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Panama Supreme Court Rules Against Chinese-Linked Port Concession, Advancing U.S. Strategic goals
Panama’s Supreme Court has declared unconstitutional the 25-year concession granted to a subsidiary of Hong Kong’s CK Hutchison Holdings to operate ports at both ends of the panama Canal, a decision that aligns with longstanding U.S. efforts to limit Chinese influence over the vital waterway. The ruling, delivered late Thursday, stemmed from an audit revealing alleged irregularities in the 2021 extension of the concession.
The decision marks a important victory for the United States, which has increasingly viewed China’s growing economic adn political presence in Latin America with concern.Blocking China’s influence over the Panama Canal was a key priority for the Trump administration, with then-Secretary of State Marco Rubio making Panama his first overseas stop as the nation’s top diplomat. Despite assurances from Panamanian officials that China has no operational control, the U.S. maintained the port operations posed a national security risk. Former President Donald Trump even suggested Panama shoudl relinquish control of the canal to the United States.
The court’s statement offered no immediate details regarding the future of the port operations. However, the ruling has already drawn strong criticism from Panama Ports Company, a subsidiary of CK Hutchison holdings. In a statement, the company asserted that the decision “lacks legal basis” and threatens the livelihoods of thousands of Panamanians dependent on port activity, as well as undermining the rule of law within the country. The company indicated it would pursue all available legal avenues, both within Panama and internationally.
The Hong Kong goverment also firmly rejected the ruling, stating its opposition to “coercive” actions that harm the interests of Hong Kong businesses. It urged Panama to uphold contractual obligations and maintain a fair business habitat. “Given the current situation in Panama, Hong Kong enterprises should carefully review their existing and future investments there,” a government statement warned.
Beijing echoed these concerns, with a Foreign Ministry spokesperson stating China would take “all necessary measures” to protect the rights of the “Chinese company” involved, though specific actions were not detailed.
Political analyst Edwin Cabrera indicated that,following official notification,the responsibility for determining the future of the ports will fall to Panama’s executive branch,specifically the Panama Maritime authority. “I have the impression from conversations that I have had with some people that the operation (of the ports) will not stop,” Cabrera noted.
The situation is further complicated by a stalled sale deal announced last year. CK Hutchison Holdings had intended to sell its majority stake in the Panamanian ports,along with others globally,to a consortium including BlackRock Inc. However, the deal reportedly encountered resistance from the Chinese government. Last July, the company explored the possibility of including a Chinese investor in the consortium, a move widely interpreted as an attempt to appease Beijing, but no further announcements have been made. This predicament underscores the challenges faced by Hong Kong business leaders in navigating the complex expectations of Beijing, particularly amid strained U.S.-China relations. CK Hutchison is owned by the family of Li Ka-shing, Hong Kong’s wealthiest individual.
The controversy originated with an audit conducted by Panama’s comptroller, Anel Flores, of the concession granted to Panama Ports Company, which has operated the ports as 1997.The 2021 renewal for another 25 years, under the previous Panamanian administration, came under scrutiny. Flores’ audit revealed discrepancies including unpaid payments, accounting errors, and the alleged existence of “ghost” concessions operating within the ports since 2015. The company has denied these allegations.
The audit estimated that these irregularities have cost the Panamanian government approximately $300 million since the concession extension and a total of $1.2 billion over the original 25-year contract period. Flores also stated the extension was granted without the necessary endorsement from his office. The comptroller formally challenged the Panama Ports Company’s contract before the Supreme Court on July 30.
