Panama was the first Latin American country to join in 2017 China’s Belt and Road Initiative (BRI). Last month, it also became the first one to leave it. Since its inception in 2013, more than 150 countries have participated in the infrastructure program aimed at increasing Chinese trade, with over 20 in Latin America. After Panama’s withdrawal, a regional domino effect cannot be ruled out.
Since taking office in January, US President Donald Trump has repeatedly accused the country of relinquishing control of the Panama Canal to China. Panamanian President José Raúl Mulino and Beijing officials deny the claims. However, following a diplomatic trip by Secretary of State Marco Rubio, Panama announced that it would renege on its agreement with China.
Tensions remain. While a 1977 treaty signed by the US transferred full authority over the waterway to Panama in 2000, Trump has not shied away from reasserting control over it.
Panama’s departure from the BRI is the first visible result of the Trump administration’s foreign policy, says Evodio Kaltenecker, associate professor of International Business and Strategy at the D’Amore-McKim School of Business of Northeastern University. “The BRI-xit, pun intended, can to be seen through different lenses. First, the geopolitical issue: Western countries have been concerned about China’s decades-long rising influence around the world. Panama and its Canal clearly signal the US plans to counter Beijing and deepen regional economic partnerships. There are no empty spaces in geopolitics. If Chinese influence decreases, Washington-led influence will regain relevance.”
Second, Kaltenecker continues, there is what he likes to call a “geoeconomic effect” that impacts international trade: “The Panama Canal is not only a key component of the U.S. freight transportation system but also a critical route of global trade. For instance, approximately 5% of global trade passes through the Panama Canal each year, highlighting the canal’s importance as a maritime pathway.”
Finally, Kaltenecker argues, there is a “signaling effect.” “Not by chance, Panama’s withdrawal came days after Rubio’s visit to Panama City,” Kaltenecker adds. “US pressure in the Panamanian case will probably set the pattern for further Washington moves.”
