BY ERIC SABO
PANAMA CITY -- Panama seeks to remain Latin America's technology leader by expanding Internet use and drawing in companies to transform the capital into a logistics hub.
The Central American nation replaced Uruguay as having the highest technology level in the region, fueled by a surge of Internet users and computer sales, according to the sixth annual Latin Technology Index from Latin Business Chronicle.
Internet penetration in Panama was up 43 percent and personal computer sales jumped 21 percent, the data show. The index uses 2010 technology data from the International Telecommunications Union, Computer Industry Almanac and the Santiago Chamber of Commerce and population data from the International Monetary Fund and the Population Reference Bureau.
Eduardo Jaen, who heads Panama's National Authority for Government Innovation, attributes the rise to government support for Internet access and success at luring new businesses into the modern capital. More than 60 corporations, including tech giants Dell and 3M, shifted regional headquarters to Panama since a tax exemption law was passed in 2007.
"There's a broad array of companies that have decided to position themselves here and use Panama as a hub," Jean says. "We intend to be ahead of Uruguay for years to come."
President Ricardo Martinelli has made "closing the digital gap" a key priority of his administration. Having established hundreds of free Internet hot spots around the country, the government will start offering discount loans to help workers buy a computer. About 21 percent of Panamanians currently have at least one computer at home, according to 2010 census data.
Martinelli's administration began offering free computers and Internet access in schools, which helped move Panama up one notch on a separate technology index comprised by the World Economic Forum.
Even so, much of the Internet growth is driven by multinational corporations and small start-ups that move to Panama because of lower tax rates and cheaper operating costs.
Panama eased requirements for starting a business in 2007, and some 35,000 individuals and legal entities have since registered as a Panamanian company online, according to government figures. Among those are a growing number of young American web developers and movie production crews that are demanding faster Internet.
Roman Kogan, who runs Internet service provider PaNetma, says that his business has grown 150 percent from last year.
"You can get cheap Internet anywhere, but you can't run a business if it's slow or unreliable," says Kogan, whose company offers connection speeds up to twice as fast as Cable Onda and Cable & Wireless, Panama's two largest providers.
He blames a lack of competition for Internet costs that are higher in Panama than in the United States.
"It's about 20 times more expensive to get a signal connection from Miami to Panama than it is from California to Japan," Kogan says.
Still, Panama's Internet rates are competitive with other Latin American countries and many find they can save money while running a successful business out of the endless sky rise buildings that pop up in Panama City.
"The Internet here is quite reliable and fast enough," says Jesse Schoberg, who moved his web development company, LJ Host, from Madison, Wisconsin to Panama in 2009. Rent, food and basic living expenses are all less than in his home state.
Meanwhile, wireless networks connected by BlackBerries and iPhones allow him to keep working on remote beaches and in the mountains, he added.
"You have the perfect storm for Internet entrepreneurs who want a high quality of life," says Schoberg.
Internet penetration and computer sales are expected to climb as Panama's economic growth outpaces the region. Backed by an expansion of the Panama Canal, finance officials predict at least 9 percent growth this year.
The boom has caused an envious problem: too many companies are understaffed. While unemployment hovers above 9 percent in the U.S., Panama's is 5.4 percent, leaving banks and other industries that rely on technology without enough workers. Officials say they are looking at ways to attract foreign skilled labor, which should propel further Internet use and computer sales.
While Panama's Internet is up to speed now, the basic tech infrastructure needs improvement to handle more online traffic, said Mario Ernesto of Solusoft, a Panama-based company that is advising the government how to convert paper records to digital formats.
It will need to improve fast. Martinelli is investing heavily in construction to fuel growth, more companies are moving in, and hotels including the Trump Ocean Club and Hard Rock are opening their doors to tourists who want to check email.
"We are advancing," says Jean of Panama's technology agency. "The government is committed to growth."