Bi-Directional Foreign Direct Investment in Thesis

Yet, what is important to accomplish at this stage is the presentation of the direct effects of the foreign direct investments. If these impacts materialize in growths of the Panamanian economy, it will be safe to conclude that the country reveals an efficient bi-direction foreign direct investment system. In this order of ideas, the following lines reveal some of the most notable impacts of FDIs onto Panama's socio-economic status (they are written in bulleted form to increase readability and clarity):

The first and foremost important impact was given by the massive investments made in the enlargement of the Panama Canal; the effects of such an endeavor were tremendous. On the one hand, the enlarged canal offered greater opportunities for traffic, which in turn materialized in greater revenues from offering services in the canal. Then, this enlargement translated into an increased demand for workforce, which in turn created new jobs, reduced unemployment rates and improved the living standards of the population.

But the socio-economic effect of job creation and unemployment rate reduction was felt in virtually all domains which received foreign direct investments, not just the enlargement of the Panama Canal

The foreign investors who exported the products made in Panama also traded in Balboa, increasing as such the stability of the national currency

The foreign investors brought in new technologies and as such supported the country's alignment to it developments

The FDIs set the context for the training of national employees, who benefited from advantages of professional formation

All the above point out extensive levels of economic and social development. In a nutshell then, nothing is safer to say than that Panama enjoys the benefits of an efficient and effective bi-directional system of foreign direct investments, through which the alien investors have made significant contributions to the growth and development of the Panamanian economy and society."Foreign direct investment is one of the principal drivers of Panama's booming economy, which according to the U.N. Economic Commission for Latin America and the Caribbean (ECLAC) will have the highest growth rate in the region this year" (Reuters, 2007).

Despite all the incentives and benefits of the bi-directional foreign direct investment, fact remains that the stability of the system could be disrupted by the impediments to FDI in Panama. These basically refer to the following:

The Panamanian legislations forbids foreigners from owning land within the country, element which significantly limits investment opportunities for those foreigners who would like to increase their safety net through the possibility of purchasing land

Then, the plants opened in Panama enforce strict rules of employment; for instance, at least 90% of the blue collar employees must be native Panamanians; foreign companies were also restricted from firing employees, but these restrictions were lifted in 1995

The final barrier is posed by the judicial system, which is extremely slow, the personnel is insufficiently trained and skilled and the entire system is sensitive to external influences; basically, corruption continues to affect the Panamanian judicial system (SICE, Foreign Trade Information System)

References:

Woolford, P., Panama Has the Highest Foreign Direct Investment to GDP Ratio in Latin America, Panama Real Estate Investment, 2008, http://panamarealestateinvestment.org/2008/08/04/panama-has-the-highest-foreign-direct-investment-in-latin-america / last accessed on October 28, 2009

Panama, SICE -- Foreign Trade Information System, http://www.sice.oas.org/ctyindex/USA/ftbpan1999_e.pdf last accessed on October 28, 2009

Panama: Country and Foreign Investment Regime, Low Tax, 2009, http://www.lowtax.net/lowtax/html/jpacfir.html#forinv last accessed on October 28, 2009

Panama FDI Grows 19% in First-Half 2007, Reuters, 2007, http://www.reuters.com/article/economicNews/idUSN1928223720070919 last accessed on October….....