Panama annuls concession to Chinese firm in the canal amid pressure from Trump

The Supreme Court of Panama on Thursday annulled the concession that allowed the Hong Kong company CK Hutchison Holdings to operate two strategic ports in the Panama Canal, a decision that comes in a context of strong pressure from President Donald Trump, who accuses China of controlling the interoceanic waterway.

The full court declared unconstitutional the laws that supported the contract through which the company managed the ports of Balboa, in the Pacific, and Cristobal, in the Atlantic, according to an official statement consulted by AFP, which did not detail the specific irregularities. The nullity had been requested by the Comptroller General of the Republic, which filed lawsuits considering that the concession violated the Constitution and generated damages to the State.

The Panamanian president, José Raúl Mulino, had repeatedly described the contract as "leonine" and contrary to national interests.

Economic impact and sale on hold

After learning of the ruling, shares of CK Hutchison Holdings fell more than 4% in early trading on Friday on the Hong Kong stock exchange. The court decision comes as the company keeps on hold a process to sell its stake in the Panamanian ports to a consortium led by U.S.-based management firm BlackRock, as part of an overall deal valued at up to $22.8 billion.

The United States views this sale favorably, while China has expressed mistrust, considering that it could affect its strategic interests and its New Silk Road initiative.

In April, the Panamanian Comptroller's Office also denounced that the firm had not paid the State some US$1.2 billion, according to an official audit.

Political background and international reaction

Trump has insisted since his return to the White House that China controls the Panama Canal through companies such as CK Hutchison, despite the fact that the waterway is managed by an autonomous Panamanian public entity. The Republican has even threatened to "take back" the canal, ceded to Panama in 1999 under bilateral treaties.

Panama rejects Beijing's control of the canal, through which about 5% of the world's maritime trade transits and whose main users are the United States and China.

Following the ruling, Panama Ports Company considered that the decision "lacks legal basis" and warned that it puts at risk the stability of thousands of Panamanian families. Meanwhile, Chinese state media and Beijing officials have urged caution and warned of possible legal consequences if the sale of the assets goes forward without their approval.

The case is shaping up as a new chapter in the geopolitical dispute between Washington and Beijing for influence over one of the world's most strategic trade routes.