The President of Panama has requested that the National Assembly approve an agreement with the Southern Common Market - Mercado Común del Sur (Mercosur), with the aim of initiating bilateral negotiations with each member country to enable Panama's accession as a full member (which entails joining the customs union and gaining decision-making power within the economic and trade bloc).

Mercosur is a regional integration process established in 1991 by Argentina, Brazil, Paraguay, and Uruguay, later joined by Venezuela (currently suspended) and Bolivia. The bloc currently has Chile, Peru, Colombia, Ecuador, Guyana, Suriname, and Panama as associate members—a status that does not grant participation in the customs union or decision-making power.

Back in December 2024, Panama became an associate member of Mercosur, thereby strengthening trade ties with the bloc’s full members.

Panama’s accession to full membership is key to Mercosur’s expansion and to the deepening of regional trade relations, as it increases opportunities for foreign investors. Panama’s inclusion would grant Mercosur strategic access to Central America, the Caribbean, and the Panama Canal. In addition, it would represent a major opportunity for Panama to reinforce commercial alliances with South America, especially in light of a potential association agreement between Mercosur and the European Union, which could eventually lead to a free trade agreement between both blocs.

Mercosur’s main objectives include: (i) ensuring the free movement of goods, services, and production factors among member countries by eliminating customs duties and non-tariff restrictions, as well as any equivalent measures; (ii) establishing a common external tariff; and (iii) coordinating macroeconomic and sectoral policies among full members.

The strengthening of Mercosur—through the inclusion of new members and potential agreements with other blocs such as the European Union—further underscores why Latin America remains an important destination for international investment.

Adding to this momentum, the European Union recently removed Panama from its list of high-risk countries due to deficiencies in anti-money laundering and counter-terrorism financing regime. This decision significantly enhances Panama’s international reputation, fosters greater confidence among foreign investors, and strengthens the country’s attractiveness as a location for doing business.

Together, these two developments reflect the steady progress Panama—and Latin America more broadly—is making toward becoming a more attractive and strategic destination for foreign investment. Our firm’s Latin America Practice continues to monitor these trends closely, supporting clients engaged in cross-border activity or exploring new opportunities in the region by offering strategic insight and facilitating connections with trusted local partners to help drive business growth.