Panama Exits Belt and Road Initiative But China’s Strategy in Latin America Remains Strong

On February 3, 2025, Panama's President Jose Raul Mulino announced the country’s decision to withdraw from the Belt and Road Initiative (BRI), which could be seen as a significant geopolitical shift. The official reasoning given was that the BRI had not delivered the expected developmental benefits to Panama. However, many analysts believe this decision was heavily influenced by U.S. pressure and threats.

Despite Panama's withdrawal, the implications for China may not be as severe as they appear. China's investments and strategic interests in Latin America have been expanding for years, establishing a solid foothold in the region. Notably, while Panama’s economy relies heavily on the Panama Canal, which is significantly influenced by the U.S., China has already diversified its interests through various projects in neighboring countries.

The Panama Canal, which handles about 6% of global shipping, is crucial for Panama's economy, generating nearly $5 billion in annual revenue. However, the U.S. has maintained a strong grip on the canal's operations, using military and economic leverage to influence Panama’s policies.

China has been proactive in Latin America, with major projects like the Chancay Port in Peru, which has significantly reduced shipping times and costs, benefiting trade between China and the region. Moreover, plans for the Transoceanic Railway, aimed at connecting the Pacific and Atlantic Oceans, could transform transportation across Latin America.

While Panama's exit from the BRI is disappointing, it does not signify a halt in the deepening relations between China and Latin American countries. The developments in infrastructure projects and trade agreements indicate that China’s long-term strategy in the region remains robust and is likely to continue evolving.

In 2024, despite the withdrawal, trade between China and Panama totaled $12.8 billion, reflecting ongoing economic interactions that suggest a resilient partnership. As the geopolitical landscape shifts, China's comprehensive approach in Latin America positions it well for future growth and cooperation.