‘The Attitude’ and The Future: This is the Final Part of a series of discussions of the cultural differences that most Americans must recognize and accommodate to live comfortably in the country of Panama. The earlier parts of this series are below in the reverse order they were posted (e.g., the most recent first and Part #1 listed last) if you chose to start reading from the beginning of the series.
As discussed earlier, the requirement for the ex-patriot to recognize and accept the tendency of the Panamanians to be ‘inconsiderate of others’ (by U.S. standards - what I have termed ‘The Attitude’), is more than just a method to cope with day-to-day dealings with the population at larger. And we highlighted the point that ‘The Attitude’ permeates the society in a variety of ways that have much more relevance than whether some one cuts in front of you in line in the farmacia. In the preceding postings, we looked at how ‘The Attitude’ seems to influences and accommodate organizational behavior and procedures as well as the country’s business models and practices. In short, ‘The Attitude’ directly influences government and business organizations and determines, or if you chose, drives the behavior of the people who work in them.
I think we can all agree that, even though we can identify ‘The Attitude’ and see its impact in a broad spectrum across the culture, we (we ex-pats) are not going to change that attitude – that cultural trait. And I think at least most of us would also agree, that this trait is a negative influence in the economy, particularly when viewed in the larger context of an expanding role for Panama in the world-wide business and trade environment. So the question is, what does all this mean to Panama. What is the potential impact(s) of this. And what if anything needs to be done, or even can be done – and by whom and how.
Panama Is In The World’s Spotlight
It caused quite a stir when Panama was ranked first in a Travel Section piece called “The 45 Places to Go in 2012” in The New York Times.
The article outlined conditions that justify declaring Panama’s economy to be “booming:” Expats and investors who “banked” on real estate, a steady stream of immigrants, construction, the “recent passage of the United States-Panama free trade agreement” and the expansion of the Canal, among other factors.
And there were some big names dropped: The Panamera (Waldorf Astoria’s first Latin American hotel), Trump Ocean Club (the Trump brand’s first project off US soil) and Frank Gehry (the architect whose name is on the Guggenheim Museum in Bilbao, Spain). Gehry designed the BioMuseo, scheduled to open at the Pacific entrance to the Canal in early 2013.
About the same time, Panama was also featured as a top ten dining destination in the Spanish version of TripAdvisor.com. A 24-page special supplement on Panama in the edition of the Spanish travel magazine ‘Excelencias’ proclaims that “Panamá está de moda” - Panama is in fashion.
Plus, the January edition of National Geographic featured a story (on the cover in the Spanish edition) that has been six years in the making, the discovery of the most recent burial site for chiefs and high-ranking members of pre-Colombian society at El Caño.
The Bottom Line: Panama is ‘on a roll’ and its allure is strong. Just before the end of the year, on December 23, the country counted its two millionth tourist arrival for 2011. The excitement in the air is tangible for favorable times ahead in both the business and tourism sectors.
Panama’s Economic Place In Latin America
Most economists who study Latin America economic trends and forecasts agree that Panama will take over as the #1 economy in Latin America in the near future. There are only four countries in Latin America ranked higher economically than Panama - Mexico, Uruguay, Argentina, and Chile. Panama's overall position in Latin America has improved dramatically since the start of the economic "boom" in 2003, and more importantly, the other economies were either flat or took dips during the 2008 - 2009 global economic crisis, while Panama continued to grow steadily. By the end of 20111, there was only a small gap between 5th place Panama and Chile in 1st place in Latin America. More important to note, Chile's economy grew at 6% in 2011, while Panama's economy grew at 9.2%.
As Don Winter (Panama Guide) put it when discussing Panama taking over 1st Place in Latin American economies, “It's simply a matter of time. Barring some sort of massive natural disaster - and I mean it would take something like an earthquake that destroys Panama City or something similar - I don't see anything on the horizon that will change the fundamental path and future.”
Changes Are Coming To Panama In 2012
Minimum Wage Increases: Panama has approved a minimum wage increase of between 15% and 18%, according to economic activity, occupation and size of companies around the country will take effect on 1 January 2012. The monthly wage of a worker will increase to between $432 and $490 per month (from the current $376 and $416).
On the surface most people voice support for increasing the minimum wage, particularly in light of inflation pressures that, although comparatively mild here in Panama, has been about 9% cumulatively over the past two years. However, agricultural producers are already predicting they will have to implement staff reductions in order to cope with the higher wages, so it is not all good news. For instance, the president of the Manufacturers Association of the Highlands, considers the increase to the minimum wage to be just, but he said the increase does not come at a good time considering that the agricultural sector is "in trouble," and adds that the new minimum wages will jeopardize many jobs as many producers will have to make adjustments in spending. (Note that the hourly wages go from $1.08 to $1.16 [after 1 January 2012] to $1.22 to $1.43).
However, it is in the business sector that the biggest impact will be felt, particularly in the small business sector. The small businessmen will really feel the crunch when facing pressures to reduce the size of their workforce to keep their payroll in line, or increase their prices to generate the additional cash flow necessary to pay the higher payrolls (or some combination thereof).
A representative of the Panamanian Association of Business Executives termed the increase, a "… thrust against the micro and small enterprises, an important part of the growth engine of our economy."
Other Wage Increases: Starting in February 2012, Metro Bus drivers will receive a monthly base salary of $680 - representing an increase of $100 over the current base. As I am sure you aware, the government is expanding the system and deploying new buses as fast as they arrive in the country, as they take the old "Red Devil" buses off the streets. They have been having problems attracting drivers to take the bus driver jobs because Panama's economy has been red hot and expanding steadily, creating a stream of new and better paying jobs. Simply put, anyone who can drive a bus can usually get a better paying job driving something else.
This inability to hire drivers is representative of the broader problems in the labor market in Panama, where there is an abundance of new jobs but a shortage of skilled personnel to fill them. This new wage will put the bus drivers at about $200 per month - or about 45% - above the new minimum wage.
No Getting Around It - Inflationary Pressure In 2012
From the standpoint of our review, about one third of the Panamanian work force gets paid at the minimum wage level. So, you can expect these wage increase to add significantly to inflationary pressures in the near future. Generally speaking, prices will go up, pretty much across the board, for just about everything.
In addition, the true cost of having an employee in Panama is actually about twice the stated wage, once you add in additional expenses for Social Security payments, mandatory vacation time, paid holidays, maternity leave, and the "13th month" bonuses. And of course those costs will be higher if you need skilled labor or anyone who can demand a higher wage, someone who is bilingual, high school or college graduate, skilled in just about anything, etc.
The Economic Growth In 2012
Tourism
All indications point to the Panamanian tourist industry having another record year in 2012, after over 2 million visitors in 2011. The next year could easily become a ‘boom year’ if economic conditions improve even slightly around the world. The 2011 level of tourism generates estimated revenues of more than $2.5 billion dollars, per Panama's Tourism Minister. That income makes tourism one of the most important sources of income for Panama, along with the Panama Canal, the Colon Free Trade Zone, and the banking center. It also important to note that 2 million visitors per year was a goal established by the government of Ricardo Martinelli, which they had hoped to achieve by 2014, his last year in office.
Hotel Rooms
Panama experienced a significant increase in hotel rooms in 2011. And it is now being reported that in 2012 the total inventory of hotel rooms in Panama will increase from the current 9,000 to 15,000 – another massive increase (66%) in just one year. There's no way the market can absorb that new inventory without there being some impact on prices. Hotel room occupancy rates will surely drop and many expect some operators will lower their prices in an attempt to lure tourists and businessmen to their hotels, and away from others. They will probably put together all kinds of package deals and generally get creative.
However the projections for the future are based on a continued growth in demand over time, and in coming years demand will increase to the point where occupancy rates will improve, so the 2012 dip will be temporary. In the meantime it should be an exciting and volatile business sector.
‘The Attitude’ and 2012 Economic Growth
Tourist income has the big advantage of spreading dollars across a wide spectrum of the economy. Tourists come and spend freely in restaurants, bars, hotels, shopping centers, gift shops, etc. And taxis and buses and rental car companies get a share of that as well. For government economic planners, nothing could be better. But, lets’ back up and put our ‘The Attitude’ filter on this situation
Those tourists (thousands of them) are dealing with the ‘man in the street’ and an array of businesses that we have noted are the very antithesis of ‘customer service’, at least as seen in the eyes of many tourists. I guarantee you the matron from New York City will notice when the sales clerk that she is dealing with stops in mid-sentence and answers her cell phone or answers a question from someone who interrupted them with a question. And the sales executive from Texas will sure as hell notice when the man cuts in line in front of him at the store or the bartender is standing around talking and failing to notice that his drink is empty.
Last year I read an article talking about the Panamanian Tourism Bureau establishing a program to work with small businesses throughout the country helping them with the tourist business. I do not know the details of the program or what, if anything it accomplished. But, at least that is an encouraging sign. Hopefully a program of that type will be actively and aggressively pursued. Nothing is worse from a business standpoint or a national image standpoint than to go to the trouble and expense to get tourist to come here, and then step on their toes and send them home with a bad taste in their mouths.
The biggest challenge I see for 2012 is in the hotel industry. Rapid growth is always a major headache, but when you spread it across an entire industry it can become paralyzing. Just think how many new employees are required to take care of visitors in 6,000 new rooms, in an industry that probably has not caught up with personnel requirements generated by room increases in 2011! And a significant percentage of these new employees will ideally be someone who is clean-cut, out-going, full of personality, bilingual, high school or college graduate, good at dealing with people, etc. And, most importantly, people who are ‘trainable’ in that they can be reprogrammed easily to replace ‘The Attitude’ with a customer service orientation. Sounds easy, huh?
Sounds like the government needs another Reuben Blades. If you remember Senor Blades, took it upon himself to overhaul things while he took leave as an entertainer and be Director of Tourism. Not only did he develop a far-reaching Master Plan for the industry, he did some amazing and inventive things to increase the tourist traffic, which based on the existing numbers, were obviously very effective. I suggest it is time for the government to do the same type of planning and training on how you interface with the tourists when you get them here. How to make an entire industry customer service oriented!
As an aside, I can see some clever businessman putting together a ‘Customer Service University’ down here in Panama and making a killing $$ wise. I mean it is not exactly an original idea. How do many of those U.S. chains we discussed earlier get people off on the ‘right foot’ and all on the same page? Ever heard of ‘Big Mac University’? Many big corporations have such training and indoctrination centers. But, first you have to recognize there is a problem. I am not convinced the powers-to-be are there yet. They better get there – and soon.
What Can We Ex-Pats Do?
I think it is realistic to say that we ex-pats will have as much impact on this big problem as we do on the small one we started out discussing originally, e.g. our daily dealings with the Panamanians. But keep in mind, we interface with visiting tourists. And we often interface with them in a variety of ways.
Not only do I have occasional tourist visitors, I come in contact with many more because I live right here on Cervantes Parque. I have a little 3-paragraph speech I give new arrivals (sometimes unsolicited) on what to expect and how to act so they are not surprised or offended by their exposure to ‘The Attitude’. I also make sure we all understand there are going to be no ‘Ugly American’ incidents on my watch. And yes, I have had people evicted from the hotel for behavior that was unacceptable.
I trust this discussion at least gave you things to think about and in some small way may make your life in Panama easier.
Larry Matthews
Coming next on ‘The View From Here’:
'America – The Land Of The Free?'
I take a hard look at the changes that have been implemented in the United States in the decade since 9/11 – changes that government officials of two administrations insist are essential to protect our country from the terrorist threat. Research into all of these ‘protections’ yields some startling results when all these initiatives are viewed in total. Revelations that raise the question, “What is happening to the individual freedoms America is famous for and Americans are so proud of?”
Till Next Time. Pura Vida.