Mining, IVM and the Panamanian labor crisis

After economic and labor disaster caused by the covid-19 pandemic, faced with an increasingly uncertain socioeconomic environment and the inevitable collapse of the Disability, Old Age and Death (IVM) Program, the economy and employment in Panama continue to recover, but at different speeds.

Gross domestic product (GDP) is already exceeding pre-pandemic levels, but creating 36% fewer formal jobs and more than three times more informal jobs than in 2019 (INEC). The country is facing a serious labor crisis, which is not a crisis of employment but of confidence. It is neither indirect, but structural, and it is only at the beginning.

According to information from National Institute of Statistics and Census (INEC), In 2020, the private sector lost about 364,000 formal jobs, 42% of the more than 873,000 existing in August 2019. Furthermore, Contracts were suspended for 284,000 private workers work (43 thousand did not return to work). In other words, in the first year of the pandemic, 3 out of 4 formal jobs in the private sector disappeared or were suspended.

Mexico, with 126 million inhabitants and 55.5 million jobs in 2019, lost 647 thousand formal jobs in 2020. Panama, with 30 times less population and 33 times less jobs, lost more than half of the formal private workers that Mexico lost.

Adding lost private official jobs in 2020 and workers whose contracts were not reactivated or were fired (43,000), between 2020 and 2021 the pandemic wiped out 407,000 formal jobs in private companies, 47% of the total number existing before the crisis.

In 2022 MITRADEL processed 20,000 new monthly employment contracts compared to an average of 32,000 in 2019, and about 10,000 new informal jobs (INEC) were generated per month compared to 3,079/month in 2019. We generate 36% less formal jobs and more than three times more informal jobs than in the year before the pandemic.

The pandemic worsened loss of capacity of the Panamanian economy create decent jobs. In 2022, MITRADEL processed about 240,000 new employment contracts, compared to 445,000 in 2017. By 2023, the entity expects to process about 300,000, which is still well below pre-pandemic levels.

6 sectors that create two thirds of private jobs in the country have ceased to be attractive for private investment. These are trade, construction, logistics, industry, hotels/restaurants and other service activities which, as a block, generated only informal employment between 2012 and 2022, as a result of the deterioration of the climate for private investment in these activities, which represents 4 of every 5 new jobs generated by the economy and 9 thousand out of 10 thousand new informal workers added monthly.

These activities are part of production chains of mining activity, which makes purchases from these 6 sectors in the amount of more than 600 million dollars per year. In this context, beyond the minimum contribution of $190 million to the IVM program, is it possible to increase these purchases to maximize the potential for formal job creation in these economic activities?

Informality of work in tourism, of logistics and production in Panama is 62%, 61% and 64%, respectively. It is useless to talk about the tourism, logistics or industrial “potential” of Panama if we are not able to attract investments to realize them and create decent jobs. We need to convey the belief that investing in Panama is good business. Potential without investment is an “illusion”.

If we do not create formal employment, there will be no contributors and CSS will be sentenced to death. This is not an ideological debate, but a mathematical reality.