Comptroller General of Panama Anel Flores on Monday announced that he would file a criminal complaint against Panama Ports Company (PPC), a subsidiary of Hong Kong-based Hutchison Port Holdings, on accusations of breach of contract over the two ports it manages at the Panama Canal.
Flores, during a press conference, stated that an audit of PPC launched by his office this year found that the company, which operates two ports at opposite ends of the Panama Canal, found evidence of breaches of contract that amount to more than $300 million losses to the Panamanian state.
Flores further accused Panama’s Maritime Authority (AMP) of “misrepresenting” financial figures and will therefore file criminal lawsuits against the company’s board and the authorities responsible for the 25-year renewal of PPC’s concession.
“There are important findings that show amounts of more than 300 million dollars owed to us due to noncompliance with the contract. We see a renewal that also did not comply with all the procedures of law, nor does it have the endorsement of the Comptroller’s Office,” Flores said.
“I want to announce that in the next few days we will go to the Public Prosecutor’s Office to file the corresponding complaints so that the directors who handled this renewal, the board of directors and the officers of Panama Ports, who will obviously have to explain to the Panamanian people before the Public Prosecutor’s Office why so much magnanimity, why so much benevolence in a contract that has been unfair,” he continued.
Panama Ports Company signed a contract with Panama in 1997 that granted PPC a 25-year concession to develop and administer two ports at opposite ends of the Panama Canal located in the provinces of Balboa and Cristóbal. Local authorities renewed the contract for an additional 25-year period in 2021 as per the terms of the original 1997 deal, which reportedly contained automatic-renewal provisions so long as PPC complied with the agreed terms.
In February, Panama’s Attorney General Luis Carlos Gómez requested that the nation’s Supreme Court rule to declare the 1997 concession contract “unconstitutional” because it allegedly violated 15 articles of the Panamanian constitution. Gómez presented the request a month after the Comptroller General’s office began an audit of PPC. In March, Comptroller General Flores stated that, despite the growth in container traffic in the country, the economic benefits for Panama resulting from the PPC lease deal have been “minimal” and described them as a “colonial enclave that perpetuates economic inequalities.”
PCC’s two Panama ports have been at the center of a debate initiated by President Donald Trump in December after he called for the United States to regain control of the Panama Canal and denounced China’s alleged growing influence and control of the interoceanic trade route.
The two ports are among the list of facilities included in a $22.8 billion deal between Hutchison Port Holdings, the Hong-Kong conglomerate that owns PPC, and asset manager BlackRock. The deal was blocked by the Chinese communist regime last week.
Flores clarified at the start of his press conference that the PPC audit proceedings were signed off on January 15 but that the auditing staff physically began its labor on January 20 — the same day as the United States’ Inauguration day — stressing that the date “has nothing to do” with what international media “may possibly say” about the proceedings being a response to the U.S. statements and that the audit is an autonomous action of Panama and his office.
Flores said the financial damages to the Panamanian state can be estimated from “different angles” and explained that under the original terms of the 1997 contract, Panama was receiving a percentage of the company’s profits that increased every year, reaching $27 million in 2002. In that same year, Flores further detailed, the administration of former Panamanian President Mireya Moscoso modified the contract so that Panama would receive ten percent of net profits instead of ten percent of gross profits — which made the Central American nation go from receiving $27 million in 2002 to only $1.3 million in 2003.
“If we had complied with the first contract in full, Panama should have received $1.337 billion during the concession period. And we only received $483 million, with a loss to the Republic of Panama of $853 million in the same period,” Flores said. “Now, that is not the company’s fault. It is the fault of many people, bad Panamanians, I tell you, who delivered what they did not have to deliver, they negotiated very badly.”
“If we add this to the economic damage caused by the fact that we gave them so many tax exemptions, they did not pay the rent, this results in another $350 million more,” he continued. “In other words, the real damage for the Republic is in the order of 1.2 billion dollars at a rate of 55 approximately per year that we as a country stopped receiving.”
Flores also explained that PPC used “concessionaires” to perform container transportation services, and detailed that the Panamanian State does not receive a percentage of the profits of these companies. Additionally, the Comptroller pointed out that even though the volume of containers increased, the reported profit of the company, “at least on paper,” remains practically the same.
“The company where Panama has a 10 percent stake, which is Panama Ports, earns less every day with more TEUs [Twenty-foot Equivalent Unit]. I can assume that this is happening there, and so can everyone who is watching me,” Flores said.
The Comptroller, who described the contract as “leonine,” stressed that PPC received $3.78 billion between 1997 and 2003 but only paid a total of $236 million to the Panamanian state, and said, “In other words, they gave us a tip.”
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.
