Q COSTARICA — Hours after President Laura Fernández indicated she would activate “all mechanisms at her disposal” to eliminate the trade embargo Panama has imposed on several Costa Rican products since 2019, Panamanian President José Raúl Mulino ordered the “immediate and indefinite suspension” of electricity sales to Costa Rica.
The neighboring country’s decision is significant, considering that the El Niño phenomenon will cause a 30% reduction in rainfall in Costa Rica, which could affect the electricity supply and increase prices.
“I strongly believe in the guiding principle of international relations, which is reciprocity, and believe me, that reciprocity will be exercised in all matters related to our relationship with Costa Rica.
“For now, there are no energy sales to Costa Rica; it’s that simple.
The Panamanian newspaper, La Estrella, reported on Thursday that the Panamanian president also questioned the tone used by the new Costa Rican government to publicly air the bilateral conflict.
Mulino insisted that disagreements between two neighboring countries should not be handled from “platforms” or public conferences, in clear reference to the recent statements made by the Costa Rican president during an agricultural tour.
“International relations are based on great prudence (…) it’s not through a pulpit, a platform, or a press conference that one makes statements that directly affect the relationship between two countries, especially neighbors and friends,” said the Panamanian president.
Mulino added he was “surprised” by the Costa Rican reaction, given that Panamanian and Costa Rican authorities had already met to discuss these energy sales plans, which he did not elaborate on.
“The foreign policy of countries is conducted with discretion, moderation, and respect,” Mulino stated, adding that Panama will apply a policy of “reciprocity” with Costa Rica.
“This is an important issue for Costa Rica, but it is also important for Panama, and it is my duty to protect Panamanians,” he added.
The conflict between the two countries stems from restrictions imposed by Panama between 2019 and 2020 on the import of agricultural products from Costa Rica, including bananas, plantains, beef, pork, chicken, strawberries, pineapples, and dairy products.
Panama argued at the time that the restrictions were due to health reasons and the failure of Costa Rican exporting companies to renew their permits. However, Costa Rica took the case to the World Trade Organization (WTO), alleging unjustified trade barriers.
In 2024, a WTO arbitration panel ruled partially in favor of Costa Rica, rejecting Panama’s main argument regarding the alleged insufficiency of scientific evidence related to specific agricultural products.
Far from settling the case, Panama filed an appeal in January 2025, a process that remains unresolved.
Mulino defended Panama’s position and asserted that for years, Panamanian companies had also faced obstacles in accessing the Costa Rican market.
“For more than ten years, countless Panamanian companies that operated and worked in Costa Rica were blocked and did not enter that country,” he stated.
“I will not allow national producers to be mistreated by blockades that have no legal basis. People are losing millions in Costa Rica—dairy, potato, and onion producers… We are going to activate all the mechanisms at our disposal to achieve justice for Costa Rican agriculture,” Fernández said at Wednesday’s press conference.
Energy Shock
Although Panama is not the region’s leading electricity exporter, it is a significant player in the Central American Regional Electricity Market (MER).
MER operational data shows that Costa Rica imported approximately 687.4 GWh of energy from Panama during 2024. The neighboring country is also the region’s leading electricity exporter, with nearly 49.8% of the regional market share, followed by Guatemala and Panama.
The measure announced by Mulino does not imply an immediate blackout for Costa Rica, but it does constitute a high-impact political and commercial signal.