This chapter provides an assessment of the Panamanian high-technology (high-tech) sector, with a focus on the semiconductor segment where possible. It is organised into three main sections, each addressing a distinct area: Panama’s industrial landscape and high-tech market structure; an assessment of the infrastructure critical to the semiconductor industry; and an evaluation of the skills required for the semiconductor ecosystem, together with recent labour market developments in Panama. The analysis builds on a combination of publicly available aggregate data, commercial data accessible to the OECD Secretariat and granular data provided by Panama’s National Statistics and Census Institute (INEC).
Promoting the Development of the Semiconductor Ecosystem in Panama
Abstract
The semiconductor industry does not currently operate in Panama. For statistical purposes and to assess the environment in which semiconductor firms would operate, the following analysis focuses on the information and communications technology (ICT) sector and, more broadly, on the high-technology (high‑tech) sector.1
Over the last decade, gross domestic product (GDP) growth in Panama has been robust and, in contrast to other countries in the region, inflation was contained in the aftermath of the coronavirus disease 2019 (COVID-19) pandemic. However, Panama presents a rather unequal economy, as indicated by Gini index statistics, reflecting economic disparities between different provinces of the country.
The Panamanian economy is predominantly driven by the services sector, with the manufacturing sector representing roughly 5% of value added in 2022 (INEC, 2024[1]). The high-tech sector has outperformed the non-high-tech sector in terms of revenue, employment and profit growth, especially in recent years.
In terms of position in global value chains (GVCs), Panama presents a deficit in the trade of ICT products and is not specialised in the semiconductor supply chain. Services exports create most of the domestic value added from trade, primarily through transport and tourism. Panama could leverage its privileged logistics position and expertise to diversify into sectors beyond transportation, adding value to products transported through Panama and benefitting from economies of scale and reduced costs.
Patent activity, commonly used as a proxy for measuring technological innovation, indicates that innovation in the semiconductor industry in Panama has been nearly non-existent over the last two decades. Similarly, patent activity has also been limited for other technologies, except for two peaks in 2016 and 2018. Research and development (R&D) expenditure in Panama remains significantly below the regional average and the average for OECD Member countries, with R&D expenditure by Panama’s private sector almost non-existent.
Attracting foreign investment can lead to positive productivity spillovers and foster economic growth. In particular, attracting foreign investment in high-tech activities and semiconductors in particular, could drive the economy towards higher value-added sectors and attract highly specialised talent, which would benefit the development of a semiconductor ecosystem. By 2019, around 12% of high-tech firms in Panama had received foreign capital. However, from 2017 to 2022, the capital invested in mergers and acquisitions of high-tech Panamanian firms from abroad decreased significantly compared to previous periods. In terms of greenfield investment, the renewable energy and metals sectors received the most investment over the last two decades, with the metals sector heavily influenced by investment in the creation of one of the world’s largest copper mines. Nonetheless, efforts to attract foreign investment need to be accompanied by a strategy to develop a domestic ecosystem of suppliers and customers in support of a nascent semiconductor industry.
2.1.1. Macroeconomic environment
Panama is one of the wealthiest countries in Latin America. In 2022, Panama’s GDP per capita surpassed that of neighbouring countries, Colombia and Costa Rica, and also that of larger economies such as Argentina, Brazil, Chile or Mexico (IMF, 2024[2]). The rapid expansion of Panama in the decade-and-a-half preceding the COVID-19 pandemic was mainly driven by the construction and investment booms. Tocumen International Airport and the Panama Canal were expanded, numerous buildings were constructed in Panama City and one of the world’s largest copper mines was inaugurated (IMF, 2023[3]). In 2023, real GDP grew by 7.3%, although this growth slowed to 2.9% in 2024 due in large part to the closure of the Cobre Panamá copper mine (IMF, 2025[4]).
During the post-pandemic inflation period, price rises were contained in Panama compared to other Latin American countries. In 2022, the annual growth rate of the Harmonised Index of Consumer Prices stood at 2.9% in Panama, significantly lower than in Chile (11.6%), Uruguay (9.1%), Costa Rica (8.3%) and Mexico (7.9%).2 The food and fuel subsidies introduced in July 2022, after social protests sparked by the rising cost of living, partially contributed to keeping inflation low compared to other countries in the region (IMF, 2024[2]). In 2023, inflation further decreased to 1.5% (Ha, Kose and Ohnsorge, 2023[5]).
Despite the favourable macroeconomic conditions, Panama remains a highly unequal country. The Gini index, which measures the degree of inequality in the distribution of income, indicates that Panama exhibits a high level of inequality when compared to other Latin American economies (Figure 2.1), although it has been decreasing in the past few years. Inequality is exacerbated by limited access to quality services, economic opportunities and regional differences, as poverty rates in indigenous regions (comarcas) have reached 70% (UNDCO, 2024[6]).
Index: 0-100
Note: The Gini index measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution. A Lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting with the poorest individual or household. The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. Thus, a Gini index of 0 represents perfect equality, while an index of 100 implies that one individual concentrates all of the country’s income.
Source: World Bank (n.d.[7]), Gini index, https://data.worldbank.org/indicator/SI.POV.GINI (accessed on 15 September 2025).
Panama is a heavily services-oriented economy, with the services sector accounting for 70.4% of the gross value added in 2023. The role of the manufacturing sector is limited, with only 4.9% of the gross value added in 2022 (INEC, 2024[8]). By province, the province of Panamá contributed to 56.5% of GDP in 2022. Colón, Panamá Oeste and Chiriquí followed with contributions of 17.6%, 10.0% and 6.1%, respectively (INEC, 2024[9]).
Historically, Panama has enjoyed a strong sovereign credit rating, which can increase investor confidence and facilitate foreign direct investment (FDI). However, between 2023 and 2024, all three major credit ratings agencies downgraded Panama’s credit rating due to fiscal pressures and a rising interest burden. As of 2025, Fitch considers that Panama has lost its investment grade status. Nonetheless, Moody’s and S&P consider that Panama has maintained its investment grade.
2.1.2. The high-tech ecosystem in Panama
Granular data provide a better understanding of the market structure and firm dynamics and shed light on important differences in performance across different categories of firms, thereby helping policymakers better design and target policy actions. This report partially builds on data made available by Panama’s National Statistics and Census Institute (INEC). For more details, see Box 2.1.
This report employs data made available by INEC1 and includes the following datasets.
Register of Enterprises and Establishments (Directorio de Empresas y Establecimientos): The business registry dataset offers identification information, geographical location, size category, economic activity and contact information for the universe of firms in the country. Available to the OECD Secretariat for the years 2018 and 2022.
Survey of Non-Financial Enterprises (Encuesta Entre Empresas No Financieras): This survey contains information on the general characteristics of the firm as well as balance sheet data for a sample of non-financial firms, thereby facilitating the analysis of performance trends for different sub-sectors. Available to the OECD Secretariat on an annual basis from 2012 to 2022.
Labour Market Survey (Encuesta del Mercado Laboral): This survey provides statistical information on workers, including their occupation, education level and economic activity of their employer, facilitating the analysis of employment trends and sociodemographic changes. Available to the OECD Secretariat on an annual basis from 2012 to 2023.2
Multiple Purposes Survey (Encuesta de Propósitos Múltiples): This survey provides statistical information on workers as well as on households. This dataset is useful to complement the previous dataset and obtain information about the infrastructure characteristics of households such as access to internet or drinking water. Available to the OECD Secretariat on an annual basis from 2012 to 2022.
Notes:
1. For more information on the different datasets, see https://www.inec.gob.pa/Publicaciones.
2. The detail of the economic activity was only made available at the 4-digit level for 2023.
This section analyses Panama’s medium-high- and high-tech sectors to help understand the broader setting in which semiconductor firms may operate. This analysis sheds light on the correlation between firms’ performance and their characteristics, thereby pointing to possible policies to unleash the potential of the Panamanian ecosystem for semiconductors.
The classification of medium-high- and high-tech industries in this report adheres to the industry taxonomy established by Galindo-Rueda and Verger (2016[10]) based on R&D intensity. The sectors of interest for this report are outlined in Table 2.1.
In 2022, there were 918 manufacturing and services firms identified as medium-high- or high-tech firms (hereafter high-tech firms) corresponding to 1.2% of all registered firms in Panama. Most of these firms (79.4%) were in the province of Panamá, followed by Chiriquí (7.2%) and Panamá Oeste (6.8%) (Figure 2.2). Within high-tech services,3 the dominance of the province of Panamá was even stronger, with 89.4% of the firms located there. By contrast, high-tech manufacturing firms were more geographically distributed, with 57.6% in the province of Panamá, 15.3% in Chiriquí and 13.2% in Panamá Oeste.
Source: Galindo‑Rueda, F. and F. Verger (2016[10]), “OECD Taxonomy of Economic Activities Based on R&D Intensity”, https://doi.org/10.1787/5jlv73sqqp8r-en.
Source: OECD calculations based on the 2022 Directorio de Empresas y Establecimientos from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
In terms of sectors of economic activity, the majority of high-tech firms were engaged in computer programming, consultancy and related activities (56% of high-tech firms), followed by the manufacture of chemicals (12%). The manufacture of computer, electronic and optical products, with 17 firms, only represented 1.9% of high-tech firms in 2023 (Figure 2.3), suggesting that while incipient it could potentially grow alongside the development of an ecosystem for semiconductors.
The high-tech ecosystem of Panama is characterised by a large share of micro firms, with around 74% of the firms having fewer than 10 employees and just 2.0% of the firms more than 100 employees. This reflects the early-stage nature of this ecosystem and the scope for potential development. This pattern is in line with the non-high-tech sector where 70% of the firms have fewer than 10 employees and just 0.8% of the firms employ more than 100 workers (Figure 2.4, Panel A).
Source: OECD calculations based on the 2022 Directorio de Empresas y Establecimientos from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Note: In Panel A, micro firms have fewer than 10 employees, small firms have between 10 and 50 employees, medium firms have between 50 and 100 employees and big firms have more than 100 employees. In Panel B, micro firms have revenues of less than PAB 150 000 (Panamanian balboa), small firms have revenues of between PAB 150 000 and PAB 1 million, medium firms have revenues of between PAB 1 million and PAB 2.5 million and big firms have revenues of more than PAB 2.5 million.
Source: OECD calculations based on the 2022 Directorio de Empresas y Establecimientos from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Based on income ranges, 35.6% of high-tech firms are micro, 41.2% are small, 12.6% are medium-sized and 10.5% are large. Compared with non-high-tech firms, which are predominantly micro, high-tech firms are more frequently medium-sized or large. When comparing revenue distribution (Figure 2.4, Panel B) with firm size by employment (Figure 2.4, Panel A), revenue per worker appears to be higher within the high-tech sector. Although high-tech firms represent only 0.95% of all registered businesses in Panama, their higher concentration among medium-sized and large establishments indicates a comparatively greater contribution to national economic activity.
In 2019 and especially in 2020, revenues and employment in both the high-tech and non-high-tech sectors experienced a significant decline, before rebounding in 2021 and 2022. Despite this recovery, revenues in the non-high-tech sector remained notably below pre-COVID-19 levels, while the high-tech sector stayed close to the 2015 levels. In terms of employment, both sectors stayed below 2015 levels in 2022, although the rebound was stronger in the high-tech sector (Figure 2.5). From 2015 to 2024, the unemployment rate in Panama across all sectors of the economy rose from 5.1% to 9.5% (MINERPA, n.d.[12]).
Note: Employment is measured as the number of employees. Data for 2021 and 2022 are preliminary. Nominal revenues are deflated using the GDP deflator linked series produced by the World Bank and are expressed in 2018 prices.
Sources: OECD calculations based on Encuesta Entre Empresas No Financieras from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/; World Bank (n.d.[13]), GDP deflator: linked series (base year varies by country) (indicator), https://data.worldbank.org/indicator/NY.GDP.DEFL.ZS.AD (accessed on 15 September 2025) (for deflators).
As shown in Figure 2.6, the high-tech sector was incurring net losses in 2015 and 2016 but has been exhibiting net profits since 2017. The net profit margin in the high-tech sector eventually surpassed that of the non-high-tech sector in 2021 and 2022. Preliminary data for these years suggest that the high-tech sector achieved a net profit margin of over 7%. Conversely, the non-high-tech sector faced a notable decline in net profit margins in 2020; although it has since rebounded, it has not yet reached its 2016 peak of above 5%.
Figure 2.7 shows that compensation per employee is significantly higher in the high-tech sector compared to other sectors. Moreover, compensation per employee in the high-tech sector has increased since 2019. This increase likely reflects several underlying factors that characterise the high-tech industry such as the demand for highly specialised skills and advanced technical expertise, typically associated with higher wages. This result could also reflect the pace of expansion of the digital economy during and after the COVID-19 pandemic, which increased the demand for talent in the high-tech sector.
Note: Net profit margin is calculated as the ratio of net profits to total revenues. Net profits are calculated as total revenues minus total costs. Data for 2021 and 2022 are preliminary.
Source: OECD calculations based on Encuesta Entre Empresas No Financieras from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Note: Compensation per employee is calculated as the total remunerations paid by each sector in a year divided by the sector’s number of employees. Nominal compensation per employee is deflated using the GDP deflator linked series produced by the World Bank and are expressed in 2018 prices. Data for 2021 and 2022 are preliminary.
Sources: OECD calculations based on Encuesta Entre Empresas No Financieras from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/; World Bank (n.d.[13]), GDP deflator: linked series (base year varies by country) (indicator), https://data.worldbank.org/indicator/NY.GDP.DEFL.ZS.AD (accessed on 15 September 2025) (for deflators).
Figure 2.8 shows that, as expected, the high-tech sector employs more intangible fixed assets than the non-high-tech sector. Intangible fixed assets include, but are not limited to, patents, software, databases, distribution networks and other forms of intellectual capital. The predominance of intangible assets within the high-tech sector is also highlighted by Figure 2.3, which indicates that nearly 60% of the firms operate in computer programming and related activities. These industries often rely more on intellectual capital rather than on tangible assets, such as buildings, machinery, equipment and other forms of physical capital. However, it is important to note that wafer fabrication and semiconductor assembly, testing and packaging (ATP) rely heavily on physical capital.4
Note: Data for 2021 and 2022 are preliminary.
Source: OECD calculations based on Encuesta Entre Empresas No Financieras from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
2.1.3. Integration in global value chains
Panama is an open and services-oriented economy where trade significantly contributes to its GDP. In 2022, the total value of merchandise exports and imports accounted for nearly 60% of GDP, above the OECD average but below levels observed in Latin American OECD Members such as Chile and Mexico. In contrast, trade in services accounted for over 25% of Panama’s GDP in 2022, exceeding the OECD average and that of other selected Latin American economies (Figure 2.9).
In Panama, most of the domestic value added embodied in trade is created through services exports, primarily through the transport and tourism industries (Orozco and Padilla Pérez, 2023[14]). The transport sector mainly exports its value added directly, unlike other economic sectors, which pass their value added through various stages and different industries in the economy before reaching the final export stage (OECD, 2017[15]).
Note: Merchandise trade as a share of GDP is the sum of merchandise exports and imports divided by the value of GDP, all in current USD. Trade in services is the sum of service exports and imports divided by the value of GDP, all in current USD.
Sources: World Bank (n.d.[16]), Merchandise trade (% of GDP) (indicator), https://data.worldbank.org/indicator/TG.VAL.TOTL.GD.ZS (accessed on 15 June 2024); World Bank (n.d.[17]), Trade in services (% of GDP) (indicator), https://data.worldbank.org/indicator/BG.GSR.NFSV.GD.ZS (accessed on 15 June 2024).
Trade balance for ICT products
This section first describes the trade balance for ICT products and then focuses specifically on the GVC of products that are essential to the semiconductor ecosystem. The primary data source used in the analysis is the BACI database,5 which allows for the monitoring of global trade statistics by product and trading partner at the six-digit Harmonised System (HS) code level. For more detailed information on the methodology and the list of products, refer to Annex B.
In 2023, Panama’s exports of ICT products amounted to approximately USD 96 million, and main trading partners included Costa Rica, Guatemala and the United States (Figure 2.10). The two most exported products, representing together 29% of the exports, were telephones for cellular networks (HS code 851712) and machines for the reception and transmission of voice, images or other data (HS code 851752).6
In contrast, Panama’s imports of ICT products amounted to approximately USD 845 million in 2023. The main trade partners were the People’s Republic of China (hereafter “China”), Mexico and the United States (Figure 2.11). Imports of machines for the reception and transmission of voice, images or other data (HS code 851762) accounted for 19% of the imports, followed by portable automatic data processing machines (HS code 847130) with 12% of the imports. The prevalence of the same products in both imports and exports and the absence of a domestic industry suggests that re-exports are extremely important for Panama’s manufacturing sector.
Overall, Panama exhibited a trade deficit in ICT products, which was especially significant with China, Mexico and the United States. Conversely, Panama recorded a surplus with several Latin American countries including Chile, Costa Rica and Guatemala.
USD thousands
Note: “Others” refers to exports to other partners not included in the figure.
Source: OECD calculations based on the BACI database (2026[18]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html.
USD thousands
Note: “Others” refers to imports from other partners not included in the figure.
Source: OECD calculations based on the BACI database (2026[18]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html.
Trade in the semiconductor value chain
The semiconductor supply chain encompasses a series of stages and production processes, starting from the extraction and refinement of raw materials to semiconductor ATP. The inputs needed for each of these stages are illustrated in Figure 2.12. The products involved in each of these steps can be categorised using the international trade data classification, with a comprehensive list provided in Table A B.1. The subsequent analysis involves studying the evolution of exports and imports and examining Panama’s market specialisation and trade dependencies.
Note: For more details on the list of products, see Table A B.1.
Sources: OECD compilation based Bonnet, P. and A. Ciani (2023[19]), Applying the SCAN methodology to the Semiconductor Supply Chain, https://publications.jrc.ec.europa.eu/repository/handle/JRC133736; Haramboure, A. (2023[20]), “Vulnerabilities in the semiconductor supply chain”, https://doi.org/10.1787/6bed616f-en; OECD (2019[21]), “Measuring distortions in international markets: the semiconductor value chain”, https://doi.org/10.1787/8fe4491d-en.
From 2013 to 2022, imports of chips remained considerably higher than exports. This deficit was particularly pronounced in 2022 (Figure 2.13). The countries from which Panama imported the most in 2023 were Colombia, Mexico and the United States. It is important to note that all exports of chips likely reflect re-exports because Panama does not currently produce chips domestically.
Note: Exports and imports were deflated using the merchandise trade values annual dataset from the World Trade Organization (WTO), using the annual merchandise export (import) unit value chained indices for exports (imports) (WTO, 2025[22]).
Source: OECD calculations based on the BACI database (2026[18]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html.
Semiconductor-related trade has shown widening deficits between 2012‑2014 and 2021‑2023. Figure 2.14 shows that chip exports declined from USD 20.9 million to USD 12 million, while imports remained high, decreasing only slightly from USD 30.2 million to USD 26.8 million. This resulted in an expanding trade deficit of USD 14.8 million. Exports of foundry inputs, raw materials and wafer inputs also fell over the period, further deepening their respective trade balance deficits. The largest increases in deficits were recorded for manufacturing equipment (USD 61.3 million) and photosensitive semiconductor devices (USD 55.7 million). Trade in silicon wafers remained negligible, with minimal exports and imports. Across all segments, the ratio of imports to total trade (exports plus imports) has increased over time, and for most segments now approaches 1, indicating that imports account for nearly all trade flows in these products.
Source: OECD calculations based on the BACI database (2026[18]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html.
To complement the analysis, the revealed comparative advantage (RCA) indicator can help assess Panama’s relative standing within the different segments of the supply chain. The RCA indicator compares a country’s share of exports in a particular segment to the global share of those exports, thereby providing evidence of countries’ specialisation in certain segments and products. An RCA value above 1 indicates a revealed comparative advantage (see Annex B for more details).
Figure 2.15 shows that Panama does not exhibit a high level of specialisation in any of the segments under analysis. Among the selected countries, only Costa Rica shows a specialisation in the export of chips.
Source: OECD calculations based on the BACI database (2026[18]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html.
The existence of few countries supplying certain goods can induce trade dependencies that may ultimately result in supply bottlenecks, shortages and higher prices. To identify dependencies, the Herfindahl-Hirschman Index can be calculated for each commodity imported by Panama. This analysis determines whether Panama’s imports of a specific product are concentrated in a limited number of economies. Further to the analysis of concentration in the import market, additional criteria are used to determine if Panama is trade-dependent on a specific product (see Annex B for more details).
During the first period under analysis (2012‑2014), Panama registered six trade dependencies for semiconductor-related products, with two related to products imported from the United States7 and the remaining four from Canada, China, Mexico and Peru. However, by the latest period (2021‑2023), these dependencies increased to seven: two from the United States, two from China and the remaining three from Brazil, Japan and Thailand (Figure 2.16). In the first period, four dependencies were associated with the import of raw materials and two with the import of chips. In the latest period, two dependencies were associated with the import of chips, two with the import of inputs for wafers, and the remaining three with the imports of manufacturing equipment, photosensitive semiconductor devices and foundry inputs.
Note: Each arrow denotes one dependency at the country-product level.
Source: OECD calculations based on the BACI database (2026[18]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html.
Openness to trade, facilitating trade with a broader range of countries, and enhancing trade agreements can reduce reliance on a small number of suppliers and create more balanced trade relationships, ensuring secure access to essential semiconductor products.
2.1.4. Innovation and investment
Patent activity and investment in R&D
Patent statistics provide insights on the general state-of-the-art in the concerned technology area and can help identify the maturity of certain technologies or technological trends (EPO, n.d.[23]; WIPO, 2023[24]). While patent data may not tell the whole story regarding the innovative nature of an industry in a country, they are often considered as the best proxy for measuring technological innovation. In evaluating technological progress, this patent information can be complemented with other indicators such as investments in R&D and digital technologies. See Box 2.2 for details on the use of patents as a measure of innovation activity.
Patents provide a detailed source of information on the inventive activity of a country, and are frequently used as a proxy for innovation measures, following a long tradition in the literature (Griliches, 1990[25]). Patents are used by firms, by research institutions or by individuals to protect inventions in a given market. Indicators on patents convey information on the output and on the processes of inventive activities, as described in the OECD Patent Statistics Manual (OECD, 2009[26]).
The patent data derive from the intellectual property (IP) data of the OECD Science, Technology and Innovation (STI) Micro-data Lab, which mostly relies on the Worldwide Patent Statistical Database maintained by the European Patent Office (EPO), also known as PATSTAT Global, in its Autumn 2025 edition. The PATSTAT database includes information on patents filed worldwide, including their administrative steps, the origin of the invention (with the name and location of inventors or applicants), the technologies that are covered by the invention (e.g. patent classes, title, abstract and claims describing the invention), the countries in which the inventions are protected, the citations made to or by other patents, as well as references to the scientific literature.
Semiconductor patents are identified as those allocated to International Patent Classification (IPC) codes H01N or H10 and complemented with patents featuring the keywords related to semiconductors in their abstract that are not classified in the IPC codes (Table 2.2).
The latest trends in semiconductor patents worldwide are shown using patent applications filed under the Patent Co-operation Treaty (PCT). Notably, PCT patent applications aim to protect patents across multiple jurisdictions and therefore typically include patents of higher economic value than patents protected in a single jurisdiction.
Patents are assigned to the country where the applicant filing the patent is located, using fractional counts (if two firms located in two different countries jointly file a patent, each country gets assigned one-half of a patent). Owing to the scarcity of patent citation records in PATSTAT, citation-based measures only rely on EPO or United States Patent and Trademark Office (USPTO) patents.
Sources: Griliches, Z. (1990[25]), “Patent Statistics as Economic Indicators: A Survey”, https://www.jstor.org/stable/2727442; OECD (2009[26]), OECD Patent Statistics Manual, https://doi.org/10.1787/9789264056442-en.
At the global level, patent filings in semiconductor technologies have increased since the early 1980s. As shown in Figure 2.17 (Panel A), the number of patents filed for semiconductor inventions saw a significant increase between 1995 and 2005, with an annual growth rate of 19.1% for PCT applications.8 Since then, PCT applications related to semiconductors have slowed down: from 2015 to 2020, PCT applications grew at an annualised growth rate of 4.7%. Additionally, as illustrated in Figure 2.17 (Panel B), the share of semiconductor patents in total PCT applications has remained broadly stable since 2002.
Note: Data refer to patent applications filed under the PCT, by earliest filing date. Patent applications follow fractional counting. The latest observations are for 2024.
Source: OECD (n.d.[27]), STI Micro-data Lab: Intellectual Property Database, http://oe.cd/ipstats (accessed on 20 March 2026).
In Panama, patenting activity across all technologies has remained limited in the last two decades, with an average number of 19 patents per year, except for notable peaks in 2016 and 2018. In 2016, transport was the category with the largest number of patents, with 19% of total patents. In 2018, furniture and games was the main category, with 16% of patents.9
For patents related to semiconductors, activity has been almost non-existent, with only a single patent registered in 2018 during the period 2000-2024 (Figure 2.18).
R&D expenditure, an often-used input measure of innovation, can shed further light on Panamanian patenting performance. Figure 2.19 shows that Panama allocated less than 0.2% of its GDP to R&D in 2022, a figure significantly below the OECD average (3%) and below the regional average for Latin America and the Caribbean (0.56%).
Figure 2.19 also shows that while the government share of R&D expenditure in Panama increased in recent years, business investment remained practically non-existent as of 2021. In Panama, a large part of R&D expenditure is driven by foreign investment, with the contribution of domestic higher education and non-profit private institutions being very limited. 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.
Note: Data refer to patent applications filed under the PCT by earliest filing date. Patent application follows fractional counting. The latest observations are for 2024.
Source: OECD (n.d.[27]), STI Micro-data Lab: Intellectual Property Database, http://oe.cd/ipstats (accessed on 20 March 2026).
Note: The latest observations are for 2022 for Costa Rica, Mexico, Panama and Uruguay; and 2021 for Chile.
Sources: OECD calculations based on: Panel A: RICYT (n.d.[28]), “Indicators”, https://www.ricyt.org/en/category/indicators/ (accessed on 15 September 2025); Panel B: SENACYT (n.d.[29]), “Homepage”, https://observatorio.senacyt.gob.pa/ (accessed on 15 July 2024).
Foreign direct investment
FDI can produce positive productivity spillovers as multinationals integrate domestic firms into their productive process and foster the development of a local ecosystem. Moreover, multinationals may bring new technology and provide access to new markets, thereby improving the training and qualifications of the local workforce and improving employment and wages (Carril‐Caccia and Pavlova, 2020[30]; Alfaro Urena, Manelici and Vasquez, 2021[31]). The positive spillovers of investment by multinationals can be further leveraged if co-ordinated with the development of a local ecosystem of suppliers and customers to help ensure long-term benefits to the local economy.
Multinational corporations engage in FDI activities for various strategic purposes. Market potential, asset seeking, efficiency seeking, institutional quality and macroeconomic stability are among the primary determinants for firms to engage in FDI activities (Carril‐Caccia and Pavlova, 2020[30]).
Figure 2.20 shows that the share of Panamanian firms investing abroad is small in both the high-tech and non-high-tech sectors, constituting less than 2% of all firms in each category. In contrast, the proportion of non-high-tech firms in Panama with foreign capital surpasses 10%, while more than 12% of the high-tech firms have capital from an entity residing abroad.
Note: Investment abroad corresponds to Question 4 of the Encuesta Entre Empresas No Financieras (EEENF) questionnaire, whereas capital from abroad corresponds to Question 5 of the EEENF questionnaire.
Source: OECD calculations based on the Encuesta Entre Empresas No Financieras from INEC (n.d.[32]), “Instituto Nacional de Estadística y Censo”, www.inec.gob.pa.
FDI net inflows in the form of acquisitions in Panama have been historically high, reaching their peak in 2006, representing around 16% of GDP, significantly above other Latin American countries and the OECD average. Nonetheless, after this peak, inward FDI declined and, in 2020, outward investments surpassed inward investments, influenced by the halt in investment during the COVID-19 pandemic. Post-pandemic, there was a resurgence in FDI net inflows, reaching approximately 4% of GDP by 2024. Nonetheless, this figure falls below that of Chile and Costa Rica (Figure 2.21).
Note: FDI is the net inflow of investment to acquire a lasting management interest (10% or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital and short-term capital as shown in the balance of payments. This series shows net inflows (new investment inflows less disinvestment) in the reporting economy from foreign investors, and is divided by GDP.
Source: World Bank (n.d.[33]), Foreign direct investment, net inflows (% of GDP) (indicator), https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS (accessed on 15 September 2025).
The overall decline in net investment inflows in recent years was also reflected in mergers and acquisitions (M&A) activity involving high-tech firms. In Panama, inward investment accounted for most of the value of this M&A activity during the periods from 2005 to 2016. However, in the most recent period (2017-2022), the share of outward investment has notably increased whereas inward investment has decreased (Figure 2.22). Throughout the entire 2005-2022 period, Israel had the highest share of inward investment, accounting for 20% of the total value of acquisitions. Following Israel were Mexico with 18%, the United Kingdom with 17% and the United States with 10%. For outward investment, the United States was the main partner with 52% of the value of the deals.
Deals involving at least one firm outside the high-tech sector (either on the target or the acquiror side) played a significant role in this growth, accounting for more than 80% of the total deals’ value, pointing to important inter-sectoral spillovers and low intra-sectoral spillover.
The effects of greenfield investment on the economy tend to materialise more rapidly since these investments directly include new elements, such as jobs, facilities and production capacity in the economy. This immediate impact can lead to increased competition and enhanced productivity (World Bank, 2020[34]). To date, there have been no greenfield investments in the semiconductor sector in Panama.
As illustrated in Figure 2.23, among the sectors receiving high levels of greenfield investment between January 2003 and February 2026 was the renewable energy sector, which attracted USD 8.4 billion of investments. There were 32 projects in this sector, with the largest being a project announced by the US firm SGP BioEnergy to develop the world’s largest biofuels production and distribution hub, located in Balboa and Colón. The metals sector, which includes minerals, received USD 7.5 billion, with 89% of this amount attributable to two investments made by the Canadian firm First Quantum Minerals, managing the Cobre Panamá mine, which was closed in December 2023. The transportation and warehousing sector was the third largest, attracting USD 5.1 billion from 17 countries, featuring a Swiss investment of USD 1.4 billion in 2022, to build a new terminal on the Panama Canal.
Note: This figure covers the deals in the following categories: “Genuine acquisition”, “Further acquisition”, “Minority stakes” and “Joint venture”. The sectors considered are the sectors outlined in Table 2.1. Inward deals are the deals with a Panamanian firm as target. Outward deals are the deals with a Panamanian firm as acquiror. Only cross-border investments are considered; domestic deals are not included.
Source: OECD calculations based on Zephyr (v.2022), currently Orbis M&A (2026[35]), “Welcome to Orbis M&A”, https://login.bvdinfo.com/R1/OrbisMA.
Note: The sectors selected are the top ten sectors by net inflows of greenfield investment. Based on 519 projects recorded for Panama.
Source: OECD calculations based on fDi Markets (2024[36]), “Homepage”, https://www.fdimarkets.com/ (accessed on 14 January 2025).
Nonetheless, investments with the highest job creation were in the real estate as well as hotel and tourism sectors. The real estate sector generated almost 17 000 jobs, while the hotel and tourism sector created nearly 14 000 jobs, followed by the transportation and warehousing sector with more than 12 000 jobs (Figure 2.24). Real estate activities were mainly in construction, with accounted for nearly all jobs created. There were also projects in the sales, marketing and support, and business services segments, each generating fewer than 100 jobs.
Note: The sectors selected are the top ten sectors by number of jobs created by greenfield investment. Based on 519 projects recorded for Panama.
Source: OECD calculations based on fDi Markets (2024[36]), “Homepage”, https://www.fdimarkets.com/ (accessed on 14 January 2025).
In the ICT and electronics cluster, which according to the fDi Markets database includes the communications, electronic components, information technology (IT) and software and business machines and equipment sectors, total inward greenfield investment in Panama amounted to USD 3.8 billion and 10 195 jobs were created over the entire 2003-2026 period. Investment originated mainly from Spain, Luxembourg and Jamaica, all with a focus on the communications sector (Figure 2.25).
Note: The figure shows inward investment in Panama. Based on 80 projects recorded for Panama in the ICT and electronics cluster. “Others” refers to exports to other partners not included in the figure.
Source: OECD calculations based on fDi Markets (2024[36]), “Homepage”, https://www.fdimarkets.com/ (accessed on 14 January 2025).
Several types of infrastructure play a crucial role in supporting the semiconductor industry. The provision of water and power is critical for running semiconductor facilities, both in wafer fabrication and semiconductor ATP, with the provision of stable broadband connectivity playing also a relevant role. Furthermore, the availability of well-maintained transportation infrastructure (e.g. roads, airports, ports) is necessary to ensure smooth and timely access to critical inputs and shipment of outputs.
Panama benefits from abundant freshwater resources, although access to potable water varies significantly by region. Panama benefits from low energy costs for businesses and a considerable share of renewable resources in electricity production. However, further efforts to ensure power reliability would be important.
Connectivity also contributes to the development of high-tech and semiconductor firms. Data on fixed broadband subscriptions indicate Panama’s lagging performance compared to other Latin American countries. Additionally, internet coverage at the household level reveals significant disparities across regions.
Despite a significant decline in infrastructure investment over the past decade, Panama remains one of the top countries in the Latin American region for infrastructure quality and port traffic volume. Even if there is room for improvement in the efficiency of its major ports, Panama can leverage its strategic position to diversify into other sectors beyond transportation, adding value to the products transported. The country also benefits from strong road and air transport infrastructure, further enhancing its potential.
Part of the analyses in this section draw on the OECD’s Principles for Private Sector Participation in Infrastructure (OECD, 2024[37]), which brings together 24 principles on how government can mobilise private investment in infrastructure projects. Key principles relate to the allocation of risk and responsibilities between the public and private sectors, fiscal discipline, transparency and governance, effective competition, access to capital markets, consultation with end users and the importance of competent, well-resourced regulatory authorities (OECD, 2024[37]).
2.2.1. Key utilities
Water
Semiconductor fabrication is a water-intensive process and, in recent years, the industry has faced challenges due to the increasing scarcity of water resources and disruptions caused by climate change. Many regions of the world are already reaching the limits of a sustainable supply of freshwater for nature and human needs. In response, the semiconductor industry has been actively developing and implementing water-saving technologies to enhance water recycling and minimise waste (Frost and Hua, 2019[38]).
Figure 2.26 shows Panama’s favourable standing in freshwater resources. With around 31 000 cubic metres (m3) per capita in 2021, Panama surpassed the OECD average (approximately 9 300 m3 per capita) and only remained behind Chile (approximately 45 000 m3 per capita) among select Latin American countries. However, there has been a steady decline from the level observed in 2000 across all economies, including Panama.
Recent droughts in Panama have resulted in reduced freshwater resources, leading to transit restrictions in the Panama Canal (see Section 2.2.2 on maritime transport). These droughts have also created a trade-off between allocating water for Panama City, hydroelectric power generation and attending to the needs of the Panama Canal (IMF, 2024[2]).
In only four provinces of Panama, more than 90% of households have access to potable water every day of the week, regardless of the season (Figure 2.27). Ensuring access to clean and sanitised water is a fundamental requirement for the future development of a semiconductor ecosystem in Panama, particularly in the areas with the highest degree of industrial development.
Note: The graph shows the internal renewable resources (internal river flows and groundwater from rainfall) in a given country.
Source: OECD calculation based on World Bank (2024[39]), Renewable internal freshwater resources per capita (cubic meters) (indicator), https://data.worldbank.org/indicator/ER.H2O.INTR.PC (accessed on 15 September 2025).
Notes: The share is calculated by taking the sum of the households that responded as having drinking water seven days per week according to Question 1J1 of the Multiple Purposes Survey (Encuesta de Propósitos Múltiples) of April 2022, corresponding to “How often do you receive drinking water?”, and dividing by the total number of households
Source: OECD calculations based on Encuesta de Propósitos Múltiples from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Energy
Together with water, energy is a key input for the development of semiconductor production in Panama. Beyond the wafer fabrication process – including photolithography, etching, deposition or ion implantation – energy is needed to power the overall infrastructure of the semiconductor facilities, including maintaining the required environment in cleanrooms. The ATP segment of the semiconductor value chain is, on average, less energy-intensive than fabrication but still depends on a strong and reliable supply of energy.
As of 2023, Panama had not yet achieved universal access to electricity (Figure 2.28). In response, the government implemented a programme with the goal of achieving universal access to electricity by 2030 and supporting the development of rural areas without access to basic services.10
Source: World Bank (2023[40]), Access to electricity (% of population) (indicator), https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS (accessed on 15 September 2025).
Figure 2.28 provides valuable context relating to electricity access throughout Panama as a whole and expanding the population’s access to electricity is a necessary objective for the country’s broader economic development. However, it is particularly important to analyse electricity supply and reliability in Panama’s special economic zones (SEZs), as this is where the semiconductor industry would be expected to operate.
There are limited sources of data on electricity in SEZs. Nevertheless, it appears that strong electricity infrastructure is one of the major advantages of Panama’s SEZs. Panamá Pacífico – an SEZ located close to the Panama Canal and home to over 300 firms – has electric power capacity that exceeds the demand from firms in its industrial park (Panamá Pacífico, 2022[41]). Three electrical substations operate within Panamá Pacífico, which represent dedicated electricity infrastructure for the industrial park and its firms. Panamá Pacífico also offers redundant power systems (LatAm FDI, 2025[42]). The City of Knowledge – an SEZ that hosts 81 high-tech firms and 27 academic and research organisations – advertises its constant electricity supply and redundant power from the Panama Canal’s thermal plant, located just 300 metres away at Miraflores Locks (AmCham Panama, 2024[43]).
The redundancy in power supplies in Panamá Pacífico, the City of Knowledge and other Panamanian SEZs is in response to the country’s challenges relating to power outages. Consultations with stakeholders carried out in the context of this report suggest that frequent power outages in Panama are an important challenge that needs to be addressed. This is reinforced by data relating to the frequency and duration of power outages experienced by firms. In 2019, the most recent year available, firms in Panama experienced on average 5.2 power outages per year according to the World Bank’s system average interruption frequency index. This was higher than other countries in the region such as Costa Rica (0.2), Mexico (0.9) or Uruguay (4.0) (World Bank, 2020[44]). Also in 2019, the average total duration of outages experienced by a firm in Panama per year was 7.8 hours according to the World Bank’s system average interruption duration index (World Bank, 2020[45]). This was higher than in Costa Rica (0.5 hours) or Mexico (0.6 hours) but lower than Uruguay (10.0 hours).
These data are not disaggregated by firms inside or outside Panama’s SEZs, so it is not possible to establish whether firms within the SEZs have more reliable supplies of electricity than their counterparts outside the SEZs. However, given the SEZs’ electricity infrastructure, it would be reasonable to assume that their firms do benefit, on average, from more reliable electricity.
In addition to electricity access and reliability, electricity costs are another key consideration in attracting semiconductor firms to Panama and developing a domestic semiconductor ecosystem. Figure 2.29 shows the average cost of electricity for households and businesses in selected economies between 2023 and 2025. The figure includes all components of the electricity bill, such as power costs, distribution fees and taxes. Differences in regional or federal subsidies and varying tariff structures can significantly impact these costs and affect the comparability between countries. As with the above data on the frequency and duration of power outages, these data do not distinguish between firms inside or outside Panama’s SEZs.
Taking these caveats into account, Figure 2.29 shows that Panama benefits from lower electricity costs compared to other Latin American countries. The price of electricity for businesses in Panama stays below USD 0.2 per kilowatt-hour (kWh), which is significantly less than in Costa Rica and Mexico, although still higher than in Chile and Uruguay. Low electricity costs are essential for developing the semiconductor ecosystem, as they lower production expenses, attract foreign investment and stimulate industrial growth.
Note: The graph shows average electricity rates for households and businesses between 2023 and 2025. Using average prices helps mitigate electricity price volatility between quarters. The price includes all components of the electricity bill such as the cost of power, distribution and taxes. In terms of electricity consumption, for households, the displayed number is calculated at the average annual level of household electricity consumption. For businesses, the displayed data point uses 1 000 000 kWh of annual consumption.
Source: OECD calculation based on GlobalPetrolPrices.com (2025[46]), Electricity prices (dataset), https://www.globalpetrolprices.com/electricity_prices/ (accessed on 15 September 2025).
Panama is one of the very few “carbon-negative” countries in the world, as its forests capture more carbon than Panama’s total greenhouse gas emissions (EC, 2024[47]). Relatedly, Panama benefits from natural endowments that enable the production of renewable electricity. Figure 2.30 shows that, in 2023, solar photovoltaic (PV), wind and notably hydropower accounted for 60% of the electricity production. While solar PV has a higher share in Panama, hydropower and wind have a higher share in Costa Rica, where these three sources together account for 77% of electricity generation. Panama’s electricity generation from these three renewable sources is higher than in Mexico (17% of total generation) but slightly lower than in Chile (64%) and Uruguay (67%). Panama has a diversified energy matrix as more than 21% of its electricity is generated from natural gas, which the country sometimes relies on in times of drought when hydropower becomes limited.
Note: Latest data for Chile, Costa Rica and Mexico are from 2024. Latest data for Panama and Uruguay are from 2023. Accessed in September 2025.
Source: OECD calculations based on IEA (n.d.[48]), Country and regions (database), https://www.iea.org/countries.
Broadband connectivity
Stable broadband connectivity is important for the development of firms in the semiconductor industry, in the high-tech sector and in the rest of the economy. As with electricity (see above), some of Panama’s SEZs support their firms by providing stable and fast internet connectivity. For example, Panamá Pacífico SEZ offers firms high-speed fibre optic internet due to its proximity to a digital interconnection of at least six submarine cables (IMF, 2020[49]; LatAm FDI, 2025[42]). Firms in Panamá Pacífico can choose from one of nine telecommunications carriers that have established nodes within the SEZ and are connected to each building via pre-installed fibres (Panamá Pacífico, 2015[50]). Similarly, the City of Knowledge highlights that organisations located within the SEZ can access high-speed internet connections and a variety of information technology (IT) and telecommunications services (AmCham Panama, 2024[43]).
Beyond firms’ internet connectivity, Panama is developing several flagship initiatives to enhance its digital infrastructure. For example, Panama Digital Gateway plans to facilitate the convergence of current and future submarine cables and establish a data centre (TI Sparkle, 2023[51]). In 2023, Panama Digital Gateway reached an agreement for the installation of an internet exchange point (IXP) in the data centre to manage intellectual property (IP) traffic exchange nodes in Panama (Gruppo Tim, 2023[52]). This could enhance local firms’ connectivity and lead to faster internet traffic.
Panama also hosts the CopernicusLAC Panama Centre, under the auspices of the European Union-Latin America and Caribbean Digital Alliance. The CopernicusLAC Panama Centre serves as a regional hub for spatial data management and strategic use, and it is anticipated that a Copernicus Data Centre will eventually be established in Panama. The project brings together the European Commission and the European Space Agency with the National Secretariat of Science, Technology and Innovation (SENACYT), Panama’s Ministry of Foreign Affairs and the National Authority for Government Innovation (AIG) (EU Global Gateway, 2024[53]).
Despite Panama’s investment in its digital infrastructure, internet access for Panama’s population is relatively weaker. As shown in Figure 2.31, Panama is in line with the general expansion of fixed broadband subscriptions in Latin America. However, as of 2023, Panama lagged behind other countries such as Costa Rica, Mexico and Uruguay, despite having had similar levels of fixed broadband subscriptions as these countries in 2004.
Note: The graph shows fixed subscriptions (from both individuals and organisations) at downstream speeds equal to, or greater than, 256 kilobits per second (kbit/s), including cable modem, digital subscriber line (DSL), fibre-to-the-home/building, other fixed (wired) broadband subscriptions, satellite broadband and terrestrial fixed wireless broadband. The latest data for the OECD average are from 2022.
Source: OECD calculation based on World Bank (n.d.[54]), Fixed broadband subscriptions (per 100 people) (indicator), https://data.worldbank.org/indicator/IT.NET.BBND.P2 (accessed on 15 September 2025).
According to data from the 2022 household survey, only four provinces reported more than 80% of households with access to internet. In the case of Emberá and Ngäbe-Buglé, this figure remains below 40% (Figure 2.32). These results highlight the ongoing need to enhance connectivity and extend coverage nationwide. Although improving household connectivity may not have a direct impact on Panama’s ability to attract semiconductor firms and grow its ecosystem for semiconductors, it is an important step in the country’s economic development.
Note: The share is calculated by summing households that reply “no” to both Questions 5a and 5b of the Multiple Purposes Survey (Encuesta de Propósitos Múltiples) of April 2022, corresponding to “Does this household have internet access via mobile network?” and “Does this household have internet access via fixed network?”, and dividing by the total number of households.
Source: OECD calculations based on Encuesta de Propósitos Múltiples from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
2.2.2. Transport infrastructure
Logistics is one of Panama’s strengths and major competitive advantages. According to the Logistics Performance Index (LPI), Panama excels particularly in the “Infrastructure” and “International shipments” dimensions, with the “Tracking and tracing” dimension a potential area for improvement (Figure 2.33). Panama already leverages its logistics and transport infrastructure to support the regional semiconductor ATP. Enhanced co-operation between Panama and Costa Rica could help enhance transportation and customs capacities in the two countries and support the region’s development into a resilient hub in the global semiconductor value chain.
Note: The LPI is based on logistics professionals’ replies to a survey that takes into account six different dimensions – “Customs”, “Infrastructure”, “International shipments”, “Logistics competence and quality”, “Timeliness”, “Tracking and tracing”– of a country’s overall logistics performance. The score within each category goes from 1 (very low quality) to 5 (very high quality).
Source: OECD calculation based on World Bank (2024[55]), “Logistics Performance Index (LPI)”, https://lpi.worldbank.org/international/scorecard/radar/C/PAN/2023.
Between 2008 and 2013, public investment in transport infrastructure in Panama remained very high. During these years, the country saw significant developments in various infrastructure projects, which supported its economic expansion. These developments included the expansion of the Panama Canal and Tocumen International Airport. However, investment in transport infrastructure declined after the peak in 2013, when it represented 5.3% of GDP, to 1.2% of GDP by 2020. Transport infrastructure investment has since increased to 2.7% of GDP in 2023, higher than in comparator economies in the region (Figure 2.34). Panama’s investment in transport infrastructure is expected to increase further with the 475-kilometre (km) railway line between Panamá Pacífico and David on the border with Costa Rica, set to begin construction in 2026 (Presidencia de la República, 2025[56]).
Note: The investment in infrastructure includes roads, urban transport, rail transport, air transport and maritime transport. Most recent data for Uruguay are from 2021.
Source: OECD calculations based on Infralatam (n.d.[57]), Data on public investment in economic infrastructure in Latin America and the Caribbean (database), https://www.infralatam.info/ (accessed on 15 September 2025).
Maritime transport
Figure 2.35 shows that Panama has a high volume of container port traffic, surpassing larger countries such as Chile or Mexico. This result, which does not take into account containers that are crossing the Panama Canal and are not offloaded, underscores Panama’s crucial role in international trade, highlighting its strategic position and its importance in connecting various markets around the world.
Figure 2.36 shows that the export volume at Panama’s main ports remained broadly stable from the first quarter of 2019 to the first quarter of 2023. Since then, it has followed an upward trend, reaching about 45 million metric tonnes in the second quarter of 2024 (preliminary data). In the first quarter of 2024, Balboa (located on the Pacific coast) was the port with the highest export volume, accounting for 32% of the total. It was followed by three ports located on Panama’s Atlantic coast: Manzanillo with 28% of total exports, Colón with 24% and Cristóbal with 13%.
The Container Port Performance Index (CPPI) ranks 405 global container ports by efficiency, defined as the duration of port stay for container vessels. Although time is not the only metric for assessing port efficiency, it serves as a valuable quantitative indicator to analyse the efficiency of port operations. According to the CPPI, the port of Colón is the highest-ranking Panamanian port for efficiency, ranked 102nd worldwide (World Bank, 2024[58]). However, several ports in the region obtain a better performance such as Lázaro Cárdenas in Mexico (ranked 50th worldwide) or Puerto Limón in Costa Rica (ranked 79th worldwide). In Panama, the ports of Cristóbal and Balboa rank in the 236th and 314th positions respectively.
Note: Port container traffic measures the flow of containers from land to sea transport modes, and vice versa, in 20-foot equivalent units (TEUs), a standard-size container benchmark used for measuring cargo capacity. Data refer to coastal shipping as well as international journeys. Transshipment traffic is counted as two lifts at the intermediate port (once to offload and again as an outbound lift) and includes empty units.
Source: OECD calculations based on World Bank (n.d.[59]), Container port traffic (TEU: 20 foot equivalent units) (indicator), https://data.worldbank.org/indicator/IS.SHP.GOOD.TU (accessed on 15 September 2025).
Note: The figure shows the quarterly average of the daily transit.
Source: OECD calculations from IMF (n.d.[60]), IMF PortWatch, https://portwatch.imf.org/ (accessed 12 October 2025). The latest observations correspond to 31 May 2024, so the data for 2024 Q2 are still partial and preliminary.
The Panama Canal was inaugurated in 1914 and since then more than one million cargo ships from all over the world have transited through the canal. The Panama Canal expansion project started in 2007 with the objective of doubling the waterway’s capacity.11 The Panama Canal is a crucial point for maritime trade: each month around 1 000 ships pass through the Panama Canal, amounting to about 5% of global maritime trade (Arslanalp et al., 2023[61]).
However, in October 2023, the country experienced its worst drought in the canal’s history. Significant restrictions on ship transits were imposed amid insufficient rainfall at Gatun Lake, which supplies water to the canal. As shown in Figure 2.37, daily transit trade reached the lowest levels by January 2024 and have, since then, begun to recover.
By December 2023, the number of ships transiting through the canal was limited to 22 per day. However, the Panama Canal Authority (ACP) has implemented water-saving measures and has gradually lifted these restrictions in response to new weather forecasts. In June 2024, the ACP announced that by 22 July 2024, the number of ships would increase to 34 per day. By the final quarter of 2024, the ACP had allowed 36 ships per day to transit, as the canal returned to normal levels of activity.12
Note: The figure shows a seven-day moving average from the daily transit, measured in million metric tonnes of cargo. For more information on how trade flows are calculated, see https://portwatch.imf.org/pages/data-and-methodology.
Source: IMF PortWatch, IMF (n.d.[60]), IMF PortWatch, https://portwatch.imf.org/ (accessed 12 October 2025).
Road transport
Road quality is a crucial factor to consider when developing the semiconductor ecosystem. High-quality roads ensure the safe and efficient transport of inputs essential for semiconductor production as well as outputs, reducing the risk of quality losses. This is especially important for delicate inputs like specialised manufacturing equipment and for finished products, which can be damaged if transported on roads in poor conditions.
Figure 2.38 suggests that Panama is well positioned in terms of road quality amongst select Latin American economies, ranking just behind Chile, on par with Mexico and ahead of Costa Rica and Uruguay, according to data from the World Economic Forum (WEF) Global Competitiveness Index.
Through the Pan-American Highway, Panama is well connected with Costa Rica. This highway is part of a broader network that extends from the southern tip of South America to the northern reaches of North America, making it a crucial conduit for regional trade and travel. However, the highway is interrupted in the Panamanian province of Darién, at the border with Colombia, where natural conditions complicate the development of infrastructure.
Note: The graph shows the quality of roads based on answers to the WEF Executive Opinion Survey. The scale ranges from 1 (“underdeveloped”) to 7 (“extensive and efficient by international standards”).
Source: OECD calculation based on WEF (2019[62]), Roads quality - Country rankings (dataset), https://www.theglobaleconomy.com/rankings/roads_quality/ (accessed on 15 February 2025).
Panama also has other important roads that connect the main cities. For example, Colón Highway connects Panama City with Colón, providing an alternative to the Panama Canal in linking the Pacific and Atlantic coasts.13 Additionally, the public infrastructure section of the Strategic Government Plan (2019‑2024) (Plan Estratégico de Gobierno 2019-2024 de Panamá) included a series of recovery and rehabilitation projects for 2 000 km of priority roads in the national road network. Among these projects is the improvement of the western Pan-American Road (Carretera Panamericana Oeste), which connects the province of Panamá Oeste with the province of Veraguas.14 Nonetheless, road quality is poorer in the provinces populated by Indigenous communities and the connections with the rest of the country can be improved.
Air transport
According to data from the WEF Global Competitiveness Index, Panama has very high air transport quality and holds the eighth position globally (Figure 2.39). From 2006 to 2019, Panama expanded Tocumen International Airport in three main phases. The first phase, conducted in 2006, focused on renovating and expanding the existing facilities. The second phase, from 2009 to 2012, involved the construction of the northern terminal. In the third phase, between 2012 and 2019, a new terminal was built (IMF, 2023[3]). Tocumen is also the base for Copa Airlines, which has become one of the leading aviation firms in the region (El Economista, 2024[63]), helping transform the airport into one of the main regional hubs.
In addition to Tocumen International Airport, the smaller scale Balboa Panamá Pacífico International Airport, was developed in the context of the Panamá Pacífico SEZ (see Section 3.2.3), after the United States handed over Howard Air Force Base to Panama in 1999. The airport has a cargo terminal as well as a passenger terminal with domestic and regional flights. Balboa Panamá Pacífico International Airport benefits from a strategic location, as it is situated within the SEZ, near to Panama Pacífico’s industrial areas and with close connections to the Panama Canal. This creates a multi-modal hub for air and maritime transport.
Note: The graph shows the quality of air transport based on answers to the WEF Executive Opinion Survey. The scale ranges from 1 (“underdeveloped”) to 7 (“extensive and efficient by international standards").
Source: OECD calculation based on WEF (2019[64]), Air transport infrastructure quality - Country rankings (dataset), https://www.theglobaleconomy.com/rankings/air_transport_infrastructure/ (accessed on 15 February 2024).
Semiconductor industry stakeholders across the world cite lack of talent as a critical barrier in the development of semiconductor ecosystems. Developing the required skills is crucial for countries aiming to expand their role within the semiconductor GVC. A recent study on semiconductor workforce development (Younkin, 2024[65]) highlights several core components, namely fostering the growth of required talent, refining curricula, aligning knowledge, skills and abilities with critical job functions, ensuring access to state-of-the-art educational and training facilities, facilitating experiential learning and providing recruitment support. Addressing these challenges will help narrow the gap between skills demand and supply to ensure a successful semiconductor ecosystem development in individual economies and globally.
Quality education is critical to generate a sufficiently large and diverse talent pool for a semiconductor ecosystem, particularly in technical fields. However, government expenditure on education in Panama remains significantly below the OECD average and other Latin American countries. Additionally, the pupil-to-teacher ratio, a key indicator for education quality, has decreased significantly for secondary education although it has increased recently for primary and tertiary education.
The technical expertise needed for the semiconductor ecosystem builds on the education given at early ages, especially in science, technology, engineering and mathematics (STEM) fields. The efficacy of education systems in preparing students can be evaluated, for instance, through the OECD Programme for International Student Assessment (PISA), which assesses the knowledge and skills of 15-year-old students in mathematics, science and reading and serves as a benchmark for international comparison.15 PISA scores for both mathematics and science increased in Panama from 2018 to 2022, in contrast to the OECD trend. Nevertheless, Panama should continue its efforts to catch up with other economies.
Despite low enrolment rates for upper secondary education in 2017 compared to other countries with similar GDP levels, Panama is well positioned in upper secondary education attainment compared to other Latin American countries. Of the upper secondary education students who opt for the academic track, a large share specialises in sciences. The percentage of upper secondary education students taking the vocational path with a specialisation in electronics, which is particularly relevant for the semiconductor sector, is very low.
Additionally, the share of university students in Panama graduating from STEM-related subjects is lower than in other Latin American countries.
Semiconductor manufacturing, and in particular ATP, requires considerable technical skills, such as molding, dicing, wave soldering, swaging, and lamination and technical occupations, which are also in high demand by other sectors, particularly in countries where manufacturing accounts for a large share of value added. The share of workers with these occupations in Panama is particularly low. Enhancing the provision and quality of vocational training (and retraining) with a focus on these skills and occupations, would help alleviate pressures in what would otherwise be a tight labour market for technical skills.
Empirical analysis reveals that wages are positively associated with university education and employment in STEM-related occupations. Additionally, residence in the province of Panama, having a permanent contract and being male are also positively associated with wages. Implementing policies that promote STEM careers, enhance access to university education, ensure job formality and security, and address regional and demographic disparities could attract students to the relevant fields and lead to wage growth and reduced inequality.
2.3.1. Supply of semiconductor skills in Panama
During the last decade, government expenditure on education in Panama fell short of other Latin American countries (Figure 2.40). The share of population under 15 years of age is slightly higher in Panama than in the same group of countries (UN, 2024[66]), meaning a larger proportion of young people relies on education spending. The gap to other economies underscores ongoing challenges in allocating sufficient resources to education, likely impacting the quality and accessibility of educational services in the country. Efforts to increase investment in education could play a crucial role in fostering long-term economic growth and development, ensuring that Panama’s education system meets the needs of the semiconductor and high-tech ecosystems.
The number of teachers per pupil is a key indicator of education quality. The quantity and distribution of teachers are critical in shaping the learning environment and impacting educational outcomes across all levels, from primary to tertiary education. Furthermore, to maintain high educational standards, it is essential for teachers to receive proper training and access to professional development opportunities (for more details, see Section 3.3).
Figure 2.41 shows that, in Panama, the pupil-to-teacher ratio is lowest in secondary education and has decreased significantly since 2016. However, in primary and tertiary education, the growth in the number of teachers has not matched the increase in the student population, leading to a higher pupil-to-teacher ratio. This trend is more pronounced in university education, where the growth has been higher, from 12 students per teacher in 2018 to 15.8 in 2022.
Smaller class sizes can enhance individualised instruction and boost student engagement. Nonetheless, the pupil-to-ratio in Panama is higher for primary education (Figure 2.41), limiting opportunities for more individualised instruction. The impact of individualised education on student achievement is particularly high in first and second grades (French Government, 2017[67]), where larger class sizes are likely to constrain the level of attention each student receives.
Note: The data refer to government expenditure without specifying the level of education. Government expenditure on education includes expenditure funded by transfers from international sources to government. Government usually refers to local, regional and central governments. 2014 was selected as the starting year since it is the first year with complete information for all of the countries in the sample. Data for 2019 and 2022 for Mexico are missing. For Chile, data for 2022 are missing. For Costa Rica, data for 2022 are missing.
Source: World Bank based on UIS (2025[68]), Government expenditure on education, total (% of GDP) (dataset), https://data.worldbank.org/indicator/SE.XPD.TOTL.GD.ZS (accessed 15 September 2025).
Note: The pupil to teacher ratio is calculated as the number of enrolled students per teacher at each level of education. In this graph, tertiary education includes university education only; it does not include tertiary-level vocational education.
Source: OECD calculations based on INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/ (accessed on 15 May 2024).
Secondary education and vocational training
Technical aptitude (i.e. understanding and applying technical concepts), is particularly relevant to engineering and technician profiles required for the semiconductor industry. The efficacy of education systems in preparing students for these kinds of tertiary education tracks can be evaluated, for instance, through PISA. PISA scores for both mathematics and science increased in Panama from 2018 to 2022, although Panama is still behind other Latin American economies such as Chile, Costa Rica, Mexico and Uruguay. The gap is particularly pronounced in mathematics scores (Figure 2.42): only 16% of Panamanian students achieved Level 2 proficiency, compared with the OECD average of 69%.16 In science, 38% of Panamanian students achieved Level 2 proficiency, compared with the OECD average of 76% (OECD, 2023[69]).
The latest PISA assessment also placed Panama below the OECD average in reading. It is important to highlight that Panama is one of the countries in the PISA programme with the highest share of students belonging to a disadvantaged socio-economic background, measured by the lowest quintile across all students in the PISA programme (OECD, 2023[69]).
These results are in line with the challenges pointed out by stakeholders consulted in the context of this report. Stakeholders agreed on the need to enhance public education, particularly focusing on STEM and English language skills. Panama recorded a low index score ranking 71st out of 113 countries in the most recent EF English Proficiency Index assessment.17 Compared to other Latin American countries like Costa Rica and Uruguay, Panama’s results underscore the need for increased efforts in English language education. There is nevertheless considerable heterogeneity across different Panamanian provinces, with cities like Colón, David and Panama City and the best-performing cities in the country.18
Note: The results are scaled to fit approximately normal distributions, with means around 500 score points and standard deviations around 100 score points. The country scores are averages of all of the national 15-year-old students taking the test.
Source: OECD calculations based on OECD (2023[70]), PISA 2022 Database, https://www.oecd.org/pisa/data/2022database/ (accessed on 16 April 2024).
According to these stakeholders, one of Panama’s priorities should be enhancing education at the secondary level. In 2017, enrolment rates for upper secondary education remained below other countries with similar GDP levels (Figure 2.43). However, Panama’s upper secondary education attainment seems to be higher than in other Latin American countries. By 2023, 51% of the population aged 25 or more had obtained upper secondary education, below Chile (68%) but above Mexico (41%), Costa Rica (40%) and Uruguay (34%) (Figure 2.44).
Note: The sample includes 127 economies with available data on GDP per capita adjusted by purchasing power parity and net enrolment rates for 2017, the most recent year for which data from Panama are available.
Source: OECD calculations based on UIS (2025[71]), “Homepage”, https://data.uis.unesco.org/ (accessed on 15 October 2025).
Note: The chart shows the percentage of the population aged 25 and over that attained or completed upper secondary education. This indicator only measures educational attainment in terms of level of education attained, i.e. years of schooling, and does not necessarily reveal the quality of the education (learning achievement and other impacts).
Source: World Bank based on UIS (2025[72]), Educational attainment, at least completed upper secondary, population 25+, total (%) (cumulative) (indicator), https://data.worldbank.org/indicator/SE.SEC.CUAT.UP.ZS (accessed on 15 September 2025).
In 2020, Panama saw 38 500 students graduate from upper secondary education. From these, 22 500 (59%) had followed the academic path while 15 900 (41%) followed the professional and technical path. About 33% of the students following the academic path studied in private institutions, compared to only 9% of technical and professional students. The majority (57%) of academic education students were women, while technical and professional students were mostly men (53%) (Figure 2.45).
By province, Colón had the highest percentage of upper secondary graduates following the professional and technical path, with 58%. This was followed by Darién with 54% and Emberá-Wounaan with 52%. Chiriquí and Herrera were the provinces with the highest share of academic graduates, with 67% each.
Source: OECD calculations based on data from MEDUCA (2020[73]), MEDUCA - Estadísticas Educativas 2020 (database), https://www.datosabiertos.gob.pa/dataset/meduca-estadisticas-educativas-2020 (accessed on 15 June 2024).
Within the academic track, sciences dominated, accounting for about 88% of all graduates from upper secondary education (Figure 2.46). In the professional and technical track, a large share of graduates (32%) specialised in commerce, with young women representing 67% of this group. Tourism (15%) and technology and informatics (13%) were the next most common fields. By contrast, only 294 students graduated in electronics in 2020, which is particularly important for the semiconductor sector, corresponding to just 1.9% of all technical students. This field of study was pursued almost exclusively by men, who accounted for 90% of graduates in electronics. These statistics suggest a considerable potential to develop the pool of talent for semiconductors by incentivising students, notably women, to enrol in and graduate from relevant fields such as electronics.
Source: OECD calculations based on data from MEDUCA (2020[73]), MEDUCA - Estadísticas Educativas 2020 (database), https://www.datosabiertos.gob.pa/dataset/meduca-estadisticas-educativas-2020 (accessed on 15 June 2024).
For more details on the different vocational educational programmes at the tertiary level, please refer to Section 3.3.3 on vocational education and training.
Tertiary education
While secondary education lays a crucial foundation, tertiary education is key to prepare future engineering and STEM-related professionals, as was also emphasised by industry stakeholders consulted in the context of this report. According to the August 2023 labour market survey, 51% of the workers in the high‑tech sector had a university degree, compared to only 20% of workers in the non-high-tech sector.
Source: OECD based on UIS (2025[74]), UIS Data Browser - September 2025 Update (database), https://data.uis.unesco.org/en (accessed on 15 September 2025).
Panama is undertaking significant efforts to improve and expand STEM education at the tertiary level to adapt to semiconductor sector needs. However, recent data and comparisons with other Latin American economies show that important efforts are still required. The percentage of tertiary education graduates in STEM fields in Panama decreased from 16.5% in 2019 to 14.8% in 2023. This figure is still approximately 9 percentage points (p.p.) lower than in Mexico, 8 p.p. lower than in Chile and 3 p.p. lower than Costa Rica (see Figure 2.47).
For more information on the different university programmes currently available in Panama and the number of graduates, see Section 3.3.2.
2.3.2. Demand for semiconductor skills, based on data from other countries
This section provides information on the demand for semiconductor skills. Given that the semiconductor industry is not currently operating in Panama, the analyses are based on data from other countries, namely Indonesia, Mexico and Viet Nam (Box 2.3).
Analysing online job postings from Lightcast provides an indication of the skills and qualifications most frequently sought by employers in the semiconductor sector. This approach provides valuable insights into the evolving demand of the labour market and identifies core competencies needed by firms in the semiconductor sector (North American Industry Classification System [NAICS] code 3344), which may not always be known by policymakers. The job postings analysed in this report are from Indonesia, Mexico and Viet Nam. Out of the 28 999 total semiconductor-related job postings, 26 491 were from Mexico, 1 384 from Viet Nam and 1 124 from Indonesia. The study period is 2020-2022.
The findings come with a few important caveats. One limitation of this analysis is the limited sample of countries. Nonetheless, this allows for a focused study of the semiconductor industry, particularly ATP, which is the main segment present in these countries. Nonetheless, the sample is focused on studying the semiconductor sector since these countries are focused on ATP. In addition, the coverage of online job postings might be affected by several biases, including a bias towards more skilled jobs and the inclusion of jobs only available online. Furthermore, these job postings represent flows rather than stocks. As a result, jobs with high turnover might be overrepresented in the data. Job postings are comprised of traits the employer would like the ideal candidate to possess but may not necessarily be required to be successful in the role.
Most common skills in the semiconductor and other electronics sector
The semiconductor sector requires a blend of generic and specific skills. Generic competencies, such as communication, management and operations skills are the most in demand (Figure 2.48, Panel A). Complementing these generic skills are specific technical proficiencies like manufacturing processes (such as molding, dicing and swaging) (Figure 2.48, Panel B). These specific skills form the technical toolkit necessary to work in the semiconductor sector. The complete list of generic skills is listed in Annex C and the specific skills are listed in Annex D.
Note: Panel A shows generic and Panel B specific skills, where the y-axis corresponds to the number of online job postings by skill in the semiconductor sector (NAICS code 3344). The complete list of generic skills is listed in Annex B and the specific skills are listed in Annex C.
Source: OECD calculations based on Lightcast (2023[75]), “Lightcast Data”, https://lightcast.io/products/data/overview.
Similarities in skills demand across sectors
Specific skills are generally in high demand in manufacturing but are even more prominently required within the semiconductor sector. Figure 2.49 compares the most sought-after skills in the semiconductor and other electronics sector to those in other manufacturing activities. This comparison highlights that communication skills are found in 31% of job postings within the semiconductor sector, compared to 25% in other manufacturing sectors. Additionally, security policies emerge as the most relatively demanded skill, with a 13-p.p. higher prevalence in job postings within the semiconductor sector. This is followed by operating systems (10 p.p.), data collection (10), arithmetic (10), and memos (9).
Note: Panel A shows the frequency share of the 100 most sought-after skills in the semiconductor and other electronics sector (x-axis) and all the other manufacturing sectors (y-axis). Panel B omits the top five skills.
Source: OECD calculations based on Lightcast (2023[75]), “Lightcast Data”, https://lightcast.io/products/data/overview.
In addition, certain skills needs are common across sectors. By computing the distances between sectors based on the most common 1 000 skills associated with the semiconductor sector, it is possible to evaluate similarities in skills demand between the semiconductor sector and other economic sectors.19 Consequently, sectors with which the semiconductor sector competes for talent can be identified. Policy initiatives aimed at fostering human capital development that help enhance such skills, can therefore earn double dividends.
Figure 2.50 shows that motor vehicle parts manufacturing is by far the closest to the semiconductor sector in terms of skill demand. This sector involves the production of components vital for automotive assembly, which tend to require precision engineering and adherence to stringent safety regulations.
Other similar sectors, albeit to a lesser extent, include the manufacturing of beverages and pharmaceuticals, which require competencies related to ingredient sourcing, production processes and packaging, along with cutting-edge R&D. Manufacturing of medical equipment and supplies, as well as the manufacturing of navigational, measuring and electromedical equipment also share similarities with semiconductors and require proficiency in software, precision machinery and electronics assembly.
Note: The Mahalanobis distance serves as a metric for evaluating the similarity between economic sectors. It provides a distance between industries in the skills space, weighting the different skills by the number of job postings in which they appear. The last three sectors of the graph correspond to the furthest to semiconductors. Distances were standardised, with a maximum distance of 1 (between semiconductors and lime and gypsum sectors) and the remaining distances ranging between 0 and 1 relative to the furthest distance.
Source: OECD calculations based on Lightcast (2023[75]), “Lightcast Data”, https://lightcast.io/products/data/overview.
2.3.3. Panama’s labour market developments
The latest labour market survey, conducted in August 2023, pointed to around 18 000 workers in the high‑tech sector. This represents a small share of the overall workforce, with less than 1% of workers. Women constituted 32% of high-tech-sector workers in contrast to 41% in non-high-tech sector. This highlights the potential for women to further contribute to high-tech industries, given their current under‑representation and the ongoing growth in these sectors.
As outlined in Section 2.3.2 on skills demand, the semiconductor sector requires technical expertise and skills. This sector particularly needs technical occupations related to STEM professionals, mid-level professionals in science and engineering, as well as machine operators and assemblers.20 As of August 2023, there were 56 500 workers in these roles in Panama, accounting for approximately 2.9% of the total workforce. The presence of assemblers, which is important in semiconductor ATP, was particularly constrained with only 208 workers in Panama as of August 2023 (Figure 2.51).
The limited presence of assemblers is attributed to the insufficient development of the semiconductor industry, and vice versa. This impedes both the expansion of the semiconductor industry and the development of an adequate skilled workforce. To address this issue, it is essential to implement strategic measures that attract industry investment while simultaneously developing a trained workforce through targeted educational and infrastructural initiatives.
Note: The sample is restricted to those workers considered employed according to Question 30 of INEC’s labour market survey. STEM professionals, science and engineering mid-level professionals, stationary plant and machine operators and assemblers correspond to Categories 21, 31, 81 and 82 respectively, of the National Classification of Occupations of 2010 (CNO). Figures are based on survey data weighted using survey weights. The total number of workers has been extrapolated to align with the size of the total labour force, ensuring comparability across estimates.
Source: OECD calculations based on Encuesta del Mercado Laboral from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Within the high-tech sector, ICT professionals and ICT technicians were some of the most common occupations, together accounting for 21% of high-tech occupations (Figure 2.52). This is explained by the predominance of the computer programming and consultancy sector (see Figure 2.3).
Note: The sample is restricted to those workers considered employed according to Question 30 of INEC’s labour market survey. Only the top ten most common occupations are shown. Figures are based on survey data weighted using survey weights. The total number of workers has been extrapolated to align with the size of the total labour force, ensuring comparability across estimates.
Source: OECD calculations based on Encuesta del Mercado Laboral from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/ (accessed on 15 May 2024).
Panama’s labour market is characterised by a high incidence of informality, affecting 49% of Panamanian workers in 2024. This is slightly higher than the regional average for Latin America and the Caribbean (47.6%) and significantly higher than countries such as Costa Rica (37%) (ILO, 2025[76]). Additionally, the incidence of informality is higher for workers from poor households, amongst the young and the less educated, thereby exacerbating the inequality gap (OECD, 2024[77]; 2017[15]).
Supporting the transition to formal work could help tap into an important pool of talent. Improving access to and quality of education is one of the most powerful instruments to address informality. Simplifying labour market regulations to ensure greater flexibility can also help transition informal workers into formal employment (Deléchat and Medina, 2020[78]).
The incidence of informality varies across sectors. Figure 2.53 shows that, in the non-high-tech sector, 48% of workers are informal. In contrast, 14% of workers in the high-tech sector are informal. This suggests that a significant portion of workers in the non-high-tech sector face less job security and potentially fewer labour protections. Indeed, Figure 2.54 shows that 18% of workers in the non-high-tech sector lack a written contract; this rate is much lower for the high-tech sector, where 2% of workers are without a written contract. The high-tech sector has a higher incidence of workers with permanent contracts, implying greater job stability and formal employment status among its workforce.
The incidence of informality is also evident in salary levels. According to the August 2023 labour market survey, the median salary for informal workers in the non-high-tech sector was PAB 400 (Panamanian balboa) per month, while the median salary for formal workers in the same sector was double that amount. In the high-tech sector, informal workers earned a median salary of PAB 800 per month, compared to PAB 950 for formal workers (Figure 2.55).
Note: Informality is defined as employed non-agricultural workers aged 15 and older without access to social security or without a formal contract, including: private company employees without social security or work contracts; self-employed workers without social security; employers without social security whose businesses have fewer than 5 employees; domestic workers without social security; and family workers. Managers, administrators and professionals who are self-employed or employers are excluded from this definition. The sample is restricted to workers not declared to be owners, and for whom information about the contract type and salary is available. Figures are based on survey data weighted using survey weights. The total number of workers has been extrapolated to align with the size of the total labour force, ensuring comparability across estimates.
Source: OECD calculations based on Encuesta del Mercado Laboral from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Note: The sample is restricted to workers not declared to be owners, and for whom information about the contract type and salary is available. Workers with an open-ended contract according to Question 34 of the Encuesta del Mercado Laboral survey are classified as permanent. Figures are based on survey data weighted using survey weights. The total number of workers has been extrapolated to align with the size of the total labour force, ensuring comparability across estimates. Workers are classified as informal if they are either not affiliated with social security or do not have a written contract. As a result, the share of informal workers is not equivalent to the share of workers without a written contract.
Source: OECD calculations based on Encuesta del Mercado Laboral from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Note: The sample is restricted to workers not declared to be owners and for whom information about the contract type and salary is available. Workers with an open-ended contract according to Question 34 of the Encuesta del Mercado Laboral survey are classified as permanent. The salary corresponds to the median monthly salary. Figures are based on survey data weighted using survey weights. The total number of workers has been extrapolated to align with the size of the total labour force, ensuring comparability across estimates. Workers are classified as informal if they are either not affiliated with social security or do not have a written contract. As a result, the share of informal workers is not equivalent to the share of workers without a written contract.
Source: OECD calculations based on Encuesta del Mercado Laboral from INEC (n.d.[11]), “Publicaciones”, https://www.inec.gob.pa/publicaciones/.
Understanding the determinants of wage evolution and quantifying their impact can inform policy decisions, target interventions to reduce inequality and foster economic growth. Building on the data from the August 2023 labour market survey, it is possible to develop a cross-sectional regression model aimed at estimating wages based on individual characteristics. This model explores the link between wages and fundamental variables such as sex, education level, contract type or age. The model aims to provide a detailed understanding of how different attributes influence wage levels, thereby shedding light on the underlying dynamics of the Panamanian labour market (for more details, see Box 2.4).
The model takes the functional form expressed in the following equation:
where:
is the natural logarithm of hourly wages of individual
is the intercept term
and take the value 1 if the individual has university or secondary education respectively, 0 otherwise
takes the value 1 if the individual is a male, 0 if female
and represent the age and age squared respectively, of individual
is a categorical variable for type of employment contracts, with permanent contract as the base category
takes the value 1 if the individual is a STEM professional or a science and engineering mid-level professional,1 0 otherwise
takes the value 1 if the individual is based in the province of Panamá, 0 otherwise
represents industry fixed effects
is the error term.
The first two explanatory variables capture differences in education attainment, measured by whether a worker has completed tertiary university or secondary education. Positive coefficients on these variables would indicate wage premia associated with higher educational qualifications. Sex is included to account for any disparities between men and women, whereas age serves as a proxy for work experience in the absence of direct experience data. The model also controls for the type of employment contract, as reported in the labour market survey. A STEM indicator is included to assess the wage effects of holding a STEM-related occupation. Finally, a regional dummy variable differentiates between workers in the province of Panamá and those in other provinces and industry fixed effects to account for systematic wage differences across sectors, isolating the contribution of individual and job characteristics. Together, these variables allow the model to quantify how human capital, demographics, job characteristics and regional factors influences wage levels, thereby identifying significant factors contributing to income disparities in the labour market.
This estimation approach relies on ordinary least squares, under the standard assumptions of linearity, homoscedasticity and no multicollinearity (for more details, see Annex E). The data are drawn from the August 2023 labour market survey.
Note:
1. STEM professionals and science and engineering mid-level professionals correspond to categories 21 and 31 respectively of the National Classification of Occupations of 2010. This list is not exhaustive and only contains the STEM-related occupations shown in Figure 2.51.
Holding a STEM-related occupation correlates positively with higher wages compared to non-STEM-related occupations, even after controlling for other factors. Residing in the province of Panamá also emerges as significant. Similarly, male workers tend to receive higher wages on average.
Furthermore, university education proves notably advantageous, as degree holders earn substantially more than those without a university qualification. In contrast, non-permanent contracts (fixed-term, temporary or without a written contract) are generally associated with substantially lower wages than permanent contracts. Finally, age is positively correlated with wages.
These results highlight the importance of investing in education and in addressing informality. Regulators could strengthen labour laws to protect workers with non-permanent contracts, ensuring they receive fair compensation and benefits, and labour reforms could also focus on transitioning temporary workers to permanent positions.
The positive correlation between STEM-related occupations and higher earnings underscores the need to promote STEM education. Policies could include scholarships and targeted educational programmes to encourage more students to pursue STEM fields. Additionally, policies should provide specific support for women pursuing STEM careers, such as mentorship programmes, to retain women in the workforce.
The results of the analysis are promising, but they are limited by their static nature. Acquiring more detailed information across multiple years would facilitate the assessment of the evolution and labour dynamics underlying these results, enabling the provision of more tailored policy recommendations. Furthermore, establishing a stable panel dataset would allow for control of time-invariant individual characteristics (such as having a STEM background) but also time-varying factors (like experience proxied by age), thereby permitting the application of more sophisticated econometric methods.
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← 2. The economies selected in this report are those with the smallest absolute difference in GDP per capita compared to Panama within the Latin American region in 2022, based on data from the World Bank (https://data.worldbank.org/indicator/NY.GDP.PCAP.CD (accessed in April 2024).
← 4. Wafer fabrication is sometimes also referred to as front-end manufacturing; ATP is sometimes also referred to as back-end manufacturing – see Annex A for more details on the semiconductor value chain.
← 5. French acronym for Database for International Trade Analysis (Base pour l’Analyse du Commerce International). The BACI database can present several advantages over the raw UN COMTRADE database, which is the most comprehensive database on world trade, building on data on bilateral trade flows reported by countries to the United Nations Statistical Division (for more information see https://comtradeplus.un.org/). However, while countries report both their imports and their exports through the UN COMTRADE database, mirror flows (which should be identical for the reporting and partner country) between partners may differ. BACI employs a procedure to reconcile flows reported by importers and exporters to provide consistent trade flow estimates (Gaulier and Zignago, 2010[79]).
← 6. Several leading ICT firms, such as Ericsson, Huawei and ZTE, have established operations in Panama under SEM. These companies can benefit from the regime by setting up back-office services in Panama and take advantage of the country’s strategic logistics position to establish distribution centres for product supply in the region. However, these firms do not manufacture any ICT products under SEM regime.
← 7. As a result of the United States-Panama Trade Promotion Agreement, barriers to trade are significantly lessened between the United States and Panama, including the elimination of some tariffs. The agreement is therefore beneficial for semiconductor component imports and exports. The agreement also provides strong protections and enforcement mechanisms for United States trademarks, alleviating potential intellectual property concerns for semiconductor designs (CBA, 2023[80]). However, the long-term impact of the 10% tariff imposed by the United States on imports from Panama in April 2025 remains to be seen.
← 8. The Patent Cooperation Treaty (PCT) makes it possible to seek patent rights for an invention in multiple countries simultaneously by filing a single international patent application (PCT application) with a single patent office. The PCT is administered by the World Intellectual Property Organization (WIPO).
← 9. According to WIPO domains, furniture, games, are part of the same group. For more information on the different patent technologies, see https://data-explorer.oecd.org/s/325.
← 10. This project was financed by the Inter-American Development Bank (with a contribution of PAB 35 million), the Instituto de Crédito Oficial represented by the Spanish Agency for International Development Cooperation (PAB 15 million) and the government of Panama (PAB 6 million). For more information, see https://ensegundos.com.pa/2020/10/27/gabinete-aprueba-financiamiento-para-el-programa-de-acceso-universal-a-la-energia/
← 11. For more information, see https://www.embassyofpanama.org/panama-canal.
← 12. For more information, see https://pancanal.com/.
← 13. The Panama Canal Railway also connects Panama City with Colón alongside the Panama Canal.
← 14. For more information, see https://enterector.gob.pa/proyecto-carretera-panamericana-oeste/.
← 15. https://www.oecd.org/en/about/programmes/pisa.html. Data refer to the 2022 PISA assessment, published by the OECD in December 2023.
← 16. Level 2 is the minimum level of proficiency that all students should reach by the end of secondary education. It is the baseline level of proficiency that students require to participate fully in society. At Level 2, students begin to demonstrate the ability and initiative to use skills in simple real-life situations, for example by using basic mathematical formulae, employing simple scientific knowledge and interpreting simple texts.
← 17. The EF English Proficiency Index is based on the EF Standard English Test (SET). SET is free and online, so anyone with an internet connection can participate. Almost all the test takers are working or young adults finishing their studies and are self-selected, which suggests that the test takers are disproportionately individuals who want to learn English or curious about their English skills. Therefore, the test-taking population is not guaranteed to be representative, and the results need to be interpreted with a lot of caution.
← 18. For more information, see https://www.ef.com.pa/epi/regions/latin-america/panama/.
← 19. “Semiconductors” is defined as NAICS 3344 Semiconductor and Other Electronic Component Manufacturing.
← 20. This list is not exhaustive and only contains four of the most relevant occupations for the sector.