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On the night time of March 11, 2024, the brand new ambassador of the Folks’s Republic of China to Panama, Xu Xueyuan, arrived at Tocumen Worldwide Airport in Panama Metropolis. Ambassador Xu is a profession diplomat and the previous deputy chief of mission in China’s embassy to america of America. She changed Ambassador Wei Qiang, an eloquent, Spanish-speaking and extremely regarded diplomat, who served in Panama for greater than six years after the institution of diplomatic ties in 2017. Xu brings an fascinating set of experiences to the desk. She served, greater than 20 years in the past, in Trinidad and Tobago and was, extra not too long ago, for 5 years the deputy chief of mission in america, appearing as chargé d’affaires in the course of the notorious 2023 balloon incident. Her appointment and the continuity of the ambassadorship sign the significance of Panama in China’s strategic outlook for Latin America. It additionally reiterates the rising affect Beijing is exerting in Panama.
Just a few hours after Xu’s arrival, on March 12, Panamanian President Laurentino Cortizo inaugurated the development works of the fourth bridge over the Panama Canal, an funding of greater than $1.3 billion operated by a PRC-controlled consortium (China Communications Building Firm Ltd. and China Harbour Engineering Firm Ltd.). On March 13, the Chinese language embassy launched a video the place Xu highlighted, in Mandarin, the accelerated development and vigorous promotion of bilateral ties between Panama and China, whereas additionally emphasizing the pragmatic cooperation China affords.
Panama is strategically situated within the Americas and has remained vital within the wider geopolitical panorama. It has additionally been a theater for geopolitical competitors for a lot of centuries, together with competitors with hegemons of the likes of Spain, France, the UK and the U.S. This historical past isn’t misplaced on China. However for Beijing, Panama’s significance goes far past the canal, touching upon its worldwide companies platforms, ports, and provide chains. It’s significantly in these areas the place China has sought to exert its affect after the institution of diplomatic relations between the 2 nations.
Upon his inauguration as president in 2019, Cortizo signaled his intent to ease up Panama’s ties with Beijing by, amongst different issues, reversing and, generally, freezing vital infrastructure investments granted to Chinese language corporations by his predecessor (Juan Carlos Varela, 2014-2019). Amongst these investments have been the fourth bridge over the Panama Canal, a cruise port in Amador within the Pacific facet of the canal, a container port facility in Margarita Island, the “Panama-Colón Container Port” within the Caribbean facet of the canal, and an electrical energy plant in Pilón Port. Nonetheless, this expressed intent would show to be futile and even empty. Whereas these initiatives have been initially halted and revised by the federal government, at the moment they’re properly underway and nonetheless underneath PRC management.
The primary vital check for Cortizo’s China coverage got here in 2021, when Hutchison Ports (PPC), a subsidiary of the Hong Kong-based company group Hutchison Whampoa Ltd., efficiently utilized for a 25-year renewal of the concessions it had over the ports of Balboa and Cristóbal. These ports are strategically situated on the Pacific and Caribbean sides of the Panama Canal, which supplies PPC a de facto monopoly over the porting business across the canal. All through these negotiations, Panama obliged most of PPC’s phrases and circumstances. Paradoxically, the Panamanian authorities didn’t elevate a single concern over oblique management over PPC by the PRC. These negotiations additionally coincided with the deteriorating state of affairs in Hong Kong and the nationwide safety regulation, which successfully curtailed the established order enshrined within the Sino-British Joint Declaration.
The PPC negotiations proved to be a blueprint for the PRC in managing their investments in Panama. Administrative litigation to safe monopolistic practices and curtail free market insurance policies was additionally integrated into the playbook. PPC would go on to efficiently forestall the institution of different ports near the canal, such because the case of Corozal Port. Different Chinese language-controlled corporations engaged in related administrative litigation with a view to finish the Panamanian authorities’s halt of the Margarita Island and Pilón Port initiatives. The PPC negotiation toolkit was utilized in First Quantum Minerals’ (FQM) copper mine contract renewal. By way of its native subsidiary, Minera Panamá, FQM initially sought a contract renewal and afterward a brand new contract for 25 years. Whereas FQM is a Canadian firm, in November 2023, one of many largest Chinese language state-owned mining corporations, Jiangxi Copper, expanded its stake within the firm to 18.5 p.c curiosity, making it the second-largest shareholder.*
The one cause why the PPC technique didn’t come to fruition in Minera Panamá was the Panamanian individuals taking to the streets in late 2023. Whereas China’s participation in First Quantum was hardly the primary driver behind the protests, it stays a related instance of how PRC’s corrosive capital and affect can produce within the quick and medium time period a country-wide instability, undermining democratic governance, human rights and transparency. Over the course of 43 days, a whole bunch of hundreds of Panamanians demanded on the streets that the nation exit the contract with the FQM subsidiary and be declared free from metallic mining. On November 28, 2023, the Supreme Courtroom of Panama declared the contract unconstitutional, saying it breached 25 articles of the structure. It was a singular occasion in Panama’s quick democratic historical past and an train of self-determination, throughout which the demonstrators coined the phrase “the gold of Panama is inexperienced,” reflecting Panamanians’ dedication to a sustainable and inexperienced future.
In sum, the PRC has a wider technique in Panama, which seeks to exert management over key infrastructure initiatives and provide chains. On this regard, China’s latest try to buy the railroad that connects Balboa and Cristobal ports illustrates the vulnerabilities of Panama’s provide chain and its non-diversified port business. It showcases the necessity for diversification and free market practices. The railroad in query was owned by Kansas Metropolis Railroad. After reviews of Chinese language curiosity in buying the operation, the corporate (not solely the railroad) was acquired by Canadian Pacific, which has a number of railroad operations in Latin America. This acquisition makes it impossible that China will be capable of exert some type of management over it within the foreseeable future.
One in every of Panama’s goals must be diversifying overseas direct funding, guaranteeing the participation of personal corporations from different key stakeholders, together with however not restricted to america, Canada, South Korea, Japan and India. Extra broadly, Panama additionally must develop a sound China coverage to cooperate in areas akin to local weather change and compete the place it must, together with by way of world provide chain resiliency.
With the arrival of Ambassador Xu, Panama-China relations have entered a brand new and extra advanced stage. China has consolidated its affect in Panama via vital infrastructure initiatives linked to the quintessential world provide chain tied to the canal. Xu’s type and demeanor are definitely completely different from that of her predecessor, Wei. This might sign a extra sturdy posture and assertive positioning from China. The impression of the appointment and an eventual strategic shift in China’s coverage in Panama will develop into evident sooner slightly than later.
*A earlier model of this text mistakenly claimed that “the Chinese language, via completely different corporations, had an estimated participation [in FQM] between 20 to 40 p.c.” This assertion has been clarified, detailing that Jiangxi Copper holds an 18.5 p.c curiosity in FQM.
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