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Panama and Costa Rica engage in “mini trade war” over blocked exports

. Jan 24, 2021
trade panama costa rica Cargo containers in Panama City. Photo: Rob Stokes/Shutterstock

For Latin American standards, Costa Rica and Panama are seen as socio-economically stable countries. Far above the world’s worst in terms of human development — ranking 68th and 67th in HDI terms, respectively — neither country were among the most affected by the Covid-19 pandemic and their economies posted good GDP growth figures in 2019, before the coronavirus crisis. 

But after sitting on opposite sides of economic and migratory issues in the region, and disagreeing on the crisis in Venezuela, Costa Rica and Panama are now dealing with a mini trade war.

</p> <p>At the beginning of 2021, the Costa Rican government went to the World Trade Organization (WTO) to complain that their neighbors were illegally blocking the entry of Costa Rican products into Panama.</p> <p>The tiff began in February 2020, when Panamanian authorities blocked the entry of a shipment of Costa Rican strawberries, claiming they had detected &#8220;excessive levels of pesticides&#8221; in the fruits. The conflict continued, with dairy products, meat, pineapples, and bananas from Costa Rica being denied entry at the border.&nbsp;</p> <p>The alleged &#8220;blockade&#8221; is especially curious considering the usually healthy trade relationship between the two Central American neighbors. Imports and exports across the Costa Rica-Panama border increased an average of 3.2 percent a year between 2010 and 2019. In 2019 alone, Costa Rica sold USD 614 million worth of goods to Panama, according to official figures.</p> <p>The government in San José complains that Panama&#8217;s import restrictions are “inconsistent” with the provisions of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures and the General Agreement on Tariffs and Trade (GATT). In other words, <a href="https://brazilian.report/latin-america/2020/05/25/costa-rica-sets-example-to-be-followed-in-latin-america/">OECD member</a> Costa Rica says that its neighbor&#8217;s decisions are arbitrary and anticompetitive, and there is no concrete evidence to suggest that Costa Rican products contain excessive amounts of pesticides.&nbsp;</p> <p>With a formal dispute being opened at the WTO on January 15, the two governments have 60 days to reach an agreement in negotiations. Otherwise, the complaint could be submitted to the organization&#8217;s international panel for a decision.</p> <h2>Trade battle not good for the economy</h2> <p>Since hostilities began, Costa Rica&#8217;s Foreign Trade and Agriculture Ministries say that <a href="https://www.britannica.com/topic/Panama-Canal">negotiations</a> with Panama have not progressed. The agribusiness sector in Costa Rica has already stopped exporting roughly USD 2.4 million of goods, but the Costa Rican Chamber of Exporters (Cadexco) suggests the true deficit is much higher.</p> <p>While neither country have faced severe hardship during the Covid-19 pandemic, the crisis has created some worrisome conditions for both going forward. The International Labor Organization (ILO) expects the region to hit a never-before-seen unemployment rate of 2021 by the end of the year, meaning that a slowdown in trade could also affect job creation.&nbsp;</p> <p>And despite positive economic outlooks before the pandemic, the International Monetary Fund believes that both countries went into recession last year, with year-long estimates of -2.1 and -3.3 percent GDP for Panama and Costa Rica, respectively.</p> <p>The &#8220;strawberry issue&#8221; has put the economic recovery prospects of both Costa Rica and Panama in check. Former members of Costa Rica&#8217;s Foreign Trade Ministry say that the best solution would be to seek a quick resolution and avoid the conflict going to the WTO&#8217;s international panel.

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Lucas Berti

Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.

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