Hong Kong firm did not uphold Panama Canal ports contract: Panama audit

PANAMA CITY – The Hong Kong company in charge of two ports at either end of the Panama Canal – which sparked US President Donald Trump’s threats to seize the waterway – has flouted the terms of its contract, according to Panamanian audit results released on April 7.

The audit found “many breaches” of the concession awarded to a subsidiary of logistics giant CK Hutchison to operate the two ports and said Panama did not receive US$1.2 billion (S$1.6 billion) it was owed under the contract.

The subsidiary, called Panama Ports, benefited from many tax exemptions and also had irregularities in a previous audit that was used to justify an extension of the concession first awarded in 1997, said state comptroller Anel Flores.

“This is a very delicate issue,” Mr Flores told reporters, adding that he would file a complaint with prosecutors in the coming days over the unpaid concession fees.

The release of the audit results came hours before US Defence Secretary Pete Hegseth was to arrive in Panama, which has come under strong pressure from Mr Trump to reduce Chinese influence in the canal.

The United States has said it is a threat to its national security – and the region as a whole – for a Hong Kong company to operate ports at either end of the canal connecting the Atlantic and Pacific, through which 5 per cent of all global shipping passes.

But Mr Flores denied that the announcement of Panama Ports failing to honour the concession contract had anything to do with Mr Hegseth’s visit.

“This is an autonomous act by Panama,” Mr Flores said.

However, some analysts had predicted that this audit would in fact purport to show irregularities, so that Panama could strip the Chinese company of the contract and thus appease the Trump administration.

“It comes as a surprise to no one that the audit turns up alleged irregularities, since the idea was to have some kind of legal justification strong enough to cancel the concession,” Dr Euclides Tapia, a professor of international relations, told AFP.

The state comptroller’s office is an autonomous body that examines how government money is spent.

It began the audit of Panama Ports in late January to determine if it was honouring the concession contract, after Mr Trump threatened to take over the canal, by force if necessary.

Faced with Mr Trump’s repeated threats to “take back” the US-built canal, the Central American country in turn has put pressure on CK Hutchison to relinquish its control of the ports.

In March, the company announced an agreement to sell 43 ports in 23 countries – including its two on the inter-oceanic Panama Canal – to a group led by giant asset manager BlackRock for US$19 billion in cash.

A furious Beijing has since announced an antitrust review of the deal, most likely preventing the parties from signing an agreement on April 2 as planned.

Panama Ports, a subsidiary of CK Hutchison, won the concession to operate Balboa port on the Pacific side of the canal and Cristobal port on the Atlantic side in 1997.

The concession was renewed for another 25 years in 2021. AFP