Labor Market: Panama vs. Costa Rica

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

2. 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 www.cia.gov

3. 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 www.cia.gov

4. 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

5. Currency: Costa Rican colon (CRC) Exchange Rate: Costa Rican colones per US dollar 519.53 (2007) 511.3 (2006) 477.79 (2005) 437.91 (2004) 398.66 (2003) Currency: balboa (PAB); US dollar (USD) Exchange Rate: 1 balboas per US dollar Economic Overview

6. 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 • 300,000-500,000 Nicaraguans estimated (legally and illegally) • Increasing concern for the government • Social welfare system • Mostly unskilled labor

7. 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.

8. 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 (2007-2014) • Double Canal’s capacity • Economic activity in Panama • Canal’s infrastructure • Logistics and financing of international shipping

9. 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 1904. • Explains low inflation

10. Economic Environment: Panama • 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

11. Costa Rica Panama Labor Market Sectors

12. 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.

13. 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

14. Costa Rica vs. Panama

15. Costa Rica: Hourly Wages

16. Panama: Hourly Wages

17. CAFTA

18. Potential Benefits of CAFTA for Costa Rica • Companies from around the world • direct investment to the region • creating jobs

19. Thank You