The Story Regarding Panama Quitting China’s Belt and Road Initiative

While China has been trying to expand its influence in Panama for years, as part of its broader ambition to increase its footprint in Latin America, the Asian country recently faced a major setback as Panama announced it would not renew its participation in the Belt and Road Initiative (BRI). The decision made Panama the first Latin American country to withdraw from China’s ambitious global infrastructure and investment project. 

Incidentally, Panama was also the first Latin American country to officially join the BRI in November 2017, five months after breaking ties with Taiwan in favor of Beijing.  According to Newsweek, on February 6, the Panamanian government gave China a 90-day notice of withdrawal from the BRI, a decision, President José Raúl Mulino said was made prior to the visit of U.S. Secretary of State Marco Rubio.

Beijing’s reaction was not long in coming. According to a statement from the Chinese Embassy in Panama, the Chinese government summoned Panamanian Ambassador to Beijing Miguel Humberto Lecaro Bárcenas, to express its dissatisfaction and urge Panama to reconsider its position.

Panama’s departure from the BRI comes at a transformational time in global geopolitical and economic dynamics. In recent years, several countries have reconsidered their participation in the Chinese initiative due to indebtedness and sovereignty concerns, Colombia’s 360 Radio reported.

This rethinking is partly a response to the initiative’s loss of momentum. “China strongly insisted on the BRI, but now that we are experiencing political and economic changes in the region, countries are taking a closer look at the Chinese narrative around this initiative, which has lost steam,” Sergio Cesarin, coordinator of the Center for Studies on Asia Pacific and India at the National University of Tres de Febrero in Argentina, told Diálogo.

Italy’s withdrawal from the BRI and the initiative’s cooling in other countries reflect a broader trend: Projects have declined, and China’s financial commitment worldwide is weakening. According to Cesarin, “the loans that used to come for that purpose have been significantly reduced. Many countries that are part of the BRI are seeing how promised investments have become scarcer.”

Under New Management

In early March, U.S. company BlackRock and China’s CK Hutchison announced a deal in which most of the port business of the Hong Kong-based conglomerate, including its stake in the Balboa and Cristóbal ports in Panama, would be purchased by a consortium backed by Blackrock.

CK Hutchison’s operations of the Balboa and Critóbal terminals, on either end of the Panama Canal, have long been a source of concerns due to the risks associated with China’s presence in the Canal. According to experts, the lack of transparency and clarity in the Canal port concessions raised flags, while port operations by a Chinese company have been said to potentially provide a backdoor through which China could exploit the ports and the Canal.

Crucial axis

The Panama Canal, inaugurated in 1914 and fully transferred to the control of Panama in 1999, is a crucial axis for global trade, connecting the Atlantic and Pacific oceans. Its strategic relevance makes it a key point for the Panamanian economy and the geopolitical interests of global actors. China denies that it plays any role in the canal’s operations.

Seeking to expand its influence in Panama, Chinese state-owned enterprises sought multi-million dollar projects in critical infrastructure, such as construction of a fourth bridge over the Canal. Panama’s exit from the BRI and the ports deal mark a transition in the relationship between the two countries. These events could redefine the future of Chinese investment in the isthmus and Panama’s role on the global geopolitical stage. “Now begins China’s desperate search for an alternative canal to the Panama Canal,” Cesarin said.

Following Panama’s exit, 21 countries in Latin America and the Caribbean are part of the BRI, including Argentina, Chile, Peru, Ecuador, Bolivia, Nicaragua, and Venezuela. Key investments include the $3.6 billion Chancay deepwater port in Peru and lithium mining projects in Chile, news site Colombia One reported.

According to Cesarin, the recent BRI review is not an isolated case. “While some countries may choose to renew agreements with China, others are rethinking their participation. Colombia, which at one time considered joining the BRI, may not do so. Brazil has already said no. We are seeing a new configuration in the region, where alliances are being reviewed,” he concluded.