BREAKINGVIEWS-Venezuela raid heightens the stakes in Panama

By Sebastian Pellejero

NEW YORK, Jan 16 (Reuters Breakingviews) - A man in the White House has plans for a canal. Even before a shock incursion into Venezuela or resumed belligerence over the ownership of Greenland, U.S. President Donald Trump began his current term in office demanding greater American control of Panama’s famed waterway. As U.S. assertiveness and concerns over Latin America’s trading ties with China grow, a stalled deal for key infrastructure may become the next geopolitical flashpoint.

The canal’s strategic importance is enormous. Roughly 5% of global maritime trade passes through its locks each year, most of it moving to or from the United States. China, however, accounts for around a fifth of cargo volumes and is Panama's second-largest source of imports. Chinese firms are woven into its logistics, perhaps most crucially conglomerate CK Hutchison, which operates ports flanking the waterway in Cristobal and Balboa under a concession first won in the 1990s.

After Trump claimed that China “is operating” the canal and vowed to “take it back,” and as Panamanian authorities began auditing CK’s contract, the company in March struck a $23 billion agreement to sell the assets to a consortium led by asset manager BlackRock. The deal has since been caught in a geopolitical tug-of-war, with Chinese state media blasting the sale and state-owned Cosco demanding a major role, Bloomberg reported.

Meanwhile, the Supreme Court of Panama is preparing to rule on a lawsuit seeking to nix CK’s contract entirely. For the country, any outcome carries immediate implications. Washington is increasingly hostile to geopolitical hedging. Excluding Beijing risks its own backlash. Panama is signaling its alignment, exiting China's Belt and Road Initiative and deepening military cooperation with the United States. The risk is that this path ends up binding Panama’s room to maneuver, with Panama Canal Authority head Ricaurte Vasquez warning in June that the BlackRock deal could jeopardize the waterway’s neutrality.

The White House seems unlikely to relent. Republican politicians have charged that Panama may be in violation of a neutrality treaty signed between the two nations. Trump’s administration is pursuing an expansive vision of dominance in the Americas.

With trade between China and Latin America and the Caribbean reaching $515 billion in 2024, others may well soon feel similar pressure. Chinese firms now control or operate one-third of ports in the region, the Center for Strategic and International Studies reckons. After the U.S. intervention in Venezuela and subsequent belligerent warnings to countries from Cuba to Colombia, the geopolitical trap is tightening.

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CONTEXT NEWS

The Supreme Court of Panama is weighing lawsuits brought by the country’s comptroller seeking to nullify a contract under which Chinese conglomerate CK Hutchison operates key ports along the Panama Canal.