The trade dispute between Panama and Costa Rica intensified significantly in mid-2026, evolving from a multi-year agricultural standoff into a prominent diplomatic and energy-sector conflict.
The Federation of Chambers and Associations of Commerce of Central America (Fecamco) expressed its concern regarding trade conflict that keeps Panama and Costa Rica apart due to protectionist measures on dairy and meat products.
The primary catalyst for the recent escalation was the inauguration of Costa Rican President Laura Fernández in May 2026. Fernández immediately declared the trade blockade a top national priority. In response following the strong rhetoric from the Costa Rican administration, Panamanian President José Raúl Mulino suspended a highly anticipated plan to sell electricity to Costa Rica, invoking the principle of international reciprocity. Costa Rica’s state power company minimized the impact, stating the country has enough internal capacity to power through 2026 without importing Panamanian energy.
The differences formally reached the World Trade Organization, which at the end of 2025 issued a final ruling in favor of Costa Rican interests, which was not complied with by the Panamanian government under the premise of safeguarding the interests of its national agricultural sector. Since 2019–2020, Panama has blocked major Costa Rican agricultural exports, including dairy, beef, pork, poultry, strawberries, pineapples, bananas, and plantains. Panama argues these are necessary technical and phytosanitary safeguards (relating to the health of plants and measures used to control plant diseases, pests, and invasive species) to protect domestic farmers.
Fecamco asserts that this refusal to lift the restrictions has triggered an unnecessary verbal confrontation between neighboring governments that tarnishes the region’s economic integration. It calls for the unrestricted defense of the free market and the elimination of tariff barriers that hinder the fluidity of intraregional trade.
The President of Fecamco, Arturo Rosabal, stated, “The border barriers imposed by the Panamanian authorities are not a current phenomenon, but a long-standing historical controversy that at one time prompted international arbitration.”
By late 2026, Fecamco has urged both nations to transition away from aggressive media rhetoric and return to free trade agreements. Costa Rica has recently submitted an objective bilateral proposal to Panama’s Ministry of Commerce. The proposal aims to fast-track market access for specific Panamanian goods in exchange for lifting the agricultural bans, allowing both nations to bypass the paralyzed WTO appellate framework.
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