Panama’s strategic location, connecting Central and South America, has made it a key transit point for illicit trade, as well as a refuge and negotiating area for criminal organizations. Its trade-oriented, dollarized economy and the booming contraband market of the Colón Free Zone (CFZ) have long attracted international money launderers.
The country’s sluggish judicial system and persistent corruption have allowed transnational networks to consolidate their operations, including Colombian and Mexican drug trafficking organizations (DTOs).
Foreign actors cooperate with Panama’s local gangs to coordinate drug shipments through the country. A steady increase in drug seizures suggests the amount of drugs transiting Panama has risen in recent years, fueling violent crime.
Geography
Panama is the southernmost country on the Central American isthmus. It borders Colombia to the east, Costa Rica to the west, the Pacific Ocean to the south, and the Caribbean Sea to the north. Sometimes referred to as the “mouth of the funnel,” it has long been a transit point for drugs heading from South America to Mexico, the United States, and – more recently – Europe. Most drugs reach Panama via maritime smuggling routes departing Colombia, Ecuador, and Peru. A dense strip of forest along the border with Colombia, known as the Darien Gap, also facilitates the trafficking of arms, drugs, and persons – albeit to a lesser extent.
The Panama Canal has served as a gateway between the Eastern and Western Hemispheres since it opened in 1914, and has long been used to smuggle all types of illegal goods. The advanced logistics infrastructure built around the Canal has transformed Panama into a global shipping hub, leading traffickers to target the country’s ports to dispatch drug and contraband shipments around the world.
Multi-ton seizures of cocaine are common at both Pacific and Caribbean ports. The city of Colón, which houses the country’s busiest Caribbean ports, has become a pivotal launching point for cocaine heading to Europe or transiting via African countries that also feed European cocaine markets.
The country also has numerous loosely monitored islands that serve as staging points for traffickers sending drugs along maritime channels heading north to Mexico and the United States.
History
Panama’s involvement in the drug trade began in the early 20th century with the trafficking of opium from Asia to Europe through the Panama Canal.
During the 1960s and 1970s, cannabis was cultivated in Panama, but the growing cocaine trade soon replaced the marijuana business.
As South American groups trafficking cocaine into the United States began to shift away from Caribbean routes popular in the 1980s, Panama’s shared border with cocaine-producing Colombia made it a natural transit point for drugs heading north.
During the 1980s, Panama became one of Latin America’s most emblematic examples of a “narco-state” under the leadership of military dictator General Manuel Noriega, who collaborated with Colombia’s Medellín Cartel and Central American traffickers.
Noriega became de facto ruler of Panama in 1983 and maintained a close relationship with the United States, collaborating with the Central Intelligence Agency (CIA) for decades, despite his involvement in the illegal drug trade and money laundering.
After striking a deal with Medellín Cartel leader Pablo Escobar in 1982, Noriega began charging Colombian traffickers $100,000 a load to fly cocaine into Panama. Throughout the 1980s, Colombian smugglers would use Panama as a safe haven, a cocaine processing location, and a center for banking and money laundering, setting the trend for decades to come.
Noriega’s luxurious lifestyle – characterized by drug-fueled parties and lavish mansions – was abruptly cut short in 1989, when the US military invaded Panama and arrested the dictator. The United States charged Noriegal with laundering millions of dollars, smuggling marijuana, and collaborating with the Medellín Cartel. Three years later, a US court sentenced Noriega to 40 years in prison. He was later extradited to France to stand trial on money laundering charges, and after being convicted there was returned to Panama, where he was also convicted for human rights abuses.
In the 1990s, following the US invasion, Panama abolished its military and transferred law enforcement responsibilities to newly formed public security forces led by the Ministry of Public Security. The new force struggled in subsequent years with a lack of capacity and experience, allowingf organized crime to flourish.
Panama’s gangs found space to grow amid the disbanding of the military, incoherent security policies, and high poverty rates . This trend continued in the 2000s; between 2005 and 2010, official data showed that the number of gangs operating in the country tripled.
During the 2010s, the government’s attempts to resolve the gang issue yielded little success.. An amnesty for gang members agreeing to disarm, proposed by President Juan Carlos Varela in 2014, did not lead to a sustained reduction in crime. In 2016, authorities launched a gang crackdown on a major gang and disrupted the operations of another involved in international cocaine trafficking. The moves signaled a shift toward more repressive policies against gangs, but they did not significantly disrupt their criminal operations.
Much like the gangs, international DTOs took advantage of Noriega’s ouster to expand their presence in Panama. A US government report published in 1991 suggested that drug trafficking in was increasing in Panama following the US invasion. In 1999, a decade after Noriega’s arrest, the US State Department still described Panama as “a major transshipment point for illicit drugs smuggled from Colombia.” By 2016, the country was seizing record amounts of drugs, spurred in part by a boom in Colombian cocaine production. Panama has since continued this trend; its annual drug seizure tally is among the highest worldwide.
Noriega’s graft-riddled style of governance left a legacy of corruption that has fueled one of the main criminal industries in Panama: money laundering.
Panama has historically been an international money laundering hub because of its extensive banking sector, its dollarized economy, and the presence of the Colón Free Zone (CFZ) – a free trade area established in 1948 that is now one of the largest in the world. Historically weak oversight of financial crimes, combined with a lax and often corrupt judicial system, further contribute to money laundering activities.
Panama’s central role in international money laundering was laid bare in 2016 by the publication of the so-called “Panama Papers.” An immense trove of documents showed how Panamanian law firm Mossack Fonseca helped set up offshore accounts and shell companies for thousands of elite clients across the world, including prominent Mexican drug traffickers, a Guatemalan drug “queen,” and a Salvadoran crime boss.
That same year, the United States blacklisted several members of one of the country’s wealthiest and most powerful business families, the Wakeds, on money laundering allegations. In 2017, Nidal Waked Hatum, labeled by the Drug Enforcement Administration (DEA) as “one of the world’s most significant drug money launderers and criminal facilitators,” pleaded guilty to involvement in a money laundering conspiracy.
Inconsistent and underresourced law enforcement and judicial institutions have helped perpetuate corruption in Panama, which has facilitated not only money laundering but also drug trafficking and other criminal activities.
In the early 2010s, leaked US diplomatic cables showed concerns about the involvement of Panamanian politicians in the drug trade. These concerns persisted throughout the decade; in late 2017, for example, authorities disrupted an alleged international drug trafficking ring with links to a local mayor. Weeks later, a Colombian drug trafficker told a local media outlet that Panamanian authorities resell seized drug shipments.
Elite graft remains a major problem, as illustrated by the case of former President Ricardo Martinelli. The former leader fled from Panama in 2016, seeking refuge in the United States from an investigation into his alleged involvement in multiple corruption schemes. Martinelli was arrested in 2017 near his home in Miami following an extradition request accusing him of illegal spying, as well as accepting bribes from Brazilian construction company Odebrecht, then at the center of a wide-reaching multinational graft scandal.
Martinelli and former president Varela were both indicted on separate corruption and money laundering charges in 2019, though he has so far managed to evade outright conviction. Prosecutors did circle closer towards Martinelli in 2021 with the arrest of his two sons in Guatemala.
Both sons were extradited to the US, where they pleaded guilty to money laundering charges. Both sons established offshore bank accounts to hide the profits of shell companies and facilitate bribery from Odebrecht, according to the Federal Bureau of Investigations (FBI).
In 2023, a Panamanian judge sentenced the elder Martinelli to 10 years in prison for money laundering, but the former president has avoided jail time by seeking refuge in the Nicaraguan Embassy in Panama City and subsequently gaining asylum in Colombia.
Criminal Groups
Panama has had a gang presence since the 1980s, albeit to a lesser extent than other countries in the region. For a long time, these groups mainly carried out petty crimes, but they later grew and became more organized, engaging in transnational drug trafficking and hired assassinations.
The country’s gang landscape is dominated by two rival factions: Bagdad and Calor Calor. Both began as youth gangs but have evolved into powerful criminal syndicates capable of absorbing dozens of smaller gangs and partnering with some of Latin America’s most powerful drug trafficking organizations.
Operationally, the two factions function in much the same way. Both are intensely focused on dominating the cocaine trafficking corridors that connect Panama to overseas markets. Their main objective is to control key areas along major smuggling routes and shipping ports, especially along the coasts near Panama City and Colón.
Both gangs have built wide networks of collaborators to gain access to transatlantic trafficking routes. These networks often begin in coastal communities, where residents and fishermen collect and stash cocaine shipments arriving from South America. The groups then rely on contacts inside shipping companies to identify containers for contamination, while bribing freight drivers and cargo handlers to move the drugs into ports and load them onto specific shipments. They also leverage insiders within customs, police, and port security to obtain intelligence on anti-drug operations, such as which containers are scheduled for inspection.
Competition for access to drug routes provokes routine violence between the two groups, with inter-gang clashes linked to upticks in Panama’s homicide rate.
Some local gangs specialize in stealing drugs from other criminal groups – a practice known as tumbe.
Various transnational criminal organizations — particularly those based in Colombia and Mexico — rely on Panama’s gangs to traffic cocaine through Central America. These alliances allow foreign traffickers to operate remotely, sending representatives to Panama to negotiate deals instead of maintaining a permanent presence. Through such collaborations, some Panamanian gang members have gained access to higher levels of the trade, becoming partial owners of cocaine shipments or traveling abroad to manage business in places like Europe and Dubai.
The Urabeños, one of Colombia’s largest criminal organizations, is the most influential foreign criminal actor in Panama. Also known as the Gulf Clan (Clan del Golfo), the organization leverages its extensive territorial control in northern Colombia to dominate the maritime and overland smuggling routes connecting the two countries.
The group has sought to consolidate its influence by corrupting local law enforcement. The capture of some 56 individuals in Panama’s Operation Fisher exposed the extent to which the Urabeños have co-opted Panamanian organized crime, particularly for the cocaine trade. Among those arrested in Panama were also police officers and Panama Canal Authority functionaries, among other public officials.
The group is also involved in human smuggling, employing local communities as guides to move migrants through the densely-forested Darien Gap.
Mexican crime groups, including the Sinaloa Cartel, have operated in the country since the 1980s. Like their Colombian counterparts, Mexican DTOs generally send emissaries to Panama to secure a consistent cocaine supply rather than establish territorial control. They also rely on local gangs to handle the movement of cocaine across the country.
Security Forces
Panama’s Ministry of Public Security has been responsible for matters of citizen security ever since the armed forces were abolished in the 1990s. Anti-crime efforts rely heavily on three institutions: the National Police (Policía Nacional de Panama – PNP), the National Aeronaval Service (Servicio Nacional Aeronaval – SENAN), and the National Border Service (Servicio Nacional de Fronteras – SENAFRONT). All three conduct operations against drug traffickers and domestic gangs.
The direct involvement of all three institutions in anti-crime operations has helped Panama significantly increase its drug interdiction capacity. The country seized just under 100 tons of cocaine in 2024, one of the highest tallies worldwide. Interagency cooperation has allowed Panamanian authorities to make record seizures, such as a 13.5-ton drug haul confiscated from a tugboat off the country’s Pacific coast in 2025.
These efforts have been facilitated by Panama’s willingness to engage in regional cooperation, including joint operations with Colombia and the United States. The US also provides Panama’s security forces with tactical support, training, and intelligence assistance. Collaboration with the DEA, for instance, has yielded demonstrable success in combatting Bagdad, one of the country’s top criminal organizations.
Despite this, Panama’s security forces have long faced criticism over corruption, with a number of drug trafficking organizations infiltrating and at times recruiting authorities. Several officials from SENAFRONT, the police, and other state entities were arrested in 2023 as part of a probe into a transnational drug-smuggling network. Operations targeting the leadership of Bagdad have also exposed how gangs bribe police to secure protection.
Judicial System
Panama has a civil law system, and its highest judicial authority is the Supreme Court. The rest of the judicial branch includes superior, provincial, and municipal courts.
The Attorney General’s Office is responsible for criminal prosecution. It consists of the Attorney General (“Procurador”) and of District Attorneys (“Fiscales”), among other representatives. Criminal investigations are carried out by the office’s Judicial Technical Police.
Although Panama’s constitution grants independence to the judiciary, it is nonetheless susceptible to political influence and corruption. In 2021, Transparency International found that Panama was especially lacking in the autonomy of its criminal justice system.
The selection process for judges was also found to be politicized and slow. Corruption within the judicial system remains problematic, even reaching into the country’s Supreme Court, as was revealed in the case against a judge appointed by former president Martinelli.
Prisons
Panama’s prison system is overseen by the National Penitentiary System Directorate (Dirección General del Sistema Penitenciario – DGSP) of the Interior Ministry (Ministerio de Gobierno). Prison authorities have struggled with staffing and resource shortages, which have contributed to corruption. The prison system has also been criticized for poor infrastructure and state abuse.
As of September 2025, Panama’s penitentiary system had an occupancy rate of 167%, following a sustained increase in the country’s prison population. Such a percentage is not among the highest in the region. Furthermore, the county has a fairly low pretrial detention rate, with 35% of inmates awaiting trial.
The reputation of Panamanian prisons was severely damaged by a gang massacre that killed 14 prisoners in the La Joyita penitentiary in 2019. Multiple firearms were seized after the attack, including assault rifles, highlighting a severe smuggling dilemma within the prison.