[NEW YORK] The Panama Canal is planning to enter the ports business with a tender for two terminals, a move that comes amid a high-profile clash between the US and China over the waterway.

The Panama Canal Authority expects to open a tender to operate a port on the Atlantic coast and another on the Pacific, both of which would connect to a liquefied petroleum gas (LPG) pipeline. They would be owned by the canal and likely operated by a third party, Ricaurte Vasquez, head of the authority, said on Monday (Aug 11) in New York.

“We are coming into the game of port terminals,” Vasquez said.

Panama’s ports have drawn intense scrutiny from Washington in recent months. US President Donald Trump has criticised Chinese influence over the canal, threatening to take back the waterway and falsely alleging that Beijing controls it. Panama President Jose Raul Mulino has repeatedly defended the canal as a Panamanian operation over which the country exercises full sovereignty.

Though China has no role in operating the canal, Hong Kong-based conglomerate CK Hutchison Holdings has operated ports on the Atlantic and Pacific sides.

The canal authority’s plan to own ports is part of US$8.5 billion in capital spending it’s proposing over the next seven years, including the LPG pipeline, a new water reservoir and roads and highways. Existing ports run by CK Hutchison subsidiary Panama Ports, located outside the canal’s jurisdiction, were concessioned in 1997 and use old technology.

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The Panama Canal will seek to use newer crane technology that moves cargo more efficiently, and compete with the more modern Port of Cartagena in nearby Colombia, Vasquez said.

“We believe we can leapfrog that situation, and we can try to do it differently,” Vasquez said.

The decision comes as Mulino said that his administration will draft a national maritime logistics strategy to determine a new framework for port operations in Panama. The country’s comptroller has filed suit against a contract extension with CK Hutchison’s local unit, potentially complicating the conglomerate’s plan to sell its global terminals business to a consortium involving BlackRock.

The Panama Canal is seeing an unexpected windfall this year due to new US tariffs. Shippers of semi-manufactured goods and automobiles rushed to import products to the US before duties took full effect, helping boost canal revenues. The canal authority expects the front-loading of cargo to dissipate in the next fiscal year beginning in October, and forecasts revenue of around US$4.4 billion next year, below roughly US$5 billion this year, Vasquez said.

More plentiful rainfall this year has allowed the canal authority to maintain a draft of 15 metres, which will likely continue till the end of the year, he said. A severe drought in the previous two years forced the canal to limit transits and use new water-saving techniques. BLOOMBERG

PANAMA CITY (Reuters) – U.S. Secretary of State Marco Rubio on Sunday warned Panama’s President Jose Raul Mulino that Washington will “take measures necessary” if Panama does not immediately take steps to end what President Donald Trump sees as China’s influence and control over the Panama Canal.

Mulino, after the talks with the top U.S. diplomat in Panama City, signaled he would review agreements involving China and Chinese businesses, and announced further cooperation with the U.S. on migration, but reiterated that his country’s sovereignty over the world’s second busiest waterway is not up for discussion.

Rubio delivered a message from Trump that China’s presence – through a Hong-Kong based company operating two ports near the canal’s entrances – was a threat to the waterway and a violation of the U.S.-Panama treaty, the U.S. State Department spokesperson Tammy Bruce said in a statement.

“Secretary Rubio made clear that this status quo is unacceptable and that absent immediate changes, it would require the United States to take measures necessary to protect its rights under the Treaty,” Bruce said.

Rubio did not spell out exactly what steps Panama must take or what U.S. retaliation would look like.

Upon returning to office, Trump threatened to take control of the Panama Canal, built by the United States in the early 20th century and handed over to Panama in 1999, claiming the canal is being operated by Beijing.

He has refused to rule out use of military force over Panama, drawing criticism from Washington’s Latin American friends and foes alike.

Rubio, a longtime China hawk during his Senate career, said last week on Sirius XM’s The Megyn Kelly Show that China could use the ports to shut down the canal, a vital route for U.S. shipping, in the event of a conflict between Beijing and Washington.

Mulino said his meeting with Rubio was respectful and cordial. He showed willingness to review some Chinese businesses in Panama, including a key 25-year concession to Hong Kong-based CK Hutchison Holdings (0001.HK) renewed in 2021 for the operation of ports at both entrances of the canal, pending the results of an audit.

The contract has been targeted by U.S. lawmakers and the government as an example of China’s expansion in Panama, which they claim goes against a neutrality treaty signed by both countries in 1977.

Panama’s government and some experts reject that assertion, mainly because the ports are not part of the canal’s operations. The canal is operated by the Panama Canal Authority, an autonomous agency overseen by the Panamanian government.

A broad agreement between Panama and China to contribute to China’s Belt and Road initiative, under which the Asian country expanded investment in Panama during previous administrations, will not be renewed, Mulino said.

“We’ll study the possibility of terminating it early,” he added.

“I do not feel that there is any real threat at this time against the (neutrality) treaty, its validity, and much less the use of military force to make the treaty,” Mulino said, adding that it will be important to have face-to-face talks with Trump.

Rubio later visited the Miraflores Locks through which ships pass between the Pacific and the canal. Canal officials briefed Rubio as a Panamanian-flagged LPG carrier entered a lock from the canal to descend to the Pacific.

China has said it plays no part in operating the canal and that it respects Panama’s sovereignty and independence over the waterway.

“Never ever has China interfered,” Chinese Foreign Ministry spokesperson Mao Ning said when asked about the U.S. claims last month, adding that China recognizes the canal as “a permanently neutral international waterway.”

Rubio is touring Central America and the Caribbean on his first foray in the post as he seeks to refocus U.S. diplomacy on the Western Hemisphere – in part to recruit help in stemming migration toward the U.S. southern border.

The visit also reflects a U.S. desire to counter China’s growing economic and political influence in Latin America.

Mulino also announced that a memorandum of understanding signed in July with the U.S. Department of Homeland Security could be expanded so Venezuelans, Colombians and Ecuadoreans can be returned from the perilous Darien Gap at U.S. cost, through an airstrip in Panama.

The Darien Gap connects Colombia with the Central American nation of Panama and increasing numbers of migrants were making the journey north to reach the United States.

Rubio has ordered the State Department to put migration issues at the center of its diplomacy with countries in the region. Officials have said Rubio will use the trip to smooth the acceptance of U.S. deportation flights to the region.

“We never really thought about success,” says Wong, who was just 22 when he started the business. “We were just working really hard – making sure we can make the best product, get the best costing…We paid ourselves the bare minimum because we didn’t raise any capital at the start.”

Eventually, the world began to take notice of the rising shoe label and its makers. But Wong began to tire of the attention. “I was getting a lot of awards and interviews, and that sort of disrupted my work.”

As China rose as an economic superpower, he was constantly confronted by the media on his business strategy for the market, for which he had no answers. “The question asked at that time was: ‘When are you going to China? What’s the plan?’ And I kept giving the same excuse: ‘Oh, China is in my plans’ – but they were never (carried out).”

Cracking the Chinese market

In 2010, Wong packed his bags and headed for the world’s second-largest economy.

What was meant to be a brief stint, however, turned into a decade-long residency in Shanghai. “I did not realise it would take me 10 years to crack the market,” he admits.

To support this expansion, the brothers sold a 20 per cent stake to L Capital Asia, a private equity fund backed by French luxury giant LVMH, for more than US$30 million in 2011.

Wong restricted his trips back home to just one day each month. He would arrive on a morning flight for a meeting at headquarters, before flying out by midnight.

He intentionally kept creature comforts at bay. “If you’ve only one day, you don’t have a choice but to leave (right away). But after two or three days, you might say: ‘Actually the bed is quite comfortable; then there’s the food, parents, friends,’” he quips.

A little extreme, perhaps? For Wong, there is no middle ground: “I’m a person who doesn’t have a regulator. Either I go all the way, or not at all.”