Think Regional, Act Local

This focus on commerce and trade is crucial to understanding Panama’s relations with both the region and the wider world; it has some of the lowest import tariffs in Latin America and is known for its liberal trade and investment regimes. The country has an export-oriented economy and is already a dynamic international hub for such activities as shipping and banking.

For a great deal of recent history, much of Panamanian diplomatic engagement with its neighbors was related to the effort to gain regional support in negotiations with the US over renewing the Canal treaty, when Panama needed to negotiate a strong hand, which the US sought to undermine. There were, of course, incidents that further strained US-Panamanian relations. It is not forgotten in Panama City that the US invaded Panama in 1989 to overthrow its former ally, military ruler Manuel Noriega, over his use of the country as a link in the drug trafficking chain.

Panama looks more actively outward now. As an example of regional cooperation, the government of President Juan Carlos Varela has made significant policy improvements in terms of improving cooperation with international organizations, tracking flows of money, and strengthening the local police. Under the auspices of its role in the Organization of American States (OAS), Panama will also host the Seventh Summit of the Americas in April 2015. Sharing responsibility in confronting the threat of organized crime and drug trafficking will feature high on the agenda, and efforts to implement the Central American Security Strategy, which will mainly take place through regional mechanisms, will surely be seen as a regional effort.

Panama also engages its neighbors through its membership in The Association of Caribbean States (ACS). Founded in 1994 in Colombia, the ACS is tasked with the objective of promoting consultation, cooperation, and concerted action between all the economies of the Caribbean. With the growth of the Panamanian and neighboring middle classes, tourism between Latin American nations is becoming high priority. Otto Pérez Molina, President of the Republic of Guatemala, describes the issue this way: “Tourism is one of the sectors that sees a kind of monopolized trade relationship between Panama and Guatemala; however, I see an interesting potential in infrastructure projects and energy (including renewable energies), as well as many others.”

Slightly further afield, Panama is also joining the club of nations known as the Pacific Alliance. Francisco Álvarez de Soto, Minister of Foreign Affairs, told TBY that, “Joining the Pacific Alliance is a normal and natural move for Panama, a country that has been moving forward in terms of regional trade integration. In this context, we are already partners with the founding members of the Alliance and we aim at closing a future agreement with Mexico, a country with which we have also had long historical ties.” One example of the Pacific Alliance at work is the increasing coordination amongst trade representatives and export promotion agencies. While competitors in specific market segments, their collective economic growth benefits from a degree of coordination and collaboration. There are also visa waivers issued for skilled labor, jointly managed education programs, and zero level tariffs for 90% of the bloc’s trade. There are tangible benefits to adopting a regional—and global—rather than inward looking approach. And Panama is well placed to reap the rewards.