having a US degree.

Panama is a great place to be an entrepreneur if your clients are located worldwide - not as good place to be an employee of a Panama company. If you think about being a "salaryman" in Panama, the call center at Dell always needs young insomniacs at US$600/month.

Most companies feel that US or European workers will come with expectations of a stateside salary which will create jealousies from local staff which performs the same work. Branches of US multinationals are usually manned by an expat send from headquarters who does not want another English-speaking stateside young mind to steal away his thunder. Many Panama companies are privately-held and prefer to hire an incompetent relative over a smart finance wiz from Wharton. UN, STRI, embassies and other international organizations or NGOs usually tailor their hiring ads in order to favor a friend they want to hire ("International Relations graduate with 13.5 years of experience with a government organization and 3.25 years working in a European country").

Foreign professionals will find that Panama-owned companies are unwilling to go through the work permit hassle unless they feel they really need somebody (MBA in finance, bilingual accounting and occasionally marketing) or are really needed because of a short supply (all Civil Engineering and Port-related degrees - and now even Geology experts). By law, companies cannot hire more than 10% of their staff as foreigners so they think twice about their hiring.

Needless to say, fluency in Spanish is helpful, a work permit is crucial. Thinking about moving to Panama with a family and then finding a job - as some have suggested by email - is not prudent. Things to do which are not guaranteed to get a foreigner a job but certainly do not hurt:

- Send resumes in SPANISH and English to Panama alumni. Your college's alumni office should have their addresses. Pay a Spanish translator to proofread the Spanish version. Most Panamanian alumni may have aced their written exams in the US but are more comfortable with a resume in Spanish.

- List your resume with Panama headhunters registered in http://www.panamcham.com/business_center/business_directory.asp?cat=H14 and Panama websites like www.mastrabajo.com Specify that you are willing to pay all expenses of your relocation, work permit and visa.

- Read the 2 leading business weeklies in Panama: http://www.martesfinanciero.com and http://panama.capitalfinanciero.com Not only do they give you most of the hard realities on Panama business, the new, progressive companies and they also have job surveys every so often.

- If you can afford it, enroll in a good Panama MBA program http://www.latintrade.com/resources/MBA%20Ratings%20Oct07%20eng2.pdf . Locals who are currently working with Panama companies attend there. Even better, enroll with Thunderbird or another school popular with Latin execs to start a networking process BEFORE relocating.

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Back when Latpro was just a free conference list and before they started charging for their website services, its founder Eric Shannon circulated a very revealing email about how HR people at multinationals think, when going abroad:

Subject: Managing Your International Career Forum Synopsis
Date: Thu,16 Oct 1997 08:31:49-0400
From: Eric Shannon eshan@one.net
To: “Latco list(E-mail)”latco@psg.com

This email contains a synopsis of “Managing Your International Career” a forum held September 22, 1997 by the Global Business Association of New York City.

Best Regards,

Eric Shannon
Latin America’s Professional Network (LATPRO)
For more information about LATPRO, send a blank email to index@mailer.mindexchange.com or visit our web site: http://www.latpro.com

KF = Korn Ferry
CX = CONEX / Intersearch
WMB = West Merchant Bank

WHAT IS THE TYPICAL PROFILE OF THE CANDIDATE YOU ARE LOOKING FOR IN LATIN AMERICAN?

Both KF and CX are “agressively seeking” Spanish speaking candidates. In the last six months CX finds Information Technology to be the hottest market. KF agrees but says recruitment for these positions is a “local issue”. KF says Mexico is a “hot market”, Venezuela is coming back nicely, Brazil office is expanding rapidly while Argentina is flat. The major drivers are multinationals and some large indigenous family conglomerates.

WMB emphasizes that they are mostly sending infrastructure people to Latin America – technology and intranet specialists.

All the panellist agreed that they prefer to hire foreign nationals (locals) over US citizens for foreign assignments. They emphasized several times that the corporation will always choose the fastest, most efficient, cheapest alternative. A foreign national with a “western education” is always their first choice.

WMB- Doesn’t like to hire US citizens in foreign countries because in this situation they are paid as locals and find themselves sitting next to another American from headquarters who makes more money.
Goldman Sachs VP disagreed, has no problems making these hires.

The panellists report that Americans with foreign MBA’s are not at a disadvantage with their US educated counterparts and they also view the executive MBA no differently than the full time MBA.

When they do send US citizens on foreign assignments they look for mentor / teacher types who can more easily train locals to replace themselves

WHAT IS THE BEST WAY TO GET A FOREIGN ASSIGMENT?

CX remarks that a good way to get an international assignment is to attend an international MBA program such as Thunderbird’s, MIBS, or pepperdidine’s. Recruiters tend to gravitate to their alumni networks particularly the more organized ones. WMB agrees; “strong alumni networks play a key role in our recruiting”.

KF says the best way to get overseas is to go to work for a company with revenues of 10 billion or more in a domestic assignment and lobby persistently for an expatriate assignment. WMB agrees and mentions that they generally don’t send anyone overseas who doesn’t have several years experience with the company.

KF- Be careful picking your international assignment as the general manager of operations in a small country, you may be forgotten- “Vince Who???” Have an exit strategy or end up in a job you had ten years ago when you get back. Try to negotiate your next job when they promote you. Even if you do this, the person you negotiated your career path with may have been axed when you get back!

HOW DO YOU FEEL ABOUT A CANDIDATE WHO HAS SPENT SIX MONTHS OR A YEAR TRAVELING THE WORLD?

AM- I like it, sometimes companies are looking for that types of person. My boss however would say he doesn’t like it. Companies look heavily at the chronology of your resume.

KF- This is a very serious issue with a man – if his career is substantive or if he has been job seeking, it isn’t so bad. Unemployment or consulting gaps are OK but travelling is a serious question mark for me.

WMB – If you haven’t been laid off in financial services you lack experience.

HOW DO YOU LOOK AT A CANDIDATE WITH OVERSEAS GOVERNMENT EXPERIENCE BUT NO CORPORATE EXPERIENCE?

AM – If the person has the skills the client is looking for and there is chemistry between the candidate and the client and the company is flexible – no problem. The search is always steered by what the client says.

KF – this person should look into opportunities with the consulting companies.

Setting up an e-business in Panama

http://www.panama980.com/issue04_05.php
http://www.panama980.com/products1.asp?step=25&id=58&catid=4&pstring=58

>> setting up an e-business in panama
by Alvaro Aguilar


In this day and age of connectivity, modern technology allows many individuals to run their business from wherever they are. When considering where to relocate, Panama provides excellent opportunities to continue managing a business and tend to customers worldwide from your new tropical location.

High bandwidth increases connectivity
The central location of Panama, right in the middle of the Americas, makes it the place where submarine fiber-optic communications circuits between North and South America converge. This allows users in Panama to enjoy extraordinarily ultra-high-speed bandwidth intensive applications such as multimedia and digital video, enabling fast and reliable connections for B2B, banking, ecommerce and other businesses as well as additional high-speed consumer activity units. Currently, Panama has the same bandwidth capability as New York City, with the difference that Panama uses 3% of its capability as opposed to 70% in New York.

Several local companies have set up data warehousing facilities in the Panama Canal area, where these circuits converge. These companies provide large and small online businesses with the use of their servers or can host their servers in special secure rooms
dedicated to providing rack-mount space.

The increased connectivity has encouraged 20 call center companies to employ around 5,000 workers, available for customer service. Currently, most centers serve businesses in the United States, especially Hispanic customers. The Government has increased the availability of English-speaking personnel for these centers with special education programs. An expatriate who only needs a single person for customer service can retain one of the many small virtual office services which provide a receptionist and a dedicated telephone line.

Special laws for online activities
Larger online businesses may have their office in Export Processing Zones, which allows them to claim benefits such as duty-free importation of equipment, low taxation and more flexible labor conditions. Offshore services, such as international marketing, financing, management, consulting and all services related to information technologies for data processing and technological research for clients abroad, may be set up at these Zones.

Additional benefits are provided to businesses set up in the City of Knowledge, a special technology park zone located next to the Miraflores Locks of the Panama Canal. Businesses have a 25-year income tax exemption and are exempt from limits on hiring of foreign staff.

The government grants online gaming licenses to operations whose owners provide full background information and pay a S$20,000 yearly license fee. In addition, they must maintain a bank account in Panama to ensure payment of prizes.

Tax and Financial Framework to Ensure Success
Once the hardware and logistic issues are dealt with, there are many advantages when setting up a business in Panama. A Panamanian corporation can be set up in a few days and its activities are not subject to Panamanian taxes as long as it sells to clients located outside of Panama. With proper legal advice, shareholders can arrange the structure of the corporation to defer or reduce the taxes they have to pay in their home country. In most countries, online transaction tax is based on the nationality of the corporation owning the domain of the business or on the location of its server, which further favors choosing a Panamanian corporation with Panamanian servers to conduct business.

A foreigner who qualifies for a retiree visa but wishes to maintain an active lifestyle can run a business online without the need of a work permit if he or she maintains a minimal business presence.

Alternatively, an expatriate owning a business with physical offices in Panama, 3 full-time employees and US$40,000 in investment can apply for a small investor visa. Other visa options are available when higher amounts are invested.

Panama has around 100 banks, out of which several actively seek out clients for e-commerce services. Prospective businesses must provide all due diligence information on the background
of their owners. Basic information on the structure of the online transactions must be provided to the bank to ensure that no unlawful activities will be conducted through the bank. Once the
bank official is acquainted with the purpose of the e-commerce activities, transactions are conducted in a secure manner under Panama’s confidentiality laws. Alternatively, micro payments can be routed through non-bank “digital cash” online services, some of which are incorporated in Panama but do business though banks elsewhere.

This combination of advantages makes Panama the ideal location for an e-commerce operation. º

lombardi aguilar & garcia Tel. ( 507) 340-6444

http://www.laglex.com/