Caribbean & Central America - November 2025
PANAMA: Lawmakers approve move to join Mercosur as associate member
On 9 October lawmakers unanimously approved a bill which ratifies an economic agreement between Panama and South American trading bloc Mercosur that will see Panama join as an associate member.
Agreed in December 2024 at a summit in Uruguay’s capital, Montevideo, associate membership means that Panama gains preferential trade access, such as tariff reductions, rather than free market access, but does not have voting rights in Mercosur institutions. The country joins Chile, Peru, Colombia, Ecuador, Guyana, and Suriname in becoming an associate member of Mercosur, which counts Brazil, Argentina, Uruguay, Paraguay, and Bolivia as full members. The agreement establishes a joint legal framework that will improve safety and transparency for businesses; a framework designed to encourage investment; and a programme to boost economic cooperation. A free trade agreement has also been floated, which would eliminate tariffs and export restrictions on certain goods and services
Panama’s minister for trade and industry, Julio Moltó, said the move reflects the vision of President José Raúl Mulino. “Panama is moving with conviction towards more regional integration, while always looking out for the interests of the country and its economic producers.” said Moltó, who believes that the move will increase exports in areas such as frozen fish, seeds, and cereals; attract investment; and boost the logistics sector. Following the approval of the bill, and Mulino’s signing of the new law, Moltó said that a new commission will be created in conjunction with the private sector and bilateral negotiations will begin with individual Mercosur countries. Any future agreement will have to be approved by the national assembly, he added.
The move comes at a time when Mulino is balancing geopolitical pressures centred around the Panama Canal, with the US and China stepping up an ongoing battle for influence. While the Mercosur deal is unlikely to significantly influence this great power competition, it could be useful for Mulino, with Brazil’s President Luiz Inácio Lula da Silva already underlining his support for Panamanian sovereignty and announcing plans to join the Treaty of Permanent Neutrality of the Canal.
- Boosting ties with Brazil
In a meeting which took place in Brazil at the end of August, delegations headed up by Presidents Lula and Mulino signed two memoranda of understanding. One was between the Panama Canal Authority (ACP) and Brazil’s ministry of ports and airports which commits the two sides to undertaking joint initiatives to maintain cooperation aimed at promoting the exchange of information and experiences relevant to the management of ports as well as maritime and fluvial transport logistics. The other was between Panama’s agriculture development ministry and Brazil’s agriculture and livestock ministry and seeks to stimulate broad development in the areas of agriculture and livestock systems. It focuses on the exchange of information, experiences and agricultural inputs among other things.
These early signs are encouraging, but the overall impact of Panama’s new status is far from certain. While its accession to Mercosur as an associate member may improve market access for Panamanian exporters, and it could help to attract investment from Mercosur nations keen to use Panama as a gateway to Central America, trade officials will need to identify strategic niches to maximise the potential benefits. The impact will also be tied to Panama’s success in navigating geopolitical tensions and balancing great power competition in order to attract the significant investment necessary to execute strategic infrastructure projects, such as a proposed interoceanic gas pipeline and a new reservoir to improve water security at the Panama Canal, which are needed to secure its position as a logistics hub.