Panama officials search CK Hutchison's subsidiary office, source says

• Summary

• Companies

• Panama raids CK Hutchison unit amid US-China trade tensions

• Panama’s President Mulino downplays potential Chinese response

• Mulino says “China needs Panama - a lot”

• Top court ruled CK Hutchison’s port contracts unconstitutional

PANAMA CITY, Feb 27 (Reuters) - Panamanian authorities searched a ports unit of Hong Kong conglomerate CK Hutchison (0001.HK), opens new tab in Panama on Thursday, according to a person familiar with the operation, escalating a rift over control of two key ports in the strategic waterway.

The search comes amid growing U.S.-China rivalry over global trade routes that has deepened tensions between Washington and Beijing and embroiled CK Hutchison’s Panama Ports Company (PPC), which until recently held contracts to operate two terminals at the Panama Canal’s Pacific and Atlantic entrances.

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The raid on PPC did not relate to last month’s government decision to annul deals that gave the company control of the two canal ports in Panama, the source said.

The person declined to be identified because the information had not yet been made public.

“This is an independent investigation carried out exclusively by the Public Ministry of Panama in the exercise of its legal powers,” the Panamanian government said in a statement without naming CK Hutchison as the target of the raid.

Before the raid, Panama’s President Jose Raul Mulino said he did not know what Beijing might do after CK Hutchison lost the ports.

“If you want my personal opinion, nothing is going to happen,” he told a weekly press conference.

The Hong Kong conglomerate had also acted with “arrogance” and without transparency, he said.

“That company did whatever it wanted in Panama for decades, since it came to this country.”

China also relied heavily on Panama, Mulino added.

“China needs Panama - a lot, a lot. Everything those people produce goes through the canal … All the gas that reaches them goes through the Panama Canal. Maybe they need us more than we need them.”

Panama’s foreign ministry had conveyed its position to China’s ambassador.

CK Hutchison did not respond to a request for comment regarding the search or Mulino’s comments.

The company said earlier this week that Panama authorities had threatened its employees with criminal prosecution if they refused to leave the two canal ports.

China’s Foreign Ministry said on Friday that Beijing’s position concerning the ports in Panama was “unequivocal” and it would “resolutely safeguard the interests of its enterprises.”

The Hong Kong government did not respond to a request for comment.

CK Hutchison’s shares closed down 0.6% in Hong Kong on Friday.

PANAMA PORTS SAGA RUMBLES ON

The Hong Kong company had agreed to a $23 billion sale of dozens of ports worldwide, including the Panamanian terminals, to a consortium led by BlackRock (BLK.N), opens new tab and Mediterranean Shipping Company (MSC).

The deal has been criticized by Beijing but welcomed by U.S. President Donald Trump who had declared he wanted to “reclaim” the Panama Canal to reduce Chinese influence over the canal’s key assets.

The ports at the centre of the dispute, Balboa and Cristobal, will now be operated temporarily by Maersk (MAERSKb.CO), opens new tab and MSC, Panama’s government said this week.

Panamanian media reported the raid earlier. Television station TVN showed images of about a dozen people, some wearing vests emblazoned with the initials of Panama’s investigative police in an underground parking lot that the station said was in the affluent Albrook area of Panama City.

The images showed some cardboard boxes being loaded into the back of a police truck.

The name of the location was not visible in the images, and Reuters could not independently verify the report.

Panama’s top court recently declared unconstitutional CK Hutchison’s contracts to operate port terminals at the entrance to the Panama Canal, leading the government to annul the deals.

The decision sparked a battle embroiling both Beijing and Washington, after pressure from Trump for Panama to curb Chinese influence over the Panama Canal, which carries about 5% of global maritime trade.

CK Hutchison has said it sees the decision as unlawful and is considering legal action.

Reporting by Emily Green, Elida Moreno; additional reporting by Clare Jim in Hong Kong and Joe Cash in Beijing. Writing by Daina Beth Solomon, Scott Murdoch; Editing by Neil Fullick, Stephen Coates and Tomasz Janowski

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Emily Green

Thomson Reuters

Emily is the chief correspondent for Mexico and Central America. She won the inaugural Pulitzer Prize for audio reporting for her coverage of migrant kidnappings in Mexico. Emily covers the economy, trade, tariffs and macroeconomics.

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