Panama experiences increased scrutiny on its ships following a legal decision against Chinese interests. The Panamanian Supreme Court recently annulled concessions held by Hong Kong’s CK Hutchison at key container terminals, a move that has prompted China to heighten inspections and detain Panamanian-flagged vessels. Officially, Beijing cites safety precautions; however, Panamanian authorities perceive these actions as retaliatory given the impact on China’s commercial positioning at the Panama Canal.
This situation is part of a broader rivalry for dominance in the Western Hemisphere. China’s involvement in Latin America has grown for over twenty years, with investments in ports, railroads, power grids, telecommunications, and logistics. These efforts have extended China’s influence beyond mere commerce. Amidst this, the United States is increasingly pushing back against Beijing’s advancements.
The challenge is reversing two decades of Chinese infrastructure proliferation. My initial military assignment was at the Panama Canal Zone, where I gained an understanding of the canal’s pivotal role not only as a transit route but also as a symbol of American ingenuity and resilience. The canal, constructed by the U.S. Army Corps of Engineers, overcame immense challenges to revolutionize global trade and maintain America’s strategic advantage.
Recently, upon visiting Panama, the focus was notably on China’s pervasive presence around the canal. While American attention has been late in emerging, Panamanians have long observed this ongoing expansion. China’s link with Panama strengthened when Panama acknowledged the People’s Republic of China in 2017, severed ties with Taiwan, and joined the Belt and Road Initiative the next year. Chinese companies have since been involved in significant projects such as the Panama City-David railway and the Fourth Bridge over the Panama Canal.
Concerns mount over facilities like the Balboa and Cristobal terminals, run by the Panama Ports Company, part of CK Hutchison. While China does not own the canal, its influence over surrounding infrastructure has raised alarms. Panama’s situation is not isolated as Chinese firms have similar footholds in Peru, Brazil, and Venezuela, leading to a broader network of economic influence.
Washington views Chinese influence near the canal as a national security risk and has raised it during negotiations with Panama. U.S. involvement led to CK Hutchison agreeing to sell its terminal stakes to a U.S.-backed group. Panama also exited the Belt and Road Initiative. After Chinese challenges stalled the sale, Panama’s Supreme Court facilitated new management by invalidating the concessions.
Panama’s moves mark a significant step in countering China’s infrastructure-driven strategy across Latin America. China’s response highlights infrastructure’s importance in global trade, energy, communication, and logistics. Once dependent on such systems, nations may face political pressure.
The repercussions on Panama’s shipping registry underline these pressures through slowdowns and stricter inspections, urging shipowners to consider alternative registrations. This is a precursor to more such disputes across the region, where strategic infrastructure intersects with national security concerns. Overturning China’s entrenched position will require the U.S. to employ similar perseverance and strategy that China used in its initial expansion.
John Spencer and Frank Viola, both associated with the Madison Policy Forum, emphasize this geopolitical dynamic.