PANAMA´S GIVEAWAY GAME / THE ECONOMIST

Donald Trump’s canal 

Panama’s giveaway game

Panama has made a series of concessions to Donald Trump. It has not helped

Editor’s note (March 14th): After this story was published it was reported that the Trump administration is exploring military options to gain full access to the Panama Canal.

He could have declared victory. 

On March 4th Donald Trump stood to address the US Congress hours after BlackRock, an investment firm based in New York, announced that it would acquire two ports at either end of the Panama Canal from CK Hutchison, their Hong Kong-based operator. 

It was Mr Trump’s biggest triumph yet in his campaign to increase American influence over the canal, which he has pursued since his election as president in November. 

But instead of crowing, Mr Trump doubled down, and repeated his intention to reclaim the waterway. 

His secretary of state, Marco Rubio, would be “to blame if anything goes wrong”.

Mr Trump has shown that threatening Panama’s economy and national identity can yield major concessions from its government. 

Panama has not just pushed through the sale of the canal ports since Mr Trump took office. 

It has supported his efforts to deport migrants who entered the United States illegally. 

It has accelerated plans to invest in infrastructure to solve water-supply issues on the canal which have irked American officials. 

So far, Panama has received nothing in return, not even a cooling of Mr Trump’s rhetoric.

Panamanians might have thought that their fondness for the world’s most powerful country would protect them from this kind of shakedown. 

Last year some 90% said Panama had a good relationship with the United States. 

But as it turns out, in Mr Trump’s world, allegiance paints a target on your back.

Panama was already working to address American interests before Mr Trump’s election. 

José Raúl Mulino, the president, had cracked down on migration through the Darién Gap, a stretch of dense jungle that separates Colombia and Panama. 

Following Mr Rubio’s visit to Panama in February, Mr Mulino agreed to beef up a migrant-detention centre and an airport runway in Darién province, and to take 299 people, deported from the United States, who came from countries as disparate as Iran, China and Afghanistan.

American pressure also appears to have speeded up the long-delayed construction of a dam designed to address the canal’s water-supply problems, a Trumpian bugbear. 

When water levels are low, passage through the canal is curbed and some spots are sold by auction. 

In November 2023 one firm shipping American LNG paid a record $4m for this privilege. 

A day after Mr Rubio met officials of the Panama Canal Authority (ACP) in February, people living in the area to be flooded by the dam were told that funds for its construction—and their resettlement—had been approved. 

The ACP denies that the decision was related to Mr Rubio’s visit.

But the biggest concessions have been to do with Chinese influence in Panama. 

Immediately after meeting Mr Rubio, Mr Mulino announced that Panama would not renew its membership of China’s Belt and Road Initiative. 

But that was still not enough for the Trump administration. 

The fact that CK Hutchison ran ports on either end of the canal was unacceptable, because of the spectre of Chinese influence. 

So work continued on a deal whereby a BlackRock-led consortium agreed to a price of $22.8bn for Hutchison’s 90% stake in two Panamanian ports, and its 80% interest in 43 others around the world.

Conciliation’s costs

As Mr Trump continues hammering Panama, its government seems flummoxed. 

Mr Mulino’s conciliatory strategy does not appear to be working, and he is now being criticised for making concessions while getting nothing in return.

Short of an invasion, there are three ways Mr Trump could pursue further influence over the canal. 

None are palatable to the Panamanians. 

The simplest is to demand a reduction in canal-transit fees for carriers of American LNG, or free passage for US Navy vessels. 

Another option is to renegotiate the treaty which governs the canal so as to favour American shipping. 

That would leave other interested parties to decide whether to take legal action. 

The most drastic option would be for America somehow to get a stake in the canal itself, and hence a say in its operation. 

That would seem to breach Panama’s constitution, which says the canal is the “inalienable patrimony of the Panamanian people”.

To avoid these outcomes, Panama could agree to take more third-country migrants from the United States. 

(Mr Mulino insists that his acceptance of deportees was a one-off.) 

A contract to build a bridge over the canal, currently held by a Chinese firm, could be offered up. 

Finally, there is Panama’s huge copper mine, Cobre Panamá, which was shut down in November 2023 because of public protests. 

There is a good deal of American money invested in the mine. 

Tristan Pascall, the boss of the firm that owns it, has said there is a deal to be done which is in both Panama’s and America’s interests.

Mr Mulino may need to alter his tactics, though. 

It was a mistake to deal with Mr Rubio, rather than talk directly to his boss, says Rodrigo Noriega, a Panamanian lawyer and political analyst. 

Mr Mulino could follow the example set by Mexico’s president, Claudia Sheinbaum, who deals with Mr Trump as publicly as she can, negotiating with him over the phone and then quickly announcing what was discussed. 

Panama could also close ranks with Canada, Denmark and Mexico to present a united front. 

That might get Mr Mulino closer to a “deal” that Mr Trump would be happy with—and which might just last.