Image source: Wikimedia Commons
Every container that crosses the Panama Canal tells the simultaneous stories of the global race to secure supply chains, and the local challenge of building trust in institutions that can sustain them. At a time of profound geopolitical shifts, Latin American and Caribbean (LAC) democracies have an opportunity to not only connect with the world but to connect with each other. By advancing subregional cooperation between Panama’s logistics hub, Paraguay’s clean energy surplus and the Dominican Republic’s export platforms, these countries can turn their institutional stability into a foundation for regional trade cooperation, which also offers a chance to engage proactively with trusted investment-ready partners and establish a new era of hemispheric competitiveness.
In LAC, stable democratic governance and institutions are no longer just political ideals — they are strategic prerequisites for attracting sustainable investment and fostering long-term regional cooperation. While that standard has historically not always been met in the region, stable middle-income countries in the region now offer compelling counterweights to global trends toward authoritarianism by positioning themselves as high-potential, value-aligned partners for the United States. Their electoral systems, independent media and progress on judicial reforms are aligned with democratic values and serve as powerful multipliers of investor confidence and economic growth.
In democratically aligned countries, institutional checks and balances are an essential ingredient in preventing a single actor from consolidating power or expropriating private enterprise for political or personal gain. This also prevents the economic stagnation that can occur when capital flees under weak or failing institutions. Strong democratic systems provide mechanisms for transparency, accountability and peaceful leadership change, in contrast to authoritarian regimes such as Cuba, Nicaragua, or Venezuela, where power remains concentrated in the hands of an unaccountable few. Such authoritarian environments not only drive away foreign direct investment and weaken competitiveness, but also erode the foundations of innovation, job creation and inclusive growth, which fuels migration pressures and creates additional social and economic instability across the region.
In addition to strong institutions, an active civil society and private sector are cornerstones of the democratic ecosystem. Civil society ensures institutional responsiveness and creates space for open dialogue while enhancing public trust. Through organized pressure, watchdog efforts and policy engagement, civil society reinforces the rule of law and contributes to a stable and competitive business environment. In parallel, a thriving private sector can generate economic growth and stability while promoting innovation. It also serves as a stabilizing actor, as long as it is grounded in transparency and stable regulatory environments. Together, these forces act as counterweights to authoritarian impulses, helping level the playing field and creating the conditions for sustainable prosperity.
Regional infrastructure plays a significant role in translating democratic gains into tangible development. Infrastructure development enables economic advancement that contributes to the overall stability and prosperity of the region. For example, the Panama Canal stands as a strategic asset that changed the course of Panama’s economy. While the Canal has already provided many benefits to the global and local Panamanian economies alike, it is still capable of catalyzing deeper regional trade integration. As a vital link connecting markets across LAC, the Canal has the potential to anchor a trade network that strengthens competitiveness across the hemisphere. To fully realize this potential and support large-scale investment, trust in the Canal’s infrastructure and reliability must be reinforced, particularly by ensuring that the security and integrity of the Canal remain intact through credible and internationally reliable management structures that are independent of government control or manipulation. Controversies such as the long-term concessions held by Hutchison Ports at Balboa and Cristóbal and the pending sale to a BlackRock-led U.S. consortium reflect the geopolitical sensitivities of such assets. These dynamics have drawn heightened scrutiny under President Trump’s renewed emphasis on reducing Chinese influence and securing strategic hemispheric infrastructure.
Regional integration through logistics coordination is key if such a trade network is to be developed. By linking Panama’s logistics hub with Ecuador’s Manta Port, Paraguay’s evolving supply chain capabilities and customs digitalization, as well as the Dominican Republic’s role as a Caribbean trade gateway, the Americas can build a trade network capable of rivaling Asia’s global reach. These countries, whose economic and political stability provide a foundation upon which to build such a network, should leverage initiatives such as the Alliance for Development in Democracy to align like-minded countries, harmonize port operations and reduce logistical friction through streamlined coordination. These efforts enhance LAC’s competitiveness on the global stage and create opportunities for investment from U.S. businesses seeking near-shore operations, generating mutual economic benefits.
This combination of robust democratic systems, civic engagement and infrastructure connectivity offers a blueprint for viable and sustainable economic development that leverages nearshoring, strengthens supply chains and delivers mutual prosperity — and the middle-income countries of the Dominican Republic, Ecuador, Panama and Paraguay provide a roadmap. These four countries should capitalize on their democratic and institutional stability and prioritize regional trade integration to build an economic system that will be sustainable in the long term and will create a foundation for lasting development throughout the region.
Antonio Garrastazu is the senior director for Latin America and the Caribbean at the International Republican Institute.
