Although it is part of the same geographic region as the countries of Central America, Panama historically has lacked strong political and economic ties with the five nations immediately to its north. Panama was not a member of either the Central American Common Market or the Central American Defense Council, although it did have observer status with the latter body. Under the rule of Torrijos, however, Panama actively sought to expand its contacts with Central America. At first, much of this was related to the effort to gain support in negotiations with the United States over a new canal treaty. During the Nicaraguan civil conflict of 1978-79, Torrijos gave political and military support to the Sandinista guerrillas seeking to overthrow the dictatorship of Anastasio Somoza. At the June 1979 OAS foreign ministers meeting on Nicaragua, Panama allowed the foreign minister-designate of the Sandinista-organized provisional government to sit with the Panamanian delegation. After the Sandinistas took power, Torrijos offered to train their military and police forces. But the Panamanian mission soon found itself reduced to training traffic police, and Torrijos, frustrated by growing Cuban influence in Nicaragua, withdrew his advisers. Since then, Panamanian relations with Nicaragua have been of lessened importance. Panamanian leaders have criticized United States efforts directed against the Sandinistas, but they also have criticized Sandinista policies. Nevertheless, during the June 1987 crisis in Panama, Nicaraguan President Daniel Ortega visited Panama, and the Nicaraguan government expressed strong support for Delvalle and Noriega.

Torrijos also had attempted to influence internal events in El Salvador, where he supported the reform efforts of Colonel Adolfo Majano, a military academy classmate of his, who had been named to the ruling junta in 1979. But Majano was removed from power in 1980 while visiting Panama, largely ending Panamanian influence in that nation.

Relations with Costa Rica were cool for several decades, following a 1921 settlement of the border dispute between the two nations, a settlement that Panama viewed as largely unfavorable to its interests. The opening of the Pan-American Highway between the two nations led to an increase in commercial ties and contributed to a steady strengthening of bilateral relations in the 1960s and 1970s. During the 1978-79 Nicaraguan civil conflict, Panama offered to help defend Costa Rica's northern border from incursions by Nicaraguan forces and, during the war's last months, then Costa Rican President Rodrigo Carazo and Torrijos worked closely together to facilitate the flow of supplies to the Sandinista insurgents. Cordial relations were maintained with Carazo's successor, Luis Alberto Monge, but numerous problems have emerged since Oscar Arias became president of Costa Rica in 1986. These began with the discovery, in Costa Rican territory, of the mutilated body of leading Panamanian critic Spadafora. Commercial disputes also began to disrupt trade. Early in 1987, the two nations signed an agreement to regulate commerce in the border region, but a few days later, Panama closed the border, claiming that Costa Rica was violating the agreement. The border was reopened after a few days, and in March presidents Delvalle and Arias signed an agreement designed to deal with commercial problems and to promote cooperation in areas such as health and education. Costa Rican press criticism of Panamanian government policy following the June disturbances, however, led to a cooling in relations. In December the Panamanian ambassador to Costa Rica charged that United States and Costa Rican officials were plotting to organize an invasion of Panama and to assassinate Noriega. Costa Rica rejected the charges, for which no supporting evidence was produced. Although this issue soon faded, relations between the two nations at the end of 1987 were less cordial than they had been in preceding years.

Reflecting both the growth of Panamanian involvement in Central American affairs and the expanded international role that the nation has sought was Panama's participation in the Contadora peace process. In January 1983, Panama invited the foreign ministers of Mexico, Venezuela, and Colombia to meet at the island resort of Contadora to discuss ways of mediating the conflicts in Central America. The result was the formation of the Contadora Group, a four-nation effort to promote a peaceful resolution of Central American conflicts. Although Panama's role in the mediating process was not so prominent as that of some of the other nations, it did give Panama increased visibility and prestige in international relations. Panama was also the site for many of the group's meetings with Central American representatives. Although the Contadora peace process failed to produce the hoped-for peace treaty, and, since 1987, has taken a backseat to the peace proposals of Costa Rica's President Arias, the Contradora group still exists and, under the Arias Plan, could play a significant role in dealing with security issues involving Central American states.

More about the Government of Panama.

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Source: U.S. Library of Congress