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US Secretary of State Marco Rubio’s whirlwind tour of Central America and the Caribbean, less than two weeks since taking office, is predicated on two broad elements. First, it shines the spotlight on illegal migration, one of US President Donald Trump’s main campaign issues. Central America and the Caribbean account for 22 percent of the unauthorised immigrant population in the US, and immigration is a key agenda item with every country on this visit, including Panama, El Salvador, Costa Rica, Guatemala, and the Dominican Republic. This sends a clear message to Trump’s base back home—the new administration intends to apply as much pressure as required to strike deals that stem the flow of illegal migrants to its borders. The second element is hard to miss these days: China. Beijing has rapidly expanded its clout in the Latin American region over the past two decades. Last year, Chinese President Xi Jinping inaugurated a megaport in Chancay, Peru, run by a Chinese state-run company, boosting connecting between South America and Asia. China has been South America’s largest trading partner for more than a decade and is one of the region’s most important lenders and investors. It is thus no coincidence that Rubio’s visit is limited to Central America and the Caribbean, where the US still holds primacy as the largest trader and investor. Washington will maintain its authority in Central America and the Caribbean and hopes to signal to the larger Latin American region its intention of regaining influence in what was once considered its own ‘backyard.’
China has been South America’s largest trading partner for more than a decade and is one of the region’s most important lenders and investors.
This wishful return to eminence in Latin America is the underlying motive behind Trump’s recent threats and intimidation against Panama. Trump’s provocative statements on the Panama Canal during his inauguration were designed to fluster the Central American nation, asserting that “China is operating the Panama Canal, and we didn't give it to China. We gave it to Panama, and we're taking it back.” Such an overt threat sent shockwaves across Latin America and brought global attention to Panama. Many countries voiced their support for Panama, and the Panamanian president responded immediately, describing the claim as ‘nonsense’ and adding that there is “absolutely no Chinese interference” in the Canal.
Despite Trump’s threat to take over the Panama Canal and his refusal to rule out the use of military force if required, there exists no chance at all of a US invasion of Panama. This entire episode has united Panamanians to stand behind their country, one that has long been defined by the contours of the Canal. Moreover, any military action would threaten the canal itself and would be an utter operational failure. Panamanians alone have managed this waterway for more than a quarter century and replacing them overnight would be an impossible task since there is no margin for error as ships cross the narrowest of canals. For decades, only Panamanian pilots have navigated ships through the canal, and training new pilots takes years.
Instead, the primary point of contention for Washington appears to be two ports at the Pacific and Atlantic ends of the Canal, Balboa and Cristobal, which are operated by Hutchison Port Holdings, a Hong Kong-based private company listed in the Singapore Exchange. For all of Trump’s assertions, these ports hold no strategic value whatsoever. Most observers are unaware that Hutchison’s responsibilities are limited to unloading and loading containers and cargo from ships that use Panama as a transshipment and logistics hub. Hutchison has no say on ships transiting the canal – that power lies with the Panama Canal Authority (ACP in Spanish). The ACP has done a commendable job since taking over as custodians of the Canal in 1999, expanding the canal to handle double its original capacity and making space for larger, longer ships to transit the waterway. The ACP remains a professionally run, highly autonomous body whose focus remains on efficiency and safety.
Panamanians alone have managed this waterway for more than a quarter century and replacing them overnight would be an impossible task since there is no margin for error as ships cross the narrowest of canals.
Despite these realities, Hutchison’s port concessions in Balboa and Cristobal are now under threat. The company recently faced a suit of unconstitutionality against Article 1 of Law No. 5 of January 16, 1997, alleging that the concessions violate multiple articles of the constitution. Moreover, Hutchison now also faces an audit related to payments it owes the Panamanian state. Come what may, Hutchison may well lose its concession to both ports in Panama, thanks in large part to American pressure.
If anything, this friction in US-Panama relations is a sign of the erosion of Washington’s influence in the Latin American region, in no small part due to its neglect, which has opened up the space for China’s slow but steady ascendance. Yet, although China’s clout in the region has increased considerably, it is still in the early stages in Panama. Rubio’s visit proves that Panama remains a steadfast ally of the US, evident in the accommodations made by the Panamanians – from backing out of China’s Belt and Road Initiative and discussions of possible US investments in Panama’s infrastructure projects to near-total cooperation in combating the flow of illegal migrants. In fact, under an agreement with the US, Panama has also deported illegal migrants from India through US charter flights to New Delhi. Panama has now also offered US border control agents access to the Metetí airport in the province of Darién to repatriate illegal migrants. Even if Washington’s pressure tactics achieve their intended objectives, they are likely to undermine the soft power the US has spent decades cultivating. However, the result in Panama may just be the weakening of Chinese economic power in the country, replaced swiftly by an increase in US economic and strategic influence.
Hari Seshasayee is a Visiting Fellow at the Observer Research Foundation and is a co-founder of Consilium Group.
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