China’s growing influence over key infrastructure in Latin America and the Caribbean has set the Trump administration on edge. Nowhere have the White House’s concerns been sharper than around the Panama Canal, where Hong Kong-based company CK Hutchison operates two ports. U.S. President Donald Trump has inaccurately characterized the firm’s activity as tantamount to China “operating the Panama Canal” and vowed that his administration would be “taking it back.”
Under pressure from Washington, CK Hutchison announced in March that it had agreed to sell off its 80 percent ownership stake in 43 port holdings outside of China and Hong Kong—including the two in Panama—to a consortium led by the U.S.-based investment firm BlackRock. The move seemed to be an early win for Trump’s brand of aggressive dealmaking diplomacy.
But Beijing had other plans. Within weeks of the announcement, China launched a regulatory and public relations blitz against CK Hutchison, forcing the private company to back away from the planned sale. China’s expansive anti-monopoly laws give the government authority to block mergers or acquisitions that may impact competition in the country’s market. CK Hutchison is legally independent but has become highly exposed to Chinese authorities, especially as they have tightened their grip on Hong Kong.
After months of uncertainty, China signaled that it would approve the deal only if state-owned shipping giant COSCO were added to the consortium and granted a 20 percent to 30 percent stake plus veto rights in any arrangement. That demand has left the talks frozen.
Now, policymakers in Washington are reportedly considering a troubling alternative: a version of the deal that would leave the Panama Canal ports in the hands of BlackRock and its Western partners—but allow COSCO to gain a stake in the 41 other terminals, five of which are in Latin America and the Caribbean.
On paper, the compromise would let the United States claim victory at the Panama Canal. In practice, it would extend Beijing’s influence at a far larger network of ports—some of which carry greater economic and security risks to the United States than those adjoining the strategic waterway. A deal that Trump could sell as a political win might prove to be a poisoned chalice.
China’s overseas investments span nearly every sector, from mining to energy to telecommunications. But maritime infrastructure—including ports—has played an especially important role.
Through a mix of ownership stakes, long-term leases, and construction projects, Chinese private firms and state-owned enterprises are involved in more than 100 ports worldwide. In recent years, that footprint has increasingly extended into waters close to the United States, raising questions about the risks that these ports might pose to U.S. interests.
Armed with government financing, high-quality and affordable technologies, and political backing, Chinese overseas companies often function as an extension of Beijing’s power.
Encouraged by Beijing, these companies invest in economies that are hungry for capital and infrastructure, bringing countries opportunity and connectivity while also drawing them into China’s orbit.
In some cases, such as in Djibouti or Cambodia, deals have paved the way for China’s People’s Liberation Army to establish overt operational footholds. More often, though, the relationships remain centered around commercial or technological partnerships.
The close links that many Chinese state-owned enterprises such as COSCO maintain with central authorities—including the country’s military and intelligence services—allow them to function as Beijing’s eyes and ears abroad. Their financial heft and minimal transparency can create leverage and influence over the politics of host countries, particularly in those places where corruption is endemic and institutions are weak. And their ability to provide low-cost technology solutions works to lock countries into China’s technology stack, creating long-term dependencies and opening potential backdoors for cyber intrusion and intelligence collection.
Beijing can also co-opt or coerce ostensibly privately owned firms when its interests are at stake, as in CK Hutchison’s experience. But its authority over state-owned companies is more direct.
As China’s economic ties with Latin America and the Caribbean have expanded, so too has its presence in the region’s maritime infrastructure. In a June study that we published at the Center for Strategic and International Studies, where we both work, we analyzed 37 port projects across the region that are either owned, operated, built, or financed by Chinese firms.
Using 11 unique indicators, we evaluated the relative level of risk that each project poses to the economic and national security of the United States and its partners. These indicators included factors such as U.S. economic exposure to port disruptions, proximity to major maritime choke points, and the presence of Chinese technologies such as cargo scanners and smart cranes that could be used for surveillance purposes.
Despite dominating the headlines, the two Panamanian ports that Trump targeted—named Balboa and Cristóbal—do not top the list in terms of risk. Other ports in the region, including Kingston in Jamaica and Manzanillo and Veracruz in Mexico, landed above the Panamanian facilities due to a mix of factors such as their proximity to the United States and vulnerability to Chinese operational influence or disruption.
Notably, many of the highest-ranking ports were operated by CK Hutchison, even though projects linked to Chinese state-owned enterprises rather than private firms were penalized more heavily in the scoring methodology.
Aside from Balboa and Cristóbal, CK Hutchison operates five additional ports across Latin America and the Caribbean: the second- and third-ranked ports of Manzanillo and Veracruz as well as two others in Mexico and one in the Bahamas. The only port in the top three that lacked a Hutchison presence was Kingston, where the state-owned China Merchants Port exercises significant influence.
These are some of the busiest container ports in the region, each servicing billions of dollars of goods arriving on North American shores each year. Several also regularly host U.S. Navy vessels, which depend on commercial terminals in the region to refuel and resupply. As the United States has ramped up its military operations in the Caribbean in recent months—including lethal strikes on alleged drug-trafficking boats—U.S. warships have called to port in or near Hutchison-operated facilities such as Manzanillo and Balboa, highlighting their growing strategic value.
CK Hutchison first began acquiring facilities in Latin America and the Caribbean in the 1990s. Yet Beijing has squeezed the company’s independence in recent years. China’s 2017 National Intelligence Law requires even private companies to hand over sensitive data and other valuable information to authorities if asked. And Beijing’s tightening control over Hong Kong, particularly after its imposition of the 2020 national security law, has blurred the lines that once insulated the city’s private firms from state pressure.
Beijing put its authority over CK Hutchison on display earlier this year, when it moved to scuttle the blockbuster $23 billion deal between the company and the BlackRock-led consortium. China’s powerful State Administration for Market Regulation quickly launched an antitrust review of the deal to “safeguard [China’s] national sovereignty, security and development interests,” according to the Chinese Foreign Ministry, and made rare public warnings against any attempts by CK Hutchison to circumvent the review.
Chinese authorities even targeted the expansive business empire of CK Hutchison’s founder, the 97-year-old Hong Kong billionaire Li Ka-shing, directing state-owned enterprises to halt any new deals with firms tied to Li’s family. Meanwhile, state media lashed out at CK Hutchison with nationalistic rhetoric, accusing the company of “sell[ing] out all Chinese people.”
This intense pressure campaign delayed the negotiations past their July deadline, closing the door on the prospect of a quick and painless deal. Relinquishing its indirect stake in these strategically valuable facilities proved to be unacceptable to Beijing.
On July 28, CK Hutchison announced that it would seek to bring a Chinese investor into the ports deal in order to win Chinese regulatory approval. Reporting quickly identified that company as COSCO. The state-owned giant is among the world’s largest maritime shipping and logistics companies, operating a vast network of dozens of port terminals globally, including the recently inaugurated megaport of Chancay in Peru. COSCO is pursuing a 20 percent to 30 percent stake along with substantive veto rights in any deal.
Allowing COSCO into the deal may be the only path forward, considering China’s leverage over the approval process. Several formulations are reportedly under consideration, including the aforementioned proposal that would see COSCO excluded from the politically sensitive Panamanian ports but still granted a stake in CK Hutchison’s other 41 facilities around the globe. This outcome could be politically attractive for the Trump administration, since it could claim victory at the canal.
But Trump’s fixation on ports in Panama risks putting the United States in an even worse strategic position than it was in before the deal.
While CK Hutchison has clearly shown itself to be vulnerable to pressure from Beijing, it remains a private firm motivated primarily by commercial interests. COSCO, by contrast, is directly overseen by China’s central government, meaning that its operations are driven primarily by China’s national interests. On Jan. 7, under the Biden administration, the U.S. Defense Department blacklisted COSCO as a “Chinese military company” for its close ties with the People’s Liberation Army.
Replacing CK Hutchison’s overseas holdings with a consortium that includes COSCO as a major stakeholder is unlikely to decrease risk for the United States and its partners. On the contrary: Even if COSCO is excluded from the two ports in Panama, it will gain new inroads in other regional ports, such as Manzanillo and Veracruz, where our study found U.S. economic and security interests to be even more at risk. Allowing a Chinese state-owned enterprise to gain a stake in Mexican port operations could also risk unraveling U.S.-Mexico cooperation on economic security.
Negotiations for the port deal will set an important precedent for how the United States manages China’s expanding role in regional infrastructure. Panama, for its part, is seeking to prove itself a staunch U.S. partner by suing CK Hutchison to terminate its contracts at the two canal ports, meaning that China may lose its stake in the isthmus no matter how the deal proceeds.
Allowing China to tie negotiations over the Panama Canal to COSCO’s push to deepen its global footprint would be a puzzling giveaway by the United States. Any resolution that bars COSCO from Panama while allowing its entry into dozens more facilities in the Western Hemisphere and beyond would sacrifice the United States’ long-term strategic interests for immediate political gain.
The challenge for Washington is to look past Panama to evaluate how different port deals would affect regional trade and security. Only then can the Trump administration begin to move from bombastic rhetoric to durable regional strategy.
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