Economic Activity in Honduras: Recent Growth and Future Outlook

Economic activity in Honduras grew by 4.7% in the first five months of 2024. The Central American country will grow between 3.5 and 4.5% thanks to greater private consumption in 2024 and 2025. The Honduran Central Bank (BCH) reported that the Monthly Index of Economic Activity (IMAE) continues to show “a positive evolution,” growing by 4.7% in the first five months of 2024.

IMAE Annual Variation

The State issuer indicated in a report that the annual variation of the IMAE (from June 2023 to May 2024) was 3.2%. The IMAE is an indicator that measures the main sectors of a country’s economic activity and is used to make investment decisions. The institution highlighted the “boom” of several economic activities driven by the increase in investment in machinery and transportation equipment and the dynamism in private consumption, which denotes the Honduran economy’s capacity for “resilience” despite the context of uncertainty and geopolitical conflicts at a global level.

Sectoral Growth

The Central Bank of Honduras detailed that the activities with the most significant growth were financial intermediation, insurance and pension funds (15.1%), private construction (12.8%), electricity and water (7.1%), commerce (5.7%), hotels and restaurants (4.9%), and transportation and storage (2.1%). This positive growth in critical sectors provides a reassuring outlook for the Honduran economy.

Challenges in Other Sectors

On the other hand, agriculture, livestock, forestry, and fishing reported a drop of 2.1% due to lower production of coffee, African palm, and shrimp. The manufacturing industry (maquila) registered a 0.2% decrease due to the decline in coffee export volumes, mainly in the markets of Germany, the United States, and Mexico. This slowdown is attributed to the lack of labor due to emigration, adverse weather conditions, which led to diseases such as rust and borer, and higher production costs for implementing actions to control pests,” explained the Central Bank.

Economic Performance in 2023 and Outlook for 2024-2025

According to the Honduran organization, the Honduran economy grew by 3.8% in 2023 despite the adverse international environment and lower external demand. The Monetary Program predicts that the Central American country will grow between 3.5 and 4.5% in 2024 and 2025 thanks to greater private consumption, while inflation will be between 4% and 5% in the two years.

Sectoral Highlights

Insurance Funds and Pensions

Overview: Growth Drivers: Increased contributions from the public and private sectors and higher returns on investments have bolstered this sector.

Key Trends: The expansion of insurance products and pension schemes aimed at improving financial security for individuals has been a significant factor.

Challenges: The sector faces regulatory changes and the need for more robust risk management frameworks.

Impact: It has enhanced financial stability for individuals and institutions and improved overall confidence in long-term financial planning and savings.

Private Construction

Overview: Growth Drivers: Rising demand for residential and commercial properties, driven by urbanization and economic expansion, has fueled this sector’s growth.

Key Trends: Investment in infrastructure projects and real estate development, including housing and office spaces, has increased significantly.

Challenges: Land acquisition, regulatory hurdles, and fluctuating material costs could impact future growth.

Impact: Construction projects create jobs and economic activity in Honduras, boosting related industries such as manufacturing and services.

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Electricity and Water

Overview: Growth Drivers: Infrastructure expansion and service delivery improvements have been central to the growth in this sector.

Key Trends: Investments in renewable energy sources and water management systems have contributed to growth.

Challenges: Addressing the need for modernization and dealing with the impacts of climate change on water resources are ongoing concerns.

Impact: Improved access to reliable utilities supports industrial and residential growth and enhances sustainability through investment in renewable energy sources.

Commerce

Overview: Growth Drivers: Increased consumer spending and growth in e-commerce have been significant contributors.

Key Trends: Expanding retail outlets, online marketplaces, and improvements in logistics and supply chain management are driving growth.

Challenges: The sector faces challenges from economic fluctuations and changing consumer preferences.

Impact: Boost employment opportunities and economic activity in Honduras. It improved consumer access to goods and services.

Hotels and Restaurants

Overview: Growth Drivers: A rebound in tourism and increasing domestic consumption have spurred growth in this sector.

Key Trends: The recovery from pandemic-related restrictions and a rise in domestic and international travel have been key growth factors.

Challenges: The sector must navigate fluctuations in tourism trends and manage operational costs.

Impact: Job creation and increased revenue for businesses. It enhanced cultural and economic exchange through tourism.

Transportation and Storage

Overview: Growth Drivers: Increased trade activities and investments in logistics infrastructure have contributed to sector growth.

Key Trends: The development of transportation networks and advancements in storage solutions have been significant factors.

Challenges: The sector needs to address issues related to infrastructure bottlenecks and sustainability concerns.

Impact: Improved efficiency in trade and supply chain operations. Support for other economic sectors through enhanced connectivity.

Honduras has seen growth across these critical economic sectors due to investment, policy improvements, and increased demand. Each sector has unique drivers and challenges, but collectively, they contribute to the country’s economic development and stability.

In conclusion, economic activity in Honduras in early 2024 demonstrates a positive trajectory driven by robust growth across key sectors. The notable expansion in financial intermediation, private construction, and commerce reflects a resilient economy capable of adapting to global uncertainties. While challenges remain, including issues in agriculture and manufacturing, the overall outlook remains optimistic, with projected growth rates between 3.5% and 4.5% for 2024 and 2025. The diverse contributions from various sectors underscore a dynamic and evolving economic landscape, poised to harness private consumption and strategic investments for sustained development and stability in the coming years.

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The recent news of Moody’s upgrading Paraguay’s credit rating from Ba1 to Baa3 is making waves. The Chilean private sector has also taken notice. Carlos Medina, executive director of the Chilean-Paraguayan Chamber of Commerce, recently shared his views with the Paraguayan newspaper La Nación/Nación Media.

Medina stated that the rating upgrade is likely the best economic news of the year. This decision will result in a lower interest rate on sovereign debt issuance. “This is an incentive to invest in Paraguay and create jobs. It benefits companies operating there or those considering doing so, especially those that decide to take on debt in international markets. Though it may seem like a distant, technical decision, it directly impacts the citizens,” he remarked.

Areas of Interest

Medina illustrated this point by citing a hypothetical Chilean entrepreneur who might invest in Paraguay to build a plant for producing frozen fruit pulps for export, thereby creating 300 jobs. Due to Paraguay’s current Moody rating, this entrepreneur would benefit from better financial market rates to fund the project, which would be a significant incentive to invest in Paraguay.

He mentioned that Chilean investments in Paraguay amounted to approximately USD 570 million in 2023, with expectations for a significant increase this year, particularly in sectors such as real estate, manufacturing, and agribusinesses. He revealed that a mission of agricultural entrepreneurs from southern Chile is projected to visit Paraguay in October.

He highlighted, “These entrepreneurs aim to invest in producing fresh and frozen fruits and vegetables for export. The potential in this sector is immense, and with the improved credit rating, Paraguay is well-positioned to become a global leader in subtropical fruit production. This potential, coupled with the improved credit rating, is an additional incentive to invest in Paraguay.”

Medina also noted Paraguay’s market openness and improvements in horticultural production quality compared to the genetic quality revolution in Paraguayan cattle farming that began 30 years ago.

Boric’s Visit to Paraguay

Regarding Chilean President Gabriel Boric’s recent visit to Asunción, Medina emphasized its value, as it bolstered bilateral trade and investment and focused on the Bioceanic Corridor. This corridor is South America’s most significant logistical project, connecting central Brazil, the Paraguayan Chaco, northern Argentina, and Chilean Pacific ports. “In 10 years, 40% of the region’s grain will be transported through this corridor,” he stressed.

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The benefits of a higher investment grade rating

An investment grade rating, such as the one recently achieved by Paraguay, offers several key benefits to companies operating in or considering investment in the country:

• Lower Borrowing Costs: Companies can access debt at lower interest rates. Investment grade ratings reduce perceived risk for lenders, leading to more favorable borrowing terms and lower interest rates on loans and bonds.
• Improved Access to Capital: Companies with a higher credit rating are more attractive to investors and lenders, making it easier to raise capital. This is crucial for funding expansion, new projects, or operational needs.
• Increased Investor Confidence: A strong credit rating signals economic stability and reliability, boosting investor confidence. This can lead to greater interest from both domestic and international investors.
• Enhanced Creditworthiness: Companies operating in investment-grade-rated countries benefit from an improved perception of creditworthiness. This can make it easier for them to secure financing and negotiate better terms.
• Greater Market Opportunities: Lower borrowing costs and increased access to capital can enable companies to pursue more ambitious projects and investments, potentially leading to growth and expansion into new markets.
• Economic Stability: Investment grade ratings reflect overall financial stability and sound fiscal management, which can create a more predictable and stable business environment. This stability can positively impact business operations and strategic planning.
• Attractive for Partnerships: Companies may find it easier to form partnerships and joint ventures with other firms or governmental entities, as a high credit rating indicates economic health and reliability.

Overall, an investment grade rating enhances the financial environment in which companies operate, making it more conducive to investment and business growth. The recent upgrade in Paraguay’s credit rating to Baa3 by Moody’s represents a significant milestone for the nation’s economic landscape. This advancement lowers sovereign debt costs and creates a compelling incentive to invest in Paraguay, particularly for international investors, including those from neighboring Chile. As highlighted by Carlos Medina, this upgrade could stimulate substantial foreign investment, potentially boosting job creation and economic growth. The improvements in Paraguay’s market openness and the strategic advantages offered by the Bioceanic Corridor further amplify the country’s attractiveness. With increased access to capital, enhanced creditworthiness, and greater investor confidence, Paraguay is poised to leverage these benefits for long-term economic development. The anticipated rise in Chilean investments, especially in agribusiness and real estate, underscores the positive ripple effects of this credit rating improvement. As Paraguay continues to enhance its economic infrastructure and investment climate, it positions itself as a burgeoning hub for international business and a key player in the regional economy, reinforcing the incentive to invest in Paraguay.

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In recent years, Argentina’s agroindustrial sector, one of the most prosperous in the world, has attracted foreign investors eager to leverage the country’s vast agricultural potential. This influx of international capital has triggered changes that have reshaped the sector, with significant implications for technology, production, and sociopolitical dynamics.

Technological Advances: Transformation in Argentine Agriculture

The agri-food sector, a pillar of the Argentine economy, has seen a significant transformation due to the involvement of foreign investment in the agroindustrial sector in Argentina. These investors, armed with cutting-edge techniques and machinery, have been instrumental in the sector’s technological modernization, introducing innovations that have the potential to revolutionize traditional agricultural practices completely. This potential for revolution underscores the magnitude of the changes brought about by foreign investment in the agroindustrial sector in Argentina.

Adopting advanced technologies such as automated machinery and data-driven decision-making systems has significantly improved the efficiency and productivity of the agroindustrial sector of Argentina. More importantly, these technologies have played a crucial role in promoting more sustainable agriculture. Data analytics, satellite images, and sensors enable farmers to optimize resource use, increasing yield and reducing waste. Automation allows agricultural work to be carried out with greater precision and a lower margin of error, which is crucial for maximizing efficiency in using inputs such as water, fertilizers, and pesticides. This emphasis on sustainability underscores the positive impact of foreign investment in the agroindustrial sector in Argentina on the environment.

Technology has not only improved productivity but also enabled more sustainable agricultural practices. Implementing smart irrigation systems and using drones to monitor crops have significantly reduced water consumption and improved plant health. Moreover, precision agriculture allows for localized application of inputs, reducing environmental impact and improving long-term sustainability. These advances not only increase productivity but also help farmers adapt to the challenges of climate change, ensuring the viability of agriculture in the future.

Labor Impact: Automation and Small Farmers

These technological advances, however, present challenges for local smallholder farmers in Argentina’s agroindustrial sector. Mechanisms must be in place to ensure that the benefits of these innovations are accessible to all actors in the sector, regardless of their scale. The inclusion of small farmers in this technological revolution can improve their production processes, raise the quality of their crops, and increase their income, thus promoting a more inclusive and sustainable industry.

Small farmers can adopt technologies through training programs and accessible financing. Agricultural cooperatives and associations can be crucial in disseminating technology and knowledge among smaller-scale farmers. This way, the industry is improved in all aspects, and agricultural productivity experiences sustainable growth. Additionally, the social and economic inclusion of small farmers is encouraged, who, by having access to these technologies, can optimize their production processes, improve the quality of their crops, and, ultimately, increase their income.

Collaboration between local research institutions and foreign investors could also drive significant advances in crop science, pest management, and sustainable practices, positioning Argentina as a global leader in agrotechnology. The transfer of knowledge and technology not only benefits local farmers but also strengthens the country’s innovation capacity. Strategic alliances with research centers and universities can facilitate the development of new solutions adapted to the specific conditions of Argentine agriculture.

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Production Expansion and Economic Growth

Foreign investment in the agroindustrial sector in Argentina has facilitated the expansion of agricultural production, with increased investment in land, infrastructure, and productive capacity. This has resulted in a considerable increase in global agricultural production, opening new opportunities for export and economic growth.

Large commercial farms can embark on ambitious expansion projects with financial backing from foreign investors. These could involve acquiring additional land, implementing advanced irrigation systems, and establishing more efficient supply chains. These infrastructure investments increase production and improve the competitiveness of Argentina’s agroindustrial sector in the global market.

The broader economic implications of such expansion include job creation, rural development, and the overall economic prosperity of the nation. Investing in rural infrastructure, such as roads, storage facilities, and processing centers, can significantly improve the quality of life in rural communities. Additionally, increasing agricultural production can generate employment in related areas, such as transportation, logistics, and marketing of farm products.

However, balancing these benefits with land ownership and resource distribution concerns is crucial. Without adequate mechanisms, the benefits of increased production could be concentrated in large commercial operations, marginalizing small farmers and harming the industry in the long term. Critics warn that an uncontrolled influx of foreign capital could threaten national sovereignty, raising questions about the autonomy and control of Argentina’s agricultural resources.

Social Dynamics and Potential Tensions

The presence of foreign investment in the agroindustrial sector in Argentina also requires an analysis of its impact on the rural social structure. Investments must be evaluated to determine whether they generate equitable benefits or contribute to the concentration of wealth. Equity and sustainability must be guiding principles to ensure that agricultural development benefits all layers of society.

The central question is whether these investments are aligned with sustainable development and social equity or if they are exacerbating existing gaps in rural areas. Equity and sustainability must be guiding principles to ensure that agricultural development benefits all layers of society. Policies that promote the fair distribution of economic benefits and support small farmers so that they can compete on equal terms must be implemented.

Tensions between small farmers and large operations backed by foreign capital are a concern. Effective dialogue and inclusion mechanisms are essential to avoid the marginalization of local actors and guarantee fair and sustainable agricultural development. The dynamics between foreign investments and local actors in the agroindustrial sector of Argentina also raise questions about the concentration of power and influence in decision-making.

The future of Argentina’s agroindustrial sector will depend on how these sociopolitical challenges are managed. Equity, inclusive participation, and sustainability must be pillars in formulating policies that promote the sector’s comprehensive development, ensuring that its benefits are distributed equitably and contribute to the well-being of all rural communities. Only in this way can we build a strong, inclusive, and sustainable Argentine agribusiness capable of leading globally.

In conclusion, the influence of foreign investment in the agroindustrial sector in Argentina presents significant opportunities and considerable challenges. While the infusion of international capital has spurred technological advancements, increased productivity, and economic growth, addressing these investments’ sociopolitical and environmental implications is essential. Ensuring equitable access to technological benefits for small farmers, fostering sustainable practices, and maintaining control over national resources are critical for achieving a balanced and inclusive growth trajectory. By prioritizing equity, sustainability, and comprehensive development, Argentina can harness the potential of foreign investment to strengthen its agroindustrial sector, enhance rural livelihoods, and maintain its leadership position in the global agricultural arena.

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Some 107 initiatives have generated 4,640 jobs.

The Chilean Foreign Investment Promotion Agency (InvestChile) has achieved a significant milestone by closing the first half of 2024 with a portfolio of projects valued at USD 34.5 billion, distributed across 405 initiatives in different stages of development. This amount represents an increase of 24% compared to the USD 27.8 billion registered in the same period of the previous year. According to the data provided by InvestChile, USD 13.9 billion corresponds to investments already in the materialization phase, that is, projects that have already been installed or are under development in the country. These 107 initiatives have generated 4,640 jobs.

The Chilean Minister of Economy, Nicolás Grau, highlighted that these results reflect the hard joint work between InvestChile and several ministries. In addition, he highlighted Chile’s positive image as a reliable partner worldwide. “As a ministry and at the request of President Gabriel Boric, we are working hard to accelerate investment: we have traveled throughout the country speeding up the materialization of projects, and we are processing a structural reform of sectoral permits that allows us to shorten deadlines without reducing regulatory quality,” declared Grau.

For her part, the director of InvestChile, Karla Flores, stated that the increase in the project portfolio reflects the continued interest of foreign companies in the country and the practical work of her agency. “We have managed to articulate a backbone for investment promotion from the regions to the InvestChile attachés abroad. This includes the portfolios and agendas of the different ministries and the country’s entire foreign network,” Flores explained. In addition, she mentioned the key opportunities that Chile offers in areas such as critical minerals, digital infrastructure, and clean energy and highlighted efforts in business intelligence and digital marketing. Flores added that “there is also less visible work, but that is fundamental, and that has to do with working with the ministries to improve our enabling conditions to enhance this investment’s positive effects. A large part of our efforts are in generating better conditions for companies to establish themselves, but also programs and plans so that the benefits of these investments reach more people.”

These achievements underline Chile’s ability to attract and materialize foreign investments in Chile, offering an adequate environment for developing projects that boost the economy and generate jobs.

The main projects

Foreign investments in Chile have concentrated mainly in three sectors: Energy, Mining, and Global Services. According to recent reports, the energy sector has raised USD 17.5 billion, while mining and global services have received USD 6.4 billion and USD 5.5 billion, respectively. The notable increase in energy and mining projects stands out compared to June 2023, with 41% and 25% increases in each sector. One of the most outstanding aspects is the growth in infrastructure projects, which have increased by 72%, reaching USD 3.6 billion. This progress reflects a national consolidation strategy in critical areas such as clean energy, green hydrogen, and critical minerals, where Chile seeks to position itself as an international leader.

In the energy field, hydrogen projects and their derivatives have emerged as pillars, with 29 initiatives totaling USD 4.6 billion, surpassing solar and wind generation projects for the first time. At the same time, in mining, InvestChile’s portfolio already includes seven projects associated with lithium, whose value reaches USD 1.2 billion. This mineral is essential for producing energy storage batteries, although mining exploration and exploitation projects continue to lead the sector. InvestChile highlighted that “the good results by sector coincide with Chile’s strategies to consolidate itself as an international leader in clean energy, green hydrogen, and critical minerals.” The relevance of these sectors is indisputable in the country’s current sustainable development agenda.

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The origin of the foreign investments in Chile

The United States has emerged as the principal foreign investor in InvestChile’s portfolio, accumulating USD 12.5 billion. According to the figures, this amount almost doubled the investment registered at the end of the first half of 2023, which was USD 6.6 billion, reflecting an increase of 88 percent. In terms of the sector, initiatives linked to energy stand out, especially those that experienced a notable growth of 181 percent.

Chinese investment projects, with USD 4.6 billion, and Canadian initiatives, with USD 3.8 billion, are in second and third place, respectively. In both cases, the growth is primarily due to projects focused on the mining sector. A relevant fact is the inclusion, for the first time, of a USD 1.4 billion infrastructure project from Saudi Arabia.

For Flores, Chile is experiencing a “special moment” in terms of foreign investments, with record FDI figures in the last two years and large projects recently announced in the country. She concluded that McMoran’s $7.5 billion El Abra mine expansion and the environmental assessment of HNH Energy’s $11 billion green ammonia production project are clear signs of the attractiveness of our opportunities available in Chile for foreign investors.

In summary, Chile’s impressive 24% increase in foreign investments in Chile, reaching USD 34.5 billion in the first half of 2024, underscores the country’s robust appeal and strategic advancements in attracting global capital. This significant growth, driven by key sectors such as energy, mining, and infrastructure, highlights Chile’s commitment to becoming a leader in clean energy, green hydrogen, and critical minerals. The diverse influx of investments from major global players like the United States, China, and Canada, along with new contributions from Saudi Arabia, reflects the nation’s effective promotional strategies and its favorable investment climate. As Chile continues to refine its regulatory frameworks and enhance investment conditions, it stands poised to capitalize on its economic potential and strengthen its position as a premier destination for international investors.

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Significant Development: Panama’s Bid to Join Mercosur

Panama’s strategic focus is on becoming an ‘Associated State’ of the Southern Common Market (Mercosur), which carries significant implications. This would involve signing a trade agreement with the economic bloc and initiating a consolidation process. Minister of Commerce and Industries (MICI) Julio Moltó underscored that the government’s efforts, under the leadership of President José Raúl Mulino, are aimed at concluding a Free Trade Agreement (FTA) with Mercosur in the next six months before the next meeting of the economic group, as he assured at the installation event for the new board of directors of the Panama Pacific Area Business Association. “The MICI has an exceptional trade negotiations team, which has already been proven. However, we recognize that this is not a task we can undertake alone. We are working closely with the Foreign Ministry to ensure the effectiveness of this process,” said Moltó. He further revealed that rounds of meetings will commence with the ambassadors of the Mercosur member countries to advance the negotiations. The MICI is committed to establishing a conducive framework that ensures Panama reaps the full benefits of this treaty, a testament to our collaborative approach to international trade negotiations. Panama joining Mercosur as an Associated State represents a significant step in enhancing the country’s trade relations.

Parallel Trade Negotiations with China

Concurrently, the Panamanian government is taking proactive steps to resume negotiations for an FTA with the People’s Republic of China, which has been on hold for several years. Moltó reported that a report on the progress made so far is being prepared, signaling renewed optimism for potential trade opportunities. “We are dusting it off. There were five years in which what had been done with China was not touched. I have asked the MICI negotiation team to give us everything that has been done regarding a trade agreement with China, and we are preparing a report for the President of the Republic. This report will play a crucial role in the National Government’s decisions about what will or will not be done with what has been advanced,” Moltó explained, underlining the significance of these upcoming decisions for Panama’s economic future. The effort to resume FTA negotiations with China complements Panama’s broader strategy, including Panama joining Mercosur as an Associated State.

Mercosur Membership Overview

Mercosur, or the Southern Common Market, is a South American trade bloc established to promote free trade and fluid movement of goods, people, and currency among its member countries. The distinctions between being an associate member and a full member involve differences in rights, obligations, and participation in the bloc’s activities. Here’s a detailed breakdown:

Full Member

Membership Rights and Obligations:

Trade Policy: Full members, which include Argentina, Brazil, Paraguay, and Uruguay (with Venezuela suspended), enjoy the benefits of the Common External Tariff (CET) and have a say in setting it. They have a more integrated approach to trade policies and can negotiate in international trade agreements as a bloc.

Decision-Making: Full members participate in all decision-making processes within Mercosur. They have voting rights and influence in shaping the bloc’s policies and strategies.

Regulations and Standards: They must adhere to Mercosur’s common rules and standards, including customs and trade policies.

Economic Integration: Full members are more deeply integrated into the bloc’s economic and political structures. They work towards harmonizing economic policies and regulations.

Political and Economic Integration:

Customs Union: Full members are part of Mercosur’s customs union, which includes a common external tariff and a coordinated trade policy.

Free Trade Area: They benefit from the free movement of goods, services, and factors of production (like labor and capital) among member countries without tariffs or restrictions.

Legislative and Executive Bodies: They are involved in the Mercosur Parliament (Parlasur) and the Mercosur Trade Commission, which handle various legislative and trade issues.

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Associate Member

Membership Rights and Obligations:

Trade Policy: Associate members, such as Chile, Bolivia, and others, do not participate in the common external tariff and are not required to adopt Mercosur’s trade policies as fully as full members. They can negotiate trade agreements independently but must align with Mercosur’s trade preferences when trading with member countries.

Decision-Making: Associate members do not have voting rights or a formal role in Mercosur’s decision-making processes. Their participation is limited to observer status in some meetings and working groups.

Regulations and Standards: They are not obliged to adhere to Mercosur’s common rules and standards as strictly as full members. Their alignment is more flexible and often subject to bilateral agreements.

Economic and Political Integration:

Trade Agreements: Associate members benefit from preferential trade agreements with Mercosur but are not part of the customs union. They have access to the Mercosur market but do not participate in setting the standard external tariff or negotiating on behalf of the bloc.

Limited Integration: They must fully participate in the bloc’s political and economic integration processes, such as the Mercosur Parliament or Trade Commission. Their involvement in Mercosur’s internal activities is generally limited.

Conclusion

Full members of Mercosur are deeply integrated into the bloc’s economic, political, and regulatory framework, with significant influence over its policies and decisions. Associate members enjoy preferential trade benefits but do not participate fully in Mercosur’s decision-making processes or internal workings. This structure allows for varying levels of involvement and integration, accommodating countries with different levels of commitment to the bloc’s goals. Panama joining Mercosur as an “Associated State” would grant Panama preferential trade benefits and access to Mercosur’s market without the complete integration and obligations of a full member. As an Associated State, Panama would not participate in Mercosur’s decision-making processes or standard external tariffs. Still, it would benefit from trade preferences and align with Mercosur’s trade policies in bilateral agreements. Concurrently, Panama is also resuming FTA negotiations with China.

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