BlackRock’s deal to acquire ports on both sides of the Panama Canal could be in jeopardy.
Panama’s top auditor accused CK Hutchison Holdings of owing the government hundreds of millions, and breaching an agreement to share 10 percent of net income with the Panamanian government as part of its 25-year contract extension signed in 1997.
Following the conclusion of an audit that began in January, Panama’s comptroller general Anel Flores told reporters Monday that his office found some payment defaults and accounting miscalculations into the renewed contract.
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“There are breaches, non-payments and countless things that were wrongly calculated,” Flores told reporters in Panama City. “There are many violations that will have to be explained.
The investigation claimed that CK Hutchison subsidiary Panama Ports generated $3.78 billion from its operations at the Balboa and Cristóbal ports between 1997 and 2023, while Panama received just $236 million. According to Flores, the company used tax-exempt subcontractors to cut the amount it pays the Panama government.
Panama Ports currently owes the Panama government $300 million, Flores said. The comptroller general planned to file criminal charges with the attorney general and brief the Panama Maritime Authority, which oversees the ports and has the power to terminate the contract.
A senior Panama official told the Wall Street Journal that the legal process could take between six months and a year and had the potential to derail the BlackRock-Hutchison deal.
“There are two people in a transaction, but they need to know what they are selling and that what they are buying might not be what they were told,” Flores said, referring to why the $23 billion deal is on rocky footing.
That sale includes both Panama ports, with 43 other ports worldwide across 23 countries also expected to change hands in the sale.
In February, Panama’s attorney general released a binding opinion finding that the port contract was unconstitutional after two Panamanian lawyers challenged the deal. The attorneys brought attention to concerns that Panama Ports Company did not pay certain taxes and social security contributions in their contract.
The Supreme Court still must rule on the deal’s constitutionality. The justices are expected to begin discussing the ruling as soon as Friday.
Panama’s issues with the CK Hutchison contract come as the Trump administration in the U.S. continues to put pressure on the country due to alleged Chinese influence over the Panama Canal. Panama has always contended that it maintains full control over the canal.
Since his election in November, President Donald Trump has stated his desire to “take back” the Panama Canal, citing baseless allegations that China is operating the waterway. The repeated rhetoric from the president was a likely determinant in both the internal government audit and BlackRock’s decision to build a consortium with Mediterranean Shipping Company (MSC) and try to acquire the ports.
After the announcement of the acquisition, China took its turn to apply the pressure. CK Hutchison is headquartered in Hong Kong, and is thus subject to China’s broad spanning national security review.
China’s chief antitrust regulator is currently reviewing the BlackRock-Hutchison deal, effectively delaying the transaction before it was expected to be signed on April 2.
The official government moves followed multiple op-ed pieces run in Chinese state-owned media that trashed the deal, as well as reports that President Xi Jinping was angry with the result. Additional reports indicated that Beijing had instructed other state-owned businesses to pause any new deals made with Hutchison chairman and business tycoon Li Ka-Shing.
As the ongoing legal battle over the canal’s ports ramps up, Secretary of Defense Pete Hegseth arrived in Panama Tuesday to meet with country officials and defense leaders from other Central American countries.
In public remarks Monday before Flores’s news conference, BlackRock CEO Larry Fink acknowledged the U.S.-China trade tensions as a barrier to the transaction.
“Of course it can [complicate the deal], but there’s going to be nine months of regulatory review. So we’ll see how this all plays out,” Fink said. “I’m actually pretty optimistic that we will find a solution, because if you look at it, everything was done in the right order. It was not done politically despite all the narrative.”
According to the Wall Street Journal, both Cosco Shipping and Chinese conglomerate China Merchants Group have begun informal talks with Hutchison to take over some of the ports should the BlackRock deal fail.
