People who have dabbled a little in the history of the American continent are not at all surprised by the newly elected US President Donald Trump’s statements on Panama.
Without mincing his words, he said he wouldn’t rule out using military force to protect American interests threatened by the presence of Chinese companies controlling the ports of entry into the canal on the banks of the Atlantic and Pacific oceans.
In fact, as history reminds us, President Ulysses Grant, during his term of office (1869-1877), and Theodore Roosevelt (1901-1909) had already stated that the Central American isthmus had a ‘strategic value’ for the USA. When the inhabitants of that small stretch of land began fighting against Colombia to gain independence from Bogotá, they immediately found support from the US Navy, which dissuaded the Colombians from trying to crush the rebellion.
As a result, Washington, with the justification of wanting to ‘guarantee’ the independence the Panamanians had acquired, began, from then on, to exercise strong control over the governments that succeeded one another in Panama City. When the French company that was building the canal declared bankruptcy, American companies took over and operated it from 1920 (the date of its inauguration). Ownership of the infrastructure and safeguarding Panamanian politics continued until President Carter, following strong local protests and political expediency, signed an agreement with the Panamanian authorities ceding ownership and management of the canal to them from 2000 onwards.
That a certain form of US political control over the state had never ceased to exist was, however, demonstrated when Washington decided to send in troops to remove the authoritarian and unwelcome President Manuel Noriega from power and replace him with more accommodating political figures (December 1989). The military arrested Noriega and transferred him to the USA, where he was tried and officially convicted of drug trafficking.
With these precedents, clearly Trump’s outburst should not come as a surprise to anyone. Just as the strategic value of the canal allowing transit between the two oceans is obvious. In fact, without that shortcut, the sailing time for goods would be a few weeks longer, with a consequent increase in costs. It is also a foregone conclusion that, although the canal has always been considered a free, neutral communication route for anyone, in the event of conflict or serious geopolitical disputes, those controlling its access could prevent ‘unwelcome’ ships from passing through. Or demand exorbitant costs.
It is important to add that the canal’s official management currently belongs to the Panamanian Government, which has, however, ceded the right to manage the two ports of entry for 25 years (from 2021 to 2046) to a Chinese company, Hong Kong-based Hutchinson Holding. When a ship from any country wants to cross the canal, as well as paying a transit fee, which varies according to the size of the vessel, the type of goods it carries and the scheduling of the crossing, the captain also has to hand over the command of his ship to a local pilot for the entire journey and pay for his services.
Trump not only considers the fact that canal access is under Chinese control a danger to US security, he is also complaining that the tariffs applied to American ships are excessively high. We shouldn’t forget that the United States is the top canal user, as it is their most important communication route for imports and exports to and from Asian markets and between their country’s east and west coasts.
Panama’s strategic value is not limited, however, to the canal and maritime trade. There are two other aspects that attract the attention of the new government in Washington: the fact that it constitutes an obligatory crossing point for migratory flows from South America through the so-called ‘Darien Gap’ and that it is the largest and most well-hidden tax haven in the world.
The Darien Gap is mainly a marshy, semi-deserted area in southern Panama. Numerous migrants gather there, mainly from Venezuela, or even Asia, and then head north to Costa Rica. Both Panama and Costa Rica have no interest in detaining illegal migrants who want to travel across their countries any longer than necessary. Hence they organize transportation to facilitate their entry further north into Guatemala. A ‘fair’ pressure on the Panamanian government could deter, rather than facilitate the passage of migrants trying to get to the United States.
The other important issue that should not be underestimated is that, despite the IMF and formal or informal requests from numerous world governments, the country continues to boast a corporate legislation which allows Foundations to have official managers (who do absolutely nothing), never reporting the real owners, nor declaring where and how the funds are used. Banking secrecy is so well safeguarded that hundreds of Panamanian citizens with no assets can offer their names, for a fee, as a cover for the real account holders. It is estimated that thousands of foreign companies hide their business affairs in that way. There are even criminal penalties and fines for those who breach secrecy.
Clearly, this makes it a formidable location for money laundering not only by people illegally exporting capital but above all by criminal organizations like drug traffickers. Right near the Atlantic entrance to the canal there is also a Free Trade Zone, the Colon Free Trade Zone, which specializes in precious stones and metals.
As a result of this system there are at least 370,000 companies in Panama, the largest number after the British Virgin Islands and Hong Kong. Likewise, Panama has the most powerful banking network in Central America. The country’s financial sector is worth three times its GDP. After the Panama Papers were leaked, some reforms were passed to make the financial system more transparent and allow the identification of the real owners of companies and foundations. They have improved the country’s international image, but Panama is still under international scrutiny to ensure that the rules are effectively implemented and respected.
Trump’s interest is therefore multi-faceted; from the strategic significance of the canal to controlling migration flows to having some control over the local banking system.
The US President’s threats seem to have immediately achieved some result, at least on the face of it. Panamanian President Jose Raul Mulino received the newly appointed Secretary of State Marco Rubio and assured him that he will cancel the Belt Road Agreement with China and this will positively impact transit tariffs for US-flagged ships.
As for the management of the two ports, Rubio said that the current status quo was unacceptable and that without immediate changes, the United States would be forced to implement the necessary measures to protect its rights.
Translation by Giles Foster