Panama

01

Overview

Panama occupies a structurally significant position in Canada's commercial world for two distinct reasons: as a logistics hub for Canadian goods transiting to Asia through the Panama Canal, and as the site of one of the largest and most consequential Canadian mining investments globally — First Quantum Minerals' Cobre Panama copper mine, which was suspended in November 2023 following a constitutional crisis and government contract cancellation.

The Cobre Panama situation represents the most significant direct loss of Canadian mining investment assets in decades and is now the defining story of the Canada-Panama bilateral commercial relationship. First Quantum invested over $10B USD in the mine — which had reached full production capacity before suspension — and is pursuing international arbitration for compensation. Beyond mining, Panama functions as a regional hub for Canadian financial services companies with Latin America operations, benefits from Canal transit fees that support a service-led economy, and maintains an active relationship with Canadian banks through correspondent banking and offshore financial structures.

AlertCobre Panama: First Quantum Minerals' Cobre Panama mine — one of the world's largest new copper mines, representing a $10B+ Canadian investment — was suspended November 2023 after the Panamanian Constitutional Court ruled the government's mining contract unconstitutional following mass public protests. The Mulino government (elected May 2024) has not reopened the mine. International arbitration proceedings are ongoing under ICSID (World Bank) rules. This is a live, high-stakes arbitration directly affecting a major Canadian mining company and has materially elevated Canadian investor risk assessments for Panama.02

Political Context

PresidentJosé Raúl MulinoIn office since July 1, 2024PartyRealizando MetasCentre-right, pragmaticCobre PanamaSuspendedConstitutional Court rulingCanal StatusOperationalWater level constraintsFTA with CanadaNoneFIPA in force (2013)Political RiskElevatedPost-mining contract crisis

José Raúl Mulino won the May 2024 Panamanian presidential election after the Constitutional Court's disqualification of former president Ricardo Martinelli (convicted on money laundering charges) enabled Mulino — who had been Martinelli's running mate — to run as an independent candidate and win with approximately 34% of the vote in a fragmented field. Mulino is a pragmatic centre-right politician and former security minister; his government's primary challenge is rebuilding investor confidence after the Cobre Panama crisis while managing fiscal pressures from reduced mining revenue.

The Mulino government has not reversed the Constitutional Court ruling on Cobre Panama — the court's decision reflects constitutional law, not executive policy — but has also not proactively sought to renegotiate a new mining contract with First Quantum. Mulino has signaled openness to foreign investment generally but faces significant popular resistance to resuming large-scale mining operations after the 2023 protests. The Panamanian constitution is being reviewed by a constitutional assembly, creating additional uncertainty. Canadian government representations on Cobre Panama and investor rights continue through diplomatic channels.

03

Economic Profile

GDP$80BUSD, 2024 est. (IMF)GDP Growth+2.5%2024 (slowed by mine loss)Pre-Crisis Growth~8%2022 (with mining at full production)CurrencyUSD / BalboaFully dollarized economyCredit RatingBaa3 / BB+Near investment grade (2024)Canal Revenue~$5B+ACP annual income (USD)

Panama had been one of Latin America's fastest-growing economies for over a decade — driven by the Canal expansion (completed 2016), services exports (financial, logistics, tourism), and, most recently, Cobre Panama copper production. The mine contributed approximately 5% of GDP at full production and was a significant fiscal and export revenue source. The mine's suspension in late 2023 slashed growth from 8%+ to approximately 2.5% in 2024 and contributed to credit rating downgrades. Moody's moved Panama below investment grade in 2024.

Panama's economy is fully dollarized — the Balboa is pegged 1:1 to the US dollar and USD is legal tender. This eliminates currency risk on USD-denominated transactions and makes Panama an attractive LAC financial hub, but removes the monetary policy flexibility that most economies use to manage downturns. The Panama Canal remains Panama's most valuable asset — ACP (Panama Canal Authority) annual revenues of approximately $5B+ fund a significant portion of Panama's government budget and provide a structural economic floor.

WatchCanal water levels: The Panama Canal faced unprecedented low water levels through late 2023 and into 2024 due to El Niño drought conditions affecting Gatun Lake. Draft restrictions reduced vessel transit capacity by approximately 30%, significantly affecting global supply chains dependent on Canal transit including Canadian goods flows to Asia. This climate-driven risk is structural — Gatun Lake water levels are directly sensitive to precipitation patterns that are expected to become less predictable under climate change scenarios.04

Bilateral Trade

Total Bilateral Trade$1.1BCAD goods, 2024 est.Canadian Exports$0.6B2024 est. (StatCan)Canadian Imports$0.5B2024 est. (StatCan)Trade Balance+$0.1BSmall Canadian surplusFDI (Historical)$10B+First Quantum alone (USD)FDI StatusImpairedCobre Panama suspended

Bilateral goods trade context: The $1.1B bilateral goods trade figure significantly understates Canada's financial exposure in Panama. First Quantum Minerals' $10B+ investment in Cobre Panama is not captured in goods trade data; neither is the services trade representing Canadian financial services companies using Panama as a Latin American hub. The bilateral relationship is primarily about investment and services rather than goods trade flows.

Top Canadian exports to Panama: Machinery and industrial equipment; aircraft and aviation parts; pharmaceutical products; machinery for mining and construction (some historically for Cobre Panama); and packaged consumer goods. Top Canadian imports from Panama: Processed food and beverages (Panama re-exports some Central American agricultural products); chemicals; and pharmaceutical products. Many nominal imports from Panama reflect goods transiting through Panama's free trade zones.

05

Market Access

No FTA No Free Trade AgreementCanada and Panama do not have a free trade agreement. Panama signed an FTA with the United States in 2012 and has trade agreements with the European Union, Chile, and several other partners. Canada-Panama goods trade proceeds under MFN tariff rates. Panama's tariffs are generally moderate (average bound rate approximately 22%, applied rates lower for most industrial goods), and Panama's dollarized economy and open financial system create a commercially open environment despite the absence of an FTA.FTA negotiations: Canada and Panama began FTA negotiations in 2010 but these stalled and have not been formally resumed. Given the Cobre Panama investment dispute and Panama's current political climate, an FTA is not an active near-term prospect.Canada-Panama FIPA In Force — September 1, 2013The Canada-Panama Foreign Investment Protection Agreement (FIPA) entered into force September 1, 2013. The FIPA provides investor protections including fair and equitable treatment, protection against expropriation, national treatment, and access to investor-state arbitration under ICSID or UNCITRAL rules. First Quantum Minerals is pursuing ICSID arbitration against Panama under the FIPA for the Cobre Panama mine contract cancellation — this is the largest active FIPA arbitration Canada has ever been an interested party in.TARIFF REFERENCE

Look up import and export tariff rates for goods traded between Canada and Panama.

Open Tariff Reference Tool →06

Opportunity Assessment

Critical Minerals / Mining — SUSPENDEDCobre Panama's suspension has effectively halted new Canadian mining investment in Panama. The mine represented one of the world's largest greenfield copper developments and its cancellation is a landmark adverse outcome for Canadian mining FDI in Latin America. No new Canadian mining investment should be contemplated in Panama until the FIPA arbitration is resolved and the regulatory environment is clarified.Financial Services — ACTIVE (cautiously)Panama's dollar-based, service-oriented economy and role as a LAC financial hub create ongoing financial services opportunity for Canadian banks and insurance companies. RBC, Scotiabank, and others use Panama for regional Latin American operations. The Cobre Panama situation has not directly affected financial services operating licences — the financial sector operates under a separate regulatory framework.Logistics & Infrastructure — WATCHThe Panama Canal expansion and Colon Free Trade Zone create logistics infrastructure opportunities for Canadian companies in port services, logistics technology, and supply chain management. Canada-to-Asia goods transit through Panama — making Canal efficiency directly relevant to Canadian exporters. AtkinsRéalis (formerly SNC-Lavalin) and other Canadian engineering firms have regional infrastructure interests.New Investment — HIGH CAUTIONCanadian companies contemplating new investment in Panama should apply enhanced due diligence given the demonstrated risk that major investment contracts can be constitutionally voided following public protests. The Cobre Panama case establishes a risk precedent that any major Canadian investment in Panama may face political and constitutional risk regardless of initial government support.07

Canadian Business Presence

First Quantum Minerals (Vancouver-based, TSX-listed) is by far the most significant Canadian corporate presence in Panama — the company's $10B+ investment in Cobre Panama represented the single largest private investment in Panama's history. First Quantum maintained the mine through care and maintenance operations following the November 2023 suspension while pursuing international arbitration. The company's financial position was significantly stressed by the mine suspension, leading to balance sheet restructuring and asset sales through 2024.

Canadian banks with Latin American operations use Panama as a regional hub: Scotiabank has a meaningful Panama retail and commercial banking presence; RBC uses Panama for certain LAC institutional banking operations. The Big Six Canadian banks collectively have correspondent relationships with Panamanian financial institutions. Canadian pension funds have historically used Panama-based holding structures for Latin American investments — Panama's financial secrecy laws and double-taxation treaty network have made it attractive as an investment holding jurisdiction, though the Panama Papers (2016) brought significant reputational and regulatory scrutiny to Panama-domiciled offshore structures. AtkinsRéalis (formerly SNC-Lavalin) has historical Canal-adjacent infrastructure project relationships.

08

Risk Register

09

Corruption & Compliance Risk

TI CPI 202433 / 100Rank ~#99 globallyFATF StatusRegular ProcessRemoved from grey list 2023Panama Papers2016 LegacyOngoing reputational riskWB Rule of Law~47th pctileWorld Bank 2023PEP ScreeningEnhancedRequiredCTI Compliance RatingHigh RiskAs of Q1 2026

Panama scores 33/100 on Transparency International's Corruption Perceptions Index 2024 — placing it in the lower quartile globally and reflecting persistent systemic corruption across government procurement, the judicial system, and the offshore financial sector. The Panama Papers (2016) — the largest financial data leak in history at that time — revealed Panama as a global hub for tax evasion, money laundering, and illicit capital flows through Panamanian offshore structures. The legal and reputational consequences of the Panama Papers continue to affect how Panamanian-domiciled financial entities are perceived by Canadian financial intelligence authorities.

Panama was placed on the FATF grey list in June 2019 for inadequate AML/CTF frameworks and was removed in June 2023 following reforms. As of Q1 2026, Panama is in the regular FATF mutual evaluation process. However, FATF removal from grey listing does not represent a clean bill of health — Panama's offshore financial sector continues to attract scrutiny from FINTRAC, OSFI, and Canada's banking regulators. Canadian companies using Panama-domiciled structures, intermediaries, or financial institutions should apply enhanced due diligence and obtain legal advice on PCMLTFA compliance. CTI rates Panama High Compliance Risk — enhanced anti-bribery compliance policies, agent screening, and legal advice on Panama structures are required, not optional.

10

Procurement Pipeline

Without a bilateral FTA, Canadian companies bidding on Panamanian government procurement do not have CPTPP or CETA-equivalent market access rights. Panama's public procurement law (Law 22 of 2006) allows foreign participation in public tenders but Canadian companies compete at MFN rates without formal preference mechanisms. The most significant Panamanian procurement opportunities for Canadian companies have historically been in Canal-related infrastructure, urban transportation, and telecommunications — sectors where Canadian engineering and technology companies have competitive offerings.

🔗Panama Canal Authority (ACP) — ProcurementThe Panama Canal Authority is an autonomous state entity that manages its own procurement for Canal operations, maintenance, and capital projects. ACP procurement is substantial and follows international best practices. Canadian marine engineering, environmental technology, and logistics companies have participated in ACP tenders. TCS Panama City can assist with ACP procurement intelligence and bid navigation.🔗TCS Panama City — LAC HubThe Trade Commissioner Service maintains a Panama City office serving both Panama and as a coordination hub for Central American commercial coverage. TCS Panama City's programming covers financial services, infrastructure, and cleantech sectors. Given the current Cobre Panama context, TCS programming is focused on non-extractive commercial opportunities.11

Government Signals

📄Canada's Official Representations on Cobre Panama — Global Affairs Canada · OngoingThe Canadian government has formally raised the Cobre Panama investment dispute with Panamanian authorities through diplomatic channels, reflecting Canada's obligations under the Canada-Panama FIPA to support Canadian investor interests. The Minister of International Trade has publicly noted Canada's concern about the treatment of Canadian mining investment in Panama. These representations signal that the bilateral commercial relationship is under active government attention beyond commercial interests alone.📄First Quantum ICSID Arbitration — Ongoing (2024–)First Quantum Minerals filed ICSID (International Centre for Settlement of Investment Disputes) arbitration against Panama under the Canada-Panama FIPA in 2024. The arbitration seeks compensation for the cancellation of the Cobre Panama mining contract. ICSID proceedings typically take 4–7 years. The outcome will establish a significant precedent for Canadian mining company FIPA protection and for Panama's treatment of foreign investors more broadly.📄Canada-Panama FIPA — Investor Protections Under ScrutinyThe Cobre Panama arbitration is the most significant test of a Canadian bilateral FIPA in decades. The outcome will provide Canadian mining and resource companies globally with important intelligence on whether Canadian FIPA protections can effectively compensate for nationalised or cancelled resource investments in Latin American jurisdictions. Canadian companies with existing or contemplated Latin American investments should monitor ICSID proceedings closely.12

Sources

1. Statistics Canada, Table 12-10-0011-01: International merchandise trade by country, 2024 annual data.
2. International Monetary Fund, World Economic Outlook, October 2024: Panama GDP, growth, fiscal data.
3. Transparency International, Corruption Perceptions Index 2024: Panama score 33/100.
4. First Quantum Minerals: Annual Reports 2022–2024; Cobre Panama status updates; ICSID arbitration filings.
5. Global Affairs Canada: Canada-Panama Foreign Investment Protection Agreement (FIPA), September 2013.
6. ICSID: Cobre Panama arbitration registration and proceedings, 2024.
7. FATF: Panama grey list removal, June 2023; subsequent mutual evaluation follow-up.
8. Panama Canal Authority (ACP): Annual Report 2024 — transit data, revenue, water level impacts.
9. Trade Commissioner Service: Panama Country Market Report, 2024.
10. Moody's Investors Service: Panama sovereign credit rating downgrade to Baa3, 2024.