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Has the Chinese winning streak in Panama ended?

 


Frozen trade talks, unsuccessful offers for infrastructure, and canceled projects suggest that the Chinese companies that won the streak in Panama came to an abrupt end. American diplomatic pressure on the government of Laurentino Nito Cortizo, who took office in May of last year, appears to have been effective in the most geopolitically strategic nation in Latin America.

Even before the decision of the previous president Juan Carlos Varelas of June 2017 establish diplomatic relations with Beijing which seemed to blind American diplomats, Chinese companies, public and private, had won tenders for port concessions, energy projects and convention centers. Over the next 18 months, the process went into overdrive. Dozens of political and trade agreements have been signed, free trade negotiations have advanced at a breakneck pace and the Chinese Premier Xi Jinping made a state visit in December 2018.

But this visit was the culmination of Sino-Panamanian relations. In the US State Department, the decline had already started.

Washington Warnings

In September 2018, Washington recalled its heads of mission to Panama, the Dominican Republic and El Salvador, whose governments have also recognized Beijing in recent months. A month later, US Secretary of State Mike Pompeo traveled to Panama City to warn against the predatory economic activity of Chinese companies. US pressure put an end to China plans to build a giant embassy at the mouth of the canal.

In Cortizo, the United States found a more malleable ally. Although he came from the same political party as General Omar Torrijos, the national hero who negotiated the transfer of the canal from the United States to the administration of Panama Cortizos seems to have taken into account the overtures of Washingtons.

Positions have shifted and the United States is once again the dominant foreign player in domestic politics, said Rodrigo Noriega, political analyst and journalist.

China has come out of Foreign Ministry news and briefings. And a series of business decisions suggest a decreasing role.

Infrastructure derailed

A Chinese proposal for a US $ 4.1 billion high-speed train connecting Panama City north of the country was laid off in september. A major electric transmission project on the caribbean coast in which a chinese group was part of the two qualified bidders was canceled and recast in public-private partnership.

In February, Panama Metro, the capital’s rapid transit system, confirmed that Koreas Hyundai Engineering to build third metro line, a 25-billion-dollar elevated 25-kilometer monorail connecting the center to the western suburbs.

Did you know?

3 of 6 countries that have officially established diplomatic relations with Beijing in the past 10 years were in Latin America

The losing bidders, including two consortia with Chinese companies, challenged the decision, originally made in November. China Railway Group Limited offered a cheaper project but was disqualified for failing to meet the minimum technical requirements.

In January, no one had the slightest doubt that a Chinese company would win the Metro tender, said Fernando Aparicio, professor of history at the University of Panama. This is another indicator that the government wants to maintain a distance with China, or at least negotiate with China from a stronger position.

A few days after the announcement of the metro, the Ministry of Public Works confirmed that a new bridge over the canal, awarded in July 2018 to a consortium led by China Harbor Engineering (CHEC) and China Communications Construction Company (CCCC), would be reduced. . Instead of crossing the bridge, metro line 3 will pass through a tunnel 50 meters below the canal.

Rafael Sabonge, Minister of Public Works, said the decision was made due to the discovery of a geological fault under one of the key pillars of the bridges which allegedly caused a delay in construction and resulted in payments for greater compensation to third parties.

However, many remain skeptical about the economic relevance of a tunnel under the canal.

I think there are two factors at play, says Noriega. The government cannot afford a delay on the bridge and there are real operational challenges to get the metro running. But there is also a political element. Japanese underwriters do not want to finance a project of this size for a Chinese company to build it, and the United States does not want Chinese companies to build directly on the Panama Canal.

the United States still retains enormous leverage over individual politicians, through the threat of visa refusal or inclusion on the Clinton list

Belonging to Hong Kong Hutchinson Ports, the third party operators of a port that would be most affected by the construction of bridges, publicly denied asking compensation from the government for the losses suffered during the delays in the project of the Chinese consortia.

The port has its own problems to deal with. In 1998, the company, then known as Hutchinson-Wampoa and with a 10% investment from a Chinese state-owned enterprise, won the operating concession from Panama Ports Company. US Admiral Thomas H Moorer told the Senate Committee on Foreign Relations that the Chinese Communists had practically completed wharf on the Panama Canal.

In February of this year, the Cortizo government announced that it Panama ports audit. There is a strong current within the government against the renewal of the concession of the ports of Panama [which expires in 2022]said Aparicio.

Blocking trade agreements

Meanwhile, the free trade agreement, many of which assumed Varela would rush before leaving office, remains unsigned and the Chinese Embassy has no long-term home. The presence of Chinese engineers and businessmen has decreased. In April 2019, the first Air China flight from Beijing via Houston arrived in Panama City. In February service was suspended.

How did the United States achieve such a turnaround?

Richard Koster, author and journalist based in Panama since the 1950s, maintains that the United States still maintains a huge weight on individual politicians, through the threat of visa refusal or inclusion on the Clinton list, which is that of businesses. and individuals who profit from money laundering. and drug trafficking, leading to potentially harsh sanctions by US prosecutors.

In May 2016, the inclusion of Panamanian businessman Abdul Wakeds on the list quickly led to his bankruptcy and, according to Koster, local politicians have not forgotten about it.

Everyone on the list has some type of financial leprosy, he says. Panamanian politicians all come from money and have relationships with the United States. Through visas and the Clinton list, the United States knows how to keep its client states honest.

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