Panama and Costa Rica have agreed to restart direct negotiations aimed at resolving a protracted bilateral trade conflict over agricultural products. The decision follows a recent meeting between Panamanian President Jose Raul Mulino and his Costa Rican counterpart, Rodrigo Chaves, in San Jose. Both leaders have now instructed their trade and agriculture ministers to find a negotiated solution, moving beyond a stalled World Trade Organization process.
The dispute has effectively blocked significant two-way trade in goods like meat, dairy, and various fruits for years. It escalated in late 2024 when a WTO panel ruled against Panama’s import restrictions, a decision Panama immediately appealed into a non-functioning system. This new diplomatic push represents the most concrete effort in years to break the impasse through dialogue rather than litigation.
Presidential Mandate Seeks Definitive Solution
Costa Rica’s Minister of Foreign Trade, Manuel Tovar, publicly confirmed the new directive in an interview. He stated that the presidents ordered their cabinets to sit down and engineer a permanent fix to the disagreement that has strained neighborly relations.
“During the recent visit of President Mulino, the two presidents of the Republic instructed us, the ministers of Agriculture and Foreign Trade of both countries, to sit down and seek a definitive solution,” Tovar said. [Translated from Spanish]
The Panamanian Ministry of Industry and Commerce, led by Minister Julio Molto, was contacted for comment regarding a potential meeting. A response is pending. The involvement of both trade and agriculture officials from each nation signals a comprehensive approach, addressing both market access and the sanitary and phytosanitary regulations at the heart of the conflict.
WTO Appeal Stuck in Legal Limbo
The path through the multilateral system is currently blocked. Panama formally appealed the WTO’s December 2024 ruling earlier this year, notifying the organization’s Dispute Settlement Body in January 2025. That ruling had found Panama’s restrictions on Costa Rican dairy, meat, strawberries, pineapples, bananas, and plantains violated international trade rules.
The WTO panel rejected Panama’s argument that the measures were provisional due to insufficient scientific evidence. It recommended Panama bring its regulations into compliance. The appeal, however, cannot be reviewed. The WTO’s Appellate Body remains paralyzed without judges, a situation stemming from a lack of consensus among member states to fill vacancies.
This creates a “appeal into the void,” leaving the dispute in indefinite legal limbo. Costa Rica previously criticized Panama’s decision to appeal as a “reckless and bad faith act.” Officials in San Jose argued they had presented Panama with a proposal to settle the matter with clear terms and timelines before the appeal was filed, hoping to avoid the WTO deadlock.
Economic Toll on Producers and Processors
The ongoing restrictions have tangible economic consequences on both sides of the border. In Costa Rica, 26 meat and dairy processing plants remain locked out of the Panamanian market. The impact is reciprocal. At least eight Panamanian processing facilities are similarly blocked from exporting to Costa Rica.
Affected Panamanian companies include major industry players like Grupo Melo, Grupo Carnes de Cocle, Grupo Mangravita, Nestle, and Prolacsa. The dispute disrupts supply chains, affects pricing and availability for consumers, and creates uncertainty for agricultural producers and large-scale processors alike. Private sector pressure for a resolution has been mounting steadily as the conflict persists.
“It is a situation that has us frustrated because it is a friendly country, a neighboring country,” Minister Tovar said, expressing a common sentiment among businesses affected by the stalemate. [Translated from Spanish]
Bilateral Path Emerges as Only Viable Option
With the WTO appeal mechanism inoperative, a negotiated bilateral settlement appears to be the only practical path forward. The conflict’s roots stretch back over two decades, making a diplomatic resolution crucial for restoring trade confidence and normalizing the commercial relationship. Both nations are members of the World Trade Organization and other regional agreements, underscoring the irregularity of the current deadlock.
Minister Tovar suggested the first step would be a direct meeting between authorities, which could involve an official visit to Panama. The goal is to move past years of tension and align trade practices with international rules. Success would require compromises on sanitary protocols and market access, potentially establishing new frameworks for managing future agricultural trade issues.
For now, the presidential mandate offers a renewed sense of possibility. The coming weeks will test whether technical teams can translate political will into a workable agreement that unblocks commerce and mends a key Central American trade partnership. The region will be watching closely.