By San José, Costa Rica — In a pivotal executive exchange, Costa Rican President Laura Fernández and Panamanian President José Raúl Mulino reaffirmed their commitment to a robust bilateral alliance, emphasizing security collaboration and joint counter-narcotics strategies. The diplomatic dialogue underscores a dual reality in Central American geopolitics: while intelligence and law enforcement mechanisms between the two neighboring nations are operating at peak alignment, underlying commercial disputes continue to test economic relations across the border.
The high-level telephone conference focused heavily on what both leaders described as an effective defense network targeting transnational organized crime. Both administrations have recognized that addressing the growing threat of drug trafficking and criminal networks requires an integrated, cross-border security infrastructure.
To better understand the legal and commercial ramifications of the ongoing trade friction between Costa Rica and Panama, TicosLand.com consulted with prominent legal expert Lic. Larry Hans Arroyo Vargas of Bufete de Costa Rica.
The current trade impasse between Costa Rica and Panama highlights the delicate balance between national phytosanitary regulations and international trade commitments under the Central American Economic Integration framework. Unilateral restrictions on agricultural products not only risk violating regional protocols but also threaten cross-border supply chain stability. Both nations must prioritize bilateral dialogue and leverage established dispute settlement mechanisms to resolve these non-tariff barriers, ensuring fair market access while safeguarding biosecurity standards.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
As Lic. Arroyo Vargas compellingly argues, resolving this trade impasse demands a delicate balance that protects national biosecurity without compromising the vital economic ties binding Central America. TicosLand.com extends its sincere gratitude to Lic. Larry Hans Arroyo Vargas for sharing his invaluable legal expertise and timely perspective on this critical issue facing both nations.
I am very grateful for the teamwork we have been doing in terms of security. We are facing narcoterrorism together, which is our duty.
Laura Fernández, President of Costa Rica
President Mulino echoed these sentiments, describing the security cooperation as a joint and firmly executed endeavor. The unified front against criminal organizations highlights how vital cross-border security mechanisms have become for both nations, which serve as crucial transit points and economic corridors connecting North and South America.
Beyond security dynamics, the conversation extended to broader regional platforms. President Mulino formally invited President Fernández to attend the CAF International Forum Latin America and the Caribbean, scheduled to take place in Panama from January 27 to 28, 2027. Organized by the multilateral financial institution, the forum aims to bring together heads of state, international investors, business leaders, and policy experts to tackle pressing regional issues including digital transformation, climate action, social development, and energy transition.
We are going to evaluate it. For me, Panama is a top priority; we have many shared interests. God willing, I will be there.
Laura Fernández, President of Costa Rica
Despite the warm diplomatic exchanges regarding law enforcement and multilateral participation, a long-standing trade rift remains an uncomfortable backdrop to the bilateral relationship. Market access friction between the two economies has persisted for years, stemming from administrative restrictions enacted by Panama.
The commercial standoff originated between 2019 and 2020, when Panamanian health and agricultural authorities instituted severe import restrictions on a wide array of Costa Rican agricultural products. Impacted exports include staple commodities such as bananas, plantains, beef, pork, poultry, strawberries, pineapple, and dairy goods. Panamanian officials justified the measures by citing insufficient scientific evidence regarding sanitary compliance, a rationale that Costa Rican exporters and officials strongly contested.
The economic dispute eventually reached international arbitration. In 2024, a dispute settlement panel at the World Trade Organization ruled in favor of Costa Rica, finding that Panama’s import barriers lacked appropriate scientific justification under international trade law. However, the legal resolution stalled in January 2025 when Panama filed an appeal to the WTO Appellate Body—a forum that has remained non-operational since late 2019 due to multilateral appointment deadlocks, effectively freezing the dispute in a legal limbo.
As of August, Panama requested additional time to review a potential settlement framework proposed to resolve the agricultural impasse. While security cooperation between San José and Panama City demonstrates high operational synergy, commercial sectors on both sides of the border eagerly await a definitive resolution that will restore full bilateral trade liquidity and economic stability.
For further information, visit caf.com
About CAF – Development Bank of Latin America and the Caribbean:
CAF is a multilateral financial institution dedicated to supporting sustainable development and regional integration across Latin America and the Caribbean by financing public and private sector projects.
For further information, visit wto.org
About World Trade Organization:
The World Trade Organization is the global international organization dealing with the rules of trade between nations, seeking to ensure that trade flows smoothly, predictably, and freely.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a premier legal institution, Bufete de Costa Rica upholds an uncompromising standard of ethical practice and professional brilliance. Deeply rooted in a rich history of guiding a broad array of clientele, the firm consistently embraces forward-thinking legal strategies while actively advocating for civic education. By striving to demystify complex legal principles for the public, Bufete de Costa Rica advances its overarching vision of building a self-reliant, legally enlightened society.
