The U.S. and Panama have formalized a new security agreement aimed at bolstering control over the Panama Canal, a crucial move to counter China’s increasing influence in the region.

Announced in a Wednesday night post on X by the Panama Canal Authority, the agreement involves a joint declaration signed by Panama’s Minister for Canal Affairs and Hegseth, reaffirming Panamanian sovereignty and outlining enhanced military cooperation.

The Canal Authority stated that the deal “reaffirms respect for, and the recognition of, Panamanian sovereignty over the interoceanic waterway.” 

It also reinforces both countries’ dedication to the Neutrality Treaty and the legal framework governing canal operations, including Panama’s Constitution, the treaty itself, and the Canal’s Organic Law.

Beyond the symbolic, the declaration details a cost-sharing arrangement for services provided to U.S. warships and auxiliary vessels, aiming for “cost-neutrality.”
 

The statement explains that “Efforts will be made [to] develop a mechanism which will allow compensation for services provided to warships and auxiliary vessels, seeking a cost-neutral basis,” adding that “This mechanism will be evaluated jointly with the Ministry of Security of Panama.”

Hegseth indicated that a broader agreement is being developed to ensure “first and free” passage for U.S. warships through the Canal.

Hegseth announced Wednesday that U.S. and Panamanian officials had already signed a memorandum of understanding, and that a final document is forthcoming to formalize toll-free priority for U.S. naval vessels.

The Canal Authority emphasized that this declaration is only the initial step. “The declaration constitutes a first step in establishing this model, which will be developed in later stages.”

In addition to heightened military coordination, the Panama Canal Authority confirmed existing collaboration in “engineering, security, and cybersecurity,” which are key areas of focus for both governments in their efforts to counter foreign interference.

This development coincides with the U.S. preparing to deploy the USNS Comfort, a Navy hospital ship, to demonstrate presence and partnership.

Earlier in the week, Hegseth visited U.S. troops, met with Panamanian officials, and toured the canal, warning of China’s growing influence in the Western Hemisphere.

“Make no mistake, Beijing is investing and operating in this region for military advantage and unfair economic gain,” Hegseth stated. “They operate military facilities and ground stations that extend their reach into space. They exploit natural resources and land to fuel China’s global military ambitions. China’s factory fishing fleets are stealing food from our nations and from our people.”

Hegseth emphasized that the goal is to prevent conflict. “Together, we must prevent war by robustly and vigorously deterring China’s threats in this hemisphere,” he said.

He also affirmed that the U.S. is actively addressing Chinese-controlled infrastructure in Panama.

“China-based companies continue to control critical infrastructure in the canal area,” Hegseth explained. “That gives China the potential to conduct surveillance activities across Panama. This makes Panama and the United States less secure, less prosperous and less sovereign. And as has pointed out, that situation is not acceptable.”

Hegseth stated firmly: “The United States will not allow China to threaten the canal’s operation.” He added, “To this end, the United States and Panama have done more in recent weeks to strengthen our defense and security cooperation than we have in decades.”

Despite the increasing military and political coordination, Panamanian President José Raúl Mulino has publicly refuted claims that China controls the canal.

“I completely reject that statement,” Mulino said, countering earlier assertions from that a toll-free passage agreement for U.S. warships had been finalized. The Canal Authority also clarified that it has “not made any adjustments” to its fee structure.

Hegseth did not immediately respond to Digital’s request for comment.

‘ Morgan Philips contributed to this report.

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