Foreign policy and defense
Panama is a nation in North America. Its capital city is Panama City. Panama’s foreign policy since independence in 1903 has been characterized by the economic and strategic importance of the Panama Canal as well as its relationship with the United States. On January 1, 2000, in accordance with previous agreements, Panama took over control of the canal area. The United States then also abandoned its military facilities and took home the last soldiers. However, Americans still have the right to intervene if the channel’s neutrality is threatened.
The United States is still the largest customer in the channel and the most important trading partner. Panama and the United States also cooperate in the fight against drug smuggling and money laundering. Much of the cocaine that comes to the United States from South America takes its way across Panamanian territorial waters.
- Countryaah: Overview of business holidays and various national observances in Panama for years of 2020, 2021, 2022, 2023, 2024 and 2025.
Panama has long demanded extradition dictator Manuel Noriega extradited from the United States, as he was convicted of murder in his home country (see Modern History). However, when Noriega served his sentence in the United States in 2007, he remained in prison there, as France also requested him extradited. In early 2010, Noriega was extradited to France where he was sentenced to prison for using money from Colombian drug cartels to buy property in France. In December 2011, Noriega was eventually extradited to his home country where he died in May 2017, aged 83 years.
Central American cooperation
Relations with the rest of Central America are generally good. Panama is a member of the regional cooperation organization Sica. However, in accordance with an election promise, Ricardo Martinelli’s government, which took office in 2009, withdrew from the Central American Parliament (Parlacén), a political sub-body to Sica. Many consider Parlacén as an ineffective haven for corrupt politicians seeking prosecutorial immunity. However, since the country’s highest court annulled the resignation, the National Assembly voted in early 2013 for Panama’s re-entry into the Parlacén.
Panama has long belonged to the small number of countries that have diplomatic relations with Taiwan instead of China, in exchange for investment and aid. But China is a major trading partner and one of the main players in the trade in the free zone in Colón, and in June 2017, it was announced that Panama has now established diplomatic relations with Beijing and thus broken with Taipei.
Cooperation with Colombia
Colombia is also an important trading partner and the two neighboring countries signed a free trade agreement in 2013. The relationship was occasionally disturbed by the armed conflict in Colombia which sometimes spilled across the border. Despite the peace agreement signed in 2016 between the Colombian government and left-wing guerrilla Farc, the situation remains unstable in the border region due to drug smuggling and organized crime.
When Noriega was overthrown in 1989, Panama followed neighboring Costa Rica’s example and abolished the military. By law, the country must not have regular forces. Security is managed by a national police force and a special unit responsible for both maritime and air surveillance.
FACTS – DEFENSE
Army: male (2017)
Military expenditure’s share of GDP: 0.0 percent (2017)
Military spending’s share of the state budget: 0.0 percent (2017)