Description: Panama’s Supreme Court ruled that Panama Ports Company, a subsidiary of the Hong – Kong based CK Hutchinson, has operated the ports of Balboa and Cristobal unconstitutionally and refused to extend the company’s concession license. The Court’s ruling is part of a longstanding dispute that was reignite by US President Donald Trump last year as part of the US – China trade war, focusing on control over maritime trade routes. CK Hutchinson planned on selling their operations in Panama, in order to protect against the company’s exposure to political risk, to a consortium led by US investment firm Blackrock Inc for approximately $22.8 billion. APM Terminals Panama, a subsidiary of the Danish shipping magnate Maersk would undertake the interim management of the ports in order not to cause disruptions in the global maritime trade, since the canal serves for more than 5% of global maritime trade volume. The Chinese government has strenuously objected the Court’s ruling, as Chinese Foreign Ministry spokesperson Guo Jiakun defended Hong – Kong’s position on the matter, stating that China would undertake all necessary measures to protect its interests.
Impact: The US demonstration of their resolve in countering threats to national security, especially within their hemisphere, has forced the government in Panama to remain within the US sphere of influence and gradually downsize China’s presence in key trade sectors. The decision by the Panamanian Supreme Court also favors Blackrock’s acquisition plans since it downsizes the necessary capital to acquire the ports from CK Hutchinson due to the company’s exposure to political risk. Going forward, Blackrock would be further incentivized to exert more pressure in order to acquire the key ports for a lower price, while China would be forced to abandon a key geopolitical asset, such as maritime trade in the US backyard. The situation could also impact the ongoing trade truce between China and the US in a negative way and potentially endanger further trade negotiations which in turn would heavily impact global trade flows and volumes.