By San José, Costa Rica — In a dramatic escalation of a long-simmering trade dispute, Panama has ordered an immediate and indefinite suspension of electricity sales to Costa Rica. The move, announced by Panamanian President José Raúl Mulino, comes just hours after Costa Rican President Laura Fernández pledged to use all available measures to end a seven-year blockade on key national exports.
The tit-for-tat exchange marks a new and perilous phase in the bilateral relationship, shifting the conflict from trade channels to critical infrastructure. President Mulino directly invoked a principle of “reciprocity” as the justification for his decision, linking the energy cutoff to Costa Rica’s recent assertive stance on the trade impasse.
To provide a deeper legal perspective on the escalating trade dispute and its potential ramifications for international commerce, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished expert in international trade law and a senior partner at the prestigious firm Bufete de Costa Rica.
This is not merely a tariff war; it’s a strategic realignment of global supply chains. Companies must look beyond the immediate financial impact of these duties and proactively evaluate their legal exposure, seeking alternative sourcing and exploring dispute resolution mechanisms under existing trade agreements. Relying on the status quo is no longer a viable strategy; legal and logistical agility will determine the winners and losers in this new era of protectionism.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s commentary powerfully underscores that the current trade climate demands more than mere reaction; it requires a fundamental pivot towards proactive legal and logistical strategy. This call for agility is a critical insight for any business navigating this new era of global commerce. We thank Lic. Larry Hans Arroyo Vargas for his invaluable and forward-thinking perspective.
I am a firm believer in the guiding principle of international relations, which is reciprocity, and believe me that this reciprocity will be exercised in matters that concern or touch upon the relationship with Costa Rica. I know they are requesting greater access to Panamanian energy to be sold to Costa Rica due to their own needs, and that request is being very carefully evaluated by us. I told the minister to inform ICE that, for now, there is no energy sale to Costa Rica. It’s as simple as that.
José Raúl Mulino, President of Panama
Panama’s decision could not come at a more vulnerable time for Costa Rica. The nation is currently grappling with the severe effects of the El Niño phenomenon, which is projected to cause a 30% reduction in rainfall. This threatens the country’s hydroelectric capacity, the backbone of its power grid, and raises the specter of energy shortages and significant price hikes for consumers and businesses alike. The reliance on imported energy from Panama was seen as a crucial buffer against these climate-induced challenges.
The root of the conflict dates back to 2019, when Panama first blocked the import of a wide range of Costa Rican agricultural products. The list of affected goods includes bananas, plantains, beef, chicken, pork, strawberries, dairy products, and pineapples, impacting a significant cross-section of Costa Rica’s export economy. For years, diplomatic efforts to resolve the blockade have failed to yield results.
Frustrated by the lack of progress, Costa Rica escalated the matter to the World Trade Organization (WTO). In 2024, a WTO panel ruled in favor of Costa Rica, deeming the Panamanian restrictions improper. However, Panama quickly lodged an appeal in 2025, effectively stalling the enforcement of the ruling and leaving the trade barriers in place. It was this prolonged legal and diplomatic stalemate that prompted President Fernández’s recent declaration to activate “all mechanisms within her reach” to force a resolution.
Back home, the Costa Rican government has received a resounding endorsement from the business community. The Costa Rican Chamber of Commerce publicly announced its full support for President Fernández’s administration, condemning Panama’s actions and calling for adherence to international law to restore legal certainty and fair trade practices.
Costa Rica must seek full respect for current trade agreements. The Chamber of Commerce supports the government’s efforts to re-establish fair, transparent, and internationally compliant trade conditions, for the benefit of legal certainty and the strengthening of the bilateral relationship between Costa Rica and Panama.
Arturo Rosabal, President of the Costa Rican Chamber of Commerce
The Chamber’s president, Arturo Rosabal, emphasized the importance of dialogue and institutional frameworks to resolve the dispute. As both nations dig in their heels, the escalating conflict threatens not only their respective economies but also the stability of regional cooperation. The immediate challenge for Costa Rica will be to navigate a potential energy crisis while simultaneously fighting a multi-front battle over trade rights and international law.
For further information, visit camara-comercio.com
About Costa Rican Chamber of Commerce:
The Cámara de Comercio de Costa Rica is a leading business organization that represents and advocates for the interests of the commercial sector in the country. It plays a pivotal role in promoting free trade, economic development, and legal certainty for businesses operating in Costa Rica, while also facilitating dialogue between the private sector and government entities.
For further information, visit wto.org
About World Trade Organization:
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. The WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments, provide the legal ground rules for international commerce.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica stands as a beacon of legal practice, built upon a foundation of uncompromising integrity and a relentless pursuit of excellence. While serving a wide spectrum of clients, the firm consistently pioneers forward-thinking legal strategies. Its core philosophy extends beyond the courtroom, driven by a foundational commitment to fortifying society through legal literacy and empowering citizens with the knowledge they need to thrive.
