COLON, Panama — Beneath a larger-than-life poster proclaiming the friendship between their lands, Panamanian President Ernesto Perez Balladares and Taiwanese President Lee Teng-hui last month inaugurated a keystone of this country's economic future.
They cut the ribbon for Davis industrial park, the biggest industrial investment so far on the former U.S. military bases being returned to Panama under the terms of a 1977 canal treaty. Eight Taiwanese companies have set up export factories here in a crucial vote of confidence for Panama's efforts to turn the old bases into thriving, job-producing manufacturing centers. The $25-million investment is expected to grow to $90 million in five years.
Still, even that project is overshadowed by the $150 million or more that Panamanian authorities said Hutchison Whampoa plans to invest during the same period in Panama's two most important ports. The Hong Kong conglomerate also will pay Panama $22.2 million a year for 25 years for the concession to run the ports, turned over to Panama under the same treaty as the bases.
Apparently, the Hong Kong and Taiwan investments are complementary parts of building Panama's future after the United States completes its gradual pullout from the canal in 1999. But they represent conflicting interests: The former British colony of Hong Kong on July 1 was returned to China, which regards Taiwan as a renegade province. And the importance of that change half a world away from Panama became clear last month when China, for the first time, used Hong Kong's economic clout to punish a nation for its ties to Taiwan.
The message is that Panama and the 29 other mainly small, poor nations that still give Taiwan diplomatic recognition may soon be forced to choose between two of Asia's most dynamic economies for much-needed investment and aid. As a result, what has been a diplomatic shuffle could have dire consequences for weak economies desperate to find an entry into the world economy.
Until now, China has used its prominence in international organizations to penalize nations that still maintain diplomatic relations with Taiwan, the island that became a haven for the losing side in China's 1949 civil war.
Beijing used its influence within the United Nations to force the organization to scale back peacekeeping missions in Haiti and Guatemala because of those countries' ties to Taiwan. Similarly, when Panama invited Lee to last month's Universal Congress on the Future of the Panama Canal, which Taiwan helped fund by donating $800,000, China pressured other heads of state not to attend.
