President Donald Trump‘s newly appointed head of the Federal Maritime Commission Louis Sola says that Panama has been inching closer to China — a risk that Trump alluded to a few weeks ago when he said he would not rule out using the military — and American businesses have been prevented from fairly bidding for business.
In his first interview since being appointed by Trump to the administration’s top maritime role, the FMC chairman told CNBC that the U.S. government wants every business worldwide to compete on a level playing field for Panama Canal and Panama ports business, including China, but the FMC is concerned that is not happening. The FMC has received complaints that some Chinese companies are getting reimbursed for canal transits, while American companies pay the ocean carriers for the transits and associated costs and are not being reimbursed.
“I find the entire practice alarming, that canal tolls would be refunded for any reason whatsoever, especially when Panama has a neutrality contract or neutrality clause in their treaty,” said Sola. “So I think that [Panama’s government] really needs to take a look at that.”
Other issues include China’s no-bid contracts to operate two ports on either side of the canal, as well as other canal infrastructure projects. Hutchison Ports PPC manages and operates the Port of Cristobal on the Atlantic side of the canal and the Port of Balboa on the Pacific side of the canal.
“After not paying for 20 years, they renewed the contract and pay $7 million a year for both ports. These assets are definitely worth $5 billion to $7 billion, so the people of Panama are not getting anything for these two ports to be operating there,” Sola said.
Trump has threatened to reassert U.S. control over the Panama Canal, accusing Panama of charging excessive rates. In a panel at the World Economic Forum in Davos, Switzerland, last week, Panama President José Raúl Mulino said the canal was not a gift from the United States. “We reject in its entirety everything that Mr. Trump has said. First, because it is false, and second because the Panama Canal belongs to Panama and will continue to belong to Panama.”
The U.S. Senate held a hearing on Tuesday about trade and security issues at the canal, at which Sola testified, with several Republican lawmakers pushing for an aggressive stance from the U.S. backing Trump’s position.
A warning on China’s growing influence over Panama
Louis Sola (L), Chairman of the Federal Maritime Commission (FMC), speaks with Daniel Maffei, Commissioner of the FMC, speak with each other before the start of a US Senate Commerce Committee hearing to examine the Panama Canal and its impact on US trade and national security, on Capitol Hill in Washington, DC on January 28, 2025.
Andrew Caballero-reynolds | Afp | Getty Images
During the CNBC interview, Sola issued a warning about China’s growing influence over Panama.
“I think that Panama over the last five years has inched closer and closer to China and away from the United States,” he said. “One of the major problems is, we have not been supporting U.S. companies in Panama for a long time. We support other types of initiatives, but supporting a U.S. company wanting to do infrastructure, I haven’t seen it in a long time. I’ve seen China and Brazil take away $20 billion with direct contracts. We definitely need to at least have a game there.”
Sola said he also hopes a proposed train line that will link Panama with Costa Rica will have an open bid process. “I know that there are countries from all over the world that are interested in developing that, including the U.S.,” said Sola.
Sola said there are steps the U.S. can take to retaliate if it sees unfair practices at the canal and ports.
“If [the Panamanian Government is] going to give subsidiaries to Chinese vessels or subsidiaries to Chinese ports we have to see what’s in the best interest of the U.S. shipper and to ship U.S. goods. If that does become an issue, we do have all options on the table when it comes to business,” he said.
Sola was referring to the FMC’s ability to issue substantial fines to a foreign government and prohibit the entrance of foreign flag vessels at U.S. ports when the FMC finds laws or practices harmful to U.S. shipping under the Merchant Marine Act of 1920.
The FMC can issue substantial daily fines to the Panamanian government and bar Panamanian-flagged vessels from calling at U.S. ports. The Panama flag is the second-most registered flag in the world because of its easy online registration, cheaper foreign labor, and the fact that vessel owners pay no income taxes.
The Panama Canal’s role in global shipping has increased given the disruption of global supply chains. The Panama Canal Authority’s revenue hit $3.38 billion last year, despite drought conditions, and revenue has increased every year since 2017.
Corruption remains the biggest problem in Panama, according to Sola, and it is an issue the Trump administration and Congress need to revisit.
“I believe the Chinese have a better ability to discuss a lot of these things with their Panamanian counterparts than the United States do. What I mean by that is U.S. companies are hindered drastically by the Foreign Corruption Practice Act. So if the lights go out and I have to call somebody at 12 o’clock at night to come over and turn on my terminal; I cannot buy that person pizza under the Foreign Corrupt Practice Act. We definitely have to ease some of our regulations so that we’re able to able to compete internationally.”
In August 2024, Sola, along with then-FMC Chairman Daniel Maffei, traveled to Panama to meet with government and Panama Canal officials to discuss drought mitigation projects and the increase in tolls associated with crossing the canal. Sola said he is optimistic that Mulino will work well with the Trump administration.
“The President of Panama did impress me as we were waiting in his office to meet with him, myself, with our official delegation, and he was 30 minutes late because the election in Venezuela happened the day before, and he was breaking relations with Venezuela. So he seems to be a pro-U.S. person.”
Sola said in that meeting, they also discussed the soaring tolls being charged by the Panama Canal Authority.
In January, the Panama Canal Authority increased tolls to traverse the canal this year, in addition to other charges and services. A vessel can pay over $1 million per transit as a result.
40% of all U.S. container traffic travels through the Panama Canal every year, and in all, $270 billion in cargo annually.
Anthony Byron
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