Significant challenges await Panama's president-elect

By Sebastian Fernandez de Soto, analyst in the Global Risk Analysis practice at Control Risks

Panama’s general elections, held on 5 May, resulted in the victory of Jose Raul Mulino, the former minister of public security, with 34% of support. Independent businessman Ricardo Lombana, running with his Other Way Movement (MOCA), placed second with nearly 25%, while former president Martin Torrijos placed third with 16%.

Mulino won due to support from former president Ricardo Martinelli (2009-2014), who was disqualified as a presidential candidate as the supreme court ratified a corruption sentence for money laundering in February 2024. Martinelli’s administration is positively remembered by Panamanian citizens, given its significant infrastructure investment and substantial economic growth, highlighting how nostalgia shaped voter preferences and increased Mulino’s support.

On the other hand, voters also highlighted a desire for change as independent candidates, the majority from the Vamos coalition, gained a plurality of seats with 20 elected members in the national assembly. Mulino’s party, Realizando Metas, gained 14 seats while the governing Revolutionary Democratic Party (PRD) only managed 13 seats, its worst electoral result in years. With another six parties entering the legislature, Mulino will likely need to seek consensus to form a governing coalition.

The question of Martinelli, who remains in the Nicaraguan embassy after being granted political asylum, will be a significant early test. Although Mulino, in his victory speech, emphasized that he was nobody’s puppet, Martinelli’s support was imperative for his victory. A pardon is highly unlikely given obligatory support from the legislature, but an option remains to allow Martinelli to leave the country. This is risky for Mulino given ample support for Martinelli’s imprisonment as voters expressed significant concern with continued corruption.

Other pressing issues will require attention from the incoming administration. The migrant crisis in the Darien Gap, on the border with Colombia, has overwhelmed Panamanian authorities. Mulino promised to close the border; however, this remains impossible, given the extremely dense jungle. 

The new government will likely attempt to limit migrant flows, which could bring Mulino into conflict with the left-wing administration of Colombian President Gustavo Petro, who has emphasized addressing the root causes of migration rather than blocking migrant flows. In addition, organized criminal groups have increasingly used migrant flows to smuggle illicit drugs to Panama for further shipping through Panamanian ports, driving an increase in security risks in the country.

Furthermore, Mulino has emphasized economic growth and attracting international investment, although business confidence was significantly eroded after protests led to the closure of the Cobre Panama mine, which provided 5% of the country’s GDP. 

Mulino has rejected re-opening the mine and has proposed dialogue with Minera Panamá, a subsidiary of First Quantum Minerals, on the condition that the company stops international arbitration proceedings, which could cost the country billions of dollars. 

Meanwhile, a prolonged drought is hitting the Panama Canal's toll revenues, as lower water levels limit the number of ships that can pass through.

In conclusion, Mulino’s economic growth and significant social investment platform face substantial challenges driven by weak economic projections, reduced government revenue, mounting fiscal deficits, and a fragmented legislature that will require the government to seek political consensus to pass meaningful reforms.