Panama’s new Asian partner

By Marijulia Pujol Lloyd

The Popular Republic of China is no longer sleeping and the mighty dragon has woken up and is ready to take over the world. This Asian nation has plans for Europe, Africa and Latin America, and Panama is at the top of its “to do list”.

Free commerce is in the mind of the Chinese government and the Panama Canal is an important part of its strategy.

The Chancellor and Vice-president of the Republic, Isabel de Saint Malo and the Chinese Foreign Affairs Minister, Wang Yi exchanged documents establishing diplomatic relations.

The Chancellor and Vice-president of the Republic, Isabel de Saint Malo and the Chinese Foreign Affairs Minister, Wang Yi exchanged documents establishing diplomatic relations.

On June 12, 2017, Panama established diplomatic relations with China and left its former ally, Taiwan, angry and confused. However, according to analysts around the world, this was not surprising bearing in mind that continental China is the first economic power of the world, according to the International Monetary Fund, and it has 20% of the global population, is the second biggest user of the Canal after the United States and recently invested almost $2 billion on a terminal in the Colón province, on the Atlantic part of the Isthmus.

There are many reasons why China is interested in Panama. The geographical position of the country is ideal for the distribution of products to Central and South America, where virgin markets await being exploited. It is important to note that this nation has tried to strengthen its links with the Isthmus for many years.

The logistics potential of the country has not been fully exploited and that is where China comes in. It has the necessary technological know-how and resources to finance some urgent infrastructure projects, such as new coastal highway that will run parallel to the Interamerican highway. The effect will be almost immediate with cargo going more speedily from the Canal area to Costa Rica and Central America.

China is the second most important client of the Panama Canal.

China is the second most important client of the Panama Canal.

The Chinese investment company, Shanghai Gorgeous, is already financing a port terminal and logistics park on Margarita Island, Colón province. They can invest on a similar project at the Pacific entrance of the Canal (i.e., such as the Port of Corozal project) and to complement it, a railway could be built at the same time to link the terminal with the one in the Atlantic.

It could even follow the route of the coastal highway all the way to Costa Rica.

These are some of the projects that would undoubtedly help Panama on the quest to become a global-class logistics hub.

Wang Weihua, the permanent representative in the Office of China-Panama Trade Development and Beijing’s top representative in the country, told Reuters that “China has made a big bet on Latin America, where it has strategic investments and Panama, which didn’t have diplomatic relations, was losing out on those advantages. “Now Panama will be able to enjoy what our country can offer it in various sectors.”

However there are always two sides to a story. China is determined to economically defend itself from the United States and has launched the “Belt” and the “New Silk Route” initiates, both designed to increase the wealth of that Asian country.

For the past five years, President Xi Jinping set ambitious goals for exchange with the Latin American and Caribbean region (LAC): $500 billion in trade and $250 billion in direct investment.

It needs new markets to invest its money and find juicy construction contracts in Latin American countries for the State-owned China Construction America, which has had a few misses in Venezuela and Costa Rica.

The future looks bright for the Chinese-Panamanian relationship, but only time will tell what is going to happen next.

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