Rubio hails Panama's move to exit Chinese infrastructure plan

(Reuters) - U.S. Secretary of State Marco Rubio on Monday welcomed Panama's decision to let its participation in China's global infrastructure plan expire, calling the move "a great step forward" for its ties with the United States.

Any move by Panama to distance itself from Chinese President Xi Jinping's signature Belt and Road Initiative is a win for Washington, which has argued that Beijing uses the scheme for "debt trap diplomacy" to cement its global influence.

Rubio this week made his first overseas trip as the top U.S. diplomat under President Donald Trump to Panama, a close U.S. partner in Latin America, and pressured the country over its ties with China.

After talks with Rubio, Panama's President Jose Raul Mulino said his country's broad agreement to contribute to the Chinese initiative will not be renewed, and could be terminated early. He said the deal was set to expire in two to three years, but did not elaborate.

"Yesterday's announcement by President @JoseRaulMulino that Panama will allow its participation in the CCP's Belt and Road Initiative to expire is a great step forward for U.S.-Panama relations, a free Panama Canal, and another example of @POTUS leadership to protect our national security and deliver prosperity for the American people," Rubio posted on X after departing the country.

Panama was the first Latin American country to officially endorse BRI in November 2017, five months after switching diplomatic ties to China from Taiwan, the democratically governed island Beijing claims as its territory.

China rejects Western criticism of the plan, saying well over one hundred countries have joined it, boosting global development with new ports, bridges, railway and other projects.

Nonetheless, it has been mired in controversy, with some partner nations bemoaning the high cost of projects and struggling to repay loans. Italy withdrew from the initiative in 2023 under U.S. pressure over concerns about Beijing's economic reach.

Such U.S. concerns have long extended to some Chinese companies' operations near the Panama Canal, including a Hong Kong-based firm operating two ports at both entrances of the waterway, built by the United States in the early 20th century and handed over to Panama in 1999.

Two Chinese state-owned firms are separately building a fourth bridge over one of the canal's entrances.

The U.S. State Department said on Sunday that Rubio delivered a message from Trump that China's presence there was a threat to the canal and a violation of the U.S.-Panama treaty.

After talks with Rubio, Mulino signaled a willingness to review a key 25-year concession to Hong Kong-based CK Hutchison Holdings, 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.

While Panama has reiterated its sovereignty over the world's second busiest waterway, Ryan Berg, director of the Americas Program at Washington's Center for Strategic and International Studies, said the audit could provide a way to unwind the concessions if it shows the deals were marred by corruption.

"That provides more legal framework for Panama to wiggle out of the concessions and for Panama to reopen them such that an American company or a European company might come in and win the bid," Berg said.



(Reporting by Michael Martina, Simon Lewis, Marianna Parraga, Jasper Ward and Susan Heavey; Writing by Michael Martina, editing by Deepa Babington)