Chinese Influence in Panama Unraveling After Decades of Growth

Approximately a decade ago, the maritime business owned by Louis Sola’s family received permission to construct a marina and cruise port on Amador, a causeway at the Pacific entrance of the Panama Canal.

“This would have been the inaugural cruise port on the Pacific side,” remarked Sola, who is now the chairman of the U.S. Federal Maritime Commission.

However, the situation shifted dramatically in 2017 when Panama allied with the Chinese regime’s Belt and Road Initiative. This partnership required the Panamanian government to acknowledge Taiwan as part of China, generating surprise and alarm in the United States, which has long supported Taiwan.

Consequently, Panama revoked the concession for the land where the Sola family intended to invest $30 million in establishing a cruise port.

Instead, Panama nationalized the development, awarded the concession to a Chinese corporation, and compensated it with $300 million to construct the cruise port.

Furthermore, the land designated for the marina was proclaimed as an embassy for the People’s Republic of China.

This century-old strategic waterway has been largely overlooked in U.S. policy for decades yet has now become a focal point amid escalating tensions between Beijing and Washington.

Experts are increasingly concerned that Chinese infrastructure and port control at both ends of the Panama Canal could imply de facto Chinese control over this strategic passage, threatening U.S. national security as per the U.S.–Panama Neutrality Treaty.

Military officials have voiced alarms regarding the rising Chinese influence at the canal and more broadly across Latin America, though the topic gained particular prominence when incoming President Donald Trump announced in December 2024 via social media that the canal belonged “exclusively to Panama,” not to China.

Furthermore, Trump expressed dissatisfaction that U.S. ships, the primary users of the canal, were being “ripped off” due to exorbitant fees, potentially breaching the treaty’s provisions for equitable treatment among all nations.

Upon taking office in January, Trump asserted that the canal was effectively under the control of the Chinese regime and pledged to take action, prompting rejections from both Beijing and Panama.

“China is operating the Panama Canal,” Trump declared during his inaugural address. “And we didn’t concede it to China. We entrusted it to Panama, and we are reclaiming it.”

National Security Risk

Chinese military presence is not necessary for the CCP to jeopardize the canal’s operations and put U.S. national security at risk, particularly if conflict with China arises over Taiwan, as posited by Andrés Martínez-Fernández, a senior policy analyst for Latin America at the Heritage Foundation.

A critical concern for analysts includes the control exercised by the Hong Kong-based CK Hutchison Holdings over two of Panama’s five main ports—Balboa on the Pacific and Cristóbal on the Atlantic.

Additionally alarming was the 2018 awarding of a $1.4 billion contract for the canal’s fourth bridge to a Chinese consortium led by the state-owned China Harbour Engineering Company and China Communications Construction Company.

“The canal is exceptionally susceptible to acts of sabotage,” Martínez-Fernández stated to The Epoch Times. “There is no requirement for a [Chinese] naval presence to execute such plans.”

The canal holds considerable economic and military relevance for the United States as it represents a critical chokepoint, crucial for U.S. naval vessels in the Atlantic and Pacific in situations of military conflict with China.

An estimated $270 billion worth of cargo navigates through the canal annually, accounting for approximately 5 percent of global maritime trade volume, with over 70 percent heading to or coming from U.S. ports.

This agreement preserved the U.S.’s right to use military force to safeguard the canal’s neutrality against foreign threats.

The canal has become fundamental to Panama’s national identity and serves as its primary economic generator, reportedly yielding approximately $28 billion for the country over the past quarter-century.

Following Trump’s allegations concerning the CCP’s control over the canal, the Panama Ports Co., overseen by CK Hutchison Holdings, was informed about the impending audit, as stated by the Panama Maritime Authority.

Martínez-Fernández expressed that he believes the most probable diplomatic avenue to alleviate U.S. national security concerns is reducing Chinese involvement in the canal’s operations and affiliate ports.

“These investments in infrastructure from China around the canal, throughout other territories in the region, the Caribbean, and South America raise numerous red flags,” he remarked.

Meanwhile, the Chinese regime has vocally backed Panama’s ownership and governance of the canal, manipulating Panama’s sense of national identity and sovereignty to cement its political position.

Wang Yi, China’s state councilor and CCP foreign minister, referred to Panama as a “friend and good partner” during a 2021 phone call with Erika Mouynes, the Panamanian foreign minister.

Yi indicated that China would “persist in supporting Panama’s endeavor to protect its legitimate rights and interests on the global stage, including Panama’s sovereignty over the canal.”

Neutrality Issue

Previously, billboards branding the Bank of China adorned the landscape upon arrival in Panama, but they were recently removed.

Residents informed The Epoch Times that these billboards were taken down just prior to a meeting between U.S. Secretary of State Marco Rubio and Panama’s president on February 2.

The billboards underscored Beijing’s strong influence in Panama, and Trump remarked on social media just before Rubio’s visit that Panama was attempting to remove 64 percent of signage written in Chinese.

“These are prevalent throughout the [Panama Canal] Zone as a result of China’s control over the Panama Canal,” Trump stated on January 28. “Panama can’t escape this reality!”

CK Hutchison Holdings secured the operation of two of Panama’s five main ports in 1997, but since then, Beijing has tightened its grip on the city’s autonomy and firmly placed it under communist authority.

The Hutchison ports have emerged as central to U.S. apprehensions, particularly concerning state-owned Chinese firms constructing a fourth bridge spanning the canal.

This is significant because the CCP enforces mandatory cooperation between Chinese corporations and national intelligence agencies.

Nevertheless, the CCP seems to have gained considerable influence without substantial financial input in the ports.

During his remarks before the Senate committee, Sola noted that Panama’s Chinese ports have not contributed anything significant over the last 25 years but have consistently managed the Balboa and Cristóbal ports.

“I fail to comprehend why Panama would permit these two ports to continue operation, jeopardizing the canal’s operations,” he expressed.

Sola explained that the Hutchison ports receive special permissions to operate because directing shipping in and out of their facilities disrupts the canal’s traffic as vessels navigate to dock.

Senators also raised concerns that Panama extended concessions to the Hutchison ports in 2021 for another 25 years without a bidding process. Sola shared that part of the agreement required the ports to settle back taxes amounting to $150 million.

“We can debate the distinctions between Port Authority control and actual management, but the truth is that the CCP wields operational control over the Panama Canal,” asserted Senator Eric Schmitt (R-Mo.), who has proposed a resolution urging Panama to terminate Chinese management over essential ports.

Potential Violation

Eugene Kontorovich, a professor at George Mason University’s Antonin Scalia Law School and a senior research fellow at the Heritage Foundation, testified to the Senate Commerce Committee on January 28 that Panama might have contravened the Neutrality Treaty with the United States by allowing Chinese enterprises to manage the ports.

Kontorovich stated that the treaty forbids “foreign operations” of the canal, emphasizing that the extent of CCP influence and engagement with Chinese firms operating the ports needs to be scrutinized to determine if a violation occurred.

“It is not essential to wait until the canal is effectively closed due to an act of sabotage or aggression, which, as we have heard from the testimony, would be catastrophic for the United States,” he explained.

Kontorovich explained that the treaty permits the U.S. to “defend the canal against any threats to the regime of neutrality.”

While the Panama Canal Authority (PCA) supervises the canal’s operations, the Panamanian government maintains administrative authority over the ports, water rights, and shipping registrations as per the Federal Maritime Commission.

Concerns persist that the Chinese control over the ports, combined with the state-owned enterprises constructing a fourth bridge over the canal, may serve as a lever to obstruct this vital chokepoint in the event of escalating conflict.

“Chinese firms are erecting a bridge over the canal—at a leisurely pace expected to stretch nearly a decade—and manage container ports on both sides,” remarked Senator Ted Cruz (R-Texas), chairman of the Senate Commerce Committee.

“The incomplete bridge gives China the capacity to obstruct the canal without notice, while the ports serve as vantage points for China to orchestrate such actions. This scenario poses a significant risk to U.S. national security.”

Influence or Control?

Nehemías J. Jaén Celada, a public policy expert and former Panamanian diplomat in China, has significant experience engaging with the Chinese regime.

He stated that while Beijing exerts considerable influence in Panama, this does not necessarily equate to a treaty violation, positing that he does not observe any legal justification for Washington to reclaim control of the canal.

When then-Panamanian President Juan Carlos Varela opted to sever ties with Taipei in 2017 to align with the Chinese regime’s Belt and Road Initiative, he anticipated that such a shift would usher in substantial Chinese investments, Jaén explained.

“I can assure you that there has been no significant [Chinese] investment in the country,” he remarked to The Epoch Times. “Such expectations have remained unfulfilled.”

Chinese firms are seeking project bids and providing services, yet this does not equate to genuine investments in Panama, Jaén clarified.

Padma’s cultural identity is tightly woven with the Panama Canal, prompting Jaén to believe that Trump’s claims to seize control represented a broader national security strategy dubbed “near security.”

“What this signifies is that various domains—trade, economics, finance, manufacturing—are subordinate to U.S. national security,” Jaén added.

“The primary objective for Trump is to ensure that Chinese influence and presence do not expand.”

Jaén pointed out that overall, Chinese leverage has declined since Panama’s copper mine was shut down for environmental issues.

He referenced data indicating that China was the leading supplier for Panamanian exports from 2021 to 2023 during copper mining operations but dropped to fourth place last year.

During the hearing, Schmitt cautioned that Chinese-manufactured shipping cranes are vulnerable to hacking.

“China’s state-owned ZPMC, which supplies 80 percent of port cranes in the U.S., has outfitted these cranes with cellular modems that create exploitable weaknesses,” he elaborated.

Senator Tammy Baldwin (D-Wis.) emphasized that the CCP’s potential to execute surveillance through its infrastructure initiatives raises significant concerns regarding the fourth bridge over the canal.

“It’s vital to have a secure and equitable playing field, which we currently lack,” she stated. “Current Chinese practices do not permit that.”

U.S. Southern Command is apprehensive that surveillance could be perpetrated from the fourth bridge spanning the canal, which incorporates a light rail system, based on commentary during the hearing.

The PCA is tasked with overseeing transit, shipping locks, and vessel movements within Panama Canal waters, while also ensuring the canal’s safety.

The agency assesses projects within its jurisdiction, such as the fourth bridge, to confirm compliance with established guidelines, according to Ilya Espino de Marotta, executive vice president of engineering and program management for the PCA.

While the PCA does not govern external port operations, it is prepared to address emergencies that could interfere with canal traffic using specialized equipment and trained ship operators, she informed The Epoch Times.

Despite the absence of substantial security problems in the past 30 years, the agency is equipped with floating cranes and a rapid response team to address situations such as disabled vessels obstructing the canal.

The canal’s operation has been advanced through modern technology, yet it can still be manually operated in an emergency, Espino de Marotta noted.

The PCA safeguards the canal and its infrastructure in partnership with the U.S. Department of Homeland Security, she confirmed.

Three years ago, the PCA began collaborating with the U.S. Cybersecurity and Infrastructure Security Agency—part of the Department of Homeland Security—to protect against cyber threats aimed at the canal.