Panama withdraws from BRI: Why China is hinting at US role

Sub :IR

Sec: Places in news

Context:

Recently, China’s Assistant Foreign Minister Zhao Zhiyuan summoned Panama’s Ambassador to China to protest Panama’s decision not to renew its Memorandum of Understanding (MoU) on the Belt and Road Initiative (BRI).
China also accused the US of using coercion to undermine China’s infrastructure projects.
Panama joined the BRI in 2017 as the first Latin American country, but its decision to not renew the MoU signals a shift in its relationship with China.

Trump’s Claims:

US President Donald Trump has made repeated claims that China is gaining control over the Panama Canal, calling for its return to US control.
Trump alleged that Panama was unfairly charging US ships and that Chinese soldiers were operating the canal, claims that Panama’s President José Raul Mulino denied, emphasizing that there are no Chinese soldiers at the canal and that Panama is open to investments from all countries.

Chinese Influence:

Chinese companies, particularly those like COSCO and the Panama Ports Company (PPC), have significant stakes in the canal.
Since 1997, Panama Ports Company (PPC), a subsidiary of Hong Kong-based Hutchison Port Holdings, has operated two key ports (Balboa and Cristobal) at both ends of the Panama Canal.
The Chinese company China Ocean Shipping (Group) Company (COSCO) is one of the canal’s largest users, and it plays a significant role in the region’s trade. In 2021, PPC’s contract was extended for 25 years, although Panama is currently reviewing the extension.
Notably, COSCO was also given the contract for the $3 billion Chancay Port in Peru, completed last year under the BRI.
The US fears that Chinese control over infrastructure could give China strategic leverage in times of conflict, as Chinese firms are often seen as being aligned with the Chinese government’s interests.

About the canal and its significance:

The Panama Canal, completed in 1914, connects the Atlantic and Pacific Oceans, significantly reducing travel time for ships between these two bodies of water.
It was originally built by the U.S. and operated under American control.
Following the Torrijos–Carter Treaties of 1977, the S. transferred control of the canal to Panama by 1999, but retained the ability to defend it militarily.
The canal remains a vital waterway for global trade, especially for U.S. shipping routes, which increases its geopolitical importance.

About BRI:

The Belt and Road Initiative (BRI), launched by China in 2013, is a global development strategy aimed at enhancing regional connectivity and fostering economic cooperation across Asia, Europe, and Africa.
It seeks to revive the ancient Silk Road trade routes through infrastructure development, trade, and investment.
To finance BRI projects, China offers huge loans at commercial interest rates that countries have to pay within a fixed number of years.
The west has accused China of debt-trapping by extending “predatory loans”that force countries to cede key assets to China.
As of 2024, over 140 countries have joined the BRI, encompassing nearly 75% of the world’s population and more than half of its GDP.