Bloomberg News

Panama 10% Growth Forces Firms to Steal Workers, Martinelli Says

April 16, 2012

Panama’s President Ricardo Martinelli, who attended a summit this weekend with Barack Obama, faces a challenges that his U.S. counterpart could only dream of: companies stealing employees from each other as economic growth reaches 10 percent for a second straight year.

“You can’t hire a lot of workers in a lot of positions because there simply aren’t the workers,” Martinelli, 60, said in an interview April 14 at the Summit of the Americas in Cartagena, Colombia. “Wages have risen, firms are stealing workers from each other.”

While Obama is struggling to create jobs during an election year, Panama’s unemployment rate hovers at around 4.4 percent and may drop further as the economy grows 10 percent in 2012, Martinelli said. A free trade pact with the U.S. should be in force by October as officials make the final changes to implement the accord, he said.

Martinelli, a supermarket magnate turned politician, took office in 2009 vowing to complete his predecessor’s trade deal with the U.S. and a $5.25 billion expansion of the Panama Canal to reduce unemployment in the Central American nation of 3.3 million. The $33 billion economy was the fastest growing in Latin America last year, expanding 10.6 percent, boosted by the canal expansion and other infrastructure projects as well as foreign investment in banking and real estate.

The fast growth and tight labor market are provoking “a high degree of uncertainty” on consumer prices, the International Monetary Fund said in an April 10 report.

‘Can’t Do Much’

Panama, which uses the U.S. dollar, has no central bank and “can’t do much” to counter inflation, Martinelli said. Consumer prices rose 6.3 percent in March from a year earlier, according to the statistics institute.

The country, which has offered to host the next Summit of the Americas in 2015, ranked second after Brazil in the region for the best hiring outlook during the last quarter of 2011 and was fifth worldwide, according to a survey by Manpower Inc. (MAN:US)

In the U.S., employers added 120,000 jobs in March, half as many as the month before, Labor Department figures showed last week. The unemployment rate fell to 8.2 percent, a three-year low, as more Americans left the labor force.

Panama’s government increased the minimum wage by 17 percent in January after about 6,000 workers on the Panama Canal expansion walked off the job, demanding higher wages and back pay. The expansion project, due to be completed in 2014, may be finished in early 2015, Martinelli said.

“We are sure that, if there is a delay, it would be of one or two months, and not more,” Martinelli said.

Moody’s Investors Service in June 2010 raised Panama to Baa3, which is the rating company’s lowest investment grade rating. Standard & Poor’s and Fitch Ratings also rate Panama as an investment grade credit.

Since Martinelli took office on July 1, 2009, the extra yield investors demand to own Panama government dollar debt instead of U.S. Treasuries has fallen 117 basis points to 160.

To contact the reporters on this story: Matthew Bristow in Bogota at mbristow5@bloomberg.net; Eric Sabo in Panama City at esabo1@bloomberg.net.

To contact the editors responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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