Jon Subinas (CIEPS, Panamá)
Panama’s modern democracy was born under the shadow of the U.S. invasion in the late 1980s. In the 1990s, a new social and political order took shape, centered around the handover of the Panama Canal and bolstered by the subsequent expansion of the interoceanic route. Now, 35 years later, that order is under threat from a Trumpist shift in U.S. foreign policy that seeks to reclaim control over the Canal, effectively ending decades of stable cooperation between Washington and Panama. Trump’s new geopolitical approach abandons soft power in favor of aggressive strategies reminiscent of a more imperial past.
The 1989 U.S. invasion, known as “Operation Just Cause,” ousted the Noriega regime and, by 1990, replaced military leadership with a civilian government backed by the White House. A decade later, Panama regained control of the Canal, and in 2006, a national referendum approved its expansion. That marked the beginning of an economic boom that transformed the country and earned it the nickname “the Latin American Singapore.”
Panama’s democratic system, once praised regionally in indexes such as Freedom House, The Economist’s Democracy Index, and the Konrad Adenauer Foundation’s Democratic Development Index, had benefited from political alternation between two major parties—the Democratic Revolutionary Party (PRD) and the Panameñista Party. However, this pattern was disrupted by the emergence of Ricardo Martinelli, whose leadership signaled a break with the previous bipartisan balance.
By 2019, Panama’s development model began to show signs of fatigue, with slowing economic growth. In 2020, the COVID-19 pandemic caused a dramatic 17.9% contraction in GDP, triggering the worst economic crisis in decades. This collapse shattered long-standing political and economic equilibria and led to the largest popular protests in Panama’s democratic history—one in 2022 over price hikes driven by the war in Ukraine, and another in 2023 against a mining contract later declared unconstitutional.
Panama’s political and economic system had long been weakened by two deep-rooted problems: persistent inequality—well documented by sociologist Charles Tilly and reflected in data from the World Income Inequality Database—and widespread perceptions of corruption. The blunt words of magistrate Alberto Cigarruista of the Tribunal de Cuentas echo strongly here: during a 2022 budget hearing in the National Assembly, he remarked, “In this country, we all steal.”
Since the 2024 elections, the new government has faced four major challenges within a shifting Latin American geopolitical landscape increasingly marked by the U.S.’s return to hard power tactics.
Domestically, the administration has been forced to address a pension crisis after one of the two public pension subsystems ran out of contributors, leading to a severe financial deficit. The controversial reform triggered a general strike and widespread protests. Internally, President José Raúl Mulino also faces the thorny issue of former President Ricardo Martinelli—once the dominant figure in his party, but barred from running due to a corruption case just as the campaign began (leading to Mulino’s candidacy). Martinelli is now in political asylum in Colombia, and his future role in national politics remains uncertain.
The third major challenge involves the Donoso copper mine, one of the largest in the world, which was shut down after Panama’s Supreme Court ruled its operating contract unconstitutional. In December 2024, Canadian mining company First Quantum met with President Trump to seek mediation. The company has since paused international arbitration to allow for renewed dialogue. Given Panama’s precarious fiscal situation, the temptation to reopen the mine is clear, but public opposition is strong—polls in 2025 show that over 60% of the population rejects any reopening. This decision will be crucial for the country’s political stability.
The fourth and most serious challenge is the escalating pressure from the Trump administration. Since his inauguration, President Trump has publicly stated his intent to retake control of the Panama Canal, accusing China of exerting undue influence over the strategic waterway—a claim that is easily debunked. Yet the threats had immediate effects: Panama quickly pulled out of trade agreements with China, including the Belt and Road Initiative, and agreed to accept deportees from the U.S. before their final repatriation.
More recently, the Panamanian government signed a controversial memorandum of understanding with U.S. authorities that, according to critics, allows the installation of American military bases, increases the U.S. military presence in the Canal Zone, and grants free passage to U.S. vessels through the Canal—all of which appear to violate existing neutrality treaties. Despite these concessions, Trump’s threats have not stopped. On the bright side, however, Panama now features less prominently in his public rhetoric: during his inauguration speech, six of the nine foreign references were to Panama—an indication of the country’s central place in Trump’s foreign policy agenda.
In this volatile context, Panama and the international community must recommit to multilateralism and the rule of international law. The Panama Canal is a critical node in global trade and logistics, with over 80% of the world’s goods transported by sea. The political and economic battle being waged in Panama has global consequences, and the world must not look away.