Panama Faces Consequences for Shifting Away from China

Panama is experiencing repercussions for distancing itself from Beijing. Reports suggest a rise in inspections and detentions of Panamanian-flagged ships by Chinese authorities after Panama’s Supreme Court nullified concessions held by Hong Kong’s CK Hutchison at key container terminals. Chinese officials claim safety prompts these measures, while Panamanian authorities perceive them as retaliatory, affecting China’s commercial stance at both ends of the Panama Canal.

This situation in Panama is a microcosm of a larger struggle over influence in the Western Hemisphere. For over 20 years, China has expanded its presence by funding, constructing, and managing infrastructure such as ports, railways, and telecommunications across Latin America, fostering influence beyond mere commercial interests. However, the United States has started to counter these efforts. The events in Panama hint at the challenges of reversing China’s two-decade infrastructure proliferation.

The Panama Canal, once overseen by the U.S. Army Corps of Engineers, remains a symbol of American ingenuity and perseverance. Built through overcoming daunting challenges, the canal reshaped global trade and reinforced U.S. strategic advantages in the region. Recent visits to Panama indicate a growing consciousness of China’s pervasive role around the canal among locals, unlike the gradual realization among Americans.

In 2017, Panama severed diplomatic relations with Taiwan, recognizing China and joining the Belt and Road Initiative. Chinese enterprises pursued significant projects, including a proposed railway and major shipping terminals, leading to concerns about influence over commercial infrastructure.

PANAMA’S situation reflects a broader trend. China’s COSCO Shipping operates Peru’s Chancay port. The State Grid of China significantly invests in Brazil’s electricity network. In Venezuela, Chinese loans secured oil access, supporting the Maduro regime through global isolation. Economically justified individually, these projects form a vast web of Chinese influence in Latin America.

The U.S. perceives the canal region’s Chinese influence as a national security threat, prompting discussions with Panama and encouraging American investment. The efforts led CK Hutchison to sell terminal interests to a U.S.-led group, with Panama retracting from the Belt and Road Initiative. Despite delays due to opposition, Panama’s court nullified port concessions, paving the way for new leadership.

Panama represents the initial effort to recalibrate a widespread Chinese infrastructure approach in Latin America. China’s active response underscores the significance of infrastructure control, linking ports, power, and logistics networks with strategic influence. Such dependencies allow commercial links to turn into political leverage. Panama’s shipping registry now faces increased scrutiny, affecting operations and prompting possible shifts by shipowners.

The Panama case marks only the beginning of similar confrontations over Chinese infrastructure influence across the Western Hemisphere. China’s strategy, rooted in sustained investment, contrasts with military force, and challenging it will necessitate comparable U.S. resolve and persistence.

John Spencer leads war studies at the Madison Policy Forum, where Frank Viola is a fellow.