Panama Quits China’s Belt and Road Initiative Amid Pressure From U.S.
By Wang Meng, Li Rongqian, Hou Wuting and Denise Jia
Panama has informed China that it is withdrawing from the Belt and Road Initiative, sparking regret from China while highlighting shifting geopolitical dynamics in Latin America.
José Raúl Mulino, Panama’s president, said on Thursday that his embassy in Beijing had formally notified China 90 days in advance, in accordance with the agreement, that the country would not renew its participation in the initiative.
At a press conference, Mulino said the tangible benefits of the Belt and Road Initiative (BRI) should be reassessed but ruled out severing diplomatic ties with China. He emphasized that Panama’s decision to withdraw was made before recent high-level U.S. visits to the country.
Lin Jian, the Chinese Foreign Ministry spokesperson, expressed deep regret over Panama’s decision at a Friday press briefing and condemned what he described as U.S. coercion and pressure tactics aimed at discrediting and disrupting BRI cooperation.
China hopes Panama will consider the broader bilateral relationship and the long-term interests of both peoples, resist external interference and make the right decision, Lin said.
He underscored that the BRI is an economic cooperation initiative that has attracted over 150 countries worldwide, including more than 20 Latin American nations, bringing tangible benefits to many, including Panama. He added that China and Panama have achieved significant results under the BRI framework in recent years, with cooperation benefiting both nations.
Marco Rubio, the new U.S. Secretary of State, embarked on his first diplomatic tour of Latin America in early February, visiting Panama, El Salvador, Guatemala, Costa Rica and the Dominican Republic.
During a Feb. 2 meeting with Rubio, President Mulino announced Panama would not renew its BRI agreement with China and was considering an early withdrawal. Rubio welcomed the decision on social media, calling it “a great step forward” in U.S.-Panama relations and another demonstration of U.S. presidential leadership.
According to a Panamanian government statement, as part of a new agreement between Panama and the U.S., Panama committed not to renew its BRI memorandum of understanding with China, originally signed in November 2017. Meanwhile, both sides agreed to extend a separate memorandum signed in July 2024 on immigration management and trade cooperation.
Panama was the first Latin American country to join the BRI, having established formal diplomatic ties with China in June 2017 after severing relations with Taiwan. Later that year, President Juan Carlos Varela signed the BRI memorandum of understanding during a state visit to China, along with additional agreements related to railway systems, industrial cooperation and economic trade zones.
Since the 2017 agreement, Chinese companies have invested in a number of major infrastructure projects in Panama. One flagship project is the Amador Cruise Terminal, built by China Harbour Engineering Co. Ltd. on Perico Island at the Pacific entrance to the Panama Canal. The terminal began official operations in March 2024. President Laurentino Cortizo, hailed it as a significant boost to Panama’s tourism industry.
However, several large-scale infrastructure projects with Chinese investment have faced delays or cancellations. One example is the Panama Colón Container Port project, launched by China’s Landbridge Group in June 2017 with a $1 billion investment. In July 2021, Panama revoked the Chinese company’s lease, citing contractual violations, and the project has since stalled.
Panama’s withdrawal from the BRI could hinder China’s global economic outreach, said Zhao Yifei, professor at Shanghai Jiao Tong University. This will have some impact on Chinese enterprises already operating in Panama, but the overall effect should be limited as the two countries have only had formal diplomatic ties for eight years, and the Covid pandemic significantly slowed investment, Zhao told Caixin.
Meanwhile, Panama has initiated an audit into Chinese-linked port operations, specifically those run by Hutchison Ports PPC, a subsidiary of Hong Kong tycoon Li Ka-shing’s conglomerate CK Hutchison Holdings Ltd. PPC operates the two ports at either end of the Panama Canal, Cristóbal on the Caribbean side and Balboa on the Pacific.
Under pressure from U.S. President Donald Trump, Panama on Jan. 20 announced an official review into PPC’s operations. Anel Bolo Flores, Panama’s comptroller general, said the audit was crucial to ensure transparency, proper resource utilization and to maximize social benefits.
Trade analysts predict that Panama’s departure from the BRI could influence other Latin American countries’ attitudes toward Chinese-led initiatives. Chinese investments in Latin America, particularly in infrastructure and energy projects, may face increasing challenges and uncertainties, a senior trade analyst told Caixin.
Emphasizing that China’s trade and shipping operations through the canal remain unaffected for now, the analyst added that if the U.S. were to invade Panama and seize control of the canal, that would be an entirely different scenario.
During his inaugural speech, President Trump vowed to take back the Panama Canal, claiming the U.S. had been treated unfairly while China was “running” the canal. He insisted that the U.S. would reclaim control over it.
During his meeting with Mulino, Rubio conveyed Trump’s concerns about China’s alleged influence over the canal. Later, Rubio announced that U.S. government ships can now move through the Panama Canal for free, a statement Panamanian authorities swiftly rejected as false and unacceptable.
According to the Panama Canal Authority, since 1998, U.S. military vessels, including submarines, have transited the canal 994 times — accounting for only 0.3% of total traffic — and have paid $25.4 million in toll fees.
The Panama Canal Authority said that while they were open to discussions on prioritizing U.S. military vessels, they have never considered waiving transit fees.
Panama’s Constitution and Canal Management Law prohibit exemptions from the transit fees. Overturning this would involve public hearings, technical evaluations, board approvals and final ratification by Panama’s Cabinet.
A Chinese Foreign Ministry spokesperson stated Friday that China supports Panama’s sovereignty over the canal and is committed to preserving its status as a permanently neutral international waterway. Emphasizing that China has never participated in the canal’s management or operations and has never interfered in its affairs, the spokesman dismissed claims of Chinese control over the canal as “a fabricated lie.”
Contact reporter Denise Jia (huijuanjia@caixin.com)
caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.
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