Panama - Foreign Relations

For historical, geographical and economic reasons, Panama has a very close relationship with the US. Under the 1977 Torrijos - Carter treaties, sovereignty of the Canal was handed back to Panama on 31 December 1999; the US withdrew all troops; and military installations were returned. The Neutrality Treaty, also signed in 1977 grants expeditious passage to US warships, and calls for US and Panama to defend the Canal from any threats.

Threats to the Canal under the Neutrality Treaty where invoked by President Bush Senior to justify 1989 invasion of Panama. Unlike the Torrijos - Carter Treaties the Neutrality Treaty has no expiration date. The Treaty of Monteria signed in 1979 with Colombia and The San Jose Declaration, exempt government owned ships from Colombia and Costa Rica from payment of tolls. Links with Colombia are stretched from time to time with the presence on Panamanian territory of Colombian paramilitaries and guerrilla groups. Occasional skirmishes occur between the latter two and the Panama police force in the Darien region.

For the last two years Colombian Customs (CC) have unilaterally imposed restrictions on goods coming from the Colon Free Zone (CFZ). CC now requires that goods from CFZ enter Colombia only through the Port of Barranquilla if goods are shipped and only through Bogota if goods are transported by air. Other restrictions include list of goods and countries that are not subject to normal customs valuation procedure. Instead minimum prices and benchmarking valuation to local products are used. Panama considers measures inconsistent with Colombia’s WTO obligations, mainly MFN Treatment (Art II of GATT), Freedom of Transit (article V of GATT) and breach of the Customs Valuation Agreement.

Panama has participated alongside the other five Central American countries in talks to reach an association agreement. In order to comply with the EU’s requirement to negotiate jointly with the rest of Central America, Panama will have to overcome two major obstacles in order to access the negotiations. First, it will have to sign the protocol of accession to SICA (Permanent Secretariat of the General Treaty on Central American Integration) and agree on a common customs union. However, the negotiations are moving slowly overall.

Panama was one of the few countries to have diplomatic relations with Taiwan, which is an important source of aid, as are Japan, Spain and the EU. Panama and Taiwan signed a Free Trade Agreement (FTA) in 2003, which took effect from January 2004. Panama does not expect any change in its relations with Taiwan or China, a senior official from the isthmus nation said 31 December 2016, despite increased pressure from Beijing on Taiwan’s allies to sever ties. Taiwanese President Tsai Ing-wen visited Latin America, against a tense backdrop after news of her phone call with US President-elect Donald Trump angered China.

“Relations with Taiwan are good, in excellent condition as always,” Panama’s Deputy Foreign Minister Luis Miguel Hincapie said in an interview. “They’ve been a cooperative partner of Panama for many years, and will continue to be so.” Hincapie said: “We have relations with Taiwan, the United States does not ... so it’s an issue for the United States.” Since the mid-1990s, almost a third of Taiwan’s allies have broken ties. It now has formal relations with just 21, mostly smaller and poorer nations in Latin America and the Pacific.

The Panama –Singapore FTA of 2005 was one of the first bilateral FTAs signed by Singapore with a Latin American country. The Panama- Taiwan FTA was also Taiwan’s first with a Latin American country. Panama also has a FTA with El Salvador (2003). In the Americas, only Panama and Chile have negotiated a FTA bilaterally with the US. All other FTA’s negotiated by the US in the American continent have been multilateral. The Panama–US FTA, which was signed in Washington on 28 June 2007 is still pending US Congress ratification. Panama concluded FTA negotiations with Chile, Honduras, Costa Rica and Guatemala. The FTA between Panama and Nicaragua is pending ratification from the Panamanian National Assembly. Together with its neighbors, Panama also negotiated a Political Dialogue and Co-operation Agreement with the EU, which was signed in Rome on 15 December 2003.

Panama is a member of the UN General Assembly and most major UN agencies. It maintains membership in several international financial institutions, including the World Bank, the Inter-American Development Bank, and the International Monetary Fund.

Panama is a member of the Organization of American States and was a founding member of the Rio Group. Although it was suspended from the Latin American Economic System--known informally both as the Group of Eight and the Rio Group--in 1988 due to its internal political system under Noriega, Panama was readmitted in 1994 as an acknowledgment of its democratic credentials.

Panama is a member of the Central American Integration System (SICA). It is in the process of withdrawing from the Central American Parliament (Parlacen). Panama joined its six Central American neighbors at the 1994 Summit of the Americas in signing the Alliance for Sustainable Development, known as the Conjunta Centroamerica-USA or CONCAUSA, to promote sustainable economic development in the region.