The increased presence and influence of the People’s Republic of China in Panama, particularly in and around the Canal, is troubling and must be addressed. Just as President Theodore Roosevelt used public funds to invest in Panama and build the Canal, the U.S. can and should use the sovereign wealth fund President Trump envisages to make investments in Panama that would achieve economic and national security while also being smart, strategic, and financially sound.
The Panama Canal Authority (ACP) has responsibly and professionally managed this asset for the past 25 years, but its authorities are limited and do not extend to infrastructure development, real estate, water resource management, or the awarding of concessions. It is in these areas, outside the authorities of the ACP, where Chinese and Chinese-linked companies have been successful in expanding their presence and influence in Panama. One example illustrating the unacceptable status quo is that mission critical ACP employees must pass through Chinese security to get to their daily place of work. These conditions must change.
Once the U.S. sovereign wealth fund is created, fund managers should immediately partner with the ACP to identify investment opportunities in and adjacent to the Canal’s operational areas. Doing so yields at least three key benefits. First, investing in ports, logistics facilities, or the Rio Indio Reservoir project would give the ACP more direct and effective responsibility for properties, businesses, and operations that are critical to the Canal but now outside their control. Second, U.S.-ACP joint investments would address concerns about an erosion of neutrality. Third, American investments would guarantee access to the Canal and associated facilities.
Holdings in transportation and infrastructure are a core part of many other sovereign wealth funds for the simple reason that they are good investments. An abundance of transportation and infrastructure investment opportunities exist in Panama. A new U.S. sovereign wealth fund making its first investments in Panamanian port, terminal, infrastructure, and related projects would result in not only a more secure Canal, but in substantial financial returns and benefits to Americans.
The low billion-dollar cost of investments in marine terminals might seem expensive at first impression, but in reality, represents an excellent value when compared to the value of trade. A $1 billion investment in a Panamanian terminal is essentially buying insurance and access for American shippers for pennies on the dollar, especially when realizing almost $1 billion in U.S. trade moves through the Canal daily.
The Panama Canal is an engineering marvel that is critical to the commerce of the United States. I applaud President Trump for flagging the troubling levels of influence the People’s Republic of China has achieved in Panama and for his vision in pursuing the establishment of a sovereign wealth fund. Strategic investments by the United States in Panama will have the effect of building bilateral relations, blunting the influence of China and ensuring that American shippers and companies always have the full benefit of access to the Canal.
Chairman Louis E. Sola is a Commissioner with the U.S. Federal Maritime Commission. The thoughts and comments expressed here are his own and do not necessarily represent the position of the Commission.