Mr. Trump and the Panama Canal: An “external shock” and the necessity of a three-phase strategy for Panama
Panama has been in the international economic and political spotlight in recent weeks, particularly following President Donald Trump’s inaugural address on January 20: “We are going to take back the Canal that was unfairly taken from us by Panama and which imposes unjustly high tolls.”
This report explores three aspects often overlooked by public opinion and financial market players:
(1) The ACP's (Panama Canal Authority) toll policy is market-driven. It does not include direct or cross-subsidies, does not discriminate by the nationality of the vessel, is adjusted every two years after public hearings with clients, and is reviewed by an Advisory Board chaired by a retired U.S. Navy Admiral.
(2) The Neutrality Treaty signed by the U.S. and Panama in 1977 (adhered to by forty nations but not by the People's Republic of China) remains in effect in perpetuity. It guarantees the United States the right to intervene in the Canal's operation if it is at risk, but solely under circumstances of operational failure, not in matters related to toll policies, revenues, or investments.
(3) While it is impossible to know for certain the underlying motives behind Donald Trump’s remarks, we believe the core issue for the new U.S. administration is not the Canal or its toll policy but rather China’s presence in ports near the waterway. The U.S. narrative (not limited to the Panamanian case) appears more focused on countering China's expansion in the region than on altering the toll system. Although China has significant commercial interests in Panama, its influence is modest compared to that of the U.S., which remains Panama's main economic partner.
(4) In response to the statements by the new U.S. administration, the Panamanian government (and society at large) must counter with a solid, data-driven narrative while applying the “minimax regret” principle to mitigate potential negative impacts in future negotiations. This requires keeping one or more projects in reserve that could meet a minimum of U.S. demands in a negotiation—excluding changes to the toll system, which are impossible—while ensuring minimal or no sacrifice for Panama.
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