The Panama lessons for Small States
For Discussion: Watch the talk by Isabel de Saint Malo de Alvarado, Vice-president and Minister of Foreign Affairs of Panama and discuss the lessons Panama provide for other small states. As Ricardo Hausmann of Harvard points out, is importing talent a quicker way to develop than investing in education? See also the growth diagnostic carried out by Harvard team and the recent growth assessment by IMF.
So while most policy-makers and experts focus on the importance of education for boosting growth in the region, Hausmann thinks the solution lies elsewhere. “If we want to build our countries, we have to be able to absorb the talent of the world. But our legislation and attitudes to immigration are preventing this.”
Our findings indicate that skilled labor, necessary to gradually diversify into more complex and higher value-added activities, is relatively scarce. This scarcity manifests into large wage-premiums to foreigners across all occupations, which are particular large within more complex industries. Major investments in education have improved indicators of schooling quantitatively, but quality remains a major concern.
The growth diagnostic exercise confirms that Panama is well-placed to maintain its business model. The results of the diagnostic suggest that the most important challenge will be to advance reforms to the education system to ensure that the system is able to supply workers with the skills demanded in Panama’s economy. In particular, addressing existing skills gaps will be key to moving up the value chain in services. Reducing bureaucracy and strengthening governance can also have important growth dividends