Panama
Updated
Summary
Panama is a Central American country whose economy rests on moving other people's trade and money. It runs the Panama Canal, which handled 13,951 transits and earned B/. 6.6 billion in fiscal year 2026 (October 2025 to September 2026, unaudited). It also runs one of the world's largest ship registries; the Panama Maritime Authority (AMP) says it flags about 15% of world merchant tonnage. Panama has no central bank of its own: the US dollar circulates freely and the local unit, the balboa, is at par with it, so the IMF calls the financial system dollarized. Its government, led by President José Raúl Mulino, ran a public-sector deficit of 3.7% of GDP in 2025 and owed about B/. 60.0 billion in March 2026.
Key numbers
Panama-flagged vessels blocked by OFAC on 2026-10-21: 7 of 9 vessels in the action (4 bulk carriers, 3 general cargo) (as of 2026-10-21). Source: ofac.treasury.gov
Canal transits, FY2026: 13,951 (up 4.1% from 13,404) (as of 2026-09-30). Source: pancanal.com
Canal tonnage / revenue, FY2026: 521 million PC/UMS tons (up 6.5%); B/. 6.6 billion revenue, unaudited (up 16.6%) (as of 2026-09-30). Source: pancanal.com
Ship registry size: 8,773 vessels, 248.8 million GRT (end-2024; 2026 figure UNKNOWN) (as of 2024-12-31). Source: amp.gob.pa
Vessels cancelled since Decree 512: 214 vessels, over 12 million GRT (over 650 since 2019) (as of 2025-06-02). Source: amp.gob.pa
Real GDP growth: 4.4% in 2025; about 5% in 2026 (IMF staff forecast) (as of 2026-10-07). Source: imf.org
Non-financial public sector deficit: 3.7% of GDP in 2025; legal cap 3.5% in 2026, target 3% in 2027 (as of 2026-10-07). Source: imf.org
Public debt stock: B/. 60,008.49 million (82% external; 86.6% in dollars); share of GDP UNKNOWN (as of 2026-03-31). Source: fpublico.mef.gob.pa
Cobre Panamá arbitration claims: at least US$27 billion claimed (not recognized by the state) (as of 2026-09-30). Source: mici.gob.pa
Detentions of Panama-flagged ships in Chinese ports: 140 in May 2026 (37% rate); 16 in July to date (10%) (as of 2026-07-24). Source: amp.gob.pa
EU tax list status: Annex II (moved off Annex I blacklist) (as of 2026-10-09). Source: consilium.europa.eu
Timeline
2026-10-22 — AMP begins cancelling the registration of the seven Panama-flagged vessels designated by OFAC and tightens pre-registration due diligence. (Source: amp.gob.pa)
2026-10-21 — US Treasury designates Panama- and Greece-based law firm Karnakis and Karnakis, five associates and Roxette Maritime under E.O. 13902; seven Panama-flagged ships blocked; GLs GG and HH issued. (Source: home.treasury.gov)
2026-10-21 — Panama Canal reports FY2026: 13,951 transits, 521 million PC/UMS tons, B/. 6.6 billion unaudited revenue. (Source: pancanal.com)
2026-10-09 — EU Council moves Panama from Annex I of its non-cooperative tax jurisdictions list to Annex II. (Source: consilium.europa.eu)
2026-10-09 — AMP restricts three Panama-flagged ships named by OFAC and says six UK-listed Russia shadow-fleet ships had already left its registry. (Source: amp.gob.pa)
2026-10-07 — IMF staff close the 2026 Article IV mission: 4.4% growth in 2025, deficit 3.7% of GDP, advice to save extra canal income. (Source: imf.org)
2026-09-30 — Interministerial commission delivers its final Cobre Panamá report to President Mulino, recommending an orderly, no-cost closure tied to ending arbitrations. (Source: mici.gob.pa)
2026-07-24 — AMP says detentions of Panama-flagged ships in Chinese ports fell from a May peak of 140 after maritime-agreement talks. (Source: amp.gob.pa)
2026-04-23 — AMP reports a Panama-flagged container ship fired on in the Strait of Hormuz and another intercepted by Iran's IRGC. (Source: amp.gob.pa)
2026-04-02 — US State Department criticises China's actions against Panama-flagged vessels and backs Panama after the ports ruling. (Source: state.gov)
2026-03-06 — AMP issues Merchant Marine Notice MMN-05/2026 telling Panama-flagged ships to raise security near Iran, the Gulf and Hormuz. (Source: amp.gob.pa)
2026-01-30 — AMP activates a port transition plan; APM Terminals to act as temporary administrator at Balboa and Cristóbal. (Source: amp.gob.pa)
2026-01-29 — Supreme Court declares unconstitutional the 1997 law and extension behind Panama Ports Company's Balboa and Cristóbal concession. (Source: organojudicial.gob.pa)
2025-10-10 — EU keeps Panama on its list of non-cooperative tax jurisdictions (eleven jurisdictions). (Source: consilium.europa.eu)
2025-08-01 — Panama stops flagging oil tankers and bulk carriers older than 15 years. (Source: amp.gob.pa)
2025-07-03 — Canal authority sets out the B/. 1.5 billion Rio Indio lake as its main water-security project. (Source: pancanal.com)
2025-06-02 — Panama rejects UANI claims on Iran sanctions enforcement; says 214 vessels cancelled since Decree 512. (Source: amp.gob.pa)
2025-03-28 — AMP says 107 sanctions-listed vessels cancelled from its registry under Decree 512, with 18 more in process. (Source: amp.gob.pa)
2024-11-06 — AMP begins de-flagging four LNG carriers sanctioned by the US over ties to Russia's Novatek. (Source: amp.gob.pa)
Key actors and links
U.S. Treasury (actor:us-treasury): Designated the Panama-based Karnakis and Karnakis network and seven Panama-flagged ships on 2026-10-21; its OFAC listings trigger AMP de-flagging under Decree 512.
United States (country:united-states): Panama's main security and financial partner; the US dollar is Panama's circulating currency, and Washington backed Panama against China after the 2026 ports ruling.
U.S. Department of State (actor:us-department-of-state): Issued the 2026-04-02 statement criticising China's actions against Panama-flagged ships and pledging wider cooperation with Panama.
Iran (country:iran): Treasury alleges Iranian petrochemical and oil trade used Panama-registered shell companies and Panama-flagged ships; Iran's IRGC intercepted a Panama-flagged ship near Hormuz in April 2026.
Greece (country:greece): Karnakis and Karnakis and Roxette Maritime are Panama- and Greece-based; FinCEN's first 5318(k) subpoena targets a Greek bank, with Greek coordination.
China (country:china): Detentions of Panama-flagged ships in Chinese ports surged after the 2026-01-29 ports ruling against a CK Hutchison unit, then fell after maritime-agreement talks.
Sanctions exposure (indicator:sanctions-exposure): Panama's open registry makes it a frequent flag of OFAC-designated vessels; each listing tests its de-flagging speed.
Sanctions/enforcement (indicator:energy-sanctions-enforcement): Flag-state de-registration is one of the practical levers through which US Iran and Russia energy sanctions bite on shipping.
Iranian oil exports (commodity:iranian-oil-exports): Companies set up by Karnakis and Karnakis were earlier designated for owning vessels in the Iranian petroleum trade, per Treasury.
Strait of Hormuz (place:strait-of-hormuz): Panama-flagged ships were fired on and seized there in April 2026; the AMP told its fleet to avoid the area where possible.
Maritime commerce (theme:maritime-commerce): Panama runs the canal (13,951 FY2026 transits) and one of the largest ship registries, so it is a hub of world seaborne trade.
Correspondent banking (theme:correspondent-banking): Inference (AA): a dollarized system with no central bank depends on US correspondent banks; sanctions and AML findings raise that dependency's cost.
US dollar (asset:usd): Circulates freely in Panama; the balboa is at par, and about 86.6% of public debt is dollar-denominated.
Copper (commodity:copper): The Cobre Panamá mine has been shut since a court ruling; at least US$27 billion in arbitration claims are pending and a closure decision awaits Mulino.
International Monetary Fund (actor:imf): 2026 Article IV staff: growth 4.4% in 2025, deficit 3.7% of GDP; urges saving extra canal income and a pre-funded liquidity backstop.
Why it matters now
Panama's flag is a sanctions battleground. On 2026-10-21 the US Treasury designated a Panama- and Greece-based law firm, Karnakis and Karnakis, five of its people (three dual Panamanian-Greek nationals and two Panamanians) and its shipping operator, Roxette Maritime, under Executive Order 13902. It named seven Panama-flagged cargo ships as blocked property. Treasury alleges the firm registered shell companies that own Iranian 'shadow fleet' vessels; these are allegations, not court findings. The mechanism is simple. An open registry earns fees for every ship it flags. A sanctioned owner wants a reputable flag because it eases port entry and insurance. Every flagged vessel later designated costs Panama reputation with the US and the EU, which are its main financial and political partners. Panama's answer, since Executive Decree 512 of 2024-10-18, is fast de-flagging: 214 vessels cancelled by mid-2025, a ban on new tankers and bulk carriers over 15 years old from August 2025, and, on 2026-10-22, a process to cancel the seven ships named by Treasury.
The canal is the second channel. FY2026 was strong: transits rose 4.1% and tonnage 6.5%, with energy cargoes and containers leading, after the drought restrictions of 2023-2024. The Strait of Hormuz crisis touched Panama directly, as Panama-flagged ships were fired on or seized there in April 2026. Panama is also caught between the US and China. Its Supreme Court on 2026-01-29 struck down the law behind the CK Hutchison unit's concession at Balboa and Cristóbal ports. The State Department then accused China of retaliating through detentions of Panama-flagged ships, which the AMP says peaked at 140 in May 2026 before talks cut them sharply.
Public finances are improving but fragile. The IMF says the deficit fell to 3.7% of GDP in 2025 and growth was 4.4%, and it wants extra canal income used to cut debt. The closed Cobre Panamá copper mine remains unresolved: a government commission reported on 2026-09-30 that arbitration claims total at least US$27 billion and that delay costs B/. 6.85 million a day in foreign exchange. On tax, the EU moved Panama off its blacklist (Annex I) to Annex II on 2026-10-09.
Risks and open questions
Bull case: Panama is fixing its weakest points. It left the FATF grey list in 2023 and the EU tax blacklist in October 2026. It now de-flags sanctioned ships within weeks, refuses old tankers and bulk carriers, and screens owners, operators and charterers before registration. If those rules hold, fewer Panama-flagged ships should appear in future US, UK or EU sanctions actions, which protects its registry and its access to dollar correspondent banking. The canal is earning record revenue as water levels recover, and the Rio Indio lake would add dry-season capacity of 11-15 transits a day. Public finances are moving the right way: the deficit fell to 3.7% of GDP in 2025 and the law caps it at 3.5% in 2026. A negotiated end to the Cobre Panamá arbitrations, which the IMF names as an upside risk, would remove a large contingent claim and could restore foreign-exchange earnings.
Bear case: Sanctioned networks keep finding Panama's flag. Treasury's 2026-10-21 action shows a Panamanian law firm allegedly registering shell companies behind shadow-fleet ships, years after Decree 512. Registry screening checks paperwork; shell-company layering defeats it. If Washington loses patience, the next step could target Panamanian service providers or banks more broadly, raising compliance costs for a dollarized system with no lender of last resort. Panama is also squeezed between the US and China: the AMP reported 140 detentions of its ships in Chinese ports in May 2026 after the ports ruling. Canal income depends on rainfall, and the IMF lists a return of El Niño drought as a risk. The Cobre Panamá claims total at least US$27 billion, and a closure without agreement would cost B/. 2.6-3.4 billion. Debt of about B/. 60 billion is sustainable in the IMF baseline only if the deficit path holds.
Falsifiers: - OFAC designates more Panama-flagged vessels in the next six months whose registration post-dates the 2025-08-01 age limit and owner screening: weakens the bull case that screening works. - The AMP fails to complete cancellation of the seven vessels named on 2026-10-21 within months: weakens the claim of fast de-flagging. - FY2027 canal transits fall because of drought restrictions rather than demand: supports the bear case on water risk. - Panama misses the 3.5% of GDP deficit cap for 2026: undercuts the fiscal-consolidation bull case. - The EU returns Panama to Annex I in February 2027: reverses the October 2026 improvement. - A Cobre Panamá agreement ends all arbitrations at no cost to the state: weakens the bear case on contingent claims.
Value accrual gate: Registry fees accrue to the Panamanian state only while flagged ships stay unsanctioned; each designation shifts value from Panama's registry to rival flags and adds compliance cost to its dollar-dependent banks. Canal revenue accrues to the state budget only through transfers, which the IMF wants saved for debt reduction rather than spent.
What to watch
AMP completes or reports progress on cancelling the seven vessels designated on 2026-10-21 (no scheduled date); Source: amp.gob.pa
President Mulino announces his decision on Cobre Panamá after the commission's final report (no scheduled date); Source: mici.gob.pa
Next EU review of its non-cooperative tax jurisdictions list, after a new OECD Global Forum review of Panama (by 2027-02-28); Source: consilium.europa.eu
Whether 2026 ends inside the 3.5% of GDP deficit cap (by 2026-12-31); Source: imf.org
Further US Treasury actions naming Panamanian companies, nationals or Panama-flagged ships under Operation Economic Outcast (no scheduled date); speculative, no scheduled source
Dry-season canal water levels and any draft restrictions in early 2027 (2027-01-01 to 2027-04-30); speculative, no scheduled source
AA inference
Inference (AA): Panama sits on the graph as a transmission node, not a decision-maker: US sanctions on Iran reach shipping largely through flag states, and Panama's flag is the largest. The test of whether Panama's de-flagging regime works is how often Treasury keeps naming Panama-flagged vessels after Decree 512; repeated designations, as on 2026-10-21, suggest screening still misses shell-company layering at registration. Canal revenue ties Panama to global trade volumes and to rainfall, while its dollarized system ties it to US financial conditions and correspondent-bank tolerance. AA does not infer any asset-price direction from this.
Sources
On 2026-10-21 the US Treasury designated Karnakis and Karnakis, a Panama- and Greece-based law firm, under Executive Order 13902 for operating in Iran's petroleum and petrochemical sectors, alleging it registered shipping companies that own shadow fleet vessels. (Source: home.treasury.gov, accessed 2026-10-23)
Treasury designated founders and co-owners Sofianos and Konstantinos Karnakis Kosmas (dual Panamanian-Greek nationals), employee Ioanis Karnakis Kosmas (Panamanian-Greek national), and Panamanian nationals Pedro and Roberto Ortega Jones for acting for or on behalf of the firm. (Source: home.treasury.gov, accessed 2026-10-23)
Treasury designated Roxette Maritime Shipping and Trading S.A., Panama- and Greece-based, under E.O. 13902 for operating in Iran's petrochemical sector, and identified seven Panama-flagged cargo vessels it operates as blocked property: ANEMOS, GLORIS, PRIDE, DESTINY, FLAMINGO 1, HARMONY and PRINCE. (Source: home.treasury.gov, accessed 2026-10-23)
Treasury says ANEMOS, GLORIS and PRIDE shipped Iranian-origin petrochemicals and steel within the past year; two further blocked vessels, WHALES DIAMOND and WHALES PEARL, are UAE-flagged and owned by Dubai-based Whales Shipping Line. (Source: home.treasury.gov, accessed 2026-10-23)
OFAC's SDN entries of 2026-10-21 list ANEMOS, DESTINY and HARMONY as Panama-flagged general cargo vessels and FLAMINGO 1, GLORIS, PRIDE and PRINCE as Panama-flagged bulk carriers. (Source: ofac.treasury.gov, accessed 2026-10-23)
OFAC issued Iran-related General License GG, authorizing the wind down of transactions involving Karnakis and Karnakis, and General License HH, authorizing wind-down, limited safety and environmental transactions and offloading of cargo involving persons or vessels blocked on 2026-10-21. (Source: ofac.treasury.gov, accessed 2026-10-23)
Treasury says Karnakis and Karnakis earlier set up Skyros Maritime and Trading S.A., Corfu Maritime and Trading S.A. and Elias Shipping and Trading Group S.A., which OFAC had designated for owning vessels in the Iranian petroleum trade. (Source: home.treasury.gov, accessed 2026-10-23)
FinCEN said on 2026-10-21 it issued its first administrative subpoena under 31 U.S.C. 5318(k) of the Bank Secrecy Act, investigating a Greek bank's potential ties to Iran and its proxies in coordination with European partners including Greece. (Source: fincen.gov, accessed 2026-10-23)
On 2026-10-22 the Panama Maritime Authority said it had started cancelling the registration of the seven sanctioned vessels under Executive Decree No. 512, was taking measures against the sanctioned company, and would require due diligence on owners, operators and charterers before registration. (Source: amp.gob.pa, accessed 2026-10-23)
Executive Decree No. 512 of 2024-10-18 lets the AMP cancel, on its own motion, the registration of vessels and owners on international sanctions lists (OFAC, EU, UK) without the longer prior process; by 2025-03-28 the AMP had cancelled 107 vessels with 18 more in process. (Source: amp.gob.pa, accessed 2026-10-23)
On 2025-06-02 Panama rejected what it called misleading claims by United Against Nuclear Iran about its Iran sanctions enforcement, saying it had removed over 650 vessels since 2019 and cancelled 214 vessels of over 12 million gross registered tons since Decree 512. (Source: amp.gob.pa, accessed 2026-10-23)
From 2025-08-01 Panama stopped accepting flag registration of oil tankers and bulk carriers older than 15 years, citing 'ghost fleet' risk and that 71% of fleet detentions from 2023 to mid-2025 involved such older ships. (Source: amp.gob.pa, accessed 2026-10-23)
The AMP reported Panama's registry at 8,773 vessels and 248.8 million gross register tonnage at end-2024 (citing IHS Markit), and about 15% of world merchant tonnage (citing Clarksons Research). (Source: amp.gob.pa, accessed 2026-10-23)
On 2026-10-09 the AMP said three Panama-flagged vessels on a new OFAC list (Bitu, Starway, Mackerel) were restricted and in cancellation, and that six vessels on a new UK Russia shadow-fleet list had already been removed from its registry during 2026. (Source: amp.gob.pa, accessed 2026-10-23)
On 2026-04-22 the Panama-flagged container ship Euphoria was fired upon by three unidentified craft in the Strait of Hormuz and the MSC Francesca was intercepted by Iran's IRGC and ordered to anchor near the Iranian coast, the AMP said. (Source: amp.gob.pa, accessed 2026-10-23)
The Panama Canal reported 13,951 transits in FY2026 (up 4.1% from 13,404), 521 million PC/UMS tons (up 6.5%) and unaudited revenue of B/. 6.6 billion (up 16.6%), with energy segments and containerships driving growth. (Source: pancanal.com, accessed 2026-10-23)
The canal kept a 50-foot maximum draft through the FY2026 dry season, said rainfall was nearing average levels, and reinstated its last-minute reservation service for the Panamax locks. (Source: pancanal.com, accessed 2026-10-23)
The planned Rio Indio lake is estimated to cost B/. 1.5 billion and to supply water equivalent to 11-15 daily canal transits in dry seasons, giving about 50 years of water security, according to the canal authority. (Source: pancanal.com, accessed 2026-10-23)
On 2026-01-29 Panama's Supreme Court plenary declared unconstitutional Law No. 5 of 1997, its addenda and the extension act underpinning Panama Ports Company's concession at Balboa and Cristóbal. (Source: organojudicial.gob.pa, accessed 2026-10-23)
After the ruling the AMP said the state guaranteed continuity at Balboa and Cristóbal, described Panama Ports Company as a CK Hutchison subsidiary, and said APM Terminals would act as temporary administrator during a transition. (Source: amp.gob.pa, accessed 2026-10-23)
On 2026-04-02 the US State Department expressed serious concern about China's actions against Panama-flagged vessels, linked them to the Supreme Court's Balboa and Cristóbal ruling, and said the US 'stands firmly with Panama'. (Source: state.gov, accessed 2026-10-23)
The AMP said detentions of Panama-flagged ships in Chinese ports peaked at 140 in May 2026 (a 37% Tokyo MOU detention rate) and fell to 16 (10%) in July so far, after talks on renewing the China-Panama maritime transport agreement. (Source: amp.gob.pa, accessed 2026-10-23)
IMF staff said real GDP grew 4.4% in 2025 and is expected to grow about 5% in 2026, the non-financial public sector deficit was 3.7% of GDP in 2025 against a 4% legal cap, and the 2026 cap is 3.5%. (Source: imf.org, accessed 2026-10-23)
IMF staff recommended saving any extraordinary canal income to reduce debt, flagged rising non-dollar debt, and, noting Panama's dollarized system without a central bank, recommended a pre-funded public-sector liquidity mechanism. (Source: imf.org, accessed 2026-10-23)
Panama's public debt was B/. 60,008.49 million on 2026-03-31, of which B/. 49,222.89 million external and B/. 10,785.61 million domestic; about 86.6% was denominated in dollars. (Source: fpublico.mef.gob.pa, accessed 2026-10-23)
Panama's banking regulator says the balboa is at par with the US dollar and that the dollar circulates freely, without restriction in commercial and financial transactions. (Source: superbancos.gob.pa, accessed 2026-10-23)
A government interministerial commission reported on 2026-09-30 that arbitration claims over Cobre Panamá total at least US$27 billion, that indecision costs B/. 6.85 million a day in foreign exchange, and that closing without an agreement would cost B/. 2.6-3.4 billion over 17-19 years; President Mulino will announce the decision. (Source: mici.gob.pa, accessed 2026-10-23)
On 2026-10-09 the EU Council moved Panama from Annex I of its list of non-cooperative tax jurisdictions to Annex II, pending a new OECD Global Forum review; the next review is in February 2027. (Source: consilium.europa.eu, accessed 2026-10-23)
Panama had been on the EU list since 2020-02-18 and was maintained on it at the 2025-10-10 update. (Source: consilium.europa.eu, accessed 2026-10-23)
The FATF removed Panama from its list of jurisdictions under increased monitoring at the plenary of 25-27 October 2023. (Source: fatf-gafi.org, accessed 2026-10-23)