PANAMA is weighing whether to cancel its contract with the Hong Kong-based company that operates ports near the Panama Canal, according to sources with knowledge of the situation, a potential concession to defuse President Donald Trump’s threats about countering China’s influence around the key waterway.
The government of President Jose Raul Mulino is weighing the possibility of cancelling the contracts held by Hutchison Ports PPC, a subsidiary of billionaire Li Ka-shing’s conglomerate CK Hutchison Holdings, according to the sources, who asked not to be identified given the commercial and political sensitivity of the issue.
They cautioned that no decision has been made and that the government would proceed in a way intended to avoid lawsuits and follow due process. Panama’s presidential office didn’t immediately respond to a request for comment, and Hutchison Ports did not respond to a request for comment.
If such a move goes through, it would mark a major gift to Trump, who says that China has too much control over the canal and has not ruled out seizing it by force. Hutchison Ports operates two of the five ports adjacent to the Panama Canal, one on each side. China has steadily eroded Hong Kong’s autonomy in recent years.
US Secretary of State Marco Rubio told Panamanian authorities during a visit on Sunday (Feb 2) that steps must be taken to kerb what he called China’s “unacceptable” influence over the US-built canal, which was ceded to Panama in 1999 under a treaty signed two decades earlier by President Jimmy Carter. Hutchison has run the ports in Panama’s Balboa and Cristobal under a concession that was first signed in 1997 and, in 2021, extended until 2047.
It’s not the only action concerning the ports. Two attorneys filed suit against the Hutchison contract on Monday, alleging it violates the country’s constitution. One of the attorneys, Norman Castro, said the concession contains excessive tax breaks and cedes large swaths of land to the port company, violating the constitution’s guarantee of placing the public good over private interests.
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Panama’s dollar bonds extended gains on Tuesday, climbing about half a cent on the US dollar across the curve on expectations US pressure on the economy may be avoided. The notes rallied on Monday after the country offered Rubio free passage for US warships through the canal and said it will withdraw from China’s signature lending programme, the Belt and Road Initiative.
Rubio has said Beijing could use the ports as a staging point for military operations in case of a conflict.
The Trump administration’s assessment marks a reversal from previous findings from the State Department. In 1999, a State Department official testified to the Senate Armed Services Committee that the US had concluded that Hutchison’s operation of the ports “does not represent a threat to canal operations or other US interests in Panama”.
“For the most part, Hutchison’s operations are limited to loading and unloading and storing cargo containers,” Ambassador Lino Gutierrez testified at the time. “They are also developing port facilities, with a view towards making Cristobal the hub of their operations in the Pacific Ocean.”
About 75 per cent of the cargo transiting through the Panama Canal goes to or from the US, making it by far the biggest beneficiary of the route. The canal brought in nearly US$5 billion in fiscal 2024, or about 4 per cent of Panama’s gross domestic product. BLOOMBERG
