As Panama’s president laid a wreath to honor those who died protesting the American occupation 60 years ago, the ceremony attendees were resolute.
The commemoration this month came just days after President-elect Donald J. Trump falsely claimed China was controlling the Panama Canal and suggested he could use military force to retake the waterway.
The threat rippled through a country still haunted by the events of 1964, when students trying to plant the Panamanian flag in the U.S.-occupied canal zone were met with deadly force.
“My brother did not die for nothing,” said Carlos E. Bonilla Cacó, whose brother was killed in the demonstrations that sparked the movement leading Panamanians to regain sovereignty.
The country’s leader agreed.
In the foothill near the Panama Canal Authority’s office, President José Raúl Mulino was firm. “The canal is and will continue to be Panamanian,” he said.
The statement directly challenged Mr. Trump, who some analysts say is only posturing to press Panama to lower fees for American goods traversing the canal, a subject he has recently railed against.
But former American officials warn that he may alienate Panama at a time when China is trying to woo the country as an ally and expand its influence in Latin America.
“Trump’s saber rattling could dampen the Panamanian government’s desire to broaden the relationship with the U.S. economically” said Ramon Escobar, who until September served on the National Security Council and is currently the managing director at Actum, a global consultancy firm.
He “may end up pushing them away at a time when there is a real opportunity to get Panama back into our orbit,” Mr. Escobar said.
The canal was constructed by the United States in the early 20th century, but Panama took back full control in 1999 and has since operated the waterway through the Panama Canal Authority.
Today, Panama holds special strategic significance for China because of the canal, but Beijing has been working to expand its influence in Latin America, and among developing countries more broadly. It has portrayed itself as an alternative to what it calls American hegemony and bullying, casting itself as a more sympathetic, fellow developing country.
And with significant investments in port construction worldwide, China is positioning itself to influence global commerce and monitor international activities.
Specifically, U.S. officials have grown increasingly concerned about two seaports at each end of the Panama Canal, which have been operated for decades by CK Hutchison Holdings, a company based in Hong Kong.
While CK Hutchison is a publicly listed conglomerate whose largest owner is a Hong Kong billionaire family, Beijing could still use its national security laws to force the company to assist in intelligence-gathering or military operations.
Panamanian officials argue, however, that China doesn’t pose a risk. The canal is open to the public, they say, and any Chinese interference would be visibly obvious.
“Anyone can use a satellite to see what is going in and out of the port,” Ilya Espino de Marotta, the deputy administrator of the Panama Canal, said in an interview last week. “The canal runs through the country, along national roads and is visible to the public.”
During his first administration, Mr. Trump did bring up the Panama Canal internally, indicating that he sees the waterway as unfinished business, said John Feeley, who served as U.S. ambassador to Panama from 2015 until 2018.
In June 2017, Mr. Trump met with the Panamanian president at the time, Juan Carlos Varela, and complained that the U.S. Navy was paying too much to traverse the canal — about $1 million annually, Mr. Feeley said. (That cost is so minuscule it would be akin to a rounding error in the Pentagon’s budget, analysts say.)
But Mr. Trump never brought up China’s presence or supposed influence over the canal even though just weeks previously Panama had broken off relations with Taiwan and aligned with Beijing, said Mr. Feeley, who attended the White House meeting between the leaders.
The former ambassador said he tried to get the White House to focus on China’s rising influence in Panama, but the issue never grew to a level of serious alarm.
At the time, China was promising to invest in big-ticket infrastructure items in Panama, including a canal bridge, as part of its Belt and Road Initiative. Through the initiative Beijing has increased its influence globally by investing in seaports, roads and trains from Kenya to Sri Lanka and, most recently, Latin America. Critics say Beijing uses the program to saddle foreign governments with failing projects or unsustainable debt in order to wield China’s leverage.
Mr. Feeley said he tried to get American companies to bid on such projects to counter China. But the U.S. Embassy in Panama City never got the White House’s backing to persuade American companies to bid, he said.
“It’s not that we are losing to China in Latin America; in most cases we aren’t even showing up to the commercial battlefield,” Mr. Feeley said.
Latin American governments like Panama’s have complained that when they put out bids for expensive infrastructure projects, the United States is often absent, forcing them to rely on others from Europe to China to get the work done.
“The U.S. isn’t bidding on big infrastructure projects here, but China is,” said Giulia de Sanctis, the president of the Panamanian Association of Business Executives. “Are we supposed to tell them now: ‘It’s time to get out of Panama; Trump doesn’t like you.’ Would anyone feel safe investing here then?”
The Panama Canal Authority has said that while the United States built the canal for military purposes, the Panamanians developed it into a major hub of global trade.
Once the U.S. military handed it over, the authority invested more than $5 billion to widen the waterway and accommodate the giant cargo ships that travel from the United States to East Asia, its most popular route.
“If it wasn’t for our investment, the canal would be irrelevant on the scale of global trade,” said Ms. Espino de Marotta.
“Our neutrality is our greatest business asset, and it enables us to be a route for global commerce,” she said. At the Atlantic entrance of the canal, three ports are separately operated by companies based in Hong Kong, Taiwan and the United States, she said.
“These ports have been managed by Hong Kong since 1997, throughout Trump’s first administration,” she added. “Trump never said a thing about it then, so why now?”
Some Panamanians are reluctant to allow China to invest further in the country. Although Mr. Varela shifted Panama’s diplomatic recognition to China from Taiwan and entered into several business agreements with Beijing, subsequent governments have sought to scale back these commitments.
Ramón Martínez, who served as the minister of commerce after Mr. Varela stepped down, expressed his discomfort with the political and economic agreements made by the earlier administration with China. He said he halted a free-trade agreement with China that was under negotiation. The bridge over the canal that China pledged to build was also paused.
Mr. Martínez emphasized that for Panama, its most important ally will always be the United States.
Last week, hundreds of tourists gathered on a terrace at the Miraflores Visitors Center, giving them a bird’s-eye view of the Panama Canal. They waved as a towering cruise ship squeezed its way through the canal.
“At first it made me laugh, the insanity of it all,” said Jacqueline Williams of Mr. Trump’s threats against Panama as she waved to a passing cruise ship. The 67-year-old nonprofit educator was visiting the canal from New York City.
“But then you think: This is a guy who idolizes Putin,” she said, referring to the Russian president. “Trump said on the campaign trail he wanted to restore peace to the world, but now he is threatening military expansionism.”
Alex E. Hernández contributed reporting from Panama City, Vivian Wang from Beijing and Emiliano Rodríguez Mega from Mexico City.
