Short on facts

In the wake of the Donald Trump’s threat to seize back the Panama Canal, Luis Carlos Gómez, Attorney General, Panama, has moved to scrap Hutchison Ports concessions for the two terminals operated by Hutchison Ports at either end of the Canal, one at Balboa and one at Cristobal. The Attorney General has initiated this move on the basis that the contract is unconstitutional and it follows on from an earlier request filed by a lawyer with Panama’s Supreme Court to nullify the contract. Hutchison has operated the two ports through its subsidiary Panama Ports Company (PPC) since 1997 with both concessions renewed for an additional 25-year term in 2021.

The plaintiffs in the case, two individuals identified as Norman Castro and Julio Macías Hernández, demonstrated, according to the Attorney General, “that when negotiating the contract that it was improperly agreed to transfer the rights of the Panamanian State. He also concluded that the contract affects public welfare and interest, thereby affecting free competition and demand. He sent his opinion to the Supreme Court on February 19.

Bottom line, he is asking the Supreme Court to confirm the unconstitutionality of the contract as a step toward terminating the agreements.

TRUMP EFFECT

This all follows on from Donald Trump repeatedly stating that China is running the Canal and that USA would take it back. As a result, Jose Raul Mulino, President of Panama, has been compelled to take steps to mitigate this assertion at the same time telling the USA to stop spreading “lies and falsehoods.”

In effect it is yet another move by Trump to cajole, some would say bully, a neighbour into following his will. Gaza, Greenland, Canada and Mexico can all, to a greater or lesser extent, be included in this category, they too have felt Trump’s ire as he pursues his stated goal of “making America great again.”

For Hutchison there is no doubt that this initiative represents a big negative, especially after over 40-years of providing container handling services at either end of the Canal.

In real terms, there are good grounds to say that Hutchison is getting the ‘rough end of the stick’ regarding the Trump administrations actions that have prompted Panama to review its concessions in Balboa and Cristobal. The following are noteworthy in this context:

• Hutchison Ports is a not a China state-owned company as are, for example, China COSCO Shipping Corporation Ltd. (“COSCO”) and China Merchants Group Ltd, who are also involved in port sector operations.
• As pointed out by the Carnegie organisation recently in Testimony before the United States House of Representatives, Committee on Homeland Security, Subcommittee on Transportation and Maritime Security, which was looking specifically at the PRC’s Strategic Port Investments in the Western Hemisphere and the Implications for Homeland Security: “Hutchison PPC exercises substantial control over terminal operations at the ports of Balboa and Cristóbal – but, like the other foreign port operators in the country, the firm must coordinate with, and remain subordinate to, the government’s sole control over Canal operations. For a ship to navigate the interoceanic route, PCA regulations dictate that it must be approved and assigned a space in the transit queue by the Panama Canal Maritime Traffic Control Centre.“ In short, Hutchison PPC is a well established arms’ length from any direct control over vessel movements in the Canal.
• Carnegie further notes: “Hutchison PPC port operations on either side of the canal collectively moved an estimated 3.8 million TEUs in 2024, representing nearly 39% of the total throughput across five ports adjacent to the canal. This is less than the total throughput of the Colón port complex on the Atlantic side, where terminals operated by the American firm SSA Marine and the Taiwanese firm Evergreen moved over 4.7 million TEUs over the same period, accounting for 49% of the cargo volume.” Plus, “Individually, the largest single (sub)port is the Manzanillo International Terminal at Colón, where the consortium led by SSA Marine (including PSA as well as Panamanian investors) accounts for nearly 30% of the total throughput in 2024 (down from 31% in 2023 and 32% in 2022).” Thus, it is very clear Hutchison PPC does not have a dominant market position.
• Trump’s assertion was that the Canal was ‘’owned’’ by China but as so often happens with Trump this is not an accurate statement. There is no public evidence that confirms that the Chinese Government exercises control over the Canal. It is true to say Chinese companies have a significant presence there including a cruise terminal and a bridge as well as accounting for over 20% of the cargo volume transiting the Canal but it certainly does not ‘own’ the Canal.

ILL-INFORMED

The attack on Hutchison PPC is without doubt ill-informed. More based on political bluster than hard facts – perhaps no surprise there where the Trump administration is concerned. Hutchison has done the hard work over the years, invested and developed two efficient operating platforms which have served the overall functioning of the Canal well. As to the threat they offer, it is a shame that the Trump administration does not take on board the findings of its own Homeland Security, Subcommittee on Transportation and Maritime Security which underlines that: “Scuttling a ship in the lock system or, more aggressively, emplacing naval mines in the harbour are other methods that could seize up a maritime chokepoint for an indefinite period. These and other methods create perhaps unavoidable vulnerabilities that do not arise from China’s access to facilities adjacent to the Canal.”