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China has been operating the panama canal since 2000 and their influence inside Panama has grown as indicated by a bill submitted last year to the legislature that mandates teaching Mandarin in all Panamanian public schools.[ii]

Currently the Panama Ports Company,[i] a subsidiary of Hutchison Whampoa Ltd.,[ii] has exclusive and extensive rights to control both ends of the Panama Canal. Hutchison Whampoa is a Chinese company owned by Hong Kong billionaire, Li Ka-Shing, who has strong ties with Beijing. Considering Li’s close ties with the Chinese government, it is highly plausible that Hutchison Whampoa has the potential to act as Beijing’s political agent and that their possession of the ports at either end of the Panama Canal constitutes a serious U.S. national security issue.
[i] Panama Ports Company Official Website (http://www.ppc.com.pa/index_eng.php)
[ii] Official website of Hutchison Whampoa clearly mentions that Panama Ports Company is a subsidiary of Hutchison Whampoa (http://www.hutchison-whampoa.com/eng/ports/international/the_americas.htm)

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Over the past years, several Latin American countries that had no diplomatic ties with the People’s Republic of China have now established them. For instance, in 2007, Costa Rica aborted its ties with Taiwan and established diplomatic relations with the People’s Republic of China, primarily for economic and financial reasons.[i] However, the most important indicator of China’s growing influence is its control over the ports at both ends of the Panama Canal. China has been operating these ports since 2000 and their influence inside Panama has grown as indicated by a bill submitted last year to the legislature that mandates teaching Mandarin in all Panamanian public schools.[ii]
Currently the Panama Ports Company,[iii] a subsidiary of Hutchison Whampoa Ltd.,[iv] has exclusive and extensive rights to control both ends of the Panama Canal. Hutchison Whampoa is a Chinese company owned by Hong Kong billionaire, Li Ka-Shing, who has strong ties with Beijing. Considering Li’s close ties with the Chinese government, it is highly plausible that Hutchison Whampoa has the potential to act as Beijing’s political agent and that their possession of the ports at either end of the Panama Canal constitutes a serious U.S. national security issue.

Brief Overview of the History of Panama Canal
The Panama Canal was established in 1914 under the leadership of the United States. The Hay-Bunau Varilla Treaty in 1903 granted a right to the United States to build and administer the canal and the surrounding areas indefinitely. However, because this treaty was signed without the consent of the Panamanians, it became a contentious diplomatic issue between Panama and the United States. The Panamanian dissatisfaction toward U.S. control over the Canal Zone reached a peak in January of 1964, when riots over sovereignty of the Canal Zone broke out. Responding to such protests, in 1977 President Carter signed the Neutrality Treaty and the Panama Canal Treaty. Under the Neutrality Treaty, Panama became obliged to guarantee the neutrality of the Canal Zone. In exchange, under the Panama Canal Treaty, the US promised to withdraw from the Canal Zone by the end of 1999 and guaranteed that Panama would assume full sovereignty over the area in 2000.

Hutchison Whampoa’s Control over the Panama Canal and Panama Law No.5
However, in 1996, Panama decided to auction the rights to manage the canal to a private company. Despite the fact that the Chinese company’s bid came in fourth after the Japanese firm, Kawasaki/I.T.S., the U.S. firm, Bechtel, and the Panamanian American company, M.I.T,[i] Panama awarded the contract to China’s Hutchinson Whampoa. A published report claimed that “Panama preemptively closed the bidding, secretly changed the rules,” and “simply awarded the contract to Hutchison Whampoa.”[ii]

According to Constantine Menges, who headed the Latin American desk at the NSC during the Reagan Administration, “China was determined to win the bidding process and used corrupt means to influence the government of Panama in its favor.”[iii] In fact, a 1996 cable to the U.S. Embassy in Panama reported that just before the bidding, Beijing gave $400 million to Hutchison Whampoa through a state-run investment company, China Resources Enterprise,[iv] a company which was identified by Senator Fred Thompson as “an agent of espionage—economic, military, and political—for China” and “has reportedly served as an intelligence-collection front for China.”[v] William J. Hughes, the U.S. ambassador to Panama, and Senator Trent Lott objected to the ‘unorthodox’ bidding process and called for an investigation, but in vain. (See “The Americas Report” April 10, 2008. Article by Nicole M. Ferrand.