Hong Kong Firm Exits Panama Canal Ports in Landmark BlackRock Deal

• CK Hutchison Holdings is the only Hong Kong concern that is the largest foreign investor in the Panama Canal; hence, its parent company has signed a $22.8 billion (£17.8 billion) deal with a BlackRock-led consortium on the latter’s bid to become the owner of vital trade corridors.
• The CK Hutchison executives justified the sale this way: “We believe this is just a very good business.” Gallant.

CK Hutchison Holdings in Hong Kong has permitted the sale to a consortium, with BlackRock being the majority shareholder, of its share ownership of the two Panama Canal harbour ports, considered the gateways to trading communities. Though the declared $22.8 billion (£17.8 billion) price tag includes the purchase of all 43 ports in 23 countries, it is unlikely that the majority of these roll-on-roll-off operations have anything to do with such an extension; the Panama Canal terminals are no doubt bigger price assets.

Strategic Sale in Issue with US-China Growing Tensions

Brought against the backdrop of this supposed aftermath, there are concerns by former US President Donald Trump that China is politically influencing the Panama Canal and has, as such, contended that the US, including historical times, saw well-managed canal operations and should reengage itself in full architectural control upon the Panama Canal.

A mere 51 miles (82 km) long, the Panama Canal represents the world passport, ensuring the lifeblood of global commerce by hosting more than 14,000 ships a year, ranging from tiny container carriers to big energy carriers and now to naval ships, thus making up an impressive noble cause, and is one of the Channel’s important access routes that also feature Chinese investment.

The Politics Behind Making the Deal

Over the past few months, concerns about Chinese politics have been expressed on the grounds of stakes in world trade, the Panama Canal being an epicentre of the debate.

Trump and his allies contend that its national security risks apply to the prospect of a Hong Kong-based firm controlling access to the canal. At the beginning of this year, the American Secretary of State Marco Rubio visited Panama and persuaded the Panamanian government to make “immediate changes” to reduce the control that China has over the canal.

Nevertheless, Panama’s President, Jose Raul Mulino, brushed off these concerns by saying that the canal “is and will remain” under Panama’s control. This is Panama’s turf, mind you, and not under the management of foreign forces in any way.

Business Transaction, Not Political Lines

In the thick of political contention all around, CK Hutchison has tried to make it look like an economically tremendous decision.

Co-Managing Director for CK Hutchison, Frank Sixt, strongly differentiated the transaction as not a response to some political pressure:

“I want to bring home the fact that this transaction is strictly commercial and is not connected in any way to recent political stories about Panama Ports.”

Terminal Investment Limited (TIL), a Swiss port operator, will be appended at the time of sale by BlackRock. With a financially strong backer in BlackRock and an efficient operator in TIL, it is hoped that the new management can bring some fresh investment to the efficiency deficit at both entrances of the Panama Canal.

What Is the Significance of This?

Regarded for many years, the Panama Canal embodies not just a mere canal but a strategic asset, with far-reaching global trading and political implications. America built it in the early 1900s and held on to it way into the countercultural ’70s until the formulation of the Torrijos-Carter Treaties, the terms of which led to Panama’s full possession of the canal in 1999.

The Pentagon and White House would view the handover as a victory, if not against the odds in light of security concerns involving Chinese involvement in the canal. Meanwhile, it would provoke many questions about China’s future actions, as China continues to expend large amounts of resources on global infrastructure projects within the Belt and Road Initiative.

What Will Happen Next?

Before this deal is completed, Panama’s government must give its approval. Economic benefits, security concerns, and possible diplomatic fallouts would likely come under consideration while greenlighting the deal.

As such, it is clear that the sale reflects a new pattern in global port ownership bespeaking the gradual renaissance of US investors in one of the world’s most strategic maritime corridors. Yet, on the grand chessboard of global trade and geopolitics, one piece has been moved into place.