By Laurence F. Sanford

President-elect Donald Trump said he would not let the Panama Canal fall into the “wrong hands,” warning of potential Chinese influence.

China has significant investments in Panama, including Hutchison Port Holdings, which administers the ports of Balboa on the Pacific side and Cristobal on the Atlantic side. Income to Panama over the 25-year contract is estimated to be $800 million.

China’s Belt and Road Initiative (BRI) programs of infrastructure building and port management are substantial and a potential threat to American interests. China is a major trading partner of most countries throughout Latin America.

Panama as an independent nation was created in 1903 when it seceded from Columbia with the support of the United States. Panamanians had been clamoring for independence from Columbia for decades. The American support included sending army and navy forces to Panama even before Columbian troops were able to respond. Critics of the move called it “Gunboat Diplomacy.”

After independence, the Panamanian ambassador to the United States signed a treaty granting rights indefinitely to the United States to build and administer the Canal Zone.

Proposals for a canal across Panama date back to the 1500s. Though only 58 miles separate the Pacific Ocean from the Caribbean Sea, the mountainous, tropical, and disease-infested terrain prohibited construction until the 1800s.

Without the canal, ships must sail 8,000 miles around treacherous Cape Horn at the southernmost tip of Chile to transit to/from the Pacific and Atlantic oceans. The waters around Cape Horn are particularly hazardous due to strong winds, large waves, strong currents, and icebergs.

The first attempt to build a sea-level canal was in 1881 by a French consortium with experience building the Suez Canal. After eight years, a purported $287,000,000 in expenditures, and 22,000 deaths due to disease and accidents, the consortium declared bankruptcy, and work on the project stopped. In 1894, a second French company attempted to complete the canal by revising the plans to incorporate a series of locks to lift ships up to a man-made lake for traversing the continental divide. Minimal efforts were made to maintain equipment and facilities.

Theodore Roosevelt, president of the U.S. from 1901 to 1909, led robust policies on domestic and international issues, including building the Panama Canal. His Great White Fleet of 16 battleships sailed around the world from December 1907 to February 1909 to demonstrate American prowess and the need for a Panama Canal.

In 1904, the U.S. purchased the French canal equipment and infrastructure for $40 million. The U.S. also agreed to pay Panama $10 million and then $250,000 each following year. The Isthmian Canal Commission was established to oversee construction. The Panama Canal was completed in 1914, with 5,600 workers dying due to accidents and diseases, such as malaria and yellow fever. The cost was $500 million or the equivalent of $15 billion in 2023.

An engineering marvel, the canal’s construction consisted of evacuating millions of yards of dirt, constructing locks to raise and lower ships, and creating Lake Gatun to provide the water necessary for the locks to operate. Medical advances were made against malaria and yellow fever.

The United States administered Panama territory surrounding the canal for decades. However, many Panamanians resented American control, especially after Egypt seized the Suez Canal from British and French control in 1956. Panamanians argued that since the U.S. supported Egypt, why didn’t the U.S. support Panama’s efforts to control the Panama Canal?

Panama signed a pair of accords with the U.S. in 1977 that paved the way for the canal’s return to full Panamanian control. The United States handed over control of the passage in 1999 after a period of joint administration.

Summary

Panama has managed the canal in a neutral and professional manner. Moreover, the toll revenue now goes to the Panamanian Treasury and not the U.S. Treasury. Tolls are published and applied based on ship characteristics, not nation of origin.

Water shortages from lack of rainfall have curtailed the number of ships crossing the canal from 36 to 22 per day. Ships are forced to wait in queue or pay as much as $4 million to jump ahead. 200,000 liters of fresh water from Lake Gatun are used for each ship that passes through the canal. Most of the water flows out to sea, though recycling programs are in process. Over two million Panamanians depend upon the same water resources as the canal, forcing administrators to balance international shipping with their citizens’ needs.

If Trump is concerned about Chinese influence in a country, he should start with the U.S. The CCP’s TikTok and fentanyl are poisoning our culture. Chinese hackers have corrupted our infrastructure. Our trade deficit with China is over $300 billion, and trillions of dollars of intellectual property have been stolen.

Trump campaigned on his previous administration of no new foreign wars. He should continue the policy of no new wars.

Action

1. Increase “gray zone” soft power actions demonstrating the advantages of American democracy over CCP totalitarianism.
2. Recognize the CCP is waging unrestricted warfare against the U.S.
3. Increase U.S. military capabilities in cyber, missiles, space, and drones.
4. Highlight CCP’s lack of transparency on BRI projects.

Laurence F. Sanford is a senior analyst at the American Security Council Foundation.