{"id":24794,"date":"2018-12-10T10:09:47","date_gmt":"2018-12-10T15:09:47","guid":{"rendered":"http:\/\/panamaadvisoryinternationalgroup.com\/blog\/?p=24794"},"modified":"2018-12-10T10:09:47","modified_gmt":"2018-12-10T15:09:47","slug":"panama-soon-become-chinas-gateway-latin-america-thanks-imminent-free-trade-agreement","status":"publish","type":"post","link":"https:\/\/panamaadvisoryinternationalgroup.com\/blog\/panama-soon-become-chinas-gateway-latin-america-thanks-imminent-free-trade-agreement\/","title":{"rendered":"Panama could soon become China\u2019s gateway to Latin America thanks to an imminent free trade agreement"},"content":{"rendered":"

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Since Panama established diplomatic relations with China in June 2017, the two countries have developed an incredibly strong relationship. Only geostrategic sensitivities relating to the trade war between China and the US have prevented the two countries from announcing the conclusion (in record time) of a bilateral free trade agreement. But it is now a matter of when not if, and China\u2019s\u00a0efforts\u00a0to draw\u00a0Latin America and the Caribbean into its Belt and Road Initiative continue apace,\u00a0writes<\/em>\u00a0<\/em>\u00c1lvaro M\u00e9ndez<\/a><\/strong>\u00a0(LSE Global South Unit).
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China\u2019s President Xi Jinping has just completed his fourth tour of Latin America with a historic two-day state visit to Panama, which Beijing sees as the future hub of its Latin American trade nexus.<\/p>\n

Panama is a very small state with a very strategic Canal. It is the prime locus where the twin prongs of China\u2019s global strategy synchronise and synergise. Beijing approaches Panama itself as a peer in its club of developing countries, a kind of grand coalition of the global periphery. The unmistakable implication for the USA, China\u2019s main rival for global hegemony, is that the writing is on the wall for its longstanding dominance.<\/p>\n

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China\u2019s growing interest in Panama marks a shift from the historical dominance of the US (PresidenciaRD<\/a>,\u00a0CC BY-NC-ND 2.0<\/a>)<\/p>\n<\/div>\n

A recent opinion piece by the Economist Intelligence Unit<\/a>\u00a0argued that China\u2019s advance into Latin America is not driven by geopolitical strategic objectives but by economic factors. However, the evidence contradicts this conclusion. The importance that China attaches to its geostrategic relationship with Latin American and the Caribbean (LAC) has become ever more noticeable since Xi Jinping came to office in 2013.<\/p>\n

His first visit to the USA came only a tour of\u00a0other parts of the Americas,\u00a0with official state visits to Trinidad and Tobago, Costa Rica, and Mexico.\u00a0Analysts<\/a> interpreted this as anything from a reordering of priorities to a direct snub\u00a0of Washington. After just five years in office Xi has already visited 12 LAC countries (see Table 1, below), which is more than have been visited during the ten years of the Obama and Trump administrations.<\/p>\n

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Table 1: Visits by Chinese President Xi Jinping to Latin America (2013-2018)<\/p>\n<\/div>\n

Panama and China: a rapidly developing special relationship<\/strong><\/h3>\n

Before 2017 Panama had no diplomatic relations with the People\u2019s Republic of China (PRC), but the situation changed dramatically in June\u00a0of that year when Panamanian President Juan Carlos Varela suddenly severed relations with Taiwan and recognised the PRC instead<\/a>. A historic state visit to China by President Varela<\/a> immediately followed in November 2017.<\/p>\n

The thirteen months since that visit have yielded more progress in China-Panama relations than other Latin American countries had managed over many years of diplomacy.\u00a0By July 2018, Panama had signed an astonishing battery of 28 bilateral agreements<\/a> with Beijing, covering everything from free trade to infrastructure development, from tourism to cultural exchange. But Xi\u2019s most recent visit in early December 2018 suggests that this was only the beginning, as another\u00a019 new agreements<\/a>\u00a0have just been announced.<\/p>\n

This gamut of agreements reveals an ambitious bilateral agenda that shows a great deal of \u201cagency\u201d and leadership on the Panamanian side, while also epitomising China\u2019s efforts to recruit the Global South, including Panama, into its ambitious Belt and Road Initiative (BRI). Beijing has stated that this\u00a0global strategy \u201cto achieve manifold economic and political ends<\/a>\u201d already\u00a0has the support of\u00a014 LAC countries and 122 countries globally<\/a>.<\/p>\n

As the first country in the region to sign China\u2019s template Memorandum of Understanding \u201con Cooperation in the Framework of the Silk Road Economic Belt and the 21st<\/sup> Century Maritime Silk Road Initiative<\/a><\/u>\u201d, Panama has made itself a fundamental part of this strategy. A bilateral free trade agreement (FTA) would surely facilitate this development, and indeed a\u00a0Panama-China FTA will arrive far sooner than anyone expected.<\/p>\n

A free trade agreement in record time?<\/strong><\/h3>\n

As President Varela himself told me earlier this year during a visit to LSE<\/a>, his goal was \u201cto advance as much as [he could] the treaty for the [anticipated] visit<\/a>\u201d of Xi Jinping, which did ultimately take place in early December 2018. Other\u00a0conversations with government officials and top policy makers also\u00a0strongly suggest that the original intent of this historic visit was to announce the conclusion of a Panama-China bilateral FTA.<\/p>\n

As the timeline below shows, the pace of the negotiations towards this agreement could well\u00a0have set\u00a0a world record, with rounds happening in every month but one between July and November 2018 in order to be ready for Xi\u2019s visit:<\/p>\n