China has reportedly instructed its state-owned enterprises to suspend discussions on new projects in Panama following the Central American country’s decision to nullify CK Hutchison Holdings’ port operations contract, Bloomberg reported.
Sources familiar with the situation have indicated that the move is part of Beijing’s broader response to the legal ruling that affects two ports along the Panama Canal.
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This decision is expected to potentially impede investments worth billions of dollars. In addition, China is advising shipping companies to consider alternative routes for cargo, provided these do not incur significant additional expenses, according to unnamed sources.
Furthermore, Chinese customs are increasing inspections on imports from Panama, including bananas and coffee, which could affect ongoing trade.
Neither the State-owned Assets Supervision and Administration Commission of China nor the General Administration of Customs has responded to requests for comments. Similarly, CK Hutchison has not provided a statement on the matter.
The development in Panama coincides with a ruling by the country’s top court that has been perceived as aligning with former US President Donald Trump’s efforts to reduce Chinese influence in strategic infrastructure across the Americas.
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By GlobalDataAfter the ruling, China, the second-largest user of the Panama Canal, issued warnings that Panama would face repercussions for what it termed as succumbing to US pressure.
This step by China mirrors a similar strategy employed after CK Hutchison declared its intent to sell its global port assets, which included the Balboa and Cristóbal operations in Panama, to a consortium led by Terminal Investment and BlackRock.
Despite China’s growing involvement in Latin America, the US remains Panama’s leading trade partner.
Among the current Chinese infrastructure projects in Panama are a $1.4bn bridge over the canal, China Harbour Engineering’s cruise terminal, and a section of the metro line constructed by China Railway Tunnel Group.
CK Hutchison, which has managed the Panama terminals since 1997, is now pursuing damages through international arbitration as a result of the court’s decision.
The company’s attempt to divest its port assets has encountered significant challenges due to the Panama ruling. Discussions are ongoing about possibly dividing the port assets into separate segments, which might allow Cosco to increase its holdings in regions more aligned with China, such as Africa.
If the transaction is finalised, CK Hutchison could potentially receive over $19bn, though expectations are for a lower valuation following the recent legal setbacks in Panama.
