Panama faces a complex investment climate marked by social unrest and political uncertainties, yet foreign investors continue to back the country. While President José Raúl Mulino, in office since July 2024, has aimed to stabilize public finances and attract investment, his reform agenda, including social security adjustments, has triggered protests. These demonstrations, also fueled by issues such as the potential reopening of the Cobre Panamá mine and a US-Panama security memorandum, have led to clashes and a drop in Mulino's approval rating. For instance, protests in April-June 2025, October-November 2023, and July 2022 significantly disrupted commercial activity, with the 2023 protests causing an estimated $2 billion in economic losses.
Despite these domestic challenges, Panama's economy generally outperforms its regional peers, maintaining key structural advantages like its strategic geographic location. The country attracts an average of $2 billion to $4 billion in foreign direct investment (FDI) annually, and US direct investment alone totaled $4.5 billion at the end of 2023. This investor confidence persists even as the fiscal deficit widened to 7.4 percent of GDP in 2024, exceeding the 4.0 percent target, and national debt reached $56.3 billion by April 2025, nearly 70 percent of 2024 GDP. A March 2024 downgrade of Panama's credit rating to below investment grade by Fitch Ratings further highlights financial strains.
Another layer of complexity comes from former US President Donald Trump's repeated threats to "take back" the Panama Canal, falsely claiming China operates it. These threats have supercharged protests and created a state of uncertainty among Panamanians. However, there are no signs of Chinese influence that Trump claims dominates the waterway. The canal, which increased its annual revenue by 9.5% to $3.45 billion in fiscal year 2024, is crucial to Panama's economy. Analysts suggest that such US actions could undermine global investment and the rule of law, potentially leading investors to question property rights in the region. Despite these geopolitical pressures and local instability, Bank of America issued a favorable assessment in June 2025 regarding Panama's pension reform, projecting it could improve liquidity by $16.1 billion, signaling continued, albeit cautious, investor optimism.
