Table of Content
Business environment in Panama
Political Legal factors
The need for international expertise into different organizations is a great necessity. The international business has progressed to demonstrate increasing complexity overtime, which has led to the interactions and transactions across national boundaries. This is actually the key difference between international companies and domestic companies. However, as a new international staff specialist moving into Panama to work with Lewis Global works Co., Inc., I intend to gather as many information as possible to establish the basis and analysis for the opening of a production facility in the country.
Lewis Global works Co. Inc. is an organization specialized in the production of a variety of consumer products which include textiles, computers and auto parts.
The assessment of the impact of political, economic, environmental, socio-cultural and other external influences has an effect on the policy of an organization and its undertaking. A form of analysis that can be used to review the organizational environment is the PEST-analysis, which is sometimes known as STEP-analysis. This is a useful tool for understanding what is entailed in an environment, the opportunity, and threats within it. By understanding such environment, it is easier to take advantage of the opportunities and minimize every available threat whatsoever. However, this paper will report the basis of my decision in considering the opening of a production facility using taxonomy in relation to technical, cultural, economic, political and legal aspect of the environments.
Business Environment in Panama
Doing business in Panama shows a total ranking on the ease of doing business based on some indications sets that measurer and benchmark regulations that apply to domestic small to medium-size businesses through their life cycle.
Panama’s economic freedom score is 64.1, making its economy the 68th freest in the 2015 Index. Its score has increased by 0.7 point since last year, with improvements in six of the 10 economic freedoms.
1-Indicators of doing business in Panama
According to data collected by Doing Business, starting a business in requires 5.0 procedures, takes 6.0 days, costs 6.4% of income per capital and requires paid-in minimum capital of 0.0% of income per capital. Globally, Panama stands at 38 in the ranking of 189 economies on the ease of starting a business. The rankings for comparator economies and the regional average ranking provide other useful information for assessing how easy it is for an entrepreneur in Panama to start a business. Figure 1.1 shows a picture of the summary indicators of the comparison of good practice of Panama within 2014 -2015 and region for 2015
During 2014 Panama made starting a business was easier by eliminating the need to visit the municipality to obtain the municipal taxpayer number. Panama made paying taxes easier for companies by changing the payment frequency for corporate income taxes from monthly to quarterly and by implementing a new online platform for filing the social security payroll.
The data on labor market regulations are based on a detailed survey of employment regulations that is completed by local lawyers and public officials. Employment laws and regulations as well as secondary sources are reviewed to ensure accuracy.
Fig. 1.1: the summary indicators of the comparison of good practice of Panama.
To open a new business in Panama you have to consider some factors that will impact your development. These factors are:
- Taxes on product and services
- Employment Laws
- Political Stability
- Govern Policy and Economy
The Political Constitution of the Republic of Panama recognizes and protects work as both an individual right and obligation. “The State shall promote full employment policies and guaranty to all employees the necessary conditions for a decent life. The Political Constitution also grants the following: the right to a minimum salary, and to periodic adjustment thereof; the right to nondiscrimination and to equal jobs; the right to form unions and to strike; the right to limit the daily work shift to a maximum of 8 hours and the weekly work schedule to a maximum of 48 hours”.
The Political Constitution establishes a special Labor Jurisdiction to handle all labor controversies and expressly precludes the waiver of any rights granted in favor of workers. Finally, the Political Constitution declares that the rights and guarantees recognized in the Political Constitution are the minimum ones afforded to workers in Panama.
Panama’s economy is growing rapidly. Panama has experienced an average growth of 8.7% annually over the last decade, with positive growth maintained during the global economic downturn. Growth in 2012 reached 10.7%, the highest in Latin America, before slowing slightly to 8.5% last year. Forecasts predict Panama will show the greatest expansion in Latin America once again in 2014. An unemployment rate of 4-4.5% effectively represents full employment. Panama has a diversified economy, including a well-developed service sector, centered on the Panama Canal, related logistics and distribution services, and its large international financial center. Services account for around 80% of GDP.
Some economic factors are:
- Higher the interest rate lowers the investments
- Economic Growth in terms of GDP
- Inflation Rate
- Exchange rate
Figure 2: Inflation rate years 2006-2014
The overall regulatory environment is efficient, but the pace of reform has slowed in recent years. With no minimum capital requirements, starting a business takes six days and five procedures. Despite some improvement, the labor market lacks flexibility. The financial sector remains open to investment and has been shielded from the global financial crisis by prudent regulations.
Company is very affected by social factors because them forces the request of the society.
Some social factors to keep in mind are:
- Education level
- Emphasis on safety
- Religion and beliefs
- Average disposable income level
- Population growth rate
- Attitudes toward work, career, leisure and retirement
- Attitudes toward customer service and product quality
This company has to keep in focus all technological factors in order to keep his business safe. It has a large variety of products so technology has an impact on them
Some of technological factors to keep in focus are:
- Risk of selecting the wrong technology at times of change (i.e. windows -v- open
2- New computer viruses may affect operations
3- Technology change
4- Time to manage IT systems
The political and economic aspects as indicated in the earlier discussions have revealed a set of environment that will essentially encourage further investments in the Panama. This analysis shows the advantages of making such environmental study for businesses. The economic factors have established the potential of the market. The social factors have presented the demands on which the company should act in accordance with so as to maintain the loyalty of its major customers. On the other hand, the technological factors represent the opportunities in which the company could market the service. By identifying opportunities I suggest that the company should be opened in Panama.
- n.d.). Retrieved July 28, 2015, from http://www.doingbusiness.org/~/media/giawb/doing business/documents/profiles/country/PAN.pdf
- Newsletter – TerraLex Connections – A Primer on Panama’s Labor & Employment Law. (n.d.). Retrieved July 28, 2015, from http://www.terralex.org/publication/p80128a914f
- (n.d.). Retrieved July 28, 2015, from https://www.gov.uk/government/publications/overseas-business-risk-panama/overseas-business-risk-panama#political-and-economic
- (n.d.). Retrieved July 28, 2015, from http://www.imf.org/external/pubs/ft/scr/2014/cr14157.pdf
- (n.d.). Retrieved July 28, 2015, from http://www.heritage.org/index/pdf/2015/countries/panama.pdf
- DataBank Error Page. (n.d.). Retrieved July 28, 2015, from http://databank.worldbank.org/data/views/reports/tableview.aspx