Trade relations between Costa Rica and Panama have reached a critical point after negotiations failed to settle a long-standing dispute over agricultural products, raising fears of disruptions to regional supply chains.

Costa Rican President Laura Fernández escalated pressure Wednesday during celebrations marking National Farmers Day, sharply criticizing what she described as Panama's agricultural trade blockade, News.Az reports, citing UPI.

Fernández said her government would not accept unjustified multimillion-dollar losses for key agricultural sectors. She contended that Panama's measures constitute "a blockade with no legal basis," particularly after Costa Rica prevailed in a dispute before the World Trade Organization.

According to local media reports, including La Nación and El Observador, Fernández ordered the activation of international diplomatic channels to denounce what her administration called "bad faith" actions by Panama. Costa Rica is seeking to pressure its neighbor into lifting restrictions on dairy products, meat, pineapples, bananas and strawberries.

The dispute dates to 2019, when Costa Rica suspended sanitary permits for Panamanian processing plants over alleged technical noncompliance.

In response, Panama closed its market to several major Costa Rican agricultural exports. Costa Rica later brought the case before the World Trade Organization and secured a favorable ruling in late 2024 that ordered Panama to reopen its market.

However, in January 2025, Panama appealed the ruling before the WTO Appellate Body, which remains unable to function because of a lack of judges, leaving the dispute in indefinite legal limbo.

Costa Rica argued that using a nonfunctioning appeals body is a delaying tactic, while it evaluates possible retaliatory tariffs.

Panama's government insists that the best solution is not automatic international enforcement measures, but rather formal negotiations aimed at reaching a mutual technical agreement to restore trade flows fairly for both markets.

For Panama, the dispute centers on protecting its sanitary sovereignty and defending local producers against what officials describe as a deeply unequal trade balance.

During 2025, Costa Rica exported $612.9 million in goods to Panama, while Panamanian exports to Costa Rica totaled just $41.5 million.

Panamanian Trade Minister Julio Moltó rejected accusations of bad faith Wednesday and reiterated that the appeal is a legitimate right under the multilateral trade system, according to the newspaper La Estrella de Panamá.

"Panama is not protecting, but doing what is appropriate for its productive sector. Our productive sector also deserves respect, and we are going to protect it. We want the rules to be equal for both sides," Moltó said.

He said Panama is demanding reciprocal conditions, arguing that Panamanian companies face bureaucratic obstacles when trying to enter the Costa Rican market.

"We want the same set of rules for both nations, and Panama will sit down as a friendly country" with Costa Rica to address the dispute, Moltó added.

Business groups on both sides of the border are closely monitoring the escalation. They warned that the prolonged paralysis threatens to fracture regional logistics chains by halting the flow of perishable goods, immobilizing transportation fleets and overwhelming distribution centers.

The dispute, compounded by possible retaliatory measures, is increasing operating costs, disrupting supplies of raw materials and creating shortages across Central American markets.

News.Az 

By Ulviyya Salmanli