Caribbean & Central America - August 2026

On 10 June Lina Ajoy, a seasoned Costa Rican diplomat, was appointed by the Central American Integration System (Sica) as its next secretary general for 2026-2030. She fills a post vacant since November 2023 following the resignation of Nicaragua’s Werner Vargas. The first Costa Rican and woman to hold the post, Ajoy’s appointment was possible after all Sica members except Nicaragua, which was due to hold the post from 2022-2026 and whose choice of candidates had been repeatedly rejected by other members, voted to amend the rules, eliminating the need for a unanimous consensus.

Ajoy’s appointment represents a boost for Sica which, founded in 1991 after years of civil wars and armed conflicts in Central America, describes itself as “the primary institutional framework for regional peace, liberty, democracy, and economic development”. However, it comes amid disputes between Sica members, while the controversy over appointing a successor to Vargas highlighted Nicaragua’s isolation in the region. Alarm over the authoritarianism of the government led by co-presidents Daniel Ortega and his wife Rosario Murillo has been expressed by countries such as Guatemala, Honduras, and Panama, which are angling for closer ties with Washington.

Ajoy, whose term begins on 9 August, was appointed at a meeting which included several heads of state and senior officials, including Guatemala’s leftist President Bernardo Arévalo, Honduras’ conservative President Nasry Asfura, El Salvador’s Vice President Félix Ulloa, Costa Rica’s Vice President Francisco Gamboa, and Nicaragua’s joint foreign ministers, Denis Moncada and Valdrack Jaentschke. With 27 years of diplomatic experience, which most recently saw her serve as Costa Rica’s ambassador to El Salvador from 2018-2026, Ajoy has also previously represented Costa Rica at Sica and in Belize, and held posts in Nicaragua and Canada.

Ajoy’s appointment was significant given the post has been vacant since the sudden departure of Vargas, a career diplomat, who, after being appointed in August 2022, was due to serve until 2026. The reasons for his resignation were not made public although pundits cited by media outlets such as Nicaragua’s independent Artículo 66 linked it to a purge by the presidential couple of government officials suspected of disloyalty [SSR-25-10]. Since then, Sica’s member states (Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, and the Dominican Republic) had been unable to agree on a successor, with Nicaragua facing pushback on all of its proposed candidates, who were reportedly deemed to be too close to Ortega and Murillo. Moncada was the last candidate to be proposed by Nicaragua, with his candidacy rejected in November 2024.

The institutional impasse lasted until 24 April this year, when, at a meeting of Sica foreign ministers in the Dominican Republic, which Nicaragua did not attend, those present voted to remove the requirement for a consensus among all Sica members, establishing the need for a qualified majority instead. This effectively removed the veto powers of member states, which Nicaragua had used to block the appointment of a new secretary general from a different country.

In a report released on 22 June, regional think tank Centro de Estudios Transdisciplinarios de Centroamérica (Cetcam) expressed optimism that Ajoy’s appointment could “inject new momentum into the organisation”, while nonetheless outlining various challenges that Sica has faced in recent years. These include El Salvador’s withdrawal from the Central American parliament (Parlacen) – Sica’s political arm – in September 2025 [SSR-25-09]; “emerging geopolitical challenges in the region” including relations with the US; and “the need to advance the Association Agreement between Central America and the European Union”, which came into force in May 2024, and is aimed at fostering trade, cooperation, and political dialogue [EB-25-08].

More recently, Sica was dealt a blow when, on 30 April, Honduras announced its withdrawal from the Central American court of justice (CCJ), which is also part of Sica, citing “institutional reorganisation and cleaning up of public finances”. Honduras’ decision to leave the CCJ, whose founding statute dates back to 1992, followed that of Nicaragua in March 2025, which complained that it only comprised judges from Nicaragua, Honduras, and El Salvador, and so failed to “fulfil the original purposes of its creation as a regional judicial body”. This followed earlier tensions between Nicaragua and its neighbours over Sica, and was in line with the country’s withdrawal from other regional bodies such as the United Nations Human Rights Council and other UN bodies last year [SSR-26-04], as well as the Organization of American States (OAS) which it formally left in 2023.

Costa Rica-Panama trade spat

In one instance of intra-regional disharmony, Costa Rica’s new President Laura Fernández, who took office in May, has revived tensions over a trade dispute with Panama. In December 2024 a World Trade Organization (WTO) arbitration panel ruled in favour of Costa Rica over a dispute stemming from measures imposed by Panama in 2019 and 2020 that restricted or prohibited the import of products such as strawberries, dairy products, meat products, pineapples, and bananas from Costa Rica. Costa Rica had formally requested consultations in January 2021, claiming Panama’s measures violated multiple obligations under the WTO’s Agreement on the Application of Sanitary and Phytosanitary Measures and the General Agreement on Tariffs and Trade (GATT 1994). Panama appealed the decision in January 2025. The case remains in limbo as the WTO appellate body has been paralysed since 2019 due to the US’ blocking of new judges to it.

Tensions flared up on 15 May just a week after Fernández took office, when, speaking during a visit to an agricultural area in Cartago province, she described the dispute as “an absolute priority for me”, and said Foreign Minister Manuel Tovar had been tasked with using “the mechanisms of international diplomacy and international actions” to resolve the dispute.

Her comments prompted anger by Panama’s President José Raúl Mulino, who responded by suspending plans to sell electricity to Costa Rica. In his weekly press conference on 21 May, Mulino declared that “this is an important issue for Costa Rica, but it is also important for Panama, and my duty is to protect Panamanians”. Mulino also appeared to level criticism at Fernández, saying that “international relations require a great deal of prudence”, and “a pulpit, a podium, or a press conference is not the place for me to make statements that directly affect the relationship between two countries.” 

OAS concern over Nicaragua

On 23 June the Organization of American States (OAS) general assembly adopted a declaration on Nicaragua in which it expressed its “deep concern over the deterioration of the human rights situation and the systematic erosion of the democratic order in the country, characterized by the weakening of the separation of powers, the closing of civic space, and widespread human rights violations and abuses documented by international human rights mechanisms”.

Impact of Costa Rica-Panama spat

According to a report published on 23 June by Panamanian media outlet La Prensa, based on information from Costa Rican authorities, the Costa Rica-Panama trade dispute has led to 26 dairy and meat processing plants lacking access to the Panamanian market, which has generated losses of over US$100m for Costa Rica’s export sector.