Just two Mondays ago Qatar was the news-maker, now it is Panama.
Juan Carlos Varela – the president of Panama- on Monday evening (12/06) announced that the country will cut its ties with Taiwan and proceed with the second largest user of the Panama Canal and the second largest economy in the world – China. Certainly, the government in Beijing was not amused by the fact that Panama, strategically situated country, recognizes Taiwan and has diplomatic and economic relationship. In fact Panama was Taiwan`s one of the oldest allies and was one of the most influential state in the list of 20 countries, which recognized Taiwan. Now, the chinese government was applauding, while the officials in Taipei was preparing a response for the Tuesday morning press conference.
Donald Trump`s call with his colleague in Beijing in April, made the government in Taiwan to worry, since during the election campaign Donald Trump was not too clear about his plans with China. However, now the situation became slightly clearer. China now gets more comfortable position in the region. In 2013 the Nicaraguan government signed a 50$ billion deal with China to build an alternative canal. The renovation and expansion of the Panama Canal was finished this year and the country could not afford to miss such a big trading partner and they wanted to avoid a competition in the region. The government needs a reliable “user” to justify the 5$ billion expansion, while the authorities in Nicaragua would recuire extra securities from their Chinese partners to finalize the project.
Financially speaking both parties are better off, however Panama lost its key card in relations with China – recognition of Taiwan. Now, it is off the table and the negotiating power of this Latin American republic became weaker. However, in the long-term this may change, if Panama becomes a key player for China in the region.
On the other hand, it is not the interest of the U.S. to isolate Taiwan from the international arena, and therefore Trump`s administration has to come up with a solution or an alternative trade-off to keep both Taiwan and China within its reach.
It seems that the Latin America is the perfect spot for such negotiations. Isn`t it?
Photo: Greg Baker via European Pressphoto Agency/ taken from washingtonpost.com