China is losing more than just two ports in Panama

The Japan Times - The Panamanian Supreme Court’s ruling on Thursday night invalidating Hong Kong-based CK Hutchison Holdings’ contract to operate two key ports at either end of the Panama Canal caps a month marked by high-profile strategic defeats for Beijing in the region.

The U.S. commando operation in Caracas in early January that swiftly removed dictator Nicolas Maduro from power, for instance, was preceded by the start of tariffs of up to 50% on many Chinese exports to Mexico and followed last week by the cancellation of a Chinese consortium’s major zinc project in Bolivia.

With the U.S. now effectively overseeing a protectorate in Venezuela, Beijing has watched an ideological ally — however unreliable and financially insolvent — slip into Washington’s sphere of influence. The White House is already setting the terms for developing the country’s vast oil reserves in ways that favor American companies, leaving China sidelined in a nation where until recently wielded considerable leverage.

In Bolivia, meanwhile, the government of the fast-moving, business-friendly Rodrigo Paz has steered the country rightward after two decades of socialism — a democratic realignment that deserves more recognition than it has received. The decision to scrap the zinc project signals a broader reassessment of the benefits of Chinese investment and reflects La Paz’s shifting geopolitical priorities.

The ruling in Panama, however, may prove the most consequential setback of all. The canal remains one of the world’s most strategic infrastructure assets, handling roughly 5% of global trade. China is the largest user of the waterway after the U.S., quietly building a string of assets around it, even if the canal itself remains firmly under the independent control of the Panama Canal Authority.

Although these two ports were until now formally in the hands of a private conglomerate like CK Hutchison, Beijing has never dispelled concerns about its influence over them, particularly after it moved to block their divestment to a BlackRock-led consortium last year. Ironically, if there was ever any doubt about their huge geopolitical value, China’s attempt to derail that deal, along with the intense lobbying it deployed in Panama to protect its position, laid bare the high stakes.

Moreover, China has lost not only two ports, but the gains it had made in Panama after years of patiently cultivating its influence since the reestablishment of diplomatic relations and the severing of ties with Taiwan in 2017 under President Juan Carlos Varela.

After becoming the first Latin American country to join China’s Belt and Road initiative, Panama under President Jose Raul Mulino has moved back toward its historically close alignment with Washington. Donald Trump’s return to the White House a year ago, armed with a more interventionist vision for the hemisphere and explicit threats to reassert U.S. control over the canal, left Panama’s traditionally U.S.-sensitive elite with little room to maneuver — even though the ports concession had triggered legitimate grievances since its rushed renewal in 2021, well before Trump turned his focus to the canal. If the revived Monroe Doctrine needed a real-world win, this decision provides one. The rum was surely flowing at the U.S. Embassy in Panama City after the ruling.

China has hardly lost its footing in Latin America. Panama has been careful to guarantee the canal’s neutrality and has a plan to ensure the reliability of its logistics supply chain until new concessions are tendered. More broadly, China will continue seeking inroads across the region through commercial partnerships, political alliances and soft power, leveraging its massive trade ties, particularly in South America. As outlined in its latest strategic policy paper released in December, the Chinese government maintains an ambitious cooperation agenda spanning trade, infrastructure, finance, energy, manufacturing, food, technology and more.

But last week’s court ruling is one more sign that the geopolitical competition for Latin America is sharpening — and not necessarily in China’s favor.