Panama is Working on Ways to Recover Foreign Investment
Foreign direct investment (FDI) fell 61.5% in the first quarter due to lower reinvestment of profits. This result poses a challenge to the government’s strategy of creating 80,000 new jobs through private investment.
Panama is actively working to recover and retain foreign investment to counter a wave of costly international arbitration claims, primarily driven by the forced closure of major mining projects like the Cobre Panamá copper mine. The government also faces fiscal strain and the need to restore global confidence in its economic and legal stability. The push to stabilize and bolster foreign capital is driven by a few critical factors:
- High-Stakes Legal Disputes: The cancellation of multi-billion-dollar mining concessions triggered international arbitration claims from large foreign investors, such as Canada’s First Quantum Minerals. Panama is negotiating and restructuring to mitigate these financial liabilities.
- Fiscal and Credit Pressures: Panama recently experienced credit rating downgrades (to BB+ status), forcing the government to strengthen its regulatory framework, enforce new economic substance requirements, and court reliable, long-term capital inflows to stabilize its public finances.
- Economic Diversification: Beyond traditional logistics and banking, the state is heavily pushing alternative high-impact sectors. This includes promoting the SEM regime for multinational headquarters, sustainable lumber through Reforestation Visas, and high-potential tech or supply chain operations.
The pandemic marked a turning point for foreign investment in Panama. Since then, the country has recovered some of the lost capital, but remains far from the dynamism that characterized it before 2020.
