Hong Kong-based CK Hutchison Holdings Limited announced Tuesday asset manager BlackRock has agreed to buy a majority stake of its subsidiary that operates two ports at the Panama Canal for $23 billion.
In addition to the sale of the majority stake of the two Panama canal ports, located at opposite ends of the interoceanic trade route, the deal is part of a broader agreement that includes over 40 additional ports across 23 countries — explicitly excluding those located in “Hong Kong, Shenzhen and South China, or any other ports in China.”
Both companies announced in a joint statement on Tuesday that they have reached an in-principle agreement for the sale of a 90-percent stake of Panama Ports Company (PPC), a Hutchison subsidiary that administers two ports located in the Panamanian provinces of Balboa and Cristóbal, connecting the Atlantic Ocean and Pacific Ocean entrances to the Panama Canal. PPC has operated both ports since 1997 under the terms of an agreement signed with Panamanian authorities that will presently run through 2047.
In recent weeks, PPC and the two ports under its control have been in the spotlight amid the ongoing debate initiated by President Donald Trump in December after he denounced China’s alleged growing influence and control of the Panama Canal and called for the United States to regain control of the Panama Canal — which the U.S. handed over to Panama in 1999 as per the terms of a deal agreement signed by both nations under the administration of former U.S. President Jimmy Carter in 1977.
The original deal signed between Panama and PPC in 1997 granted the Hong Kong-based subsidiary a 25-year lease for the development and administration of the Balboa and Cristóbal ports. As per the terms of the original agreement, the Panama Canal Authority automatically renewed the lease for an additional 25 years in June 2021, claiming that the company had “complied” with the agreed terms. The presently-active lease will run through 2047.
Frank Sixt, Co-Managing Director at CK Hutchison claimed in the joint statement that the transaction is “purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports.”
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“This Transaction is the result of a rapid, discrete but competitive process in which numerous bids and expressions of interest were received. As a result, the Transaction valuation agreed in principle is compelling, and the Transaction is clearly in the best interest of our shareholders,” Sixt said.
Last week, the Attorney General of Panama Luis Carlos Gómez issued a formal request to the nation’s Supreme Court to declare the 1997 Panama-PPC deal as “unconstitutional” under grounds that the contract violated 15 articles of the Panamanian constitution. Through a report of the Office of the Attorney General dated February 19, Gómez argued that the contract contains evidence of “fundamental breaches” of constitutional regulations and alluded to a possible lack of transparency in the original negotiations that allegedly resulted in unequal competition and damages to the interests of the Panamanian state.
Gómez’s report of the 1997 deal stems from a lawsuit filed by two local lawyers in early February. The two lawyers reportedly alleged that the necessary prior consultation with Panamanian society before signing the deal was not carried out and that the Hong Kong-owned company was granted privileges and immunities, including tax-related ones, that stand in detriment of the public treasury.
CK Hutchison Holdings Limited, while located in Hong Kong, must abide by Chinese financial law after the Chinese communist regime shut down the “One Country, Two Systems” policy in 2020 that prevented Beijing from imposing communist laws in the country through a “national security” law intended to suppress democratic protests.
Weeks after President Trump initiated the ongoing Panama Canal debate, local authorities launched a still-ongoing audit process of PPC. Panamanian Comptroller General Anel Flores reportedly stated that, despite the growth in container traffic in the country, the economic benefits for Panama resulting from the PPC lease deal have been “minimal” and described them as a “colonial enclave that perpetuates economic inequalities.”
Panama announced in a Tuesday evening statement that its Finance Ministry and Panama’s Maritime Authority (AMP) are monitoring that all regulations and laws are “complied with” through the sales process between CK Hutchison Holdings Limited and BlackRock prior to AMP issuing any decision on the matter on behalf of the national government.
The Panamanian government further pointed out that PPC is presently undergoing an audit process and that said process should continue until its competition “and whose conclusions will be an important factor for the National Government regarding a new relationship with the concessionaire.”
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here
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