Statements from Panama and the U.S. have called into question the future of Panama Canal operations.
PANAMA CITY — While Panamanian leaders have consistently stated the Panama Canal belongs to their country and remains a neutral waterway, some statements from both Panama and the Trump administration have sent mixed signals on the future of the global trade route.
Fresh off a trip to Panama, Secretary of Defense Pete Hegseth told Fox News on April 13 that the presence of Chinese influence was so evident that it could be both seen and felt in the Central American nation.
“China has too much influence over the Panama Canal and America is going to take it back,” Hegseth said on Fox. “That’s exactly what I was charged to do, and what we’re continuing to do.”
But Hegseth offered a slightly different message during his visit to Panama the week before, when he signed security agreements with Panamanian leaders aimed at decreasing alleged Chinese influence over the canal. The agreements and Hegseth’s statements stopped well short of a U.S. takeover of the canal.
“We are committed to the security partnership with our Panamanian friends,” Secretary Hegseth told a pool of reporters before departing Panama City on April 9. “It’s one that will grow.”
The agreements involve the deployment of U.S. military forces and ongoing joint training exercises with Panamanian security forces.
During the visit, Hegseth said former U.S. Army base Fort Sherman, near Colón, on the Atlantic side of the Panama Canal, will once again be used for a jungle training school. The fort was the site of the U.S. Army’s Jungle Operations Training Center from 1951 until 1999, when the fort, along with the Panama Canal, were turned over to the Panamanian government. The U.S. Navy and Air Force will also have a presence in Panama, Hegseth said.
However, during an earlier press conference, Panama Public Security Minister Frank Abrego said the country would not allow the U.S. to establish permanent military bases.
Among the agreements signed by Hegseth and Panamanian officials during the visit is a deal to allow U.S. military ships and other vessels to pass through the canal at a discounted rate. A similar agreement was announced after U.S. Secretary of State Marco Rubio visited Panama in February, though Panama President José Raúl Mulino vehemently denied it. Mulino has been very vocal about U.S. President Donald Trump’s statements on the canal, saying there is no possibility of transferring ownership of the waterway back to the U.S.
Hegseth said military ships would pass through for free, but Panama Canal Authority Chairman José Ramón Icaza told a pool of reporters the agency would charge the U.S. military a “neutral cost” in exchange for security services provided by the U.S., such as cybersecurity.
“We will continue to work through the exact details with them, but the framework is clear that we will work inside their constitution, inside the Panama Canal Authority to make sure it’s done legally and properly and that neutrality is respected in that context,” Hegseth said.
A joint statement in Spanish on the agreements released by Mulino’s office included recognition of Panama’s sovereignty over the canal; an English version released by the Pentagon omitted that wording.
Hegseth also praised Mulino, comparing him to Trump.
“President Mulino puts Panama first, fights for Panamanian interests, protects their sovereignty, and we certainly respect the sovereignty of the Panamanians and the Panama Canal,” Hegseth said. “At the same time we’re working with them to ensure that we take back the canal from malign Chinese influence.”
China released a statement after Hegeseth’s visit that said: “Who represents the real threat to the canal? People will make their own judgment.”
Hegseth’s visit comes weeks after Trump asked the Pentagon to begin developing plans for military intervention to ensure canal operations remained neutral.
Trump began to make statements about the Panama Canal during his second presidential campaign, and he made the canal a major part of his inaugural address in January.
“China is operating the Panama Canal and we didn’t give it to China, we gave it to Panama, and we’re taking it back,” Trump said.
The canal, according to a treaty signed by President Jimmy Carter and Panamanian leader Omar Torrijos in 1977, operates as a neutral waterway under the control of Panamanian authorities. However, some operations on or near the canal are leased to international firms. This is where China’s growing investment in Panama has raised economic and security concerns.
Leland Lazarus, an expert on China-Latin America relations and professor at Florida International University, said U.S. investment in Panama has been on the wane.
“There’s been a real concern over – certainly over the past decade – that the U.S. government hasn’t prioritized Latin America and the Caribbean,” Lazarus said.
Lazarus says while U.S. investment in the region is largely through financial services like banking, China’s investments in Latin America have increased in recent years, from commodities like grain and soy beans to physical infrastructure.
“What they see is a Chinese-built library in El Salvador or a Chinese-built port in Peru,” Lazarus said. “That’s physical, and you can actually see it, and it creates this perception that the Chinese have shown up where the U.S. hasn’t been so much over the past decade.”
China’s presence in Panama dates back more than 150 years, but recently, China-backed projects – including bridges, energy and wireless technology – makes China’s presence more visible.
Hong Kong-based CK Hutchison has operated the ports at both ends of the canal since successfully bidding for the leases in 1997. This lease was extended in 2021, a decision now under scrutiny by the Trump administration and Panamanian officials. A recent audit by Panama shows Hutchison may owe millions of dollars to the Panamanian government, which the firm denies.
But those operations, along with numerous other Hutchison port leases around the globe, are now a part of a pending sale to U.S.-based investment company BlackRock. While it’s unclear if the move is in response to actions of the Trump administration, it would place port management back in the hands of a U.S.-based firm.
China has criticized the pending sale, saying the deal should be subject to its own regulatory approval. This comes as the U.S. and China are embroiled in a trade war, after Trump enacted tariffs exceeding 100% on Chinese imports. China has also enacted retaliatory tariffs in excess of 100% on U.S. imports. A tentative deal to vastly lower tariffs on both sides was announced on May 12. Despite the economic and military developments, Hegseth said he’s not concerned about China taking aggressive actions.
“I’m not worried about retaliation from China,” Hegseth told reporters. “We will stand on our own merits. Peace through strength matters.”
Despite the possibility of some China-based companies pulling out of Panama, and some China-backed infrastructure projects on hold, security concerns still remain. According to a Wall Street Journal report, military intelligence under the Biden administration found at least five sites near the canal that China could use for military purposes.
“For any civil work surrounding the Panama Canal, there will always be risks associated,” Panama Canal Administrator Ricaurte Vásquez Morales said during a March press conference in Panama City.
“Will this risk be related to a more aggressive position by these entities? It’s yet to be determined,” Vásquez Morales said. “That is more in the realm of speculation than factual information. We are fully aware of the operations done by all contractors, independent of nationalities, surrounding the Panama Canal area, because it’s a matter of reliability and security to the Panama Canal.”
Retired U.S. Army Lt. Gen. Benjamin Freakley, a professor at Arizona State University, says there’s no doubt China’s influence is growing throughout Latin America, and it should be considered an economic and national security concern.
“The Chinese are not doing anything for the good of man,” said Freakley. “They’re operating for the good of China, and particularly the People’s Liberation Army and the Chinese Communist Party of China.”
Freakley questions whether China-based companies working along the canal are operating as independent businesses or as a front for China’s ruling party. This concern is echoed by Lazarus, who cited China’s National Security Law of 2020, which requires private firms to share information with and carry out actions on behalf of the Chinese government.
“Could they be marshaled in order to look at all the shipments that are coming through and which vessels are coming through and and making sure to give that informational advantage to their Chinese military counterparts in the Pacific?” Lazarus questioned.
Euclides Tapia, a professor of international relations at the University of Panama, said through a translator that he doesn’t know whether there are sites China could militarize, but that China could do more through cyberattacks than physical warfare.
“China doesn’t need to have nuclear bases in Panama to do that,” Tapia said.
Still, Tapia has concerns about China’s presence in the region. He said he would prefer the Confucius Institute on the University of Panama’s campus be removed because he said it is just a propaganda outlet for the Chinese communist party.
In terms of better relations with the U.S., he sees one way to address Trump’s concerns.
“The solution could be if you don’t charge the fees for the military to pass through,” Tapia said.
Panamanian political analyst Edwin Cabrera said that he doubts China or any country would be able to conduct espionage or other nefarious activities because Panama’s government would not allow that to happen. In terms of China’s infrastructure investments, he said those are eventually repaid.
“The Panamanian state has to pay when they [China] finish it,” Cabrera said.
Roberto Montañez, president of the Center for Asian Strategic Studies of Panama, an organization dedicated to strengthening ties between Panama and Asian countries, said that China isn’t concerned with influencing canal operations, but instead with building infrastructure.
“We have to be China’s friend,” Montañez said. “China never invalidated Panama. We are invalidated by the United States.”
Analysts of the situation in Panama, including Cabrera, say one way to address concerns of Chinese influence is for the U.S. to increase its investment in Panama.
“It’s time,” Cabrera said. “It’s an opportunity to tie tight bonds with the neighboring countries and extend a friendly hand.”
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