China’s Gateway to Latin America

On June 12, 2017, the President of the Republic of Panama, Juan Carlos Varela, announced the opening of diplomatic relations with the People’s Republic of China. Moody’s emphasized, with positivity, that this new relation will bring benefits for both countries, positioning Panama as a logistics platform for China to export to the rest of LATAM, increasing the transit demand from Panama’s canal. China gains a trustworthy logistics launch pad to access more than 600 million LATAM consumers; Panama benefits from increasing logistics demand and economic financing that will support strong growth in the decade to come and beyond.
In 1852, the first immigrants from China arrived in Panama to join the country’s railway construction and take part in the construction of the Panama Canal. Over 160 years later, descendants of the canal builders are looking to capitalize on its economic opportunities, as both governments signed the consolidation of diplomatic relations. Prior to this, Panama’s government broke all diplomatic relations with Taiwan, therefore, recognizing one China and the government of the People’s Republic of China. Panama and China agreed to develop friendly relations on the basis of mutual respect, non-aggression, and non-intervention in international affairs of the other.

The Chinese Embassy in Panama was inaugurated the September 17, 2017, making Wei Qiang the first Chinese ambassador in the country. Almost exactly two months later, the Chinese president invited his counterpart to Beijing, launching on November 16, 2017 the reciprocal first Panamanian Embassy in Beijing with Francisco Carlo Escobar as the first ambassador in China.

Signing of diplomatic relations have been a milestone for Varela’s administration. China is the world’s leading economy, which according to the International Monetary Fund (IMF) represents 16.47% of the world’s GDP compared to the US’ 16.27% share, measured in purchasing power parity. It is the second-largest user of the Panama Canal with 44 million long tons, or 18.26% of flow through the canal, after the US’ 164 million long tons that is equivalent to over 68% of movement.

Presidents Varela and Xi Jinping have laid the foundations for the signing of a free trade agreement between the two countries, and in the financial sector, they have agreed on the strategic cooperation between the Development Bank of China and the Ministry of Economy and Finance of Panama. The two entities established a cooperation platform in matters of finance and economic issues, setting up the bases for financing big infrastructure projects such as ports, logistics parks, bridges, highways, and power plants.
Another significant agreement is the cooperation MoU in productive capacity, encouraging investment in the infrastructure, energy, logistics, and agriculture sectors, as well as an MoU for development of phytosanitary measures in order to be able to export certain products.

Additionally, both governments have recognized the mutual benefit of Panama’s participation in the multinational development and infrastructure project known as the New Silk Road, and the joint promotion of the Central American country’s industrial capacity.

The trade and commercial aspects will be highly beneficial thanks to the new air route between China and Panama. At the beginning of April 2017, President Varela personally received the first direct flight between Panama and Beijing, operated by Air China. Panama also received the status of “Approved Touristic Destination,“ which will bump the number of Chinese tourists in Panama. With the largest population and highest consumer index in the world, China is an incredible, undertapped source market for tourists. There is no doubt that the Asian giant came to Panama to stay, and has caused a lot of expectation, not only because of bilateral relations with Panama but also opportunities for increased cooperation in the entire region.