Panama ditches Taiwan and forms diplomatic ties with China

In diplomatic news that could have far bigger ramifications for shipping than the current Qatar spat, Panama has established diplomatic ties with China and broken with Taiwan.

Panamanian President Juan Carlos Varela said in a televised address on Monday evening that Panama was upgrading its commercial ties with China and establishing full diplomatic links with the second most important customer of its shipping canal. It was a Chinese ship significantly that was the first to transit the expanded locks of the canal last year. As the world’s largest ship register the diplomatic swap will also have significant bearing.

Just 20 countries now formally recognise Taiwan.

The news could well spell an end too for the planned rival canal through Nicaragua – a project that had been backed with Chinese cash but has gone quiet for a number of months.

Among the largest Taiwan firms with investments in Panama is Evergreen, the island’s largest line, with some $850m of investments in the Central American nation. Evergreen stressed today to local media that the diplomatic shift is unlikely to affect its operations there.