Nearshore Americas

Charges of Laziness and a Shallow Labor Pool Have People Asking: What’s the Problem with Panama?

Even Panama promoters admit that specialized talent is hard to come by in Panama City

Long regarded as the bastion of financial services in Central America, Panama has lately been trying to position itself as a call center and outsourcing hub in the region. While sporting a very qualified workforce however, the country seems to be suffering in the often-cited area of scalability. The Panamanian government has instituted a number of programs to combat the problem, but it may be too little too late. With rising labor demand and falling labor supply, and constant competition for talented workers, several large company pullouts in recent years tell the story.

With a population of only 3.4 million, Panama is the second smallest country in the Central American region. The capital Panama City, and perhaps San Miguelito are the only cities with populations capable of supporting a decent sized outsourcing business. As a result, call centers and software development operations are mainly focused in these areas. International players like Sitel have a large presence (over 3000 employees in Panama City), as do local companies like Star Contact (can employ more than 1300 call center workers, also in Panama City).

Since 2005, as more outsourcing companies have set up in these urban centers, the demand for qualified labor has grown but the talent pool has not. Or at least, it’s been growing very slowly. Panama’s appeal has always been its extremely skilled workforce, bilingual and exposed to US culture and accent. But companies are now reporting that it’s harder and harder to find that kind of talent, resulting in several high profile pullouts from the country.

Transactel, one of the largest Central American BPO providers last year closed down its Panama call center because of labor issues. Mario Lopez, VP Human Resources and Marketing, says that one of the main reasons they axed their operations was the constant need to compete for skilled workers with other businesses in Panama. Ultimately, it just wasn’t profitable anymore.

Fighting for talent


Outsourcers operating out of Panama City often find themselves in a contest to attract qualified employees, against other industries like financial services and construction. “Panama has one of the most sophisticated financial services sectors in Latin America”, says Peter Ryan, BPO and Contact Center Outsourcing Analyst at Ovum. “That banking culture is very prevalent, so of course talented graduates would want to work in financial services rather than call centers”.

The problem with intense competition for a limited talent pool is that it drives wages through the roof. According to Lopez, a basic call center worker would be paid US $800 per month, and a high-end IT staffer could earn up to $1500. “Labor costs in Panama are in the upper end of the Central American region”, says Ryan. “It’s one of the reasons Panama has fallen off my radar”.

“In Guatemala average attendance would be 90-95%, but in Panama a really good day would be around 85%. All the call centers had to implement large attendance bonuses to fix that” – Mario Lopez, Transactel


Public and Private Initiatives

The Panamanian government is aware of the problem and has implemented several education programs to train more of the population. One example is the English for Life program, a joint initiative by the government and the Universidad Latina de Panama, to improve English proficiency among high school and university students. Apart from this program which received good reviews, and changing the tax laws to benefit outsourcing companies, the government doesn’t seem to be too visible in addressing the oversaturation problem. Panama’s Ministry of Tourism was not available to comment.

It’s really the private sector in Panama that is attempting to change things. Search for “invest in Panama” online, and among the first results is the website of Business Panama, a group of companies that facilitates foreign investment in Panama by providing support to corporate investors, much like the investment development agencies of other LATAM countries would. Groups like this one are pushing to increase the qualified labor supply, and for Panama to move up the value chain away from call centers and into higher-end IT services.

However according to them, the over-saturation claims are exaggerated. “It depends entirely what you’re looking for”, says Ricardo Castillo, Sales Advisor at Business Panama. “If you want call center workers, there are plenty that are qualified and bilingual. But if you want specialized workers with specialized skills, yes it may be hard to find them”. The solution according to him would be to implement more focused programs in universities, and to lessen the migration restrictions on workers in and out of Panama. Work permits to foreigners have increased 24% in the first two months of 2010 according to Central America Data, and this is largely due to complaints from corporations in Panama that there are not enough skilled workers. “But it’s not a question of oversaturation”, says Castillo. “It’s more like a deficit in certain specialized sectors”.


Work Ethic

According to Mario Lopez, the Transactel pullout was less about the labor supply or scalability than about the negative work ethic in Panama. He talks about the laidback attitude to work that employees had, which made punctuality and attendance very serious concerns. “In Guatemala average attendance would be 90-95%, but in Panama a really good day would be around 85%. All the call centers had to implement large attendance bonuses to fix that”, he says. “In other countries, people wanted to work. Here it was almost a custom to come in late. They got 15 days of paid sick leave. If they came in late, they could take the time out of that.” Panama also has more holidays than any other country in the region, and Panama City closes down during carnival for an entire week in February.

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The attrition or churn rate in the country is also quite a bit higher than others in the region, but this may change as Panama moves into more value-added services.

Nothing New


Oversaturation of the workforce in Panama doesn’t seem to be a new thing. There were growing concerns about it in 2005, and it was already an issue by early last year. Although the government is finally trying to increase the talent pool with various education programs, it may be too late to salvage the country’s reputation. But Peter Ryan says that in terms of public policy, Panama hasn’t really done anything wrong for a country of its size. “Investors need to assess countries with limited populations and limited urban areas. The areas with qualified bilingual graduates tend not to have the required scalability in terms of outsourcing, and companies need to plan for that”.

Lopez agrees: “Transactel’s experience in Panama may not be the general rule. There are companies there that understand the labor force better than we did, and they’re doing fine.”

Time will tell if Panama can navigate this phase in its emergence as deftly at its neighbor to the north of similar size  – Costa Rica – has, with clearly stronger results.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.


  • This article states that Panama should move up the value chain away from call centers and into higher-end IT services. In order to provide higher-end IT services you have to have world class experienced senior IT professionals and IT middle managers and they have very few. You can get the foundation for these skills in universities but the key word is experience. Vision TRE looked at outsourcing IT services out of Panama and I even served on the board of directors for the U.S. – Panama Business Council SE, but I discovered that Panama is a market for IT services, not a source. Even the Panama Government off-shored development of their new automated procurement system.

  • I know this is an old article, but I just came across it. Mario Lopez is full of c—. I worked for Transactel since day 1 here in Panama, and was promoted to Team Supervisor within 3 weeks. While it’s true that the attendance and churn can be a problem, it’s not even close as the reason why Transactel closed down. The project they were handling was a USA Bank and it got bought by a bigger bank during the recession, so they were left without a client, and no where near to getting a new one. Please get the facts straight. There are many other smaller Call Centers that are doing just fine, and the big ones continue to get business and workforce regularly. Cheers!