Nearshore Americas

Panama City Well-Positioned To Serve Financial Service Needs

In the early 2010s, the Central American country of Panama and its capital Panama City, in particular, were seen as the future of business process outsourcing (BPO) in Latin America. Companies flocked to set up shop in Panama City – but in the last two years the number of BPO investments seem to have fallen. The last significant investment announcements were in 2014, when US outsourcing firm iQor launched a call center there and APAC Customer Services expanded its operations by hiring an additional 100 workers.

Panama itself is caught in the economic woes of the region, despite growth of 5.8% in quarter 2 of 2015, with expected total growth of 6.1% for the year as a whole. According to Focus Economics, “Operations at the Colon Free Trade Zone are expected to contract by 15% this year as many of Panama’s main trading partners, including Colombia and Venezuela, are now facing weaker growth and currency devaluation.”

The services sector, however, has a great deal of potential, and in particular there is growth in the financial services arena. Focus Economics noted in October: “Ongoing strength in Panama’s diverse service-oriented sectors and substantial public investment will continue to foster growth across the economy.”

Opportunities in Financial Services

Its dollar-based economy has unusually made Panama a financial services hub in the past and Panama continues to be a significant player in this space. In 2012 a World Economic Forum report placed Panama second globally in the affordability of financial services and fourth in availability of financial services. However, in the 2014-2015 WEF rankings, Panama had slipped to 18th in affordability of financial services and 16th in availability. It is ranked 48th overall on the Competitiveness rankings.

Andy Efstathiou, Banking Sourcing Research Director at Nelson Hall, said that Panama is still well-positioned to meet the evolving needs of the financial services outsourcing market. “Financial services companies are changing the mix of services that they are looking for. Panama has delivered well in those areas in the past,” he said.

Efstathiou explained that financial institutions have faced a ten-fold increase in the cost of compliance and the legal process outsourcing (LPO) services that can be acquired from Panama are well-positioned to support outsourcing on some of the compliance requirements.

Retail banking industry is looking to expand its range of service offerings for the mass marketplace in the area of payments and more complicated services such as wealth management. “They are looking to support Spanish-speaking marketplace in the US and Panama has the skill sets and capabilities in the call center space for not just English services but also for Spanish-speaking services,” he said.

There are challenges, however. Efstathiou emphasized that banks are requiring aggressive cost reductions so vendors really cannot look to the bank for investment. Vendors will therefore have to invest in automation and IT support for service delivery and be aggressive about continuous process improvement in order to meet cost requirements, he said.

“No matter how good you are today, you have to continually invest and improve performance or efficiency of delivery over time,” he said. He highlighted the need to invest in automation – with the emphasis on increasing value rather than simplistic cost reduction – and analytics, specifically developing analytics scripts and analytics support.

Consolidating Software Development

Financial services outsourcers are not the only ones finding opportunities in Panama City. The city has also grown its software development offerings over the last 10 to 15 years. Logic Studio, a Panama City-based software development company, has offered ITO services since 2003 from their main offices in Panama, with branches in Ecuador and Peru through over 100 software developers.

“Panama City has a small but dynamic economy and many international enterprises have found the opportunity to expand to the Latin American setting for their headquarters here,” said Alex Sánchez, Founder and Manager of Logic Studio.

“For local companies the need to project their services overseas is a must. Logic Studio has accomplished this for over 12 years for major enterprises such as ACE, Sage, Todo1, among others. We found the secret to success thanks to the alignment of honesty, excellence, commitment and hard working, all common core values of the American culture.”

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The services sector has benefited from Panama city’s location relative to the Panama Canal, which itself is nearing completion of the expansion started in 2007. There are challenges, however, as its labor force of 1.563 million comprises a large unskilled base with a growing shortage of skilled workers, vital to the IT services sector.

As the City of Knowledge (Cuidad de Saber), Panama City has an established base of technology companies and the needed training institutions and universities situated in its International Technopark. The City of Knowledge offers tax and immigration benefits as well as infrastructure and technical, administrative and consulting services to service providers and affiliates.

Bianca Wright

Nearshore Americas Contributing Editor Bianca Wright has been published in a variety of magazines and online publications in the UK, the US and South Africa, including Global Telecoms Business,, SA Computer Magazine, M-Business,, Business Start-ups, Cosmopolitan and ComputorEdge. She holds a MPhil degree in Journalism from the University of Stellenbosch and a DPhil in Media Studies from Nelson Mandela Metropolitan University.

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