Panama Cracks Down on Port Concessions, China Warns of Retaliation

Balboa Port, Panama (Photo: Reuters / Phaata) 

Diplomatic relations between China and Panama are deteriorating rapidly following the Central American nation's shock decision last week: stripping the Hong Kong-based CK Hutchison group of its operating rights for two seaports.

Panamanian President José Raúl Mulino declared that the government would never again grant concessions for both Balboa and Cristobal ports to a single entity. This statement follows the Supreme Court's annulment last week of CK Hutchison's nearly 30-year contracts, citing the granting of exclusive privileges and tax exemptions.

Calling the ruling definitive, President Mulino emphasized: “Panama is a dignified country and will not allow itself to be threatened by any country on earth.”

Operationally, the President stated that CK Hutchison’s Panama Ports Company (PPC) would continue to operate both terminals while the legal status is clarified. However, Mulino noted that the state would decide on a future concession plan at a time “much later.”

In response, CK Hutchison’s Panama Ports Company has initiated international arbitration proceedings, a legal process likely to drag on for years.

Fierce Reaction from Beijing

The ruling immediately caused diplomatic and commercial ripples. Beijing has warned of “heavy prices” and reportedly ordered state-owned enterprises to pause new projects in Panama, while Chinese customs have intensified inspections of imports from Panama.

An editorial published today in the state-run China Daily argued that the Supreme Court's decision was “a textbook case of how external pressure can corrupt judicial independence and undermine the foundations of international investment”.

The Specter of the Nicaragua Canal Returns?

The rift between the two nations has prompted renowned container shipping consultant Lars Jensen – founder of Vespucci Maritime – to ponder whether Beijing might "dust off" plans for a counterweight canal in Central America.

Mr. Jensen wrote in a LinkedIn post: “The question is …whether the geopolitical turmoil surrounding the Panama Canal might lead to a rekindling of the Nicaragua Canal project as a means of geopolitical leverage from China.”

He noted that the last time such construction discussions in Nicaragua by Chinese interests vanished was over a decade ago, coinciding with the time Panama severed ties with Taiwan and established relations with mainland China.

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Source: Phaata.com (According to Splash247)

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