Panamanian President Juan Carlos Varela on June 21 defended his country’s decision the week before to give diplomatic recognition to China, effectively cutting off diplomatic relations with long-time ally Taiwan. He said the move was “the right thing to do,” adding that it would bring investment and trade to the country. Did Panama make the right decision in giving diplomatic recognition to China? What will be the consequences for Panama, China and Taiwan? How likely is it that other Central American or Caribbean countries will follow suit?
Here is my answer that was published in their last newsletter.
Locally, all that I have heard is positive about Panama’s decision to give diplomatic recognition to China and this is also evident abroad. China will undoubtedly bring in huge investments to Panama and President Varela made a hard decision, but a very good one for both China and Panama.
Panama is a hub and its strategic location is important for China. China is one of the largest customers of the Panama Canal and even before the announcement, China inked a deal to develop a $1 billion new deep-water port by the Canal. Chinese media reports that the establishment of ties between the countries and the future investments that it will bring may finally kill the proposed Nicaragua canal project once and for good.
Other countries in Central America will benefit as well and this may be the beginning of closer ties with China regionally as well. That could be especially good for some of the struggling countries. In Panama alone where we have a total trade with China of over $1 Billion annually, trade with Taiwan pales in comparison and most economists here and abroad suggest that this alliance should have been done years ago.
I for one see huge commercial real estate opportunities with China both in developments and finance. As an example, I am currently in the initial stages of the feasibility for a theme park here in Panama on a huge tract of land and China has extensive expertise in the development and operation of some of the largest and most popular parks in the world. I would welcome them help me to establish one here in Panama.