Why is Panama’s productivity so much higher than any other country in all of Latin America?

The main reasons are the People and the Culture.

Panamanians are friendly, hard-working, well-educated, smart and capable.

Panamanian culture is one that values growth and education.  The commitment to higher education in Panama is impressive. So many Panamanians work hard for and achieve University and advanced degrees.

The culture in Panama is also one that admires success and hard work while often maintaining a light and warm spirit.

While the People and the Culture are the main reasons for Panama’s productivity and prosperity, there are other important factors.

Panama is a U.S. Dollar-based economy, it has a unique location for logistics in the world, the big banking industry in Panama demands quality training, the infrastructure in the country is excellent, the political stability of Panama is enviable and Panama’s brightest days are yet to come.

Nearshoring is about  bringing business operations closer to home.  As the nearshoring trend continues, Panama, along with other less productive, yet also capable neighbors, is likely to see increasing business growth.

In the Nearshore Americas article, Panama is highlighted as the most productive country in Latin America and the Caribbean over the past two decades—an impressive achievement that demands attention.

This accolade is not just a reflection of its economic growth; it also highlights Panama’s strategic position in the global market. With a remarkable average productivity of $45 per hour worked in 2024, Panama stands out among its peers, with the next closest competitor, Uruguay, trailing at $31 per hour. The data from the Economic Commission for Latin America and the Caribbean (ECLAC) reveals not only the country’s impressive productivity leap of 151% from 2005 to 2024 but also the vital factors contributing to this success, such as strong investment flows, a booming construction industry, and advantageous tax incentives.

Moreover, this productivity surge has significant implications for the nearshore market, shows Panama’s potential to attract more foreign investment and develop its service and manufacturing sectors. The article explores how Panama can capitalize on its strengths while addressing challenges that may hinder its growth, especially in comparison to other regional players like Mexico and Costa Rica. With its ambitious infrastructure projects and economic plans, Panama is positioning itself as a competitive player in the nearshore landscape.

Breakdown: Panama, the Most Productive Country in Latin America

By Cesar Cantu: Cesar is the Managing Editor of Nearshore Americas. He’s a journalist based in Mexico City, with experience covering foreign trade policy, agribusiness and the food industry in Mexico and Latin America.

Excerpts: “The data: “Panama was identified as the most productive country (as in, the greatest generator of US dollars per hours worked) among its Latin American and Caribbean peers, according to a recent report by the Economic Commission for Latin America and the Caribbean (ECLAC).

• Panama’s productivity in 2024 averaged US$45 per hour worked. The second most productive country (Uruguay) followed far behind, with US$31 per hour worked.

• Panama also saw the largest productivity leap (151%) between 2005 and 2024.

A popular place: “Panama benefited from very strong investment flows and an expansive cycle of its construction industry [in the 2005-2024 period]”, ECLAC points out in its report..

The right moves: Panama has been able to remain popular among foreign investors thanks to appealing tax incentives, special economic zones and infrastructure projects meant to improve trade flows. 

• Currently, 15 active free trade zones exist in Panama. Seven more are being built.

• The country plans to build a “Dry Canal” and a fourth bridge over the Panama Canal. It also plans to expand its metro system.

• The job done has been so good that the country’s capital (Panama City) has been compared to Miami. 

NSAM’s take: Panama’s positioning as the most productive country in the LATAM/Caribbean region underscores the benefits of a sound investment promotion strategy. Panamanian authorities have done a good job propping-up the country’s positives, allowing it to punch above its weight, at least when it comes to productivity. With a population barely above 4 million –smaller than some mid-tier cities in the region– and a GDP that doesn’t even crack the regional top 10, Panama is doing pretty well.”

Curious about what makes Panama the productivity leader in Latin America? For more insights that could reshape your understanding of the nearshore market, read the full article to explore the factors driving Panama’s economic success and what it means for future investments! Read the full article here.