In a significant turn of events for the Panama Canal, an audit released on April 8, 2025, has revealed that the Hong Kong operator responsible for managing the ports at both ends of the canal has failed to comply with its contractual obligations. The report indicates that Panama has not received the $1.2 billion owed as stipulated in the contract, raising questions about the future of the port operations.
The audit, conducted by Panama's Auditor General Anel Flores, highlighted multiple violations by the subsidiary of Cheung Kong Group, known as Panama Ports Company, which has operated the Port of Balboa on the Pacific coast and the Port of Cristobal on the Atlantic coast since 1997. These ports were granted a concession that was extended for another 25 years in 2021, but the recent findings could threaten that extension.
Flores announced that she plans to file a complaint with prosecutors regarding the failure to pay the concession fees, stating, "Panama has abandoned US$1.2 billion (approximately HK$10 billion)" during the renewal process. This amount refers to the tax revenue concessions and benefits that were part of the contract.
The audit comes at a time when the Panamanian government is under pressure from U.S. President Donald Trump to reduce Chinese influence over the canal. Trump has repeatedly claimed that China is exerting control over the Panama Canal, leading to increased scrutiny of Cheung Kong, which is controlled by Hong Kong billionaire Li Ka-shing.
In light of the audit's findings, the U.S. Secretary of Defense, Pete Hegseth, is scheduled to arrive in Panama just hours after the report was made public. The timing of his visit underscores the geopolitical stakes surrounding the canal, as the U.S. seeks to counter China's growing presence in Latin America.
Cheung Kong's recent decision to sell its ports, including those at the Panama Canal, to a consortium led by BlackRock has also added complexity to the situation. The deal, which would see Cheung Kong receiving $19 billion in cash, has faced backlash from China, prompting Beijing to announce an anti-monopoly review of the transaction. This review could further complicate the sale, which was originally scheduled to finalize on April 2, 2025.
Legal experts have warned that if the Auditor General confirms any violations in the concession renewal, or if the Supreme Court declares the contract unconstitutional, the concession could be revoked, impacting Cheung Kong's plans significantly. The implications of this audit extend beyond the financial realm and into the geopolitical landscape, as the U.S. and China vie for influence in the region.
The Panama Ports Company has been a vital player in the operation of the Panama Canal, which is a crucial shipping route for global trade. The canal generates significant revenue for Panama, with the ports reportedly earning around $5 billion last year alone. The potential fallout from the audit could disrupt these operations and affect the broader economic stability of the nation.
As the situation develops, all eyes will be on the Panamanian government and how it responds to both the audit findings and the pressures from the U.S. and China. The outcome of the legal proceedings against Cheung Kong and its subsidiary could set a precedent for foreign investments in Panama and shape the future of the Panama Canal.
In the coming days, further developments are expected as the Panamanian government deliberates on the next steps regarding the audit findings and the ongoing negotiations with BlackRock. The political and economic ramifications of these decisions will likely resonate far beyond Panama's borders, affecting international relations and trade dynamics.
