China Saw Opportunity in the Panama Canal as US Interest Dwindled

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Profitability, Expansion and China’s Growing Influence 2000-2005: It is not hyperbole to say that Panamanian management of the Canal since 2000 has been nothing short of remarkable. In the years after the Panama takeover, the Canal has broken records in tonnages, income and profitability. Critical to this initial success was the establishment of global operating standards for the Canal. Immediately after taking over, the Panamanians sought to meet the requirements for earning the ISO-9001 designation: the international standard that specifies requirements for a quality management system (QMS). Under the United States, the Canal had never achieved the ISO-9001 standard. The Panamanians understood achieving it would prove to the world that the Canal was operating at full efficiency with the highest levels of quality assuredness. Further, ISO-9001 validation would allow for the Panamanians to expand the Canal’s offerings to a larger market with regular price increases, which would lead to greater tonnage each year and, ultimately, increased revenues.

Reaching the ISO-9001 threshold in 2001 immediately opened up enhanced communication with the Canal’s stakeholders and clients around the world. A “dialogue of equals” now existed with shipping companies, cargo importers and exporters, producers, and the ports that the ships use.

The results spoke for themselves: between 2000 and 2005, when the Canal was completely under Panamanian control, it was able to pass on $1.822 billion to the government to bring improvements to the people of Panama, a figure nearly equal to what was contributed to Panama during the previous 86 years of U.S. management. All of this laid a foundation of trust in the Panamanians’ management of the Canal, which would serve well the cause of any future expansion plans.

At the same time, the Canal Authority launched a detailed, publicly available series of business, engineering, environmental and archeological studies that explored various aspects of what a Canal expansion would look like.

2006: The Canal Authority presented to Panamanian citizens the proposal for the expansion of the Canal through the construction of a third set of locks. The people voted 77% in favor of the expansion.

2007: With a blast at Cerro Paraíso on the Pacific side, work began on the expansion of the Canal. A Spanish/Italian consortium was awarded the contract to design and build the new set of locks.

2016: The expansion of the Canal and its operations, allowing for larger vessels to transmit the lock system, were completed. The first container ship to pass through expanded Canal was Chinese-owned: the COCSO PANAMA. The ship entered the locks on June 26, marking the official opening of the expanded canal.

That same year, China acquired the management contract of Margarita Island of the Colon Free Trade Zone on the Atlantic side of the Canal. This deal established the Panama-Colón Container Port (PCCP) as a deep-water port for megaships.

2017: The Panamanian government severed ties diplomatic ties with Taiwan and fully recognized China. This opened-up Panama’s eventual entry into China’s “Belt Road Initiative” in 2018, when it became the first Latin American country to sign. In 2021, under the failing Panamanian administration of Laurentino Cortizo--and despite significant domestic and international opposition--the contract with China’s Hutchinson Ports was renewed for another 25 years.

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