Spanish investment in Central America favors Panama. The country is the EU’s leading investor in the Central American nation.

After a short period of stagnation, coinciding with the pandemic and the post-pandemic period, Panama again stands out as the nation with the most Spanish investment in Central America. Furthermore, the former country has consolidated its position as one of the leading destinations for FDI in Latin America and the Caribbean, after the sizable markets of South America and Mexico.

Panama will be one of the nine in Latin America countries where Spanish investment will increase in 2023. This is according to the latest report from IE University, ‘Panorama of Spanish investment in Latin America.’

Spanish investors prefer Panama

The report highlights Panama as the country with the best economic performance, not only because of its ability to react to the Covid-19 crisis but also because it belongs to the list of preferred ‘offshore’ destinations for Spain. The country leads growth projections in Latin America, according to Spanish businessmen. Panama is preferred ahead of other countries in the region, such as Uruguay, the Dominican Republic, Mexico, and Colombia. Spanish companies especially value the security and air connectivity of this market, and, in addition, Panama City ranks as the second preferred regional metropolis to reside in for businessmen seeking to augment Spanish investment in Central America.

Spanish firms also highlight the importance of legal certainty in Panama, its favorable regulatory framework for investment, and the boost the country’s government gives to public-private partnerships. In addition, numerous conventions and agreements between Spain and Panama reinforce a clear framework for investment. These include the Double Taxation Agreement, signed in 2010, and the Agreement for the Promotion and Reciprocal Protection of Investments, which has been in force since 1998.

Panama is, by far, the Central American country with the most significant presence of Spanish companies and investment projects. Spain is the third global investor and the first European in this Central American market. More than 400 companies are present there, notably in the infrastructure sector, but also in renewables and, increasingly, in tourism.

Spanish investment in Panama is significant

Spanish companies in Panama include OHLA, Acciona, Grupo Puentes, ACS, Naturgy, Indra, Mapfre, Meliá, Barceló, NH, Riu, Evenia, Ayesa, Iberia, Abanca, Air Europa, Duro Felguera, San José, Copisa, Ortiz, Iberdrola, Elecnor, Ecoener, Sur de Renovables, Cox Energy, Inelsa and Avanzalia. In addition, Telefónica sold its subsidiary in the country in 2019. In recent months, Grupo Puentes won a contract for 250 million dollars to expand a section of the Pan-American Highway to six lanes. In addition, Naturgy has announced that it will inject 450 million in electricity distribution through the Panamanian Empresa de Distribución Eléctrica Metro-Oeste (Edemet) and Empresa de Distribución Eléctrica Chiriquí (Edechi), controlled by the Spanish company.

According to the latest World Bank projections, Panama will lead the growth in Central America and the Caribbean, together with the Dominican Republic, with a positive rate of expansion of 5%, with mining production and tourism as significant engines of growth. ECLAC forecasts a lower increase, of 4.2%, after 7.4% last year, when Panama recovered from the strong impact suffered in 2020 by the restrictions imposed on mobility and economic activity by Covid. In 2022 there was a reactivation of trade, construction, and tourism activity in the Colon Free Zone, improvement of operations in the Panama Canal, mining, and sectors of agricultural activity, according to Panamanian government data. As a result, Panama has grown at an average rate of 6.3% during the last twenty years. This is the highest growth rate in Latin America. GDP expanded by 15.3% in 2021, driven by the Canal, after falling 17.9% in 2020.

Sectoral opportunities for Spanish investment in Central America

Spain is also one of Panama’s most important trade partners. The latter is a country that offers, according to ProPanama, “advantageous investment opportunities for Spanish businessmen, from the traditional sectors of tourism and agriculture to the digital sector or through the Energy Transition Strategy. It also holds a prominent position as a logistics hub ‘ and its infrastructure places the country as the ideal place for ‘nearshoring.’” Among the opportunities at a more concrete level is the Canal’s plan to invest 1.8 billion dollars in its new water management system. Additionally, the Ministry of Economy plans to promote eight projects with a public-private partnership, including rehabilitating the Pan-American highway from Las Garzas to Yaviza.

Last February 2023, the Panamanian government identified eight areas for developing investment opportunities through a map prepared with the UN Development Program (UNDP) and aligned with the Sustainable Development Goals. The Minister of Trade and Industry, Alfaro Boyd, explained that the initiative seeks to identify business opportunities and models that have significant potential to promote the SDGs with substantial financial returns for investors. In addition, he pointed out that public-private partnerships are essential for sustainable development. Areas identified for investment include renewables, agri-food, health, and infrastructure.

Trade and investment between Mexico and the United States have become one of the main doors that allow for strengthening Latin American startups and helping to open new opportunities for the region’s other countries

In addition to helping boost the countries’ economies, relations between Mexico and the Central American nations are also advantageous since many businessmen see Mexico as an excellent (investment) door for access to the rest of Latin America. Undoubtedly, this signifies a boost for those entrepreneurs who want to cross borders with their business ideas.

Miami is a bridge for Latin American startups

An example is the case of Miami, which is currently beginning to position itself as the bridge city that connects the Latin American region with the United States. Connecting Miami’s know-how and economic power in creating startups in Latin America and ecosystems with ingenuity is a great point of departure for creating new entrepreneurial economic activity.

On the other hand, a study by Endeavor and Glisco shows that in 2022, Mexico was one of the markets in Latin America that received the most significant amount of capital from startup investors. The country registered almost 75% of the investments made in the region, along with Brazil.

In this sense, both Mexico and the city of Miami are key locations to open the doors for entrepreneurs to new markets. These include investment funds from Latin America, such as Newtopia VC, which pays special attention to the region to strengthen relationships between entrepreneurs and investors in Latin American startups.

The increase in investment made in Mexico represents an opportunity to attract capital to startups from other countries in the Latin American region. For example, according to data from the Costa Rica-Mexico Chamber of Industry and Commerce ( Cicomex ), Mexican investment in Costa Rica exceeds 1.5 billion dollars. Additionally, large-scale investors such as SoftBank, which has offices in Mexico and dozens of regional investments, recently stated that even with the current situation, they would continue to support investment in Latin America. This confidence attracts more investors to bet on the region and new Latin American startups.

In the case of Miami, the startup ecosystem is one of the fastest growing in recent years, attracting many founders, technological talent, and venture capital funds. For example, venture capital activity could mobilize $25 billion by 2030 if it follows the same trend as other cities such as Los Angeles and New York.

However, entrepreneurs must have the necessary advice to benefit from the new investment opportunities within their reach to achieve this goal as startups in Latin America. In a conversation with Diego Noriega, Managing A Newtopia VC partner, he shared how his organization wants to strengthen relationships between the investment and entrepreneurship ecosystems for the entire Latin American region from the bottom up.

Latin American Entrepreneurs require tools to succeed

Noriega points out, “We want to give entrepreneurs the tools to be prepared for their next investment phases. So, it is important that startups in Latin America are equipped with techniques to obtain new rounds of financing, perfect execution, growth, and development for their businesses. They also require tools to align partners and teams and a high quality and variety of contacts from other entrepreneurs and investors that may be key in the future.”

These types of activities allow the promotion of greater unity among the countries of Latin America and the elimination of borders and barriers that may exist between them to establish a more robust entrepreneurial ecosystem that adds much more value. Such a network of entrepreneurs opens doors to other markets and continues attracting foreign capital to developing countries with excellent innovation capacity.

Mexico is a Latin American startup leader

In the case of Mexico, one of the countries with the most substantial number of entrepreneurs in Latin America, its ecosystem is characterized by its culture of business resilience. The country’s rapid technological advances have led large companies such as Santander, IBM, HP, and Tesla to bet on talent in the country’s main cities.

Regarding this, the principal executive of the Spanish bank Santander in Mexico recently declared that “there is a lot of optimism regarding Mexico because we are the neighboring country of the United States. The issue of nearshoring is something you hear about everywhere nowadays.”

It is anticipated that 2023 will see an increase in investment in startups in Latin America compared to previous years and that investors will pay more attention to sectors such as fintech, e-commerce, and business software

Finally, Miami is an attractive destination for collaboration by Latin American startups due to its strategic location, growing business ecosystem, cultural diversity, favorable business policies, and access to financing.

Ecuador’s dollarization system recently celebrated its anniversary. Twenty-three years ago, this past January, Ecuador adopted the US dollar as its official currency after the worst financial crisis the country had ever experienced.

Fiscal and monetary stability

Despite the external shocks that have affected the country in the last two decades, dollarization in Ecuador has generated monetary and financial stability, This is according to Guillermo Avellán, manager of the Central Bank of Ecuador (BCE).

Despite the limitations of dollarization in Ecuador, several national and international experts recognize the benefits generated by this monetary regime, especially for low- and middle-income countries, with institutionality and political stability challenges, Avellán added. In addition, they consider that monetary policy and the issuance of a local currency are oversized in terms of benefits for this type of country.

What are the benefits of dollarization in Ecuador?

According to the Central Bank of Ecuador, dollarization allowed the country to:

1. Combat a fiscal lack of discipline. The government of Ecuador cannot issue money with dollarization. The correction of fiscal deficit can only be done through financing via loans or taxes. Foreign loans currently impose conditions of budgetary discipline. This obliges the Ecuadorian government to balance the fiscal accounts and conduct better-quality spending with a more significant social impact.
2. Achieve price stability. After dollarization, inflation in Ecuador began to decrease rapidly. From 96% per year in 2000, according to World Bank figures. It declined to 37% in 2001 and 12% in 2002. Since then, it has stayed within 10% per year. Ecuador has an inflation rate of 3.74%, one of the lowest in the region. With the US dollar as its official currency, Ecuador has access to a more stable financial system, which has boosted investor confidence and attracted foreign investment.
3. Reduce poverty levels. According to a 1999 World Bank study, the poverty levels based on consumption stood at 44.8% in 1998. According to the National Institute of Statistics and Censuses (INEC), the income poverty rate in Ecuador in 2021 was 27.7%.
4. Increase citizens’ purchasing power. Before dollarization, the devaluation of the sucre, Ecuador’s old currency, inflation and inorganic money issues affected the middle class with fixed salaries. Since there was no permanent compensation for wages, poverty increased. The new system brought price stability, confidence in the international market, and high GDP per capita, which allowed people’s purchasing power to grow.
5. Increase trade: Using a stable, internationally recognized currency has made it easier for Ecuador to trade with other countries, as there are no longer concerns about the currency’s value or the risk of currency fluctuations.
6. Greater transparency: Using the US dollar gives Ecuador access to a more transparent financial system, making it easier to track financial transactions and combat corruption.
7. Lower transaction costs: Dollarization has reduced the transaction costs associated with exchanging currencies, making it easier and cheaper for Ecuadorians to do business with other countries.
8. Generate conditions for investment and growth. Dollarization brought economic stability to the country. Today, not only is it sustained by a solid financial system, remittances, exports, oil, and commodities, but its great pillar is trust. Trust is evident in international markets, the real estate sector, the financial system, and Ecuadorians’ support and acceptance. Using the US dollar gives Ecuador access to a more transparent financial system, making it easier to track financial transactions and combat corruption.

Recovered International Reserves

Currently, the strengthening of dollarization in Ecuador is a reality, Avellán said. At the most critical moment of the pandemic, the country’s International Reserves were below USD 2 billion, allowing only 25% of the deposits of public and private financial entities with the ECB to be covered with liquid assets. However, at the end of 2022, the International Reserves exceeded USD 8.3 billion, allowing 100% coverage of these deposits.

Avellán added that, in this context, the BCE is called upon to be the custodian of dollarization in Ecuador and guarantee its institutional autonomy to achieve three fundamental objectives:

1. Consolidate monetary stability through the technical management of investments.
2. Manage the central payment system.
3. Guarantee the supply and circulation of coins and bills at the national level.

Overall, dollarization in Ecuador has positively impacted the country’s economy, helping to stabilize it and attract foreign investment, leading to increased economic growth and improved living standards for its citizens.

There are forty-seven call centers in Honduras. These operations currently generate more than seventeen thousand jobs in total. Seventy percent of this activity occurs in the Altia Smart City, a development established and managed by GK in San Pedro Sula.

Call centers are increasing in Honduras’ second-largest city, San Pedro Sula. This is because the nation’s largest bilingual population is concentrated in this city of 956,000 inhabitants.

Concentrix has recently opened a new operation in San Pedro Sula

This past February 14, Concentrix’s new recruitment and career development center, which also operates in Altia, north-west sector, was inaugurated on the third level of Mega Mall, Boulevard del Este in San Pedro Sula.

Concentrix is a leading global provider of customer experience technology and solutions. In Honduras, it began operations in 2013. The company has over 300,000 employees in forty countries. Ten of its operations are located in Latin America.

Manfred Alvarez, vice president of Concentrix Honduras, explained that they design, build and operate the entire customer service experience for more than 150 companies and 120 instructor companies worldwide.

In the new call center in San Pedro Sula, applicants will be trained and educated in careers in technology, quality control, and other related areas. Later they will be hired by the same company. Interested candidates must know English and have at least a high school degree. The training is free.

Alvarez assured that the call centers in Honduras and the service outsourcing industry continue to boom. Evidence of this is that in 2022, existing companies expanded, and two new companies that generated 1,500 new jobs were welcomed to San Pedro Sula.

“The Honduran service market is mainly oriented to serve the United States market. The services exported from Honduras and GK’s Altia Smart City are various. Call centers in Honduras provide customer service, chat assistance, medical translations, insurance services, collections, virtual assistant aid, IT services, and programming, among others”, he explained.

Call centers in Honduras are well positioned

“Honduras is a country that has proven to be of high value in the nearshoring market due to its proximity to the North American market and also due to the high quality of its human resources, cultural affinity, and the ability to provide excellent customer service through its call center operations,” he pointed out.

Among the factors that call centers take into account when deciding to invest in Honduras is the competitiveness of the market, the country’s risk factor, the ability to grow, the availability of adequate infrastructure to meet their needs, and legal security, among other considerations.

It is also worth noting that one of the great benefits of this industry is the substantial number of jobs that it creates for mainly young Hondurans. It is a primary requirement that applicants that wish to work in call centers in Honduras are at least 18 years of age and speak English. The companies that employ this workforce invest in training and other benefits such as performance bonuses.

Call centers in Honduras can potentially change the future of new generations by providing decent and good paying jobs in a great work environment in modern facilities and competitive salaries,” Alvarez emphasized. He also noted that the government’s support is essential for this industry to continue growing in San Pedro Sula and other urban communities in the country.

The vice president of Concentrix pointed out that one of the keys to the growth of call centers in Honduras is that government makes investments to improve the country’s human capital. “It is imperative that the government promote bilingual education programs. This initiative could change the future of thousands of Hondurans who do not speak English. We are fully willing to make alliances with the government to support these key initiatives.”

A Spanish-speaking call center employee in Galerias del Valle shared that the flexible schedules of the call centers in Honduras allow workers to study to further their education and personal development.

Establishing a call center in San Pedro Sula offers investors benefits

Among the benefits of installing a call center in San Pedro Sula, Honduras, are the following:

Cost savings: San Pedro Sula offers lower operating costs than other countries in the region, making it an attractive location for businesses seeking to reduce expenses.

Access to a bilingual workforce: Honduras is home to a large English-speaking population, which makes it an ideal location for businesses that require bilingual agents to service clients in North America.

Government incentives: The Honduran government offers incentives to foreign investors, including tax breaks, reduced customs duties, and simplified procedures for setting up a business.

Cultural affinity: Honduras has a shared cultural heritage with North America, including a strong work ethic and a focus on customer service. This can help businesses establish strong relationships with their clients.

These factors make San Pedro Sula, Honduras, an attractive location for businesses seeking to establish a call center and expand their regional operations.