Hegseth is the second senior US official to visit Panama since President Donald Trump took office in January vowing to "take back" the US-built canal to counter what he sees as China's influence over the waterway.
"Today, the Panama Canal faces ongoing threats," Hegseth said in a speech at a police station located at the entry to the shipping route.
"The United States of America will not allow communist China or any other country to threaten the canal's operation or integrity," he added.
The United States built the more than century-old canal and handed it over to Panama in 1999.
Hegseth met with Panama's President Jose Raul Mulino, with the two issuing a joint statement that affirmed security ties -- though there was a notable discrepancy in the versions released by both sides on the issue of Panama's sovereignty over the canal.
"Secretary Hegseth recognized Panama's leadership and inalienable sovereignty over the Panama Canal and its adjacent areas," read a Spanish-language statement released by Mulino's office.
That sentence did not appear in the English-language statement released by the US government.
- 'Wonder of the world' -
A Hong Kong company operates two ports at either end of the canal connecting the Atlantic and Pacific, through which five percent of all global shipping passes.
The Trump administration has put immense pressure on Panama to reduce what it calls Chinese influence on the canal, which Washington sees as a threat to US national security.
Panama has denied the assertions that China exercises undue control over the waterway, but its protests on the subject have grown weaker and on the eve of Hegseth's visit it accused the Hong Kong company of failing to meet its contractual obligations.
"I want to be very clear. China did not build this canal. China does not operate this canal. And China will not weaponize this canal," Hegseth said, calling it a "wonder of the world."
Speaking alongside Mulino, Hegseth said the US and Panama together would "take back the Panama Canal from China's influence" and keep it open to all nations, using the "deterrent power of the strongest, most effective and most lethal fighting force in the world."
He claimed that China's control of critical infrastructure in the canal area gave Beijing the power to conduct spying activities across Panama, making Panama and the United States "less secure, less prosperous and less sovereign."
The Chinese Embassy in Panama issued a statement refuting Hegseth's claim that Beijing interferes in the operations of the canal.
"China has never taken part in the management or operation of the Panama Canal, nor has it interfered in issues" concerning the waterway, the statement said, calling on Washington to halt "blackmail" and "plundering" of Panama and other countries of the region.
It labeled Hegseth's comments "not at all responsible or founded" and said the United States "has orchestrated a sensationalist campaign based on the 'China threat theory' so as to undermine cooperation between China and Panama."
It added: "China has always respected Panama's sovereignty with regard to the canal."
- Pressure on port company -
The concession to the HK-based company's subsidiary to operate Balboa port on the Pacific side of the canal and Cristobal port on the Atlantic side was first granted in 1997 and renewed for another 25 years in 2021.
But faced with Trump's repeated threats to seize the canal, Panama has put pressure on CK Hutchison to pull out of the country.
In January, it began an audit of Panama Ports -- the subsidiary -- to determine if it was honoring its concession contract.
On the eve of Hegseth's visit Panama's comptroller announced that the audit had revealed "many breaches" of the contract and said Panama did not receive $1.2 billion it was owed from the operator.
In March, CK Hutchison announced an agreement to sell 43 ports in 23 countries -- including its two on canal -- to a group led by giant US asset manager BlackRock for $19 billion in cash.
A furious Beijing has since announced an antitrust review of the deal, which likely prevented the parties from signing an agreement on April 2 as had been planned.
Hegseth's visit to Panama comes two months after that of US Secretary of State Marco Rubio.
Shortly after that visit Panama announced it was pulling out of Chinese President Xi Jinping's landmark global infrastructure program, the Belt and Road Initiative.
Hong Kong firm did not uphold Panama Canal ports contract: Panama audit
Panama City (AFP) April 8, 2025 -
The Hong Kong firm in charge of two key Panama Canal ports has flouted the terms of its contract, according to a Panamanian audit released Monday, as US and Chinese firms fight for business on the waterway after President Donald Trump threatened to seize it.
The audit found "many breaches" of the concession awarded to a subsidiary of logistics giant CK Hutchison to operate the two ports, and concluded that Panama did not receive $1.2 billion it was owed under the contract.
The subsidiary, called Panama Ports, benefited from many tax exemptions and also had irregularities in a previous audit that was used to justify an extension of the concession first awarded in 1997, said state comptroller Anel Flores.
"This is a very delicate issue," Flores told journalists, adding that he would file a complaint with prosecutors in the coming days over the unpaid concession fees.
The release of the audit results came hours before US Defense Secretary Pete Hegseth arrived in Panama, which has come under strong pressure from Trump to reduce Chinese influence on the US-built canal.
The United States has said it is a threat to its national security -- and the region as a whole -- for a Hong Kong company to operate ports at either end of the canal connecting the Atlantic and Pacific, through which five percent of all global shipping passes.
Hegseth will meet Panamanian President Jose Raul Mulino on Tuesday and visit the canal, which opened in 1914.
He will also participate in a security conference with Central American officials.
Although the waterway has been under Panamanian control since 1999 under international treaties, Trump has threatened to take it back, by force if necessary, arguing that it is effectively controlled by Beijing.
- Trump threats -
Flores on Monday denied that the announcement of Panama Ports failing to honor the concession contract had anything to do with the Hegseth visit.
"This is an autonomous act by Panama," Flores said.
However, some analysts had predicted that this audit would in fact purport to show irregularities, so that Panama could strip the Chinese company of the contract and thus appease the Trump administration.
"It comes as a surprise to no one that the audit turns up alleged irregularities, since the idea was to have some kind of legal justification strong enough to cancel the concession," Euclides Tapia, a professor of international relations, told AFP.
The state comptroller's office is an autonomous body that examines how government money is spent.
It began the audit of Panama Ports in late January to determine if it was honoring the concession contract, after Trump threatened to take over the canal.
Faced with the US president's repeated threats, the Central American country in turn has put pressure on CK Hutchison to relinquish its control of the ports.
In March, the firm announced an agreement to sell 43 ports in 23 countries -- including its two on the interoceanic Panama Canal -- to a group led by US giant asset manager BlackRock for $19 billion in cash.
A furious Beijing has since announced an antitrust review of the deal, which likely prevented the parties from signing an agreement on April 2 as had been planned.
The Panama Ports concession to operate Balboa port on the Pacific side of the canal and Cristobal port on the Atlantic side was renewed for another 25 years in 2021.
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