As Panama re-emerges from the socioeconomic crisis generated by the COVID-19 pandemic, technology will be key to economic recovery. While the pandemic outbreak has forced many businesses to close and raised unemployment rates, some companies in Panama have been able to adapt to the new circumstances, in many cases boosting their sales and operational capacity. Here, three Panama tech companies that will emerge stronger from the pandemic are highlighted.
With consistent growth in its gross domestic product (GDP) and low inflation over recent years, Panama is considered a high-income country with a business-friendly environment that saw it score a high 92.0 in the 2020 World Bank’s Doing Business report. The Central American nation recorded more than $6 billion (all figures in USD) of foreign direct investment (FDI) inflows in 2019, stimulated by a territorial tax system in which only income earned within the country is taxed.
Furthermore, Panama has the lowest value-added tax (VAT) and income tax rate in Central America and has an advantageous location, connecting South and Central America while being home to the famed Panama Canal, which generates an estimated 8% of the nations’ GDP, with roughly 14,000 cargo ships using it to transit between the Pacific Ocean and the Caribbean Sea annually.
In addition, Panama is a popular destination for expatriates to live and develop new businesses, due to its politically stable government and strong banking sector with high privacy guarantees. As such, a Panama business visa is well sought over.
If you are considering doing business in Panama, or have already established a company in the country, learning about three Panama tech companies that are expected to grow after the pandemic might provide you with helpful ideas on how to adapt to Panama’s ‘new normal’ for business.
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The impact of the pandemic on Panamanian business
According to a socioeconomic analysis of the impact of COVID-19 in Panama (PDF download) carried out by the United Nations Development Program, the sectors most affected during the lock downs imposed during April and May were mining and construction, which reported total shutdowns resulting in estimated losses in revenue of $89 million and $529 million respectively, compared to during the same months a year earlier.
Likewise, the country’s manufacturing industry saw an estimated 50% reduction in output during those month, exceeding $89 million in losses. For the transport, storage, and communications sector, a similar 50% drop in production saw economic losses of more than $254 million. Other sectors severely affected by the restrictions imposed by the health authorities include agriculture, livestock, and fishing, which saw losses of more than $20 million, and real estate, business, and rental activities, whose losses were estimated at more than $63 million.
Other local industries affected by the pandemic include the hospitality sector, where 60% of the workforce is female, and the wholesale trade sector, with production losses at close to 42%. In addition, according to a study carried out by Alegra, between March and April the sales of micro, small and medium-sized enterprises fell by 62% in relation to the previous months.
Panama tech companies: industries that saw growth
E-commerce and logistics activities were the sectors that grew the most during the toughest months of the pandemic in Panama. According to a report published by Spain’s government, “Electronic Commerce in Panama 2020,” e-commerce in the Central American nation recorded a growth of 12% between 2014 and 2019. However, in the aftermath of the pandemic, the sector was expected to achieve growth of 41.1% and sales of $270 million by 2024. Currently, 58% of the population in Panama uses the Internet and there are 137 mobile phone subscriptions for every 100 inhabitants, according to figures from the Inter-American Development Bank.
Driven by the growth of e-commerce in the country, the logistics industry — responsible for the transport of products and merchandise — saw an increase in its operations due to the large number of products that were sold through e-commerce platforms. According to figures from the Panama Maritime Authority (AMP), the country’s ports registered a container mobilization of 3.1 million 20-foot containers, which meant a growth of 12.2% in comparison with the same period of the previous year.
According to the World Bank, for the year 2021, a slight recovery is expected, driven by an improvement in trade flows, the recovery of various sectors associated with the Panama Canal, and upturns in the mining and construction sectors, as well as improvements in domestic consumption and investments.
Top 3 Panama tech companies to watch
The following Panama tech companies have grown during the pandemic and should be expected to continue on their upward trajectories in 2021:
Fygaro allows small- and medium-sized companies to digitize themselves in order to sell their products on the internet, through the use of payment links for social networks and the use of digital invoices. Fygaro’s operation is connected with local banks, courier companies, and other types of companies, to offer a more complete service and support businesses to take that important first step towards their digital transformation.
With more than 15,000 businesses from Central America and the Caribbean registered on its platform, according to Isaac Rochwerger, founder of the company, during the months of the pandemic, his team has managed to establish conversations with different governments of Latin American countries to promote the company and help more companies in the region to adapt to the new business conditions imposed by COVID-19.
In October 2020, Fygaro was selected as the best tech company among the more than 300 contenders from more 27 countries around the region, during the Visa Everywhere Initiative (VEI), thanks to its innovative services to help companies face the challenges of the future.
ASAP was one of the first technology companies in Panama that began providing delivery services for people and businesses. This mobile messaging application allows its users to receive products and services quickly and safely. ASAP’s approach is not only to deliver a product to the end-user but also to support the logistics chain with its own motorcycles and cars.
During the first months of the pandemic, the use of mobile applications grew exponentially to reduce the risk of infection and this allowed companies like ASAP to offer their services to a larger market. According to Alan Friedheim, founder of ASAP, the company’s team grew by 200% during the pandemic, as delivery services became increasingly seen as a necessity rather than a luxury.
La Casa de las Baterías
La Casa de las Baterías (The House of Batteries) began as a company that sold car batteries for the general population, however, in recent years it has begun to market solar panels for residential houses and office buildings to support energy savings in the country and abroad and support government effort to increase the use of renewable energy in urban and rural areas.
It is expected that companies such as La Casa de las Baterías will grow considerably in the coming future since the energy bill in Panama has increased considerably in recent years. In addition, La Casa de las Baterias has managed to cope with the demand during the global pandemic, offering its services through e-commerce platforms so that people can buy their products virtually.
Digital technology: an ally in the midst of the pandemic
In November 2020, Panama was recognized by the Organization of American States (OAS) and the Inter-American Development Bank (IADB) for the government’s digital response to the pandemic –known as “Panama Solidario” — which facilitated support offered to the most impoverished communities, and promoted the use of information and communication technologies among public entities.
In addition, during the pandemic, tech companies in Panama offering online payment technologies such as Yappy from Banco General of Panama, Nequi, or PayU increased considerably.
Biz Latin Hub can support you doing business in Panama
At Biz Latin Hub, our team of experienced company formation agents is equipped to help you enter the Panamanian market and take advantage of the country’s growing tech scene. With our full suite of corporate legal, accounting, and back-office services, our multilingual team is equipped to deliver excellence and ensure the success of your commercial expansion in the country.
Get in touch with us today today for personalized assistance.
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