Labor Market: Panama vs. Costa Rica Joyce Kwan Nicoll Zapata

Costa Rica  Capital: San Jose  Population: 4,133,884  Language: Spanish (official), English  Ethnic groups: white (including mestizo) 94%, black 3%, Amerindian 1%, Chinese 1%, other 1% Reference from

Panama  Capital: Panama  Population: 3,242,173  Language: Spanish (official), English 14%  Ethnic group: mestizo (mixed Amerindian and white) 70%, Amerindian and mixed (West Indian) 14%, white 10%, Amerindian 6% Reference from

Economic Overview Costa Rica  GDP: $55.95 billion  Labor force: 1.9 million  note: this official estimate excludes Nicaraguans living in Costa Rica  Unemployment rate: 5.5% Panama  GDP: $29.14 billion  Labor force: 1.5 million  note: shortage of skilled labor, but an oversupply of unskilled labor  Unemployment rate: 7.2%

Economic Overview  Currency: Costa Rican colon (CRC)  Exchange Rate: Costa Rican colones per US dollar  (2007)  (2006)  (2005)  (2004)  (2003)  Currency: balboa (PAB); US dollar (USD)  Exchange Rate:  1 balboas per US dollar

Economic Environment: Costa Rica  Costa Rica's basically stable economy depends on  Tourism  Ecotourism  Agriculture  electronics exports  Immigration from Nicaragua  1990’s: Immigration Boom  6% of the population of Costa Rica  300, ,000 Nicaraguans estimated (legally and illegally)  Increasing concern for the government  Social welfare system  Mostly unskilled labor

Costa Rica: Inflation  Inflation rate (consumer prices): 9.3%  2nd highest in Latin America  lack of maintenance and new investment in infrastructure  over 740,000 (18%) people below the poverty line  just over 227,000 (5.5%) unemployed  Reducing inflation remains a difficult problem  rising import prices  labor market rigidities  fiscal deficits.

Economic Environment: Panama  Service sector accounts for about 80% of economic activity  Operating the Panama Canal  Banking  Colon Free Zone  Tourism  Economic growth expected through Panama Canal expansion project ( )  Double Canal’s capacity  Economic activity in Panama  Canal’s infrastructure  Logistics and financing of international shipping

Economic Environment: Panama  U.S. is Panama’s largest trading partner  U.S.  exports 39.8%  imports 27%  Costs Rica  exports 4.5%  imports 4.7%  In December 2006 Panama negotiated a free trade agreement with the U.S.  Tariffs and barriers on trading goods and services  Trade between the U.S.  Promote economic growth  Fully dollarized economy since  Explains low inflation

 Rise in Inflation rate due to the increase of petroleum prices  Recovery of the international economy due to 9/11 influenced an increase in inflation Economic Environment: Panama

Labor Market Sectors Costa Rica Panama

Costa Rica: Employment  Unemployment has dropped & new jobs are created  construction boom  increase in exportation  increase in foreign investment  increased consumption motivated by an overall 9.3 percent increase in salaries.  Lowest unemployment in all of Latin America and the Caribbean  6% (2006)  4.8% (July 2007)  Women unemployment in Costa Rica  8.2% (2006)  6.8% (2007)  Disadvantage: making up 55% of the country’s unemployment  Overall higher level of education than men  Average salary paid to women is 26% lower.

Panama: Employment Situation  Capital intensive sectors have led GDP growth in Panama  Shortage of skilled workers  Inequality between men and women in the labor market  Agriculture and manufacturing lack competitive advantages to sustain large-scale workforces

Costa Rica vs. Panama

Costa Rica: Hourly Wages CategoryMinimum Hourly Wage (Per Hour) Non skilled workers$1.85 Semi skilled workers$1.95 High school level technicians $2.10 Specialized workers$2.30 College technicians$2.80 Bachelor’s degree$3.45 Advance degree$4.15

Panama: Hourly Wages SectorMinimum Hourly Wage (Per Hour) Agriculture2.60 Balboa/hr Manufacturing2.20 Balboa/hr Construction1.90 Balboa/hr Utilities4.90 Balboa/hr Hotels and Restaurants1.40 Balboa/hr

CAFTA CountryDate El SalvadorMarch 1, 2006 Honduras Nicaragua April 1, 2006 GuatemalaJuly 1, 2006 Dominican Republic March 1, 2007 Costa RicaOctober 1, 2008 PanamaPending

Potential Benefits of CAFTA for Costa Rica  Companies from around the world  direct investment to the region  creating jobs CountryInvestorInvestingJob creation El SalvadorBrazilian shoe manufacturer $3.5 million400 during the 1 st year El SalvadorSaturn, GM $2 million in auto components 500 NicaraguaInternational Textile Group 100 million8,750

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