Foreign investors have been buying up Panama’s debt, betting that the Central American country can stage a remarkable recovery from a recent political and social crisis that threatened to badly damage its economy. Despite mass protests that closed its largest foreign investment — a copper mine accounting for 5 per cent of GDP — and deterred other investors, followed by a threat by US President Donald Trump last year to “take back” the Panama Canal, Panama’s bonds have performed much better than many investors had expected. The premium over US Treasuries it pays to borrow has dropped from as much as 3.5 percentage points in 2023 and 2024 to about 1.5 percentage points, in a sign of demand for the bonds.

Finance minister Felipe Chapman told the FT that, while it would take time for some policies to take effect, the government’s fiscal restraint had helped lure back investors. Panama’s long-dated dollar bonds currently trade at yields of 6 to 6.5 per cent, below the bonds of higher-rated US AI companies such as Meta, although countries such as Chile, Guatemala and Peru have smaller risk premiums over Treasuries. Its economy has accelerated this year after a sharp slowdown, growing 6.4 per cent year on year in the second quarter after 4.8 per cent in the first quarter, ranking it as one of the fastest-growing in the region.

President José Raúl Mulino’s government cut the deficit from more than 6% in 2024 to 3.7% last year.