

Americas
Belt and Road Hazards, Coming to the Americas
The Chinese train that came and went
At a nationally-televised press conference in Panama City in March 2019, a China-funded team of Chinese and Panamanian engineers took the stage. They unveiled the results of their feasibility study of the proposed Panama-Chiriquí Railway. They announced the megaproject would cost $4.1 billion and take six years to build. It would cut travel time from the capital to the Costa Rican border from eight hours to three. On this sunny day, Panama’s President Juan Carlos Varela was on hand to cut the blue ribbon, beaming alongside Wei Qiang, China’s Spanish-fluent ambassador. Varela said new urban areas would be created along the route, helping to develop Panama’s neglected interior. He added that the train would increase the export-competitiveness of Panama’s rural producers—noting it is currently cheaper to send cargo to Panama’s ports from Shanghai than from its own coffee-growing Chiriquí Highlands. Panama would modernize its slow, fragmented land transport, and China Railway Design Corporation would get a big fat contract. Everyone agreed it was a win-win.
“Win-win projects” are indeed the stated goal of China’s Belt and Road Initiative (BRI), also known as the New Silk Road. Introduced by President Xi Jinping in 2013, the BRI is China’s global economic strategy for the twenty-first century: to finance and build new infrastructure in partner countries around the world, linking them to China and Chinese-operated logistics hubs, putting China and its influence at the center of global commerce.
The Panama-Chiriquí Railway was to be China’s first BRI project in the Americas. Panama became the first country in the region to join to the BRI in November 2017. That was the year of what a local newspaper called a “honeymoon dance” between President Varela and Xi, when Varela cut Panama’s diplomatic relations with Taiwan and opened them with China. That same year, a Chinese firm won a $165 million contract to build the Amador Cruise Terminal at the Pacific end of the Panama Canal. At the Atlantic end, another Chinese firm began construction of a $900 million liquid natural gas (LNG) power plant and the $1.1 billion Panama Colón Container Port, to be the largest port in Panama. With hard hats and shovels, President Varela and Wei Qiang stood together at the ceremony to lay the port’s first stone—Varela noting it was the biggest investment China had ever made in Panama. The deal also meant Chinese firms would soon control three of the six container ports on the Panama Canal, as Hong Kong-based Hutchinson Ports already manages the ports of Balboa and Cristóbal. China was on a roll in Panama.
As Chinese firms poured billions into real estate and infrastructure projects at both ends of the Panama Canal, many locals worried that Panama’s sovereignty was being threatened—a sovereignty only recently achieved, when the US handed over the Canal Zone to Panama in 1997. In a 2018 editorial in La Estrella, Universidad Interamericana de Panama professor Euclid Tapia warned of the debt-trap diplomacy for which China has become infamous in many other BRI countries. Tapia cited Sri Lanka, “where to pay its debts to Chinese creditors the country was forced to lease its most important port for 99 years.” He said similarly, and with little public attention, China was now seeking to construct a new fourth set of locks on the Panama Canal at an “unspeakable” cost of $15 to $20 billion—which “will gladly be financed by China,” precisely because Panama would likely be unable to pay it back. “Knowing the degree of corruption of our governments,” wrote Tapia, “it is highly probable that the fate of the Panama Canal will follow that of the Suez Canal, which due to Egyptian debt, England took from France. China could take over our canal and swallow us by osmosis.”
Perhaps slow to respond, Secretary of State Mike Pompeo flew to Panama City in October 2018 to discuss US concerns with President Varela. Pompeo warned the president of the “predatory economic activity” of China’s state-owned enterprise (SOEs). “In parts of the world,” he told local news, “China has invested in ways that have left countries worse off, and that should never be the case. Any time there is investment that comes from outside of a country, it certainly should be a good investment for the investor, but it has to be something that’s good for the country that hosts that investment as well.” Through the media, Pompeo issued a warning to all of Latin America: “When China comes calling, it’s not always to the good of your citizens.”
Pompeo also broached another thorny topic: the four-hectares at the Pacific entrance of the Panama Canal that Varela had offered China to build its new embassy. The idea of a giant Chinese flag waving before incoming ships at the mouth of the canal the US built did not appeal to the Trump administration. The month after Pompeo’s visit, Panama announced that plans for the Chinese embassy by the canal entrance had been cancelled.
Despite Pompeo’s warnings, Varela and Xi danced on. In December 2018, two months after Pompeo flew out, Xi flew in, becoming the first Chinese president to visit Panama. During the 24-hour visit, the countries signed 19 cooperation agreements on trade and infrastructure. In a televised address, Varela recalled that Xi had once told him that China’s economy is an ocean, adding: “I want to complement those words by saying Panama connects two oceans, and [Xi’s] visit consolidates our country as China’s commercial arm and gateway to Latin America.” A day after Xi left the country, Varela announced that Chinese firms had won a $1.4 billion contract to build a fourth bridge over the Panama Canal.
China-Panama relations were growing closer than ever. By spring 2019, the Panama-Chiriquí Railway project was rolling ahead full steam. But it hit a snag: Varela was reaching the end of his term limit. Panama elected a new president from an opposing party, Laurentino Cortizo, who took office in July 2019. By now having awoken to the threat of Chinese influence in Panama, the US wasted no time in putting pressure on Cortizo to rethink his country’s relationship with China. By September, Cortizo had scrapped the Panama-Chiriquí Railway project. In October, his administration announced an audit of Panama’s twenty-five-year contract with Hutchinson Ports, which ends in 2022. The Hong Kong firm has for decades been accused of not revealing its financial records and not paying the Panamanian government its 10% share of dividends from port operations.
Not losing a step, four months after leaving office, now ex-President Varela was again dining with Xi—this time in Shanghai at the China International Import Expo. But in December 2019, a bombshell dropped: Varelaleaks.com posted a phone chat between Panamanian officials indicating that Varela had received a $143 million bribe from China in June 2017—the moment he had switched Panama’s diplomatic relations from Taiwan to China. There were calls for an investigation, which remains stuck in Panama’s bureaucracy.
Belt and Road hazards
The recent tug-of-war between US and Chinese interests in Panama foreshadows many more to come throughout the Americas in the twenty-first century. In the past decade, three of seven countries in the world to switch allegiances from Taiwan to China have been in the Americas, as El Salvador and the Dominican Republic followed Panama’s lead in 2018. (Taiwan claims China offered the Dominican Republic $3.1 billion in loans and investments to change allegiances.) Since Panama signed on to the BRI, eighteen of thirty-three countries in Latin America have done the same.
China markets the BRI as a more expedient alternative to traditional development projects funded by International Financial Institutions (IFIs), such as the World Bank and the International Monetary Fund (IMF). In some ways, this is true. IFIs often make project funding contingent on countries’ agreement to structural adjustment programs as well as the creation of jobs programs which allow local workers to actually do the work. China asks for none of this. Instead, it presents itself as a friendly banker-contractor making an offer at a low price—the “China Price”—to do the job, do it fast, and loan the money—no strings attached.
But China’s BRI deals do come with strings attached—albeit different sorts of strings from those of IFIs. Among them, China’s debt-trap diplomacy and its penchant for targeting corrupt regimes and bribing officials have already been well-documented. But there are many other hazards along the New Silk Road which countries in the Americas should recognize.
Creating new geographies of corruption
China ranked second only to Russia on the Bribery Players Index published by Transparency International in 2011. Does China’s culture of bribery and corruption travel along to its overseas construction projects? It does, according to a 57-page 2016 Journal of Public Economics paper entitled Chinese Aid and Local Corruption by Ann-Sofie Isaksson and Andreas Kotsadam. The study found that areas of Africa located within 50 km of a Chinese project showed significantly increased corruption. The results were based on matching data from 98,449 respondents to four Afrobarometer survey waves across 29 African countries with a new georeferenced dataset on the subnational allocation of Chinese development finance projects between 2000-2012. Notably, the study found that the new culture of corruption stays around long after Chinese constructions projects end—and that aid projects from other sources actually have the opposite effect:
“The results consistently indicate that Chinese aid projects fuel local corruption. Moreover, the effect seemingly lingers after the project implementation period, and does not appear to be driven simply by an increase in economic activity, but rather seems to imply that the Chinese presence impacts local norms. Moreover, China stands out from the World Bank and other bilateral donors in this respect. In particular, whereas the results indicate that Chinese aid projects fuel local corruption but have no observable impact on local economic activity, they suggest that World Bank aid projects stimulate local economic activity without fueling local corruption. Indeed, if anything, they suggest the opposite; there is some indication that World Bank health projects help reduce corruption. In line with this, suggestive evidence indicates that World Bank aid projects are successful in raising awareness of corruption. This is interesting considering that the World Bank has been at the forefront of the ‘anti-corruption movement’ among major international organizations, with explicit anti-corruption policies as part of their agenda. Comparing with other bilateral donors, who just as China might not have an equally explicit anti-corruption agenda as the World Bank, Chinese aid projects still stand out in terms of their estimated effects on local corruption. Indeed, in Uganda, Japanese and American aid projects, if anything, appear to bring reduced local corruption. Hence, the comparison of the local corruption effects of Chinese and other aid does not speak in China’s favor.”
What is especially concerning about these findings is that reducing corruption and bribery and establishing the rule of law are among the most difficult targets to attain within the UN Sustainable Development Goals. They are difficult to monitor and cannot be budgeted for in a development package like funds for a bridge or a port, which can be traced to their end use. As legal scholar Katherine Erbeznik puts it:
“Money can’t buy you law… Rule of law reform efforts have stalled. One reason is that reform has focused solely on formal rule of law institutions, rather than on the informal political or cultural norms that are needed to support such institutions. Little is known, however, about how to foster such political and cultural norms where they are lacking.” In Africa, which—like Latin America—is already struggling to make progress in changing cultural norms surrounding corruption, the Chinese presence on the ground is turning the dial backwards, further exacerbating the problem—an effect opposite that of any other development source.
Natural resource theft: the “Chinese Takeaway”
China is also the world leader in natural resource theft, and the BRI is only exacerbating this trend. For example, for over a decade, Chinese illegal logging has been rampant in Africa—dubbed by locals the “Chinese takeaway.” China has stringent regulations on domestic logging, so it looks abroad to feed the growing demand for luxury furniture among China’s middle class—and US demand for furniture made in China. Chinese agents pay Africans by the thousands to cut down trees for them—including in protected areas—and bribe local officials to get transport permits and sustainability certifications to allow the logs to be exported. China is now building an Industrial Wood Processing Park in Mozambique, where logs will be turned into chips, facilitating “log laundering.” Chinese illegal logging is already rampant in the Americas, including timber from the Brazilian Amazon and rosewood from Mexico and Guatemala. Increased Chinese presence and control of transport linkages in the Americas will only intensify bribery and the speed at which the region’s forests are pillaged.
The same is true in the seas. China sates its immense appetite for seafood in part by being the world’s largest perpetrator of distant-water illegal fishing, and the Americas have been a prime target. The US (especially Alaska), Canada, Mexico, Colombia, Peru, Chile, Ecuador, and Argentina regularly intercept and detain Chinese fishing pirates in their coastal waters. The Argentines have shot at and sunk Chinese vessels in the last several years. Chinese mafias collude with Latin American fishing cartels in multimillion-dollar smuggling networks supplying traditional Chinese medicine. For example, Ecuador apprehended Chinese ships poaching endangered hammerhead sharks for shark fin soup in Galapagos National Park. Mexico’s Sinaloa Cartel colludes with Chinese pirates in smuggling bladders of the totoaba fish caught in the Gulf of California, which can sell for over $20,000 per kilogram on the black market in China. BRI port and rail projects in the Americas, manned by Chinese personnel, promise to facilitate more Chinese maritime piracy.
Spying by any other name
US cybersecurity firm FireEye, among others, reports that China has used BRI projects for cyber espionage many times and in numerous countries. In particular, FireEye notes that state-sponsored Chinese hackers have used infrastructure built as part of BRI projects to spy on a) foreign leaders who make BRI-related decisions, b) regional opponents of BRI projects, and c) government entities managing elections in BRI countries.
Take for example the new $200 million African Union headquarters in Addis Ababa, Ethiopia. China built it for free as a “gift” in 2012. In 2017, French newspaper Le Monde and other sources reported that China had hacked all the confidential data from the African Union’s IT network, recorded conversations throughout the building with microphones it had planted in the walls and furniture, and uploaded all this information to Shanghai every night from 2012-2017.
Chinese telecom giant Huawei provided the digital surveillance equipment in the African Union building. A 2019 Wall Street Journal investigation reported that Huawei technicians also helped African leaders in Uganda and Zambia spy on their opponents. In February, the US government accused Huawei of being able to secretly retrieve “sensitive and personal information” from users of 4G networks the company has built and maintained—in the US and around the world—via technological “back doors” designed to be used only by law enforcement. Yet the firm is already responsible for building up to 70% of the telecommunications infrastructure in Africa. Now it is building the first 5G network in Southeast Asia in Cambodia. Huawei is the leading contender to create new 5G networks throughout Latin America, including Panama. It is now seeking to build a system of security cameras in Colon Free Zone, Panama’s largest free trade zone, home to over 3000 companies from around the world. Thus the Huawei security system is a potential vehicle for Chinese spying on thousands of commercial operations in Panama.
In short, every element of telecommunications infrastructure built under the BRI—the Digital Silk Road—should be viewed as a potential instrument for cyber espionage.
A future as one of China’s somewhere elses
China today is in the early stages of attempting to transition from being the world’s factory to managing factories around the world. Chinese companies are moving to outsource manufacturing—to go from Made in China to Made by China, Somewhere Else. China is using BRI projects to create a global network of Chinese-controlled somewhere elses, where it can manufacture, transport, and sell. These include Chinese-built, Chinese-operated industrial zones overseas, where Chinese-managed factories set up shop, overseeing local workers. They also include Chinese-built, Chinese-run logistics hubs, including ocean ports and “dry ports” for rail cargo transshipment. And they include Chinese-built, Chinese-managed overseas marketplaces like malls, shopping centers, and tax-free zones, where China can sell.
The roots of China’s offshore manufacturing push precede the BRI. Having hosted foreign-owned factories since 1978, in 1999 China began its “Going Out Policy,” a push to engage in outward foreign direct investment. More recently, the explosion of China’s middle class has driven the cost of labor up sharply, prodding Chinese firms to outsource manufacturing. Many BRI projects create new spaces to do just that. To illustrate, one need only look to the experience of Africa, where China is involved in infrastructure projects in some thirty-five countries.
Take Djibouti, where China built the $3.5 billion Djibouti International Free Trade Zone (DIFTZ) in 2018—the largest free trade zone in Africa. It was soon filled with Chinese-managed factories employing local workers at rock-bottom wages. China connected Djibouti to Ethiopia by building the 754-km Addis Ababa-Djibouti Railway, which will be operated by Chinese managers and drivers until at least 2023. Countries in the Americas should take notice that—while not sold as such—a key purpose of the BRI is to repeat this pattern: to create Chinese-controlled logistics networks accessing cheap labor markets to which Chinese companies can outsource factory jobs.
Or take Transsion, maker of the most popular smartphones in Africa, which sell under brand names such as Tecno and Itel. Transsion is a Chinese company, but it does not sell any phones in China and most Chinese people have never heard of it. It makes all of its African phones in factories in Ethiopia run by Chinese managers.
BRI projects have built extensive new transport networks in Africa to ship Transsion phones and thousands of other Chinese products now flooding the continent’s markets. (China is also using these new transport links to remove Africa’s natural resources at an astounding rate—legally and illegally—and discussed below.) In Kenya, China has already completed the Port of Mombasa—the largest port in East Africa—as well as the high-speed Mombasa-Nairobi Railway, the Thika Highway, and malls including Two Rivers Mall, the largest in Sub-Saharan Africa. In the works is the Mombasa-Nairobi superhighway. Laying down thousands of kilometers of road and railways, China hopes to use Kenya as its primary gateway for commerce with 120 million people in East Africa. The plan is to funnel Chinese products through Kenya and on to Uganda, Rwanda, Burundi, the Democratic Republic of the Congo, northern Tanzania, and South Sudan. Inside Kenya, products manufactured in Chinese-operated factories will be transported across Chinese-built highways and rail networks and sold in Chinese shops in Chinese-built malls.
China hopes to replicate this model the Americas. It wants to make Panama one of its Kenyas in Latin America, a gateway to commerce with Central and South America. The Panama-Chiriquí Railway would have opened the door for Chinese firms to outsource factories throughout Panama’s interior and ship the products easily by rail to the ports it controls on the Panama Canal. To be sure, Panama sorely lacks manufacturing and high-tech industries—which is why it could be tempted into signing on to projects that would, in actuality, yield large numbers of extremely low-paid manufacturing jobs. Panama would be well on its way to becoming one of China’s somewhere elses.
Part of China’s New World
Besides products, China unloads people through the BRI. In recent decades, over one million Chinese, mostly men, have permanently moved to Africa, as documented by Howard French in his book China’s Second Continent. Another million Chinese are currently working in Africa indefinitely, with more to come. Most came to work on Chinese construction projects and decided to stay. In Africa, Chinese workers often find blue skies, clean air, and freedom from the Communist Party for the first time. Many Chinese men have found African wives—an important factor, as China has a gender imbalance of 32 million more men than women due to the One Child Policy and families’ preference for boys, which led to the abortion of millions of girls. Many Chinese job-hop from one African country to another, gaining skills and experience and taking advantage of the vast assortment of Chinese projects—and Africa’s lax border controls. The highest-grossing Chinese movie of all time, 2017’s Wolf Warrior 2, is about Chinese who made a new life in Africa.
Chinese emigration to BRI countries also helps reduce potential social unrest in China. BRI workers often come from the poorer, more neglected provinces in China’s interior, where development lags far behind that of the coast. Opportunities for advancement there are much rarer. But in Africa, Chinese workers often find they can apply their skills far more, get promoted much faster, and make more money.
While Africa has been a new world for many Chinese, this sort of influx of millions of Chinese workers is the last thing the Americas region needs. It is already plagued by broken borders and illegal migration—from the two million escaping Venezuela’s economic meltdown to the half million fleeing drug violence in the Northern Triangle of Central America to the nearly one million arrested along the US border each year. Migrants fleeing conflict zones, disasters, and repressive regimes around the world—such as Haiti, Cuba, and Syria—are currently spilling over Panama’s dangerous jungle border with Colombia, the Darien Gap, in the hope of continuing northward to seek refugee status in the US. Yet many of these migrants end up staying in Panama, a small, poor country of four million people. The US and the UN Refugee Agency have been working with the Panamanian government to manage this migrant overload, but it has been anything but easy. For example, with some 2,000 migrants stuck in a camp in Peñitas, Panama on the Colombian border and running out of money for food and water, some threatened to burn down the shelter they were staying in. Add a few million Chinese BRI workers looking to stay indefinitely to the Americas’ chaotic migration picture and stir, and it’s a recipe for havoc.
On the receiving end of the Great Unloading
Through BRI projects, China unloads many of its own excesses—products, construction, and also people. Building malls, ports, and railways overseas involves immense quantities of steel, cement, glass, pipes, wires, tools, construction machines, and other products—all of which come from China, where they are massively overproduced by its state-owned enterprises (SOEs). At home, China unloads these products by (unnecessarily) tearing down and rebuilding buildings every 20 to 30 years, making construction the top industry in China—(artificially) driving up the GDP and helping to stave off unemployment (while destroying tens of thousands of demolition workers’ lungs through the inhalation of silicon dust without adequate protection). BRI projects provide new opportunities for Chinese firms running out of infrastructure-building opportunities in China, while unloading China’s excess construction materials all over the world.
However, the quality of Chinese construction does not always match its quantity. In China, construction is often rushed and/or uses cheap materials and/or unqualified workers, leading to many shoddy buildings—including outright disasters such as collapsed bridges and skyscrapers. These have earned the nickname doufuzha gongcheng, or “tofu-dreg projects”—worse than the leftover dregs from making tofu. These includes the flimsy schools that fell like a house of cards during the 2008 Sichuan earthquake, killing the students inside them. Time will tell if China has been exporting tofu-dreg construction along the New Silk Road.
Loading up and land grabs
As China unloads products and people out over the New Silk Road, it also uses it to load up on natural resources and farm products to meet the demand of its enormous population. For example, China has built new ports in a dozen countries in Africa, where it has been by far the largest extractor of the continent’s natural resources—such as oil from Angola, timber from Gabon, iron from Guinea, and cobalt from the Democratic Republic of the Congo. In Victoria, the only Australian state thus far to sign on to the BRI, Chinese firms bought the Port of Melbourne—the country’s busiest port—in 2016 for $9.7 billion. China also bought northern Australia’s Port of Darwin in 2015. China now owns 2.3% of Australia’s land, including cattle farms, dairies, and wineries, and it uses its new ports to connect to its rapidly-expanding “land grab” farms.
Chinese investors have been buying up millions of acres of farmland around the world at an alarming rate. Chinese entities own roughly 200,000 acres of farmland in the US, and Chinese investment in US farming has multiplied tenfold in less than a decade. Along with South Korea and Saudi Arabia, China is one of the top “land grabbers” in Latin America today. It owns vast swathes of the South American soy giants Brazil and Argentina. Currently, China has a controversial $3.5 billion offer on the table to double the number of pigs in Argentina and turn it in to one of its main pork suppliers—a deal opposed by a petition signed by some 400,000 Argentines. The Panama-Chiriquí Railway project would have facilitated new Chinese land grabs around the hinterlands of Panama—and potentially neighboring Costa Rica and Colombia—by providing a way to easily get the farm products to ports controlled by China.
China’s land grabs help support its dietary transition, driven by increasing affluence. UCLA historian Philip Huang found that, in recent decades, China’s diet has shifted from an historical 8:1:1 ratio of grains to meat to vegetables to 4:3:3 today. However, 40% of China’s own farmland has been degraded by overuse, erosion, and pollution, forcing it to look for new farmland overseas.
Controlling the Crossroads
Chinese influence in Panama has special importance for the US for several reasons. Built in 1914 under Teddy Roosevelt, the Panama Canal is the US’ own signature megaproject. The Panama Canal Zone was a US territory from 1903 to 1979, similar to Puerto Rico, Guam, and the US Virgin Islands. US public schools operated there, and “Zonians” received US mail addressed with the state postal abbreviation CZ. Heavy and growing Chinese influence in Panama today challenges the US’ historic cultural dominance of the “Crossroads of the Americas.” China’s control of Panama’s ports, in particular, is a threat to future US trade security. Today 63% of the cargo passing through the canal is headed to or from the US. China is currently violating nine other countries’ coastal waters in the South China Sea, persecuting over a million Uyghurs in re-education camps, and breaching its treaty with the UK on the governance of Hong Kong. So it is not hard to imagine that China could use its control of three Panama Canal ports to interfere with US trade in a time of war or other conflict. Further, China has for years tried to build new alternatives to the Panama Canal. These include plans for a maritime canal through Nicaragua (which would be an ecological disaster) as well as “dry canals” across Costa Rica and Colombia, connecting the Atlantic and Pacific oceans by rail. If any of these new canals materialize, China could use its BRI partnerships to redirect shipping to Chinese-built canals.
Alternatives Wanted
In the Americas, China sees opportunity. And in the BRI, countries in the Americas see opportunity. Argentina is the eighth-largest country in the world, yet it has no viable train system. In 2018 it signed a $1 billion deal with China Railway Construction to modernize its cargo rail by 2025. Mexico has the thirteenth-longest coastline in the world, but its aging ports use outdated technology. So it hired China Harbour Engineering Company to build a new $1.5 billion terminal at the Port of Veracruz—now the second-largest port in Mexico since the project’s completion in 2019. Colombia, a strong US ally, has had the least Chinese investment of the major countries in the Americas. But in 2019 the city of Bogotá signed a $4 billion deal for China Harbour Engineering to build a new metro system—and operate it for twenty years.
Panama’s canal has made it one of the world’s most globally-connected countries. Yet its internal connectivity lags far behind. As a result, Panama suffers from sharp regional inequalities. The average per capita GDP of the three provinces surrounding the canal is four times that of the seven outlying provinces. China promised to help change that with the Panama-Chiriquí Railway project and future investments, which would have opened the door to integrated development throughout the country—something the US never did in the 76 years of the Canal Zone era. While the Chinese project fell through, Panama is still looking for options—and China will present more offers. “We don’t offer constricting belts or a one-way road,” said US Vice President Mike Pence. But without alternatives, warnings are not enough.
“We need, and we have asked, that [the US] look toward the region more—the region, not just Panama,” said President Cortizo. “They need to pay more attention. While they’re not paying attention, another one is making advances.”
Americas
Bulletproof Panama: An Isthmus of Stability Becomes a Magnet for Migration

On the sidewalk along Vía Argentina, one of Panama City’s busiest streets, a Colombian bodybuilder passes digital nomads from the US and Europe at laptops in a café. Beneath a statue of boxer Robert Durán, a Venezuelan professional leans out of an expensive SUV to hear a fellow Venezuelan migrant recount how she recently crossed the Colombian border through the mosquito-ridden swamps of the Darién Gap, as her child holds a bowl to collect money. A block down, a tour guide leads retired Americans scouting beach and mountain homes into an traditional eatery and introduces them to ropa vieja, chimichurri, yuca, plantains, and other Panamanian foods. Despite their differences, these foreigners were all drawn to Panama in part because in a region plagued by civil unrest, inequality, inflation, broken borders, and economic mismanagement, it is unusually safe and secure.
Panama’s currency is stable, as it uses both the US dollar and the Balboa, which is pegged to the dollar. Its political stability is partly a result of the 1977 Carter-Torrijos Treaties it signed with the US, which guarantee Panama’s permanent neutrality—and that the US can use its military to defend the Panama Canal against any threat to its neutrality. As 72% of all ships passing through the Panama Canal are headed to or from the US, the US considers maintaining security in Panama vital to its national interest. And Panama abolished its standing army in 1990, following the lead of neighboring Costa Rica, which abolished its army in 1949. The 2022 Global Peace Index ranked Panama the second-safest country in Central America after Costa Rica.
Francynat León is an English and Spanish language instructor from Venezuela who has lived in Panama City since 2014. From 1999 to 2013, she lived through the Hugo Chavez administration, which expropriated industries and destroyed Venezuela’s economy. Amid rising inflation and food shortages in the early 2000s, she began researching other countries and found Panama had both low inflation and high political stability, a rare combination in Latin America. While a “pink tide” of left-wing socialist leaders swept over much of Latin America in the 2000s, Panama has been immune, in part because of its close ties to the US. “Panama is bulletproof,” says León.
By contrast, nearby Colombia and Venezuela have long been plagued by civil unrest. Medellín and Caracas are among the world cities with the highest “extreme risk,” according to the 2022 Cities@Risk Security Index. Hence some 25% of Venezuela’s population and 5% of Colombia’s now live abroad, which helps to explain why Panama City is loaded with Colombians and Venezuelans. The number of Venezuelans in Panama further escalated last October, when the Biden administration closed the US border to Venezuelans seeking asylum. This suddenly stranded thousands of Venezuelan migrants in mid-journey in transit countries from Panama to Mexico. Prior to the change, Biden administration policies had induced a staggering 40-fold increase in US Border Patrol encounters with Venezuelans from 4,520 in FY 2020 to 50,499 in FY 2021 and 189,520 in FY 2022.
Despite its overall security, starting this past July, Panama had its first major social unrest in decades. Amid inflation due to COVID and the Russia-Ukraine War, protesters across the country blocked the Pan-American Highway, and in August the teachers’ union went on strike. But unlike some of its neighbors, Panama has no talk of civil war on the horizon, no Marxist rebel guerillas plotting in the countryside, no cartels taking over whole towns. Drug trafficking does go on here, but in isolated areas like the backstreets of San Miguelito and the distant jungle coastline of Darién province, and without the extreme violence common in the Northern Triangle countries of Guatemala, El Salvador, and Honduras.
Panama is also one of Latin America’s popular destinations for expat workers and retirees from the US and Western Europe. Many come seeking some combination of affordability, a tropical climate, urban life, Hispanic and indigenous culture, and nature. Some seek a sunny paradise where they can live by the beach and go fly fishing, or sip local coffee in a mountain town while looking up at cloud forests on the slopes. And some seek simply normalcy. “America is not the same country I grew up in,” said a fellow expat teacher who, like me, has lived for several years in Panama. Like many others, he has no plans to go back.
Panama has a long history of receiving migrants from outside the Americas. Since the 16th century, it has been a “crisol de razas,” a cultural melting pot where Spanish, indigenous, and black populations have mixed. Starting in the mid-19th century, large waves of Chinese, Europeans, Barbadians and other West Indians, and South Asians arrived to build the Panama Railway and later the Panama Canal. The Chinese often intermarried with other races such that today, some estimate that 20% of Panamanians have some Chinese ancestry. Many Panamanians are a genetic mix of three or more racial groups, which helps bring society together around a common multicultural identity. The US-controlled Panama Canal Zone era (1903-1979) brought American culture and hundreds of thousands of US soldiers and civilians. And steady Jewish migrations over the centuries have led to a well-established Jewish community of 20,000, which has produced three Panamanian presidents, including the current president, Laurentino Cortizo.
In Panama City, people entering a bus or a restaurant often say “buenas,” short for buenos días or buenas tardes. Not to anyone in particular, to everyone. And someone usually says buenas back. If you sit next to a stranger, they often say “buen provecho,” “enjoy your meal.” And when they get up to leave, “permiso,” excuse me. These are signs of traditional civility and fraternity, civic virtues declining in some circles of the US, in part due to polarization promoted by social media and identity politics. While Americans tend to discuss national politics incessantly and publicly, Panamanians generally do not (although they do on the internet). In fact, it is rare to hear anyone in Panama arguing in public about anything at all. The “decent drapery of life,” as Edmund Burke put it, is still hanging. And civility and traditional values are among the reasons why many Americans are moving to Latin American countries like Panama.
In Book 8 of The Republic, Plato described an oligarchic city as “not one, but two, a city of the rich and a city of the poor, dwelling together, and always plotting against one another.” Panama City only partly fits this description. Unlike many other oligarchic societies in Latin America, despite its glaring inequalities, Panama is relatively safe, low in crime, and politically stable. But to be sure, the rich have their luxury enclaves, like Costa del Este and Punta Paitilla, and the poor have their decrepit barrios, like Curundú and El Chorillo. “This wealth dichotomy exists in many cities throughout the world,” wrote Jessica Reilly, “but in Panama City it all happens within sight of [$4.2 billion in cargo] floating past their drying laundry every year.”
Like Latin America in general, Panama is a land of contrasts, with the fourth-highest inequality in Latin America, as measured by the 2022 GINI coefficient. Sleek skyscrapers of glass and steel line Panama City’s Pacific coastline; yet there are huge piles of trash on almost every block in many central areas of the city. Panama’s postal service does not deliver mail domestically door to door; yet the country is a global shipping hub at the crossroads of the Americas and hosts the Panama Canal. Some 14,000 ships pass through the canal each year, connecting Panama to ports on every inhabited continent.
Panama is far from perfect. It is rainy for eight months of the year, service can be slow and unreliable, inequality is high, and it has a major trash problem. But many of those moving to Panama are not looking for perfect, just a stable place where there are no wars or socialist takeovers, where crime and inflation are low, the currency is stable, rent and health care are affordable, the weather is warm, the internet works, the products they need are available or can be shipped from the US via forwarding services in Miami, and people have traditional values and generally get along. Panama ticks all these boxes, promising that it will remain a magnet for migrants long into the future.
Americas
Air Balloon and U.S.-China Relations

The story of the Chinese Automatic Drifting Balloon (ADB) violating the U.S. airspace in late January–early February 2023 will be a symbolic marker for a new phase of deterioration in the US-China relations.
The relations were rapidly eroding throughout 2022 and early 2023. In some aspects, U.S.-China relations in 2022 evoked obvious associations with U.S.-Russian relations in 2021. While trying to engage in cooperation with Beijing on certain issues (particularly on Ukraine), Washington simultaneously kept imposing increasingly painful sanctions against the country.
Among important steps recently taken in this direction, there have been restrictions on supplies of advanced microchips and equipment for their production to China, effective since October 2022, as well as the pressure exerted on Japan and the Netherlands (key manufacturers of equipment for the microelectronics industry) to join these restrictions. Licenses to supply virtually any components and equipment to China’s Huawei have been terminated, and a significant number of sanctions were imposed on smaller Chinese companies and individuals.
Most of the Chinese measures have been defensive and involved steps to ensure the security of production chains and the national economy. In the meantime, Beijing is also discussing measures to limit certain items of Chinese exports, with potential thermonuclear consequences. Semi-finished products, raw materials and equipment for the production of solar panels can be affected—given China’s monopoly on a number of products, this could be a shock for the renewable energy industry in the West.
The visit of U.S. House Speaker Nancy Pelosi to Taiwan in early August 2022 played a disastrous role in the military and political situation in East Asia. That trip, despite repeated warnings from Beijing, triggered a period of rapid increase in Chinese military activity around Taiwan, which still continues.
Chinese activities include numerous live-fire exercises in the waters around the island, large groups of combat aircraft and drones flying along the island’s perimeter, and systematic violations of the median line in the Taiwan Strait by PRC ships and aircraft. For its part, the U.S. is increasing military aid to Taiwan, although it is becoming increasingly difficult to do so against the backdrop of ongoing hostilities in Ukraine.
The November 2022 meeting of Xi Jinping and Joseph Biden in Bali was similar in content to the Geneva summit of Biden and Vladimir Putin in June 2021. We saw similar attempts to achieve at least partial stabilization of relations, establishing rules of the game, unblocking channels for political communication by creating joint working groups, and the same predictable failure. So far, we can only hope that the final outcome of these efforts will not be so disastrous as the one between Moscow and Washington.
The U.S. Secretary of State Anthony Blinken’s visit was canceled due to the balloon incident, while it was supposed to restore the ruined channels of dialogue. The U.S.-Chinese relation is still lagging far behind the U.S.-Russian relationship in matters of mutual alerting, preventing dangerous incidents, and maintaining emergency channels of communication, where relevant experience has continuously been accumulated since the 1960s. Given the rapid progress of China’s transformation into a new nuclear superpower, conservation of this situation could be dangerous.
Nothing more was expected from Blinken’s visit – no U-turn in relations, no strategic deals, including those concerning Beijing’s positions on the Ukrainian issue. Now, the visit has been postponed indefinitely and the dialogue has been suspended amid the rapidly deteriorating security situation in the Pacific.
The circumstances of the very incident with the Chinese ADB over the United States allow us to take a fresh look at the behavior of China’s leadership in the heating confrontation with the United States. According to U.S. military statements, the ADB shot down on February 4, 2023 was the fourth Chinese apparatus to violate U.S. airspace. The previous three ADBs that visited the U.S. during Donald Trump’s tenure were not detected by U.S. airspace controls in time, and the Americans became aware of their existence belatedly via intelligence channels.
If this is true, China is deliberately and systematically doing what the USSR never afforded during the entire Cold War—flying reconnaissance aircraft directly over U.S. territory. For its part, the U.S. used ADBs on a large scale for flights over the USSR and the PRC in the 1950s and 1980s, and the explanation of their purpose was exactly the same as that used by the Chinese now: border violations due to navigation error or malfunction, meteorological research, observations of airstreams, etc.
China’s contemporary political culture attaches great importance to careful observance of the principle of reciprocity, avoiding situations that could be interpreted as Beijing’s recognition of its unequal position vis-à-vis any major power. This is partly due to the severe historical trauma of the “century of humiliation” in 1840–1945, a time of foreign domination over China.
The current use of the ADB over the United States is by no means a retaliation against historical grievances. Rather, it is a response to some U.S. actions within its “freedom of navigation patrols” in the South China Sea, where U.S. ships and aircraft deliberately violate 12-mile territorial water zones around a number of Chinese-controlled islands. The Americans justify their behavior by saying that these Chinese islands are artificial and do not create rights to territorial waters.
Surely, China believes that the Americans are violating the integrity of its national territorial. From China’s perspective, the U.S., as a power external to the region, should not interfere in any of its territorial disputes with the countries of Southeast Asia. Besides, the high activity of U.S. reconnaissance aircraft along China’s borders—and sometimes over disputed water bodies—has long been a matter of Chinese concern.
From China’s perspective, the use of ADB over U.S. territory may well look like an appropriate response to the U.S. actions. Chinese leaders may have seen this action as a necessary step to confirm China’s status as a great power equal to the United States, even if only a limited number of people knew about these operations for the time being.
The political motivation behind the use of the ADB can also be discerned in the Chinese response to the incident. In a normal situation, if the balloon lost control and inadvertently entered (or risked entering) U.S. airspace, the owner would have contacted the Americans, provided the necessary data and information, and tried to avoid a fallout.
China, for its part, responded to the incident only twelve hours after Pentagon’s statement to that effect. There was a dry statement from the PRC about the loss of control of the weather balloon due to force majeure, for which “regret” was expressed.
Shortly thereafter, China declared that it would not tolerate “hype and speculation” about the balloon and accused the United States of indiscriminate and excessive use of force after it was shot down, threatening some “consequences.”
Under the circumstances, it is difficult to assess this as anything other than China’s deliberate humiliation of the United States as well as demonstration of its own strength and confidence. The Chinese consciously chose this course of action in the run-up to Blinken’s visit—now, as the conflict in Ukraine is escalating, the U.S. is more interested in dialogue than the PRC.
The Americans had to choose between continuing the dialogue in a poorer bargaining position after the humiliation they had endured and abandoning the dialogue altogether. The reaction of American public opinion predetermined the choice for the latter. However, this decision was apparently not easy to make.
The visit has not been canceled, but postponed, and the U.S. will probably look for opportunities to carry out negotiations in the not-too-distant future while saving face. Alongside with Blinken’s visit, there were plans for an even more important visit to China, to be paid by U.S. Treasury Secretary Janet Yellen. On February 9, 2023, Yellen announced that she was still planning a trip to China, although it was not yet possible to give a date.
The incident has shown that the Americans are not overly prepared for a tough confrontation with a comparable superpower as soon as it stops playing at giveaway with them. As it turned out, the few previous Chinese ADBs had not been detected at all, and the last one was shot down only after it had crossed the entire U.S. territory, flying over, among other things, an intercontinental ballistic missile base.
There is nothing surprising or particularly embarrassing about it: the ADB is an extremely difficult aerial target because of its low radar visibility, extremely low speed, and a very high flight altitude. The Soviet Union has been practicing its tactics against ADB for decades. The ability to counter such targets was taken into account in the design of some Soviet air defense interceptors. These include, for example, the MiG-31 still in service in Russia, which has the highest maximum flight altitude among modern fighters and is equipped to fight balloons with a GSh-23-6 cannon.
In the United States, reconnaissance ADBs did not show up during the Cold War, simply because the Soviet Union lacked the necessary technical capabilities in the early decades of the confrontation, and the late-Soviet gerontocracy was later afraid to respond in kind to violations of its airspace. Now, the Americans faced a more active opponent and have yet to learn many new skills.
The traditional U.S. propensity to make up for real-world failures with media victories was not very convincing either. Covering the incident, U.S. propaganda followed two lines. They claimed that, first, the Chinese balloon could not have caused any serious damage to the U.S. compared to China’s existing reconnaissance satellites, and second, that the vehicle was not shot down so as not to pose a threat to civilians on the ground.
The second claim is patently absurd: a significant part of the Chinese ADB route passed over deserted or sparsely populated areas, where the risk of harm to civilians was equal to zero. As for the former, the ADB surely remains a valuable reconnaissance tool that can significantly supplement satellite data. For its part, the U.S. has made extensive use of balloons in the operations against Iraq and Afghanistan.
The reconnaissance satellite operates at altitudes of hundreds of kilometers above the ground, while the balloon does so in the altitude range of 20–30 km. This gives it additional capabilities to conduct electronic reconnaissance and detailed ground surveys. The ADB is capable of monitoring atmospheric chemistry and making other measurements useful for the reconnaissance of nuclear-weapons-related targets. Finally, the balloon is capable of remaining over the same territory for long periods of time, tracking the situation there dynamically, and its flight time over an area is not predictable, unlike that of satellites.
Was the incident with the balloon an intentional attempt to disrupt Blinken’s visit from the very beginning? Hardly. If the Chinese had flown around the U.S. three times in the Trump presidency with their ADBs and got away with it, it would make sense to continue this successful practice. When the “balloon case” became public, the Chinese might have chosen an escalatory course of action based on their view of the situation. It is likely that Beijing concluded that it would not lose with any possible U.S. reaction to the incident, and this is probably true.
From our partner RIAC
Americas
Can Lula walk the tightrope between Washington and Beijing?

As Brazil’s New President Luiz Inácio Lula da Silva (popularly known as Lula) prepares to visit China later this month, maintaining neutrality would be difficult as the winds of change enwrap Beijing.
Brazil is Back
President Lula’s coming to power has marked a decisive shift in Brazilian foreign policy. With the Pink Tide resurging in South America, the new President has clearly spelled out his foreign policy aims: restoring Brazil’s neutrality and importance in international affairs at par with both the West and East after nearly 4 years of impasse under his predecessor Jair Bolsonaro, who had adopted a Sinophobic, pro-Trump foreign policy.
Brasilia’s 39th President, who previously presided over the office between 2003-2010, will have a lot to talk about as he visits his nation’s largest trading partner that imported $89.4 billion in 2022 mostly in soy and iron ore which added a surplus of $28.7 billion to Brazil’s coffers. Boosting the economic partnership with China will be a priority for Lula, who intends to integrate South America into a closely held economic unit. Another important item on the agenda includes the appointment of former President Dilma Rousseff as the new BRICS Bank president.
Lula and the West
Lula had rattled swords with Washington on several occasions during his previous tenure such as alleging the United States for reducing South America to its “backyard” by intervening in its internal politics as well as by opposing the Iraq War. Even though he recognises the importance of maintaining good relations with the superpower up North; several of Lula’s moves including sending a delegation to Maduro-led Venezuela, refusing to sign a UN Human Rights resolution condemning human rights violations in Nicaragua, allowing Iranian warships to dock at Rio de Janeiro, maintaining an ambiguous approach on the Russia-Ukraine War and refusing to send arms to Kyiv, dubbing the ‘Balloongate’ incident a bilateral issue between the US and China and defining the Taiwan issue as Beijing’s internal matter, have deeply irked the West.
While tensions remain, Lula’s focus on combating climate change and call for saving the Amazon have earned a thumbs up from the Biden administration as the former’s election to power comes as a breath of fresh air after his staunch “Trump of the Tropics” predecessor adopted a not-so-friendly approach towards Biden’s entry in the White House. Lula understands Washington’s support is required and hence it was a top spot on his foreign visits list. Lula and Biden held talks amidst a cordial ambience and vowed to reboot bilateral ties by promising to protect democracy and combating climate change.
Winds of Change in Beijing
However, winds of change in the East have dispersed the clouds of ambiguity and China now stands more vocal, more critical and more confident in dealing with the United States.
The recent session of the National People’s Congress, which won Xi Jinping a never-seen-before third term as the President, saw him voicing his criticism against “Washington-led attempts” to “contain, encircle and suppress” China which pose ” serious challenges to its development” (“以美国为首的西方国家对我实施了全方位的遏制、围堵、打压,给我国发展带来前所未有的严峻挑战。”). Sino-US relations have been in the trough since President Trump’s tenure with the recent point of clash being the ‘Balloon incident’ which made Anthony Blinken call off his visit to Beijing.
Xi recently unveiled his new 24 Character Foreign Policy which, Dr. Hemant Adlakha believes, marks “China’s new foreign policy mantra in the ‘New Era’ ” acting as its “ideological map to attain national rejuvenation by 2049”. The characters “沉着冷静;保持定力;稳中求进;积极作为;团结一致;敢于斗争 ” which translate as “Be calm; Keep determined; Seek progress and stability; Be proactive and go for achievements; Unite under the Communist Party; Dare to fight” are set to replace Deng Xiaoping’s 24 Character Strategy focussed on never seeking leadership and assuming a low profile.
China’s confidence is further boosted by its successful attempt to broker peace between Saudi Arabia and Iran, who have been staunch rivals for the past many years. With the handshake that brought the Sunni Arab Kingdom and the Shiite Persian theocracy together, Beijing has garnered accolades from nations across the region and is all set to play a greater international role by not just pulling American allies such as Riyadh to its side but also through actively putting forth its plans to end wars with Xi all set to pay Putin a visit over the Russia-Ukraine War before he meets Lula at Beijing. Lula too eagerly anticipates what Beijing has to say as he told German Chancellor Olaf Scholz “it is time for China to get its hands dirty”.
Neutrality no more?
If the state of Sino-US relations does not improve, things would get hard for many leaders like Lula who seek to balance between the two superpowers. Lula knows neutrality is his best bet but money matters– as his former Foreign Minister Celso Amorim noted “Our surplus with China—and I’m talking just about our surplus—is bigger than all of our exports to the United States. It is impossible not to have good relations with China.” Isolating China, with which Brazil has had a long strategic partnership since the 1990s, at the expense of moving closer to the US might come hard on the purse and exacerbate the many economic challenges he faces. Nor can Washington be isolated– not just because of the economic necessities but also in the face of challenges from far-right forces that both Lula and Biden face.
Lula realises the risks of placing all his eggs in one basket but would he be left with the choice to divide them equally into both? The issue is bound to get stickier but if he successfully manages to escape the quagmire of the unfolding great power rivalry, Lula will set a precedent for not just South America but nations across the globe. The only viable solution would be to strengthen regional alliances in Latin America and boost partnerships with developing nations like India while using the collective strength to push Beijing and Washington to come together.
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