Eyeing China, Panama’s Doors Are Wide Open

Since Panama and China established diplomatic relations earlier this summer, the two countries have moved swiftly to open up new communications channels, and, you guessed it, trade has been high on the agenda.

A diverse Panamanian delegation from the Ministries of Security, Economy, Commerce and the Maritime and Tourism Authorities are on their way to China right now, following on the heels of the first Panama-China Trade and Investment Forum last month.

The Grand Plan (for China)

The pieces in China’s grand strategy seem to fit together seamlessly. China’s “One Belt, One Road” (OBOR) plan – a 21st century version of the ancient Silk Road, aiming to become the world’s largest platform for economic cooperation – has been on a roadshow the world over.

And, as the U.S. bows out of the Trans-Pacific Partnership and China fills the vacuum, courting Latin America with energy and infrastructure deals, it looks like Panama will increasingly become the gateway for China’s access to New World markets.

The Canal, the Master Plan to develop its banks, and the logistical hub around it will become a launch pad to boost trade, serving as a regional distribution center for any of China’s industrial giants looking to promote their exports in the Americas. As we said in our last article, some have been doing this quietly already — from diversified investments in ports, to telecom, to residential real estate even – paving the way for the bigger bids to come.

What’s In It For Panama?

But what’s Panama’s plan going into the negotiations?

Panama’s exports to Asia rose to US$51 million in 2016, up 23% on the previous year, all for commodities (copper and aluminum, wood, coffee…). On track to sign a Most Favored Nation Agreement to get preferential rates for Panama-registered vessels should help boost exports further.

And, to diversify growth, on their trip to China this week Panamanian officials will likely aim to position Panama as a potential regional HQ for Chinese companies and financial institutions, and pitch infrastructure projects to attract more Chinese investment (some via public-private partnerships). The good news is, OBOR’s 2017 vision (published just the day before the diplomatic relations between Panama and China were established) emphasizes sustainable development and environmental protection as core principles, so making these a cornerstone of cooperation can be in both counties’ interests.

Boosting tourism is also on the agenda during the visit, and, given Panama’s favorable residency requirements, expect more (much more) residential real estate investments from individuals, as well as developers.

Finally, a future trade agreement would be the icing on the cake – but there’s much that can be accomplished in the meantime.