Panama Reportedly Rethinking Deal with Canal-Adjacent Port Operator
- Panama is considering canceling its contract with Hutchison Ports PPC, a Hong Kong-based company that operates two ports near the Panama Canal, amid pressure from President Trump over alleged Chinese influence.
Panama’s government is reportedly mulling over whether it should cancel its contract with the Hong Kong-based company that operates two ports adjacent to the Panama Canal as pressure from President Donald Trump mounts over alleged growing Chinese influence over the waterway.
According to a report from Bloomberg, Panama would be canceling the deal with Hutchison Ports PPC, also known as Panama Ports Company. PPC is a subsidiary of CK Hutchison Holdings , which has been the target of the Trump administration over its potential ties to Mainland China.
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The report said that no decision has been made and that the government would proceed in a way intended to avoid lawsuits and follow due process.
Hutchison has operated two of Panama’s ports at Balboa and Cristobal under a deal that was first signed in 1997. In 2021, the deal was further extended until 2047. The company says it oversees 53 ports in 24 countries.
Two Panamanian attorneys also filed suit challenging Hutchison’s 25-year contract extension in the country’s Supreme Court on Monday, alleging it violates Panama’s constitution. The complaint also accuses the Hong Kong subsidiary of not paying taxes and benefits due to a series of advantages that allegedly break the law.
The potential relations between Hutchison and China, regardless of current standing, have caused recent unease in Washington, namely since Hong Kong-based companies are still subject to broadly defined Chinese state oversight .
Trump has repeatedly threatened to “take back” the canal since December due to the possible ties, while also making unsubstantiated claims that China is operating the 51-mile trade artery and that the country has soldiers deployed at the waterway.
Panama’s government has sought to assuage Trump’s hawkish rhetoric, already having performed an audit on Panama Ports Company.
After Panama President José Raúl Mulino met with Secretary of State Marco Rubio on Sunday, the U.S. got an even bigger win when Panama’s government confirmed the country would not renew its participation in China’s Belt of Road Initiative . This makes Panama the first Latin American country to leave the foreign infrastructure investment program.
Along with Panama’s severing of its Chinese ties, the authority that runs the canal indicated that it will “optimize transit priority” of U.S. Navy vessels.
A State Department statement indicated that Rubio made clear during the meeting that the “status quo is unacceptable.” But the Secretary of State’s tune was more upbeat after its conclusion, calling the Belt and Road exit “a great step forward” for both U.S.-Panama relations and a “free Panama Canal.”
Deterring Chinese influence in the Western world has been a top platform for Trump and both of his administrations, as evidenced by the tariffs slapped on the country during his first go as president , as well as the most recent tariffs introduced Tuesday. Those duties add an extra 10-percent charge on all China-made goods, targeting a total of $450 billion in imports.
Trump’s protectionist—and more recently, quasi-expansionist—platforms have extended to the Panama Canal, which is a vital chokepoint for China-U.S. maritime trade. More than 76 percent of the cargo traveling through the canal either originates or is destined for the U.S, according to the Panama Canal Authority (ACP). Additionally, the canal accounts for 46 percent of the total market share of containers moving from Northeast Asia to the U.S. East Coast.
The president has claimed that China’s influence violates the Panama Canal Treaty and Neutrality Treaty first signed in September 1977 during the Carter administration . That agreement ensured that the Panama Canal would be under Panama’s sovereignty starting on Dec. 31, 1999, operating as a neutral corridor for ships from every country to pass through.
The Commander in Chief has lamented other concerns, namely another that U.S. ships are overcharged to sail through the canal. That claim has been denied by the ACP.
China isn’t thrilled with Trump’s rhetoric surrounding the canal, with its foreign ministry saying Wednesday it had lodged complaints with the U.S. over “irresponsible” remarks.
“Currently, the cooperation between China and Panama under the framework of the Belt and Road Initiative is proceeding normally,” ministry spokesperson Lin Jian told a press briefing when asked about Panama’s decision to let the Belt and Road partnership expire.
“We hope that the relevant parties will remain confident, not be influenced by external interference, and make the right decisions based on the overall bilateral relationship and the long-term interests of the people of both countries,” Lin said.
