Is Panama pushing China out of its infra sector?

Chinese investments in Panama’s infrastructure sector have sharply decreased under the administration of President Laurentino Cortizo, just as the US attempts to counter China’s influence in Latin America.

The Panamanian government has halted funding for the US$1.5bn fourth bridge across the Panama Canal. And during the previous administration of former president Juan Carlos Varela, it moved to cancel a port concession awarded to Chinese firms.  

The halted bridge project exemplifies attempts to limit China’s influence, Nehemías Jaén Celada, a former Panamanian diplomat posted to China, tells BNamericas.

The bridge was awarded by the Varela administration to the Panamá Cuarto Puente consortium, comprising state firms China Harbour Engineering Company and China Construction Communications Company (CCCC). 

It “was taken out of the 2021 budget and I doubt that, in the end, it will materialize,” Jaén Celada previously said during a recent webinar hosted by Chinese-Mexican think tank Cechimex.  

“In previous governments, Chinese companies were highly positioned. What we have seen with the new government is that the intensity of infrastructure projects in the country has dropped a bit.” 

The Varela administration also awarded China’s Landbridge Group the US$1.1bn construction and operations concession for the Panamá Colón Container Port (PCCP) in Colón province. However, port authority AMP began the process to revoke the concession in June. 

"The PCCP concessionaire promised to make an investment of US$564mn, of which US$300mn correspond to the construction of three piers and US$263mn to other port expansion works. But it has only invested US$104mn, which represents 16.6% of the total committed and means 83.4% non-compliance," AMP said in a statement. 

The 2.5MTEU terminal was planned to serve Neopanamax vessels. Dredging and construction were the responsibility of CCCC. The terminal's foundation stone was laid in June and work was expected to take three years.

China’s engagement in Panama seemed to intensify under the previous government, Jaén Celada said, as Valera cut ties with Taiwan in 2017 to facilitate Chinese investments. It then awarded to Chinese firms contracts for a US$140mn social housing program; a US$171mn educational complex; a US$197mn convention center and a US$150mn wastewater treatment plant.

China eyeing metro and bridge projects

Late last year, the finance and economy ministry (MEF) postponed funding for the bridge to prioritize building Metro de Panamá’s US$2.5bn line No. 3. But the bridge has not been canceled, authorities said, adding that the public works ministry (MOP) will resume construction when possible.

The Valera administration had planned the metro line and the bridge as one project, with the bridge forming part of the line. But the public works ministry divided it due to the project's complexity. 

According to Jaén Celada, China is also interested in participating in the metro project. However, the contract was awarded in February 2020 to Consorcio HPH Joint Venture, comprising Hyundai Engineering & Construction and Posco.

The separation has created an opportunity for construction firms, as the government is readying a new construction tender for the 5.3km tunnel running 64m underneath the Panama Canal.

Metro de Panamá plans to start line No.3 and tunnel construction in early 2023. In August, a US$9.86mn design contract went to Consorcio Túnel de Las Américas, comprising Grupo Typsa and Louis Berger. 

Japan also approached Panama in July to express interest in investing in the country, especially in the tunnel. Japan, the Panama Canal’s second-largest user, also wants to provide infrastructure for the metro line to strengthen commercial relations.  

Is the US intervening?

The White House sent a delegation to Colombia, Ecuador and Panama on October 1 to explore public works investment projects to counter China's influence in the region.

President Cortizo met with US deputy national security adviser Daleep Singh, as well as investors from Texas.

“I do not consider that there is an ‘intervention’ by the US on the decisions of the government of Cortizo,” Jaén Celada said. 

“What is being done – and it was about time – is to consult in-depth on strategic and sensitive issues based on the interests of our country with our main ally: the United States. In fact, I encourage the Panamanian authorities to do the same with other important intra- and extra-regional allies of Panama.”