PANAMA CITY (AP) — Two ports run for years by a Hong Kong-based company at either end of the Panama Canal have thrust Panama into a geopolitical tug-of-war between the United States and China.
Even before taking office for his second term, U.S. President Donald Trump complained that China was running the Panama Canal. The Panamanian government, which operates the canal, strongly denied that.
In late January, Panama’s Supreme Court ruled that the concession
made to a local subsidiary of Hong Kong’s CK Hutchison was unconstitutional. This week, the Panamanian government occupied the two ports and designated two other companies to keep them running until the concession can be rebid. And on Thursday, investigators removed boxes of documents from Panama Ports Co. offices.
China is not happy and threatened consequences for Panama. President José Raúl Mulino responded Thursday, telling China “be careful,” adding: “They need us more than we need them.”
Here is a look at the ports that have the attention of two of the world’s superpowers:
Although Panama is not a big importer or exporter of goods, its canal has made the country of 4 million residents a critical international logistics hub.
Massive cargo ships arrive daily from Asia, Europe and both coasts of the United States. Little of what they carry is for Panamanians, but they unload their containers in Balboa, Cristobal and other ports for onward shipping via smaller routes to their final destinations.
The Balboa Port on the Pacific Ocean side of the canal and the Cristobal Port at the Atlantic end handle around 39% of all of Panama’s container traffic. About 7,000 people work at the two ports.
The two ports have been operated by Panama Ports Company, a local subsidiary of Hong Kong’s CK Hutchison, since 1997.
An audit by Panama’s comptroller alleged irregularities in the extension of the concession, including massive lost revenue to Panama’s government. After the country’s Supreme Court ruled the concession was unconstitutional, authorities said they had a transition plan that would avoid any unnecessary interruptions to port operations.
The ports are located at the entrances of the Panama Canal, but do not fall under the autonomous Panama Canal Authority that operates the waterway.
Given their locations, having a Chinese company operating them has long bothered the United States. U.S. Secretary of State Marco Rubio made his first overseas trip as the top U.S. diplomat to Panama, relaying a clear message that it was unacceptable. He suggested that China could obstruct canal traffic if it wanted to.
Since the canal, in addition to cargo ships, also accommodates U.S. warships, the United States sees national security implications. The American-built canal was turned over to the Panamanians in 1999.
Panama Ports Company started arbitration proceedings against Panama after the court’s decision. It said the Panamanian government had kept up a “campaign” against its concession for the past year causing serious harm to the company.
It argues that its rights as an investor have been compromised and is demanding unspecified compensation. Panama Economy Minister Felipe Chapman said the company is seeking $1.5 billion. The company’s concession to operate the two ports was just renewed in 2021 for 25 years.
After the court’s decision, Beijing’s office overseeing Hong Kong affairs criticized the ruling, saying it showed that Panamanian authorities were bowing down to “hegemonic powers.”
“Panama’s authorities should recognize the situation and correct their course,” it said. “If they persist in their own way and refuse to see reason, they will pay a heavy price both politically and economically!”
The government’s seizure of the ports this week set off another round of objections. Mulino said it was necessary to ensure their continuing operation and to determine their real value.
“The more than 7,000 jobs continue without changes,” he said.
Mulino has said that the court’s decision is final and must be respected.
The ports continue operating while the legal drama builds.
Chapman, the economy minister, said that arbitration could take years. Meanwhile, the government is preparing to begin the process for a new operator of the ports.
