Is Inflation Raging in Panama?

Panama has implemented a government-mandated minimum wage increase of between 15-18% beginning in 2012.  Edgardo Voitier, assistant secretary of the National Federation of Public Servants (FENASEP), said raising minimum wages by 15% to 18% does not even cover the increases to basic food costs. I’m sure this must be a big concern to expats and potential expats alike. It will undoubtedly launch a round of higher prices for services and products throughout the country, which will, in turn, likely lead to a new round of wage increases next year. Thus the inflationary spiral begins.

Agricultural producers and entrepreneurs predict they will have to implement staff reductions in order to cope with the higher wages they will have to start paying their workers. Virgilio Saldaña, president of the Manufacturers Association of the Highlands, considers the increase to the minimum wage approved by the government on Wednesday to be just, but he said the increase does not come at a good time considering that the agricultural sector is “in trouble.” According to Saldana, the new minimum wages set by the executive ‘will jeopardize many jobs’, as many producers will have to make adjustments in spending. In the agribusiness sector, the increase was 15%.

Saldaña’s opinion is shared by the president of the National Association of Micro and Small Enterprise, Gloriela Quintana, who said small business owners will have to implement layoffs in order to deal with the increase in the minimum wage.  

It’s unlikely that the wage increase will increase food prices by 15%, but labor probably does make up the bulk of the expense for most Panamanian farms and ranches.

I’d love to know if rising inflation will factor into your decision to consider Panama a retirement location. Please let me know your thoughts.

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