56 TIME February 15/February 22, 2021
China’s growing commercial pres-
ence in the ZLC refl ects the enthusiasm
it has long had for Panama, which re-
mains a strategic linchpin for Washing-
ton. In 2017, China Landbridge Group
broke ground on a new $1 billion deep-
water port and logistics complex on
Panama’s Margarita Island, where the
Panama Colón Container Port will take
over land once occupied by a U.S. mili-
tary base. Less than a week after work
began, the government of Panama sud-
denly switched diplomatic recognition
from Taipei to Beijing, blindsiding—and
infuriating—its Washington allies.
“The United States created Panama
and then built one of the engineering
wonders of the world and gave it to the
Panamanians,” says Thomas Shannon,
former Under Sec-
retary of State for
Political Affairs
from 2016 to 2018
and briefl y Acting
Secretary of State
early in the Trump
Administration.
“One would hope
that was a level
of a relationship
that allowed them
to have a conver-
sation with us to
try to understand
our point of view.
But that didn’t
happen.”
The U.S. may
have “built” the
Panama Canal,
but Chinese mi-
grant labor helped
hew the 51-mile marvel of engineering
from the earth, bestowing Panama with
a signifi cant ethnic- Chinese population
and opportunities for CCP engagement.
Even before the 2017 diplomatic switch,
“Panama featured very prominently in
Ministry of Commerce and other doc-
uments [produced by China] to guide
Chinese companies to the region,” says
Margaret Myers, director of the Asia
and Latin America Program at the Inter-
American Dialogue.
After 2017, there was a surge in Chi-
nese investment and commercial deals
in Panama amid a visit by Xi, with some
16 signifi cant deals put on the table,
including grand infrastructure projects.
Eddie Tapiero, a Panamanian economist
who worked on the negotiating team
for the Panama-China free-trade agree-
ment (FTA), says the aim was to leverage
Panama’s strategic position to boost re-
gional trade. If they could persuade the
large Neopanamax boats that deliver
goods from China to the U.S. to pass
back through the Panama Canal—which
can cost $1 million to traverse—instead of
taking cheaper return routes via Europe
while empty, they could assemble exports
from across the continent in large quanti-
ties for dispatch to China. “We saw a big
opportunity,” says Tapiero. “All that cre-
ated a lot of enthusiasm, and we advanced
rapidly in our relations.”
But in 2018, the U.S. woke up to what
was happening in its backyard and began
ratcheting up pressure on Panama. The
revelations in the 2016 Panama papers,
which exposed the shadowy off shore fi -
nancial dealings of an elite Panamanian
law fi rm, prompted the U.S. Treasury to
place Panamanian businessman Abdul
Waked on its “Clinton list” of individ-
uals and businesses banned from deal-
ing with Americans, leading to his bank-
ruptcy. In June 2019, the U.S. Financial
Action Task Force added Panama to its
“gray list” of countries not suffi ciently
tackling money laundering. The next
month, a new government took offi ce in
Panama and adopted a warier stance on
China. At least fi ve of the 16 major Chi-
nese infra structure projects have since
been nixed, according to Myers.
Evan Ellis, a professor of Latin Ameri-
can studies at the U.S. Army War College
Strategic Studies Institute, who has ad-
vised Congress on China’s expansion in
the region, says U.S. pressure helped slow
Panamanian engagement with China.
“It’s never been pressure to say, ‘You are
not allowed to engage with China.’ It’s al-
ways been, ‘It’s important you maintain
transparency, strong institutions, com-
mitment to the rule of law and equal op-
portunity,’ ” he says.
The U.S. may have succeeded in put-
ting a pause on the growth of Panama-
China ties, but American diplomats say
these kinds of setbacks won’t deter China
from further geostrategic needling. “For
China, the United States has its navy in
the South China Sea, a military ally in
Taiwan and has been harassing [them]about Hong Kong,” says Shannon. “So
isn’t it great to have a dominant posi-
tion in the greater Caribbean? That way
China can show the United States that
we can play in your neighborhood just
how you play in ours.”IT WASN’T LONG after the embarrass-
ment of Panama’s diplomatic switch that
the Dominican Republic and El Salvador
followed suit. Alarmed American offi cials
in El Salvador, including U.S. Ambassa-
dor Jean Manes, began to speak out about
what they described as China’s predatory,
coercive dealings with the region. U.S.
diplomats helped expose deals that had
been secretly negotiated between Chi-
nese offi cials and the Salvadoran govern-
ment, including plans for a special eco-
nomic zone that would cover 14% of the
nation’s territory and half of its coast, but
which eff ectively excluded U.S. compa-
nies. When antiestablishment candidate
Nayib Bukele won El Salvador’s February
2019 presidential election, he criticized
his predecessor’s planned deals with
China and renegotiated a much smaller
package, according to analysts.
According to Ellis, the pushback in
El Salvador had a chilling eff ect on the
rest of the region, which until that point
“hadn’t realized how much Washington
cared” about deepening ties with China.
Washington has also been amplifying crit-
icism of Beijing’s early COVID-19 cover-
up, faulty PPE and issues like illegal Chi-
nese fi shing off Chile, Peru and Ecuador.
Yet China has won infl uence not by
wielding sticks but by deftly distribut-
ing carrots. In Brazil, the region’s largest
economy, bilateral trade with China rose
from $2 billion in 2000 to $100 billion
last year. Today, Brazil sends 30% of all
exports to China, including 80% of its soy-
bean crop and 60% of its iron ore. These
entanglements are typically tightest with
nations with goods to sell; China has sup-
plied over $17 billion in fi nancing to Ar-
gentina since 2007, according to Inter-
American Dialogue, and is the world’s top
importer of Argentine soybeans and beef.
China is also now a preferred lender
across the region. It hosts two interna-
tional development banks—the Beijing-
led Asian Infrastructure Development
Bank (AIIB) and the New Development
Bank (NDB) in Shanghai—that are both
expanding their remit across the region.World
11
The number of
Latin American
and Caribbean
countries visited
by Xi Jinping
since he became
President in 20131
The number of
Latin American
countries visited
by Donald Trump
during his four
years as President