KEY INSIGHTS
Control of the Panama Canal has become a focal point of U.S.-China competition, with Panamanian President José Raúl Mulino navigating pressure from both superpowers. While closer alignment with the United States or stricter neutrality are the most probable outcomes, either path risks domestic unrest and strained foreign investment. Concentric encourages businesses and travelers in Panama to maintain a heightened awareness and prepare for potential economic or political shocks.
KEY EVENTS
August 2025: The Panama Canal Authority unveiled a new development strategy to diversify port management and reinforce neutrality.
May 2025: Mass demonstrations erupted across Panama to protest U.S. military agreements, fueled by memories of past American interventions.
March 2025: BlackRock and MSC submitted a joint bid for control of the canal’s major ports, pending review by Panama and China.
January 2025: U.S. President Donald Trump declared he would “take back control” of the canal, citing Chinese influence.
ANALYSIS
Panama is faced with competing visions of its future tied to canal management rights. The Panama Canal is the only waterway that allows direct maritime transit between the Americas’ Pacific and Atlantic coasts close to the equator. Roughly six percent of global trade passed through the canal in 2024. Originally constructed by the United States in the early twentieth century, Panama has held authority over the canal since 1999.
Chinese influence in Panama has accelerated in recent years. In 2017, Panama cut ties with Taiwan and became the first Latin American country to join the Belt and Road Initiative. American influence has also accelerated, particularly since President Trump’s January 2025 assertion that he would “take back control” of the canal. Following Secretary of State Marco Rubio’s visit and Secretary of Defense Pete Hegseth’s trip to Panama, President Mulino’s government pulled out of the Belt and Road Initiative and agreed to expanding U.S. military access to air and naval bases.
PANAMA’S OPTIONS
Option 1: U.S. Alignment (probable) — President Mulino has demonstrated openness to U.S. initiatives. However, taking a U.S.-centric path would place significant strains on Mulino’s public relations, with significant protest activity and pressure within the legislature.
Option 2: Panamanian Neutrality (probable) — Though the Mulino administration has mostly cooperated with American directives, there have been notable diversions. In August, the Panamanian Canal Authority presented a new development strategy designed to spread port management across a greater number of facilities.
Option 3: Chinese Alignment (unlikely) — In the improbable event Panama did elect to align more closely with China, American sanctions and even potential military interventions would leave the country in a destabilized position.
OUTLOOK
We assess growing assertiveness from the Trump administration is pressuring Mulino’s government to select its future canal policy more swiftly. We encourage organizations operating in Panama and individuals traveling to the region to consider the following risk mitigations:
- Monitor political demonstrations: Avoid protest areas, especially in Panama City, as unrest tied to canal policy can escalate quickly.
- Diversify supply routes: Plan for potential delays or disruptions at the Canal due to political decisions, protests, or shifts in port management.
- Assess partner exposure: Review local partnerships and vendors for links to U.S. or Chinese interests.
- Maintain communication redundancies: Be prepared for changes in telecom infrastructure.
- Track U.S. and Chinese policy moves: Anticipate that evolving great power competition will directly impact the operating environment.
Authored by: Robert Hodgkison
