Panama: The new "arena" of the US and China?

Washington's warning

Panamanian President Juan Carlos Varela and Xi will sign about 20 cooperation agreements during their "unprecedented" visit on December 2 and 3, a statement from the president's office said.

Earlier in July, the two countries negotiated a free trade agreement that could turn the Central American country into a Chinese goods hub across Latin America.

Xi's visit comes after Panama severed ties with Taiwan and established ties with China in June last year. Chinese Vice Foreign Minister Qin Gang said on November 23 that Xi's visit reaffirmed Beijing's commitment to Latin American countries and that cooperation between the two sides would "remain unchanged" despite the unstable global environment.

Chinese President Xi Jinping will arrive in Panama shortly after his scheduled meeting with Donald Trump. Photo: AP

With the 80-km long Panama Canal connecting the Atlantic and Pacific Oceans, the Central American nation played a key role in US dominance in the Western Hemisphere.

It is not surprising that the administration of US President Donald Trump has recently continuously criticized China's growing influence in the region and warned neighboring countries about the potential risks from China's investment strategy.

Most recently, at the Asia-Pacific Economic Cooperation (APEC) Summit in Papua New Guinea last week, US Vice President Mike Pence warned countries not to be "tempted" by Beijing's Belt and Road Initiative (BRI).

The dispute has turned Central America into a "battlefield" for influence between major powers for the first time since the US fought the Soviet Union there during the Cold War.

Notably, Mr. Xi Jinping arrived in Panama right after his scheduled meeting with Mr. Donald Trump on the sidelines of the G20 Summit in Argentina on December 1.

Beijing's intentions

Former Mexican ambassador to China Jorge Guajardo told the South China Morning Post that Xi's arrival in Panama shortly after Pence's criticism showed Beijing was not shy about competing for influence in America's traditional sphere of influence.

Meanwhile, expert Francisco Luis Perez at Tamkang University (Taiwan) said that Beijing is seeking to increase its influence in Latin America to counter the presence of the US and the Indo-Pacific region.

On the other hand, diplomats in Latin America say Washington has only itself to blame for withdrawing from the region, thereby allowing Beijing to move in and establish stronger economic and diplomatic ties.

Leaders in the region have generally ignored US warnings because they need money for infrastructure projects and China is willing to provide it, according to Tribune News Service.

Many African countries are also opening up to Chinese investment despite concerns that BRI could create debt traps, as in Sierra Leone.

President Julius Maada Bio’s administration last month decided to reject a $300 million loan from China to build a new international airport, a move that analysts quickly welcomed amid concerns that the project could plunge one of the world’s poorest countries deeper into debt.

However, just days after the announcement, Mr. Bio said he was still seeking Beijing's support to build a bridge worth more than $1 billion and left open the possibility of renegotiating the loan for the airport project.

According to The New York Times, there are many governments like Sierra Leone that are willing to ignore the risks to the economy when borrowing a lot of money from China. The International Monetary Fund (IMF) warns that 40% of countries in sub-Saharan Africa are approaching a debt crisis.

Africa as a whole owes $417 billion in external debt, with China owning 20% ​​of it. Yet, many African countries are seeking loans from Beijing to build airports, highways, railways, dams… The problem, critics say, is that the large infrastructure projects undertaken by Chinese companies are too expensive!