Port of Panama City, Panama File photo:VCG

On Thursday, Hong Kong-based company CK Hutchison said it had launched international arbitration proceedings against Panama for the latter's measures in violation of an investment protection treaty and was seeking damages of more than $1.5 billion. 

For a country of only about 4.6 million people, $1.5 billion is no small sum. In fiscal year 2025, the Panama Canal generated total revenue of approximately $5.7 billion. The $1.5 billion claim amounts to roughly one-quarter of the canal's annual revenue and exceeds half of the amount the canal contributes to Panama's national treasury. 

Panama is also a country long burdened by external debt. As of the first quarter of 2026, its public debt had reached nearly $60 billion, with its sovereign credit rating at speculative grade (BB+) and a "negative" outlook. An additional $1.5 billion compensation obligation would further strain an already fragile fiscal position.

Beyond the financial compensation, the damage to Panama's national credibility is even more significant. CK Hutchison has operated in Panama for nearly three decades, with cumulative investment exceeding $1.8 billion and creating thousands of local jobs. It has been one of the largest and most stable operators of the Panama Canal. With a single "unconstitutional" ruling, Panama wiped all of this out, effectively announcing to the world that contracts can be nullified at will, investments can be seized, and the law can yield to politics. 

In the World Bank's Doing Business reports, Panama previously ranked relatively high in Latin America. Following this incident, several international ratings agencies have already downgraded its policy predictability indicator. In the first half of 2026, more than 640 commercial vessels withdrew from the Panamanian ship registry, and major shipping companies such as COSCO Shipping suspended all services at the Port of Balboa. Investors are not fools - who would still put real money into Panama?

The heavy price Panama is paying has bought it little more than the role of counting money for others. A US aircraft carrier made its first visit to Panamanian waters in more than half a century. Panama has allowed US forces to deploy around the canal and has restarted a jungle warfare training school. In effect, Panama is turning itself into a US "forward outpost" in Latin America, with its own canal increasingly incorporated into the US military posture. 

On August 12, the US launched a $50 million tender to establish an AI supply-chain "digital passport" platform in Panama for origin certification of goods such as semiconductors transiting the canal. This vital waterway, which carries about 5 percent of global trade, is something the US hopes to turn into its own toll gate with just $50 million. Panama not only receives nothing in return but also risks its sovereignty and the canal's international credibility.


CK Hutchison is now seeking $1.5 billion in compensation under a bilateral investment protection treaty, and the international arbitration tribunal will deliver its own judgment. Rather than focusing its energy on cooperating with US military exercises and ceding aspects of canal sovereignty, Panama would be better advised to settle the accounts before it. The compensation owed cannot be avoided, and the obligations under the treaty cannot be escaped.