The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Dr. Orlando J. Pérez – professor of Political Science at the University of North Texas at Dallas, who has conducted research on and written about Panamanian politics and Panama-U.S. relations for over 30 years – is the 479th in “The Trans-Pacific View Insight Series.”
Examine the effectiveness of Panama’s ability to balance its relations with China and the United States.
Panama has practiced what small-state scholars call hedging, but it is a selective, rules-forward variant rather than true equidistance. Since recognizing the PRC in 2017, Panama has welcomed the Chinese commercial presence while maintaining the canal’s treaty-based neutrality and non-discrimination. Under President José Raúl Mulino, the balance has tilted toward Washington, yet with care to separate sovereignty from alignment.
Two moves illustrate the technique: standing firm on the assertion that the canal toll policy is set by the ACP [Panama Canal Authority] under the Neutrality Treaty regime, and exiting the BRI [Belt and Road Initiative] while maintaining open channels with Beijing for trade and shipping. This is less a pivot than a re-weighting around the canal’s legal regime, and Panama’s macroeconomic needs after the mine shutdown shock.
In practice, Panama is signaling it will privilege U.S. security concerns and investment while resisting any framing that implies external control. That is an effective posture for now, but the margin of maneuver depends on three variables beyond Panama’s control: U.S. domestic politics, the fate of Hutchison’s port assets and any successor, and rainfall that affects canal capacity. If those swing simultaneously, hedging compresses quickly, and choices harden.
Evaluate Panamanian President José Raúl Mulino’s political skills in managing domestic political pressure in managing Chinese and American demands.
Mulino’s approach is pragmatic nationalism. Domestically, he inherited an angry street after the Cobre Panamá closure and a slowdown in growth. Internationally, he faced a newly maximalist U.S. discourse on “taking back” the canal and persistent U.S. anxiety about Chinese-linked assets near it.
His response has been two-level statecraft: assert sovereignty loudly at home, then trade policy concessions where the costs are diffused and the benefits visible. Withdrawing from the BRI and welcoming deeper U.S. security cooperation satisfies Washington without touching the canal’s operating autonomy. Pushing back publicly on the notion of toll exemptions or external control reassures Panamanians that neutrality is intact. The risk is over-correction: if rhetoric against China escalates or port divestments drag on, Beijing can express displeasure through commercial channels.
Mulino’s political test is whether he can secure tangible gains that voters feel – such as investment, jobs, and water infrastructure for the canal and cities – while preventing the U.S.-China competition from dominating Panama’s domestic agenda. So far, he has contained the domestic optics better than expected, but the mine’s future, drought resilience, and the ports transaction will determine whether that skill translates into sustained governability.
Analyze the strategic context of the Panama Canal in China-U.S. strategic competition.
The canal is not “controlled” by China, nor is it a U.S. asset to repossess. It is a neutral international waterway operated by Panama under the 1977 treaty framework, which requires nondiscriminatory transit and recognizes a U.S. interest in keeping the canal open while placing operation and defense within Panamanian sovereignty.
Strategically, the competition centers on adjacencies: port concessions, logistics parks, ship services, and financing. That is why the prospective sale of CK Hutchison’s global port portfolio – including Panama Ports Company – draws scrutiny, and why the ACP is moving to diversify port operations on both ends of the canal.
U.S. policy is to shrink the Chinese commercial footprint around critical nodes and to bind Panama more tightly through defense cooperation and investment signals. China’s interest is access and influence at minimal political cost, not operational control of the locks. The most immediate operational risk is not espionage or “turning off” the canal; it is hydrology and pricing. If drought or toll dynamics divert enough traffic, geopolitics will chase economics. In short, the canal remains strategic because of what moves through it and who clusters around it, not because Beijing can flip a switch or Washington can legitimately “take it back.”
Explain President Mulino’s rationale behind withdrawing Panama from China’s BRI.
Mulino framed the decision as cost-benefit realism: BRI membership did not deliver commensurate projects, and it complicated relations with the United States at precisely the moment Panama needed security, financing, and political backing. The withdrawal reflects three calculations.
First, domestic politics: after years of controversy over mega-projects and the mine, the public has limited patience for opaque deals, regardless of the foreign partner.
Second, legal-institutional prudence: maintaining the ACP’s autonomy and canal neutrality above suspicion is easier if Panama is not formally part of a Chinese geoeconomic brand.
Third, alliance management: leaving the BRI signals responsiveness to U.S. concerns while preserving Panama’s line that neutrality and sovereignty are non-negotiable. It is not a rupture with China so much as a branding and risk-management choice.
The challenge will be to replace any foregone Chinese financing with credible alternatives that move quickly on water infrastructure, logistics competitiveness, and growth. Otherwise, the optics win while the development ledger suffers.
Assess the impact of Panama’s tilt toward the United States, despite benefiting from Chinese investment and development projects, on its long-term relations with China and on China-Latin America cooperation more broadly.
Panama’s tilt will not end China-Latin America engagement; it will diversify its form. Beijing can live without a BRI label in Panama as long as ships sail and contracts are contestable. Expect Chinese firms to continue bidding in logistics and services when permitted, while Panama applies tighter scrutiny to assets adjacent to the canal.
Regionally, Panama’s move weakens the narrative of BRI inevitability and emboldens governments to recalibrate without severing ties. It also validates Washington’s playbook: pair public pressure on security-sensitive assets with offers of investment and defense cooperation.
The risk is a chilling effect on finance if Chinese lenders conclude political risk is rising around the canal. For Panama, the long-term cost of over-tilting would be reduced bargaining leverage and vulnerability to policy swings in Washington. The strategic sweet spot remains principled non-alignment grounded in canal neutrality, diversified investors in port and logistics ecosystems, and demonstrable delivery on domestic priorities.
Suppose Panama can show that a sovereignty-first, rules-based posture unlocks U.S. and allied capital without foreclosing commercial ties to China. In that case, the tilt becomes a sustainable equilibrium rather than a tipping point toward dependency.