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November 9, 2024
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Reactivation of Construction is key for CSS, employment and investments at the national level

At a time when the future of the Social Security Fund (CSS) is being debated, the Construction sector represents a concrete opportunity to inject resources into the institution while improving the outlook for jobs and investments, according to the latest Conjunctural Analysis of the independent economist Luis Morán.

The construction industry in Panama is going through a significant crisis, with a drop of 35.8% in August 2024 compared to the same period of the previous year, according to recent data. This situation affects one of the country’s main economic drivers, generating a reduction in tax revenue, job losses and an increase in the housing deficit, especially in the social interest segment, according to Morán.

According to the analysis, construction has historically been a key pillar for economic development, representing an important source of jobs and stimulating multiple sectors. However, according to Morán, factors such as the increase in interest rates, the elimination of tax benefits for preferential housing and the State’s late payments to construction companies have reduced its growth, affecting both companies and citizens. who depend on these job opportunities and access to housing.

Layoffs and State Delinquency

The deterioration of the sector has led to massive layoffs, affecting 17,500 direct jobs and generating a contraction in the activity of municipalities that depend on taxes from construction. In addition, the lack of State payments to construction companies has exacerbated the crisis, preventing many of these companies from maintaining operations and active jobs, the analysis reveals.

Increase in Housing Deficit and Expansion of Informal Settlements

The crisis in the construction sector has also had a direct impact on access to housing for thousands of Panamanian families. Lack of access to financing for social housing can lead to an increase in informal settlements, where many families face inadequate housing conditions, with limited drinking water, electricity and sanitation services.

Currently, in the interior of the country, 70% of applications to buy a home have been rejected due to the increase in the minimum income necessary to qualify, which went from B/.570 to B/.750. This situation makes it even more difficult for families to access adequate housing and an opportunity to improve their quality of life.

Proposals to Reactivate the Sector and Expand Access to Social Interest Housing

To confront this crisis, Morán considers it urgent to implement a series of measures that will reactivate the sector and increase access to social housing, such as:

  1. Focus tax benefits for social and preferential interest housing so that more families can qualify to buy their first home.
  2. Create a stabilization fund for the sector with the support of financial entities to provide loans at subsidized rates to developers of social interest projects.
  3. Expedite State payments to construction companies so that they can maintain jobs, meet suppliers and reinvest in projects.
  4. Establish public-private alliances to build affordable housing on State land, which would expand the supply of formal housing in the country.

Author: Luis Morán, Economist

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