Panama Problems 12-2-25

In December 2025, Panama faces significant environmental problems, including a collapsed Pacific Ocean upwelling and a decline in the Panama Canal's water levels. Economically, the country grapples with fiscal challenges like high debt, while also dealing with a global economic slowdown and internal pressures on its productive sectors. Additionally, ongoing issues like corruption, insufficient transparency, and a need for workforce improvement persist, though the country has made progress in combating money laundering.  

Environmental and climate-related problems

Ocean upwelling failure: For the first time in at least 40 years, Panama's crucial seasonal ocean upwelling failed in 2025, which is linked to weaker trade winds. This could significantly impact fisheries and marine biodiversity, leading to a collapse in marine productivity along the Pacific coast.

Panama Canal water levels: The warming climate poses a risk to the Panama Canal due to reduced wet season rainfall and increased evaporation. Without mitigation measures, shipping disruptions may increase. 

Economic and fiscal challenges

Fiscal deficits and public debt: Panama is facing scrutiny over its high public debt and fiscal deficits, which is prompting debates on necessary tax reforms and government spending.

Global economic slowdown: The global economic downturn is negatively affecting Panama's trade volumes and investment flows.

Internal pressures on productive sectors: The manufacturing and agriculture sectors are experiencing internal and external pressures that require innovation and diversification. 

Social and governance issues

Corruption and transparency: While Panama has improved its anti-money laundering efforts, issues like corruption and a lack of transparency remain challenges.

Undereducated workforce: An undereducated workforce continues to be a concern in Panama.

Uncertainty regarding U.S. relations: There is ongoing uncertainty regarding Panama's relationship with the United States, particularly concerning the Panama Canal and a potential renegotiation of trade agreements, which could impact investor confidence. 

In December 2025, Panama faces a range of ongoing challenges, primarily centered on fiscal and economic instability, significant environmental and climate-related issues affecting the Panama Canal and marine ecosystems, and lingering geopolitical tensions related to the canal's sovereignty and foreign influence. 

Economic and Fiscal Issues

Panama is navigating a difficult economic period, following a credit rating downgrade in 2024 and the closure of the major Cobre Panamá copper mine. 

Fiscal Strain and Debt The country faces mounting deficits and high debt levels, with the government implementing expenditure containment plans to address the situation. Public debt reached nearly $50 billion in mid-2024, and interest payments consume a significant portion of government revenue.

Unemployment and Inequality As of late 2024/early 2025, Panama had high rates of unemployment and a significant informal labor sector (around 47%), and remains one of the most unequal countries in the world in terms of income distribution.

Business Environment Challenges Issues hindering foreign investment include corruption, an undereducated workforce lacking specialized skills, insufficient judicial capacity, and bureaucratic hurdles in areas like land titling. 

Environmental and Climate Concerns

Climate change is exacerbating environmental problems, with direct impacts on key national infrastructure. 

Panama Canal Water Shortages Ongoing drought conditions, linked to weakened trade winds and climate disruption, continue to threaten the Panama Canal's operations by causing low water levels in the critical Gatun Lake. This has led to shipping restrictions and potential revenue losses.

Marine Ecosystem Disruption For the first time in at least 40 years, the vital seasonal upwelling of cold, nutrient-rich water in the Gulf of Panama failed to occur in early 2025. This has serious implications for local fisheries and coral reef health.

Water Conflicts The need for water for the canal creates conflicts with residential needs, agriculture, and local communities, especially concerning plans to build new reservoirs that would displace people and submerge farmland. 

Political and Social Tensions

Domestic politics are marked by social unrest and public distrust, while geopolitical issues surround the strategically important canal. 

Social Unrest Protests and strikes have occurred throughout 2025, driven by opposition to social security reforms, the Cobre Panamá mine closure, and controversial security agreements with the U.S.. This unrest causes economic disruption and highlights deep-seated public discontent with the government.

Geopolitical Tensions The sovereignty and operation of the Panama Canal remain a point of international friction, with U.S. political figures alleging Chinese influence and even threatening to "take back" the canal. Panama maintains its commitment to the canal's neutrality.

Rule of Law and Corruption The judicial system struggles with inefficiency, a lack of independence, and vulnerability to corruption, which complicates dispute resolution for businesses and citizens alike.

Migration Issues Panama is a major transit country for migrants, and managing the associated humanitarian and security challenges places a strain on resources and security forces. 

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Norb Leahy, Dunwoody GA Tea Party Leader