A ship passes through the Panama Canal near the Culebra Cut
Courtesy Inter-American Development Bank

Panama's strategic location, the traditional domination of both the economy and the political agenda by the canal, and the strong influence exerted by the United States throughout most of Panama's independent history have combined to magnify the importance of foreign policy in the nation's political life. From the signing of the Hay-Bunau-Varilla Treaty in 1903 until the ratification of the Panama Canal treaties in 1978, Panama's overriding concern, both domestically and internationally, was to gain sovereignty over the Canal Zone and the control over the canal, itself. Determined to obtain sovereignty over its entire national territory, but aware of the limitations posed by its weakness in comparison with the United States, Panama sought the support of other nations, particularly in multilateral forums, in its efforts to renegotiate the canal treaties. In pursuing this end, Panama gained an international visibility much greater than that of most nations of similar size.

Traditionally, all other foreign policy matters were subordinated to Panama's concern with the canal issue. Secondary emphasis was given to commercial interests in dealings with other nations. Vehicles of international trade, such as the Colón Free Zone, international banking, and shipping were central factors in Panama's foreign economic relations. In the 1980s, the issue of the mounting foreign debt also had become the focus of increasing attention and concern.

The experience and visibility gained in the long effort to obtain international support for Panama's stance in the canal negotiations were carried over into the years following the signing of the new treaties, as exemplified by Panama's role in the 1978-79 Nicaraguan civil conflict, and its participation in the Contadora peace process (see Glossary). Panama also has tried, with limited success, to appeal to the same Latin American and Third World sentiments that won it support for its efforts to renegotiate the Panama Canal treaties to gain support in subsequent disputes with the United States. Although foreign policy concerns were not as dominant in the 1980s as in previous decades, they occupied a high priority for Panama's government and still centered on relations with the United States. This pattern was likely to persist until at least the year 2000.

Data as of December 1987

NOTE: The information regarding Panama on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Panama FOREIGN RELATIONS information contained here. All suggestions for corrections of any errors about Panama FOREIGN RELATIONS should be addressed to the Library of Congress and the CIA.