Promoting the Development of the Semiconductor Ecosystem in Panama

1. Assessment and recommendations

Abstract

This chapter summarises the report’s major findings and provides policy recommendations to promote the development of Panama’s semiconductor ecosystem. It examines Panama’s main strengths and focuses on four key areas for improvement: co-ordinating and aligning incentives for private investment; investing in talent to develop a semiconductor workforce; fostering the development of local semiconductor-related firms; and ensuring reliable and sustainable utilities infrastructure.

Policy recommendations

Co-ordinate and align incentives for the development of a semiconductor ecosystem

• Engage all relevant stakeholders in the development of the National Semiconductor Strategy

• Focus policy efforts on selected segments of the semiconductor value chain.

• Further enhance investment promotion activities to highlight the comparative advantages of Panama.

• Build on the National Semiconductor Strategy to co-ordinate and harmonise incentives offered to potential investors.

• Enhance the modernisation and digitalisation of government services and integrate all investment, international trade, business creation and migration procedures into a one-stop shop.

• Leverage Panama’s granular data available from different institutions to inform policies for the semiconductor industry and other sectors.

Invest in skills and attract talent to develop a semiconductor workforce

• Strengthen science, technology, engineering and mathematics (STEM) in primary and secondary education to create a pipeline of STEM talent, and monitor progress.

• Continue efforts to improve English language skills at all levels of education, and monitor progress in the improvement of English language skills.

• Implement plans to create a semiconductor track in university education.

• Further strengthen international collaboration to develop semiconductor talent.

• Develop vocational education and training (VET) programmes to train people with the skills needed for a semiconductor ecosystem, building on existing domestic and foreign capabilities.

• Facilitate transitions to formal employment by addressing labour market skill imbalances.

Foster the development of local semiconductor-related firms

• Improve access to capital to finance entrepreneurial activity in the semiconductor industry and other sectors, including through an early-stage financing vehicle.

• Expand programmes to support the entrepreneurial ecosystem, including for semiconductors, through incubators and entrepreneurship training.

• Support semiconductor-related innovation, including by leveraging private funding for targeted semiconductor research.

Ensure reliable and sustainable utilities infrastructure

• Ensure a reliable and stable supply of energy by further investing in a diversified, low-carbon energy mix.

• Incentivise firms to adopt best available technologies for water and wastewater management.

Panama is an open and services-oriented economy where total trade (the sum of exports and imports) represented as much as 60% of its gross domestic product (GDP) and the manufacturing sector represented only about 5% of GDP in 2022. While Panama is a cornerstone of international trade, reflecting its privileged geographic position, excellence in transportation logistics and strong air and seaborne transportation infrastructure, it is yet to engage in and integrate into the global semiconductor value chain.

Panama can capitalise on global shifts in semiconductor value chains by complementing its existing strengths in transportation and logistics with its ongoing initiatives to promote semiconductor-related talent, research and innovation. The existing regulatory framework, notably Panama’s special economic zones (SEZs), can provide important incentives for prospective foreign investors. Ensuring reliable utilities infrastructure and developing a local ecosystem of semiconductor suppliers and customers would create the necessary environment for the development of Panama’s semiconductor industry.

Panama could draw on its competitive advantages, outlined above, to seek semiconductor partnerships with other economies in Central America, which would allow it to share its expertise and leverage the semiconductor experience of other countries in the region. By focusing on select semiconductor activities, Panama could help develop a cohesive regional semiconductor value chain that benefits all partners.

This report contains concrete recommendations to support the development of a semiconductor ecosystem in Panama. In a tightening fiscal environment, governments should assess all spending decisions carefully, with a view to retaining budget neutrality while identifying crucial investment areas to foster the semiconductor industry. The following sections provide recommendations to prioritise expenditures in key areas for the development of Panama’s semiconductor ecosystem.

1.1. Co-ordinate and align incentives for the development of a semiconductor ecosystem

On 30 April 2024, Panama introduced a dedicated institutional framework for semiconductors through Executive Decree No. 7 (hereafter the Decree). This institutional framework, described in detail in Section 3.1, helps support the development of the Panamanian semiconductor ecosystem. The Decree also sets out strategic guidelines for the development and promotion of the semiconductor industry and proposes incentives for attracting semiconductor investments and promoting semiconductor-related research, innovation, entrepreneurship and talent development. Importantly, the Decree signalled Panama’s long-term commitment to joining the global semiconductor supply chain.

1.1.1. Engage all relevant stakeholders in the development of the National Semiconductor Strategy

The Decree highlights the need to co-ordinate and align the forthcoming National Strategy for the Development of the Semiconductor and Microelectronics Industry (henceforth, the National Semiconductor Strategy) with existing strategies in related areas, notably the Strategic Plan for Government, the National Strategic Plan for Science, Technology and Innovation (Plan Estratégico Nacional de Ciencia, Tecnología e Innovación, PENCYT), the National Logistics Strategy of Panama, the National Energy Plan and the National Strategic Plan for the Development of Metrology Infrastructure. This is an important acknowledgement of key policy areas for the development of a semiconductor ecosystem in Panama.

Moreover, the Decree establishes the Commission for Innovation in Microelectronics and Semiconductors (CIMS) as an inter-institutional co-ordinating body for Panama’s National Semiconductor Strategy (see Section 3.1.1 for further details on the mandate and membership of the CIMS). The CIMS will be supported by the new Technical Advisory Council on Microelectronics and Semiconductors composed of seven experts proposed by the CIMS and appointed by Panama’s president.

For the development of the National Semiconductor Strategy and the subsequent action plan to implement the strategy, it is important to take a holistic approach that benefits from the perspective of the relevant government institutions, as well as stakeholders from academia, business associations, labour unions and civil society. For example, the Ministry of Education (MEDUCA) should have a major role to play in view of the recommendations on skills discussed in Section 1.2 below; however, MEDUCA is not currently represented on the CIMS, although it is expected to form part of one of the CIMS sub-committees. Labour unions and civil society are also omitted from the CIMS’s current membership.

Such broad perspectives could be provided through representation on the CIMS, the Technical Advisory Council or an informal consultative group. Engaging with this range of perspectives would inform the implementation of the National Semiconductor Strategy through the action plan and assess its impact on both the development of the semiconductor ecosystem and broader socio-economic goals.

1.1.2. Focus policy efforts on selected segments of the semiconductor value chain

The semiconductor industry does not currently operate in Panama and the Panamanian economy is predominantly driven by the services sector, with the manufacturing sector contributing roughly 5% to the value added in 2022 (see Section 2.1.1 for details).

While Panama is undertaking considerable efforts to develop an enabling environment for a semiconductor ecosystem, prioritising and delineating a ‘first investment’ target as an entry point into the global semiconductor value chain is important. Panama would benefit from focusing resources and efforts on a selected segment of the value chain. For example, some countries that have integrated into the semiconductor value chain in the past have done so by focusing on either semiconductor design or ATP, in view of the respectively lower physical and human capital requirements, relative to semiconductor fabrication. See Annex A for an overview of the semiconductor value chain.

An identifiable entry point would help policymakers, industry and investors, academia and other stakeholders in the semiconductor ecosystem understand how best they could support the co-ordinated efforts of the CIMS. The forthcoming National Semiconductor Strategy and Action Plan should help identify short-, medium- and long-term goals, including a timeline containing targeted areas of the semiconductor value chain that should be prioritised at each stage.

1.1.3. Further enhance investment promotion activities to highlight the comparative advantages of Panama

Over the last two decades, Panama attracted important amounts of inward greenfield investment1 in the renewable energy sector (USD 8.2 billion), the metals and minerals sector (USD 7.5 billion) and the transportation and warehousing sector (USD 4.7 billion). In the information and communications technology (ICT) sector (including telecommunications) – a proxy for the semiconductor industry, which does not currently exist in Panama – total inward greenfield investment was USD 3.6 billion over the 2003‑2024 period (see Section 2.1.4).

Despite presenting comparative advantages that could motivate investments in semiconductors and advanced manufacturing more broadly, Panama’s manufacturing sector represents less than 5% of GDP and investments in the semiconductor industry are yet to materialise.

Panama should consider further strengthening investment promotion efforts to highlight its comparative advantages, in particular its transport infrastructure and logistics. The PROPANAMA investment agency could emphasise the existing incentives regimes and forthcoming investments into semiconductor talent and innovation and provide guidance to prospective semiconductor investors.

Efforts to continue tackling inequality, combating crime and fighting corruption would also help with investment promotion efforts, as well as with attracting foreign talent to work and live in Panama.

1.1.4. Build on the National Semiconductor Strategy to co-ordinate and harmonise incentives offered to potential investors

Currently, Panama has many special investment regimes that confer specific benefits for firms and investors meeting certain requirements. However, some of these regimes are challenging to identify, unclear and may overlap. For example, a firm can access tax, labour and migration incentives by operating within one of Panama’s SEZs, an activity-specific regime (e.g. SEM or EMMA),2 or both. See Section 3.2.3 for analysis of these incentive regimes.

Panama should therefore look to harmonise these incentives and associated requirements for potential investors and communicate them more clearly, to highlight the attractive business environment for semiconductor firms. One way of achieving this could be through a one-stop shop, which brings together all relevant information on a single digital platform to compare the benefits and requirements of each special regime. See also the following Recommendation 1.1.5 on the digitalisation of government services.

1.1.5. Enhance the modernisation and digitalisation of government services and integrate all investment, international trade, business creation and migration procedures into a one‑stop shop

In recent years, Panama has made considerable efforts towards the modernisation and digitalisation of government services, led by the National Authority for Government Innovation (AIG) and supported through initiatives including Panama’s Digital Hub Strategy (Panamá Hub Digital), launched in 2018. Furthermore, Executive Decree No. 7 of 2024 has tasked the Ministry of Commerce and Industries (MICI) with creating a one-stop shop for all semiconductor-related procedures and guidance.

This new one-stop shop would allow Panama to combine and digitalise onto a single platform the government services and guidance related to international trade (including customs), SEZs as well as all other entities that might need to be consulted for imports and exports (e.g. registration with the Ministry of Health for imports of hazardous chemicals). Import and export procedures may differ for firms depending on whether they operate within an SEZ regime, while these procedures can also vary across different SEZ regimes. Therefore, establishing a one-stop shop to simplify and centralise all these procedures would help expedite trade.

It is also important to finalise the digitalisation of all business creation and licensing processes, and work towards including special investment incentives (such as incentives under SEM and EMMA, which already operate digitally) and all other business licensing requirements in the one-stop shop mentioned above. This would reinforce the previous Recommendation 1.1.4. To create this type of one‑stop shop, co‑ordination between different ministries and agencies, including MICI, the AIG, the National Customs Authority and PROPANAMA would be particularly important.

1.1.6. Leverage Panama’s granular data available from different institutions to inform policies for the semiconductor industry and other sectors

Leveraging the existing data infrastructure would help inform the National Semiconductor Strategy and related policy actions. Developing the evidence base through the analysis of firm-level and other types of highly disaggregated data is key to better understand the high-tech sector and semiconductor ecosystem, alongside other parts of the economy.

Disaggregated data help identify patterns, correlations and infer causal relationships that are otherwise difficult to ascertain with aggregated data. Disaggregated data would also help evaluate the impact of existing (and forthcoming) policies. Panama should build on these data to monitor changes in the dynamics of the high-tech ecosystem and inform the implementation of the National Semiconductor Strategy outlined above. Facilitating access to anonymised, comprehensive and granular data would support analysis and contribute to a broader understanding of the semiconductor ecosystem, as well as other ecosystems.

Panama could take advantage of the extensive disaggregated data available from various institutions and agencies. For example, balance sheet data can be used to monitor firm performance and value added tax data can help map the local network of firms within the high-tech ecosystem (including suppliers and customers). More granular, comparable and up-to-date linked employer-employee data, as outlined in Section 2.3.3, would also be important to inform policy actions in support of the development of the semiconductor workforce.

1.2. Invest in skills and attract talent to develop a semiconductor workforce

A limited talent pool is a major hurdle for the development of semiconductor ecosystems around the world, including in Panama. The assembly, testing and packaging (ATP) segment of the semiconductor value chain – which could be a logical entry point into the semiconductor value chain for Panama (see Recommendation 1.1.2) – requires a blend of generic skills, such as communication, management and operations, and specific technical skills associated with manufacturing processes, such as molding, dicing and swaging. As technological complexity increases and linkages across the value chain deepen, ATP skill requirements are evolving, offering a foundation for gradual upgrading into more sophisticated activities over time. See Section 2.3.2 for more details on semiconductor skills.

Panama should enhance its ongoing efforts to develop a semiconductor workforce by expanding STEM and English education at the primary and secondary levels and targeting semiconductor skills as part of its university and VET strategies. International collaboration and openness to foreign talent could help accelerate this process.

1.2.1. Strengthen STEM in primary and secondary education to create a pipeline of STEM talent, and monitor progress

The technical expertise needed for semiconductor design, fabrication or ATP, as well as for a wide range of other manufacturing and high value-added service sectors, builds on early STEM education. Data from the OECD Programme for International Student Assessment (PISA) show that Panama is catching up with other countries on both mathematics and science scores, but there is scope for further improvement (see Section 2.3.1).

Overall, government expenditure for education in Panama remains significantly below the OECD average and other Latin American countries. However, Law 362 of 2023, which mandates that Panama must spend at least 7% of GDP on education annually (see Section 3.3.1), appears to be a step to address this important gap. Continued efforts to reduce the pupil-to-teacher ratio and enhance the quality of education through better teacher training and development are important to improve education outcomes (see Section 2.3.1).

Specific measures to strengthen STEM in primary and secondary education could include promoting the use of technology-based teaching methods (including digital tools), encouraging hands-on learning, introducing STEM role models, providing students with real-world applications of STEM, devoting more hours to STEM in the curriculum and engaging girls in STEM. In 2020, only 294 students graduated in electronics from upper secondary level, of which 90% were men. This indicates considerable potential to develop the pool of talent for semiconductors by incentivising students, notably women, to enrol in relevant fields such as electronics (see Section 2.3.1 for details).

Panama should also consider expanding the STEM programmes for primary and secondary education managed by the National Secretariat of Science, Technology and Innovation (Secretaría Nacional de Ciencia, Tecnología e Innovación, SENACYT), such as the Let’s Do Science (Hagamos Ciencia) programme aimed at training teachers and school leaders in scientific research projects and best teaching practices (see Section 3.3.1 for further details). Strengthening STEM education at the primary and secondary levels creates a pipeline of STEM talent that can be trained in semiconductor skills during tertiary education. See Recommendations 1.2.3 and 1.2.5 below.

Panama should consider setting national objectives for the number of STEM graduates by education level. It would be important to monitor and evaluate progress towards these objectives, producing information and statistics on outcomes that are published on a regular basis and at a detailed level. Such data could help inform the assessment of Panama’s progress towards its STEM objectives.

1.2.2. Continue efforts to improve English language skills at all levels of education, and monitor progress in the improvement of English language skills

English language skills are important for operating specialised equipment and engaging with suppliers and customers in global value chains, particularly for semiconductors. Panama should therefore continue its efforts towards further developing a workforce equipped with English language skills.

Until relatively recently, the Bilingual Panama (Panamá Bilingüe) programme sent Panamanian teachers to overseas universities for a two-month course in English language instruction. According to one estimate, Bilingual Panama trained more than 9 500 teachers in English, a significant proportion of Panama’s teaching workforce.3 However, some stakeholders consulted for this report stated that the impact of the programme in terms of improvements in teachers’ levels of English was uncertain. Nonetheless, Panama should evaluate the programme and, depending on the evaluation’s outcomes, consider continuing to invest in a dedicated English programme for teachers, including in partnership with foreign institutions.

Beyond primary and secondary education, Panama should also continue efforts to provide English language skills as part of VET programmes. For example, the Specialised Higher Education Technical Institute (Instituto Técnico Superior Especializado, ITSE in Spanish), which co-ordinates technical and highly specialised tertiary vocational education, requires English proficiency for part of its vocational programmes and offers “English laboratories” that promote an interactive and participatory approach to language learning (see Section 3.3.3 for further details). As Panama introduces new vocational programmes in semiconductor-related skills (see Recommendation 1.2.5 below), it must ensure that the courses also enhance the students’ English language skills.

For university-level education, the Technological University of Panama (UTP) Foreign Language Centre and its recent agreement with Arizona State University (ASU), United States, for the design and implementation of a semiconductors programme in English are important steps towards better English language skills (see Section 3.3.2 for further details). As Panama continues to sign memoranda of understanding (MoUs) with other international educational institutions, it should view these international partnerships not just as opportunities to develop technical, semiconductor-related skills but also improve their students’ English skills.

As with the efforts to develop Panama’s STEM skills, it is also important to monitor and evaluate Panama’s progress towards its English language objectives. Data on the country’s English outcomes could also allow Panama to adjust curricula or create specific new courses, as required.

1.2.3. Implement plans to create a semiconductor track in university education

In 2023, 1 671 students were enrolled in university-level electrical engineering courses, of which only 18% were women. Panama’s efforts to develop engineering and semiconductor-related academic programmes are challenged by relatively lower domestic demand for manufacturing industry jobs when compared to services. Panama faces a “chicken and egg” dilemma: it is challenging to create academic programmes which provide semiconductor skills when the absence of the semiconductor industry in Panama means that there is no domestic demand for these skills; however, the absence of semiconductor skills can also act as a barrier to investment from the semiconductor industry.

Given that talent takes time to develop and the similarities between some of the skills required by the semiconductor industry and the skills required by other sectors (e.g. manufacturing of motor vehicle parts, beverages, pharmaceuticals, medical equipment or navigational, measuring and electromedical equipment – see Section 2.3.2), Panama could prioritise developing semiconductor-specific skills in anticipation of the development of a domestic semiconductor industry.

Panama offers considerable autonomy to both public and private universities, which are regulated by the National Council for University Evaluation and Accreditation of Panama (Consejo Nacional de Evaluación y Acreditación Universitaria de Panamá, CONEAUPA). Changes in curricula are initiated by universities and subject to review by the government. The structure of CONEAUPA and the process for curriculum review mean that efforts to tailor university education to the needs of the semiconductor industry would be pursued through government-academia partnerships or co-operation amongst universities and between universities and industry (see Section 3.3.2 for further details).

One flagship initiative to develop semiconductor skills in Panama is the new Center for Advanced Semiconductor Technologies (Centro de Tecnología Avanzada de Semiconductores, C-TASC in Spanish). UTP leads the development of C-TASC, with co-ordination and strategic support from SENACYT and international expertise from ASU. The establishment of C-TASC, which will provide equipment and infrastructure to offer applied training programmes and semiconductor research, is a particularly important step to start developing semiconductor-specific skills. In parallel, SENACYT should continue its efforts to co-ordinate universities, government and industry to develop the semiconductor workforce (see Section 3.3.2 for further details).

In looking to develop semiconductor skills, Panama faces the risk of “brain drain” to other economies with more established semiconductor ecosystems. To mitigate this risk, it would be important to combine higher education efforts with investment in semiconductor innovation and entrepreneurship (see Section 1.3) to nurture new domestic semiconductor-related firms and provide opportunities for highly qualified individuals to remain in – or come back to – Panama.

1.2.4. Further strengthen international collaboration to develop semiconductor talent

In 2022, the manufacturing sector represented only about 5% of Panama’s GDP and only 918 manufacturing and services firms (representing 1.2% of all firms in Panama) were classified as medium-high- or high-technology (high-tech) firms (see Section 2.1). As mentioned in Section 1.2.3 above, it can be particularly challenging to tailor the curricula of education programmes for semiconductors in the absence of local semiconductor and other related industries. Tapping into the semiconductor knowledge available abroad through enhanced international collaboration could help ensure that education programmes for semiconductor talent are – and remain – relevant, meeting the needs of a prospective domestic semiconductor industry.

Panama should strengthen its international collaboration efforts to help train the semiconductor workforce. The MoUs between ASU and SENACYT, UTP and ITSE are a significant step in this direction. A further MoU between Panama and Purdue University (United States) and a trial academic exchange programme between UTP and Chiba University (Japan) are also encouraging. The institutional partnerships pursued by UTP with three Costa Rican universities to offer Panamanian students training from Costa Rican professors and the opportunity to visit semiconductor facilities in Costa Rica are examples of the cross‑border collaboration that should be scaled up.

Panama should consider enhancing its collaboration with other countries, notably those in the region, to achieve long-term benefits from sending students and teachers for training in semiconductor knowledge and skills. The system of scholarships provided by SENACYT for students and teacher training abroad could be used to help support such initiatives (see Section 3.3.2 for further details).

Targets for the numbers of professors, instructors and teachers in key semiconductor-related fields should be established. When this teaching capacity cannot be developed organically in Panama, it should consider attracting, for example, university professors from other countries. However, there are obstacles to the hiring of foreign professionals in Panama because of limits on the share of foreign workers, challenges with visas and work permits, university requirements that professors have knowledge of Spanish and the need to obtain approval from the Ministry of Labour and Workforce Development (MITRADEL).

While these are important barriers to hiring professors from other countries, the City of Knowledge (Ciudad del Saber) provides a streamlined process for hiring international instructors. The hiring of foreign professionals, including professors and researchers is a more straightforward for public interest associations (AIPs), such as the new C-TASC, when compared with public research centres, universities and other public sector organisations. Panama should also consider alternatives, such as online courses, that can provide semiconductor-specific training at scale while universities in Panama develop educational programmes with sufficient capacity.

1.2.5. Develop vocational education and training programmes to train people with the skills needed for a semiconductor ecosystem, building on existing domestic and foreign capabilities

In 2020, about 40% of all students graduating from upper secondary education had followed the professional and technical path, a form of VET. Panama could enhance technical semiconductor skills by strengthening VET programmes, building on the existing institutions and academic and industrial clusters. For example, the National Institute of Vocational Training and Training for Human Development (Instituto Nacional de Formación Profesional y Capacitación para el Desarrollo Humano, INADEH), and in particular ITSE, could work with Panamá Pacífico SEZ and the City of Knowledge to reskill and certify employees of firms located in these two areas in semiconductor-related technical skills. In parallel, INADEH and ITSE could also look to arrange placements with firms located in Panamá Pacífico and the City of Knowledge for some of their students who are developing certified technical proficiencies.

Certification, re-certification and job placement programmes should be co-ordinated, easily identifiable and accessible to all workers, ideally via a centralised job platform. Reskilling programmes tied to apprenticeships could also help firms secure skilled workers and enable Panama’s VET programmes to become more responsive to skills demand. Institutions such as ITSE already offer their students industry placements (for example, in the form of a “práctica profesional” or “proyecto final”), but these typically take place at the end of the course and only last a few months. Therefore, Panama should also consider formal dual education programmes, in which students combine classroom-based instruction with professional training in a firm throughout the programme.

Establishing VET programmes focused on semiconductor skills in the absence of a local semiconductor or adjacent industry might be particularly challenging during the initial phase of developing a semiconductor ecosystem. While focusing on similar skills in other sectors could be one avenue to pursue (see the discussion on similarities in skills across sectors in Section 2.3.2), engaging in international collaboration with education institutions and industry abroad (as discussed in the previous recommendation) would likely be the most impactful strategy in the shorter term.

1.2.6. Facilitate transitions to formal employment by addressing labour market skills imbalances

Labour informality – where employed workers are not affiliated to social security systems or lack a written work contract – is high in Panama, affecting nearly half of Panamanian workers in 2024. Average wages in the informal sector are roughly half of those in the formal sector and economies with high informal employment, such as Panama, often experience significant mismatches between skills supply and demand.

Therefore, investing in the reskilling and upskilling of workers through lifelong learning programmes, such as those offered by ITSE and INADEH (outlined in Section 3.3.3) and raising awareness of the wage premium associated with continued education, notably in STEM areas (see Section 2.3.3), could help both facilitate transitions into formal employment and contribute to developing semiconductor talent. Measures that support self-employment and entrepreneurship (see Section 3.2.2) also help to address labour informality, as can measures to streamline and modernise bureaucratic processes by making it more straightforward to establish a business and register its workers with the social security system (see Recommendation 1.1.5 above).

1.3. Foster the development of local semiconductor-related firms

An important objective of developing a semiconductor industry is the positive spillovers throughout the country’s economy. To amplify the benefits of semiconductor investment and distribute them throughout the economy, Panama could look to develop an ecosystem of local suppliers and customers.

Panama could tap into its strength as a logistics hub in global value chains to provide the necessary inputs and services to the semiconductor industry, even before the establishment of semiconductor facilities in the country. Panama’s supply chain centrality means that it can become a hub for supplying and servicing semiconductor firms in the region.

1.3.1. Improve access to capital to finance entrepreneurial activity in the semiconductor industry and other sectors, including through an early-stage financing vehicle

Enhanced efforts to promote entrepreneurial activity, including in semiconductor-related areas, would help strengthen the dynamism of the Panamanian economy and contribute to the development of a local ecosystem of semiconductor suppliers and customers. Moreover, measures to increase entrepreneurial activity could also help transitions to formal employment discussed in Recommendation 1.2.6.

Panama would benefit from a dedicated early-stage financing vehicle to support the development of local innovative firms including, but not limited to, firms providing material inputs and services to semiconductor firms, as well as start-ups in semiconductor design. The financing instrument could take the form of a public-private seed co-investment fund with the appropriate design to leverage private capital (see Section 3.2.2). The forthcoming National Fund for the Semiconductor and Microelectronics Industry (hereafter the National Fund for Semiconductors), announced in Executive Decree No. 7 of 2024 and described in Section 3.1.2, could provide part of the public financing, in collaboration with the Authority for Micro, Small and Medium-Sized Enterprises (Autoridad de la Micro, Pequeña y Mediana Empresa, AMPYME).

Panama could also consider a formal initiative to attract seed and early-stage capital from the private sector. There seem to be limited sources of seed funding for small and new ventures, despite the availability of both foreign and domestic capital (see Section 2.1.4). A programme to attract capital for semiconductor ecosystem start-ups and small and medium-sized enterprises (SMEs) could build on the establishment and activities of the National Fund for Semiconductors, in co-ordination with PROPANAMA. Promoting the development of a network of business angels and early-stage investors focused on the high‑tech sector, including the semiconductor industry, could complement the abovementioned financing instrument for semiconductor ecosystem start-ups.

A regional capital fund of funds, in collaboration with international financial institutions and partner economies, could also be considered. The European Investment Fund is one example of a regional fund helping to develop risk capital markets and support entrepreneurship and firm growth in the European Union. A regional fund in Central America would provide opportunities to foster collaboration and harness synergies between the strengths and capabilities of different countries and help to unlock capital for investment in promising semiconductor-related projects in the region (see Section 3.2.2). Following the regional collaboration on semiconductor skills and talent described above (see Section 1.2.4), such a fund of funds would represent another form of collaboration between Panama and other countries in Central America.

1.3.2. Expand programmes to support the entrepreneurial ecosystem, including for semiconductors, through incubators and entrepreneurship training

Expanding the capacity of existing start-up incubators and accelerators, and strengthening technical support for start-ups, could benefit the Panamanian economy in general and the development of the local ecosystem of semiconductor suppliers and customers in particular. Panama should consider expanding programmes like the City of Knowledge start-up incubator, which offers resources for entrepreneurs and entrepreneurship training. Moreover, implementing the plans for three additional business incubators and technology transfer offices supported by a loan from the Inter-American Development Bank would be an additional important step to increasing entrepreneurship support.

Panama could consider leveraging the National Fund for Semiconductors to support capacity building for semiconductor-related start-ups. One possible way of building capacity amongst start-ups is through a dedicated platform with centralised information on government programmes designed to support the commercialisation of innovation, business creation procedures and existing resources for start-ups and SMEs. More broadly, Panama could also look to create a culture conducive to entrepreneurship through information programmes on starting a business for students (including in secondary education) and researchers, raising their awareness about the available entrepreneurial resources and tools.

1.3.3. Support semiconductor-related innovation, including by leveraging private funding for targeted semiconductor research and development

As of 2021, the government accounted for more than half of research and development (R&D) expenditure in Panama, a share which had increased over the preceding years. Foreign investment also accounted for a large share of Panama’s R&D expenditure. In contrast, private investment from domestic Panamanian firms remained largely non-existent and investment from higher education and non-profit institutions was also very limited (see Section 2.1.4 for further details). Fostering domestic private R&D investment in innovation activities as well as incentivising investment by higher education institutions could unlock Panama’s potential to boost innovation and engage in high value-added activities.

In its role as Panama’s innovation co-ordinating authority, SENACYT has prioritised increasing investment in R&D and technology transfer. For example, the PENCYT 2019-24 aimed to double investment in R&D as a share of GDP. Increasing R&D investment would help develop the research and innovation ecosystem in Panama and contribute to a stronger enabling environment for the semiconductor and related high-tech industries.

Additionally, SENACYT has actively pursued public-private partnerships that have helped enrich the innovation ecosystem. AIPs support research activities through public funds, while also leveraging private capital (see Section 3.2.1). A high-profile, recent example of an AIP is C-TASC, headquartered at UTP, which is expected to serve as a semiconductor R&D centre with laboratory space and project funding for seven areas that are key to the semiconductor ecosystem (see also Section 1.2.3). Once C-TASC is fully operational, this will be an important milestone towards strengthening semiconductor research and innovation (see Section 3.2.1 for further details).

Given the very low share of domestic private investment in R&D, Panama could also consider enhanced efforts to leverage private capital for semiconductor-related R&D and innovation through, for example, R&D tax credits or incentives for the hiring of researchers by the private sector.

1.4. Ensure reliable and sustainable utilities infrastructure

Infrastructure plays a crucial role in supporting the semiconductor industry. The provision of electricity and water is critical for running semiconductor facilities, both for wafer fabrication and ATP. The provision of stable broadband connectivity also plays a relevant role. Data on fixed broadband subscriptions indicate Panama’s lagging performance compared to other Latin American countries, with internet coverage at the household level revealing significant disparities across provinces of the country. Therefore, continued efforts to enhance connectivity infrastructure are also important.

Furthermore, the availability of well-maintained transportation infrastructure (e.g. roads, airports, ports) helps ensure smooth and timely access to critical inputs and the shipment of outputs. Despite a significant decline in infrastructure investment over the past decade (see Section 2.2), Panama remains one of the top countries in the Latin American region for infrastructure quality and port traffic volume. Although there is room for improvement in the efficiency of its major ports, Panama is able to leverage its strategic position to add value to the products transported. Moreover, Panama benefits from a combination of strong road and air transport infrastructure, further enhancing its potential (see Section 2.2.2 for further details).

1.4.1. Ensure a reliable and stable supply of energy by further investing in a diversified, low-carbon energy mix

The semiconductor sector is energy-intensive and requires a stable energy supply. Panama benefits from low energy costs for firms and renewable resources account for a considerable share of electricity production. However further efforts to ensure power reliability are critical (see the discussion in Section 2.2.1 for additional details).

The reliability of Panama’s electricity network remains challenging as it depends heavily on hydropower, which is vulnerable to climate-related fluctuations. Efforts should be made to diversify into other renewable energy sources, such as wind and solar energy, to mitigate volatility. Supporting and incentivising self‑generation and clean energy R&D efforts are important.

Panama should identify specific regions capable of providing the required volume and reliability of electricity to semiconductor facilities or areas where investments should be prioritised. For example, the Panamá Pacífico SEZ provides a strategic location and high-quality transport infrastructure but could benefit from more reliable energy provision.

1.4.2. Incentivise firms to adopt best available technologies for water and wastewater management

Panama benefits from abundant freshwater resources, although access to potable water varies significantly by region (see the discussion in Section 2.2.1 for additional details). Semiconductor manufacturing requires large volumes of pure water; this is especially the case for the fabrication stage of the value chain, but semiconductor ATP also depends on access to water.

Although additional capacity is being built, Panama would benefit from incentivising all firms, including prospective semiconductor firms, to adopt best practices and technologies for water purification, treatment and recycling. Panama could also consider allowing firms to connect water treatment facilities to local and national water infrastructure. This would help incentivise the development of the infrastructure and capacity necessary for the transition to a manufacturing economy and help with water conservation efforts more broadly.

References

[1] UIS (2024), Primary education, teachers - Panama (indicator), United Nations Educational, Scientific and Cultural Organization Institute for Statistics, https://data.worldbank.org/indicator/SE.PRM.TCHR?locations=PA (accessed on 7 October 2025).

[2] UIS (2024), Secondary education, teachers - Panama (indicator), United Nations Educational, Scientific and Cultural Organization Institute for Statistics, https://data.worldbank.org/indicator/SE.SEC.TCHR?locations=PA (accessed on 7 October 2025).

[3] UNESCWA (n.d.), Archive - Greenfield investment, United Nations Economic and Social Commission for Western Asia, https://archive.unescwa.org/greenfield-investment#:~:text=Title%20English%3A-,greenfield%20investment,facilities%20from%20the%20ground%20up (accessed on 19 March 2026).

Notes

← 1.  Greenfield investment is a form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up (UNESCWA, n.d.[3]).

← 2.  Panama’s Multinational Headquarters Regime (Régimen Especial de Sedes de Empresas Multinacionales, SEM), was established in 2007 to incentivise multinational firms to establish their (regional) headquarters in Panama. The Manufacturing Services for Multinational Companies (Régimen Especial de Empresas Multinacionales, EMMA), was established in 2020 to incentivise multinational firms to conduct manufacturing-related activities in Panama.

← 3.  According to the most recently available data, Panama had 22 000 primary education teachers in 2021 and 24 000 secondary education teachers in 2017 (UIS, 2024[1]; 2024[2]).