Panama Canal Becomes 'A Blueprint For Ejecting China From Latin America

Panama Canal Becomes a ‘Blueprint’ for Ejecting China from Latin America PANAMA Panama In 1997, Panama issued the first of two 25-year licenses to a subsidiary of Hong Kong-based CK Hutchison Holdings, giving the firm control of ports on both sides of the Panama Canal – a move critics say expanded China’s strategic footprint in the waterway. Since then, American leaders, especially President Donald Trump, have sounded alarm bells over China’s influence in the region. In his inauguration speech last year, for instance, Trump vowed to take back the canal that the US transferred to Panama in 1999 and has put the Central American country under pressure ever since. The canal is a “hinge point” in the new world order that Trump is seeking to create. The American invasion of Venezuela last month was a major milestone in that plan. A second came in late January when Panama’s Supreme Court invalidated the two agreements on constitutional grounds in a case filed by the government three days after CK Hutchison refused to sell its port operations. Analysts say Panama is a warning to the rest of the Americas – get ready to be caught between the US and China. “It is hard to imagine that any of this would have happened without the pressure applied by the United States,” the Economist said. The capture of Venezuelan dictator Nicolás Maduro and ominous threats over Greenland’s sovereignty grab the world’s attention, but the squeeze that Mr. Trump has put on Panama is more relevant for the rest of the Americas. Panama could become a blueprint. Small countries are vulnerable.” In the case, plaintiffs said the licenses were bad for the country. Since CK Hutchison Holdings began operating the ports, the Panamanian government has lost $1.3 billion in revenues, which are vital to the local economy, the Wall Street Journal reported, noting that 5 percent of global trade and 40 percent of US trade pass through the canal. The court’s decision was a big win for Trump. Chinese officials described it as “political backstabbing” and a “legal absurdity,” wrote Agence France-Presse. CK Hutchison Holdings has initiated arbitration proceedings, but Panamanian officials have yet to confirm whether they will join. The canal is extremely important for Chinese exporters who would lose significant margins if they had to transport their goods around South America rather than cutting through the canal to the Caribbean and the US. The Panama case may serve as a model for other Latin American countries facing US pressure to reduce Chinese influence. In 2021, similar pressure persuaded Chile to terminate a contract with a Chinese-German consortium managing its passports. Still, China controls about two-thirds of Chile’s energy sector. Currently, Peru is in Washington’s sights because of a $1.3 billion Chinese-built megaport in Chancay. The Trump administration last week expressed concern that China was costing Peru its sovereignty by solidifying control over the South American nation’s critical infrastructure after a Peruvian court ruling restricted a local regulator’s oversight of the port. “The…port …has become a symbol of China’s foothold in Latin America and a lightning rod for tensions with Washington,” wrote Houston Public Media. The Chinese government strongly rejected the US comments on the port issue. China, since the 1990s, has been steadily increasing its influence in South and Central America. Currently, China is the top trading partner for South America and is becoming the largest for Latin America as a whole, wrote the Conversation. It is also a major source of foreign direct investment and infrastructure lending for the region. However, Chinese investments also tend to focus on areas that give Beijing control over a country’s critical infrastructure such as the Peruvian port, as part of its Belt and Road Initiative. Meanwhile, Chinese diplomats said they would force Panama to pay a “heavy price” for its actions vis- à-vis the Panama Canal. Analysts say arbitration will be costly, but other measures from China could include cutting financing to the country. Meanwhile, Panama’s investment credentials could also take a hit. Still, Panamanian President José Raúl Mulino stuck to his guns, saying the Chinese would need to accept the decision because his country respected the rule of law, according to Al Jazeera. “Panama is a dignified country and will not allow itself to be threatened by any country on earth,” Mulino said recently. However, last year, many Panamanians expressed similar sentiments toward what they perceived as US interference, angry at the bullying from the behemoth to the north. Still, Amalendu Misra, professor of international politics at Lancaster University, says the Panamanian Supreme Court decision is a warning to China and countries in the region. “(Chinese companies may) come to realize with the Panamanian Supreme Court verdict that there is nothing that China can do if your investment goes down the drain,” Misra told France24. “Many Latin American and Central American countries are going to become stronger now by taking this example, by saying no to Chinese control of their resources, their ports and other things.”