Two developments with significant implications for Panama took place on the same day this week – one diplomatic and one political. The most eye- catching headline was the announcement by Panama’s President Juan Carlos Varela that his government had severed diplomatic relations with Taipei and embraced Beijing’s ‘One China’ policy. Panama thus joins Costa Rica as the only countries in Central America to break relations with Taiwan in favour of China. Speculation abounds that the sub-region’s other nations – El Salvador, Guatemala, Honduras and Nicaragua – will follow suit imminently. At a domestic political level, the announcement that Panama’s former president Ricardo Martinelli (2009-2014) had been arrested in his house in Miami will have important ramifications for the Varela administration’s commitment to combat corruption.

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