Panama Considers Canceling Port Deal With Hong Kong Billionaire’s Firm

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Panama is weighing whether to cancel its contract with the Hong Kong-based company that operates ports near the Panama Canal, according to people with knowledge of the situation, a potential concession to defuse President Donald Trump’s threats about countering China’s influence around the key waterway.

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The government of President Jose Raul Mulino is weighing the possibility of canceling the contracts held by Hutchison Ports PPC, a subsidiary of billionaire Li Ka-shing’s conglomerate CK Hutchison Holdings Ltd., according to the people, who asked not to be identified given the commercial and political sensitivity of the issue. 

They cautioned that no decision has been made and that the government would proceed in a way intended to avoid lawsuits and follow due process. Panama’s presidential office didn’t immediately respond to a request for comment, and Hutchison Ports didn’t respond to a request for comment.

If such a move goes through, it would mark a major gift to Trump, who says that China has too much control over the canal and hasn’t ruled out seizing it by force. Hutchison Ports operates two of the five ports adjacent to the Panama Canal, one on each side. China has steadily eroded Hong Kong’s autonomy in recent years.

US Secretary of State Marco Rubio told Panamanian authorities during a visit Sunday that steps must be taken to curb what he called China’s “unacceptable” influence over the US-built canal, which was ceded to Panama in 1999 under a treaty signed two decades earlier by President Jimmy Carter. Hutchison has run the ports in Panama’s Balboa and Cristobal under a concession that was first signed in 1997 and, in 2021, extended until 2047.

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It’s not the only action concerning the ports. Two attorneys filed suit against the Hutchison contract on Monday, alleging it violates the country’s constitution. One of the attorneys, Norman Castro, said the concession contains excessive tax breaks and cedes large swaths of land to the port company, violating the constitution’s guarantee of placing the public good over private interests.

Trump’s threat to take over the waterway has set off a slew of actions targeting the Hong Kong mogul’s port business in the region. Last month, Panamanian authorities sent a team of auditors to CK Hutchison’s Panama Ports Co. to conduct what they called an “exhaustive” review to “guarantee the efficient and transparent use of public resources”.

In response to the probe, Hutchinson Ports PPC said it’s committed to operating in the country and was fully cooperating with the audit.

CK Hutchison’s ports business contributed about 15% of the conglomerate’s profit in the first half of 2024. Growth was mainly driven by increased cargo handling in Central America, where it has nine other ports in Mexico and the Bahamas. The company’s stock fell as much as 1.3% during morning trading in Hong Kong on Wednesday. 

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More than a fifth of CK Hutchison’s profit came from regions including the Americas, Australia, Canada and the Middle East — areas that could become affected by heightened US-China tensions. The majority of the group’s business in these regions involves infrastructure, a sector that could be heavily impacted by government regulatory changes.

Li himself had a taste of what it’s like being caught between two superpowers in 2020, when Trump’s former secretary of state, Mike Pompeo, warned Israel of a CK Hutchison affiliate’s bid to build infrastructure in the Middle East country, citing the firm’s alleged connection to the Chinese Communist Party. The company lost the tender.

Panama’s dollar bonds extended gains on Tuesday, climbing about half a cent on the dollar across the curve on expectations US pressure on the economy may be avoided. The notes rallied Monday after the country offered Rubio free passage for US warships through the canal and said it will withdraw from China’s signature lending program, the Belt and Road Initiative.

Rubio has said Beijing could use the ports as a staging point for military operations in case of a conflict.

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The Trump administration’s assessment marks a reversal from previous findings from the State Department. In 1999, a State Department official testified to the Senate Armed Services Committee that the US had concluded that Hutchison’s operation of the ports “does not represent a threat to canal operations or other US interests in Panama.”

“For the most part, Hutchison’s operations are limited to loading and unloading and storing cargo containers,” Ambassador Lino Gutierrez testified at the time. “They are also developing port facilities, with a view toward making Cristobal the hub of their operations in the Pacific Ocean.”

Why Trump Wants — But Can’t Have — the Panama Canal: QuickTake

About 75% of the cargo transiting through the Panama Canal goes to or from the US, making it by far the biggest beneficiary of the route. The canal brought in nearly $5 billion in fiscal 2024, or about 4% of Panama’s gross domestic product.

—With assistance from Michael McDonald and Maria Elena Vizcaino.

(Adds detail on CK Hutchison from seventh paragraph.)

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