The Panamanian Supreme Court’s ruling on Thursday last week invalidating Hong Kong–based CK Hutchison Holdings’ contract to operate two key ports at either end of the Panama Canal caps a month marked by high-profile strategic defeats for Beijing in the region.
For example, the US commando operation in Caracas that early last month swiftly deposed Venezuelan president Nicolas Maduro was preceded by the start of tariffs of up to 50 percent on many Chinese exports to Mexico and followed this week by the cancelation of a Chinese consortium’s major zinc project in Bolivia.
With the US effectively overseeing a protectorate in Venezuela, Beijing has watched an ideological ally — however unreliable and financially insolvent — slip into Washington’s sphere of influence. The White House is already setting the terms for developing the country’s vast oil reserves in ways that favor US companies, leaving China sidelined in a nation where until recently it wielded considerable leverage.
In Bolivia, the administration of the fast-moving, business-friendly president Rodrigo Paz has steered the country rightward after two decades of socialism — a democratic realignment that deserves more recognition than it has received. The decision to scrap the zinc project signals a broader reassessment of the benefits of Chinese investment and reflects La Paz’s shifting geopolitical priorities.
However, the ruling in Panama might prove the most consequential setback of all. The canal remains one of the world’s most strategic infrastructure assets, handling about 5 percent of global trade. China is the largest user of the waterway after the US, quietly building a string of assets around it, even if the canal itself remains firmly under the independent control of the Panama Canal Authority.
Although the ports were formally in the hands of a private conglomerate, Beijing has never dispelled concerns about its influence over them, particularly after it moved to block their divestment to a BlackRock Inc-led consortium last year. Ironically, if there was ever any doubt about their huge geopolitical value, China’s attempt to derail that deal, along with the intense lobbying it deployed in Panama to protect its position, laid bare the high stakes.
Moreover, China has lost not only two ports, but the gains it had made in Panama after years of patiently cultivating its influence since the re-establishment of diplomatic relations and the severing of ties with Taiwan in 2017 under Panamanian president Juan Carlos Varela.
After becoming the first Latin American country to join China’s Belt and Road Initiative, Panama under President Jose Raul Mulino has moved back toward its historically close alignment with Washington.
US President Donald Trump’s return to the White House a year ago, armed with a more interventionist vision for the hemisphere and explicit threats to reassert US control over the canal, left Panama’s traditionally US-sensitive elite with little room to maneuver — even though the ports concession had triggered legitimate grievances since its rushed renewal in 2021, well before Trump turned his focus to the canal. If the revived Monroe Doctrine needed a real-world win, this decision provides one. The rum was surely flowing at the US embassy in Panama City.
China has hardly lost its footing in Latin America. Panama has been careful to guarantee the canal’s neutrality and has a plan to ensure the reliability of its logistics supply chain until new concessions are tendered. More broadly, China would continue seeking inroads across the region through commercial partnerships, political alliances and soft power, leveraging its massive trade ties, particularly in South America.
As outlined in its latest strategic policy paper released in December, the Chinese government maintains an ambitious cooperation agenda spanning trade, infrastructure, finance, energy, manufacturing, food, technology and more.
However, last week’s court ruling is one more sign that the geopolitical competition for Latin America is sharpening, and not necessarily in China’s favor.
J.P. Spinetto is a Bloomberg Opinion columnist covering Latin American business, economic affairs and politics. He was previously Bloomberg News’ managing editor for economics and government in the region. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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