Cablegate: Panama Canal Authority Seeks to Keep Coast Guard


DE RUEHZP #1305/01 2142118
R 022118Z AUG 07

O N F I D E N T I A L PANAMA 001305




E.O. 12958: DECL: 08/01/2015

Classified By: Charge Luis Arreaga for reasons 1.4(b) and (d).

1. (SBU) SUMMARY. On July 26, 2007, Panama Canal Authority
(ACP) Administrator Alberto Aleman Zubieta told the
Ambassador that he would like to keep the U.S. Coast Guard
(USCG) billet (CGB) embedded with the Panama Canal Authority
(ACP). He added that the ACP would continue to benefit from
the continuing relationship, especially in light of the canal
expnsion challenges ahead. However, he explained that he
could not renew the contract because the USCG increased the
FY08 cost by $63,000, which exceeds the amount approved by
the ACP Board of Directors when the contract was originally
executed. Aleman noted that continuing the billet at a
higher price would require a renegotiation of the terms of
the contract, a process that would involve the Board and the
Foreign Ministry. This could open the issue to a new dynamic
and possible opposition from those who question the wisdom of
having a U.S. armed forces official embedded in the ACP. END

USCG billet a remnant from the canal handover

2. (SBU) The USCG has maintained a billet with the ACP since
the USG handover of the Panama Canal on December 31, 1999.
The billet was established partly to reassure the maritime
community that a trusted U.S. institution would be involved
in the maritime security of the canal. The ACP agreed to
cover the costs a USCG Captain stationed in Panama and
working at the ACP on safety and security matters. The CGB
operates pursuant to a multiyear contract with annual
renewals by the ACP. The next scheduled renewal is September
30, 2007. The incumbent s currently assigned to the CGB until
summer, 2008.

3. (SBU) During FY 2007, the costs were approximately
$180,000. For FY 2008, the costs increased by approximately
$63,000 to $243,000. We understand that the increase was
principally owed to the front loading of certain retirement
benefits, plus a small inflation adjustment.

ACP Administrator wants to keep the billet

4. (SBU) On July 26, 2007, Aleman told the Ambassador that he
does not have the authority to renew the contract for the CGB
for FY 2008 at the new price. Under ACP rules, he would have
to submit for approval a newly negotiated contract to the ACP
Board of Directors and eventually to the Foreign Ministry. If
on the other hand, the price remained unchanged, he would
have the authority to extend it another year, as he has been
doing for the last few years.

5. (SBU) Aleman said he would like to keep the billet at the
ACP because it has been beneficial to the canal. He
acknowledged that in recent months the billet had been in a
state of "limbo" owing to the ACP's reorganization undertaken
to meet the challenges of the upcoming canal expansion. He
now believes the CGB is correctly placed within the ACP
Operations Division (the largest and arguably most important)
and they are now willing to give the incumbent a far more
substantive role than in recent months.

6. (SBU) Aleman noted that the ACP had considered several
mechanisms for getting USCG expertise such as contracting
USCG on an as needed consulting basis from staff based at the
Embassy or USCG facilities in Miami or Puerto Rico. However,
they had reached the conclusion that it would be best for a
billet to be embedded in the ACP to get the most out of it.
Aleman acknowledged that the USG may have other ideas about
the ACP/USCG relationship and that he is willing to consider

USCG billet serving U.S.interest

7. (SBU) Post defers to Washington agencies the discussion on
the technical and budgetary merits of continuing the
ACP-funded billet. Nonetheless, Post would like to offer a
perspective on the broader context surrounding the issue.

--------------------------------------------- --------------
Canal expansion offers opportunities for deeper cooperation
--------------------------------------------- --------------

8. (SBU) The $5.25 billion canal expansion project will
require 7,000 to 9,000 additional workers and tax the ACP's
management. Given the ACP,s willingness to keep the billet
and to give it a substantive role, there may be opportunities
to for the incumbent to provide valuable safety and security
advise during the expansion project. The CGB would provide
an additional layer of review to ensure the ACP, along with
the private sector contractors (who may or may be fully
versed in the unique safety and security issues related to
the canal), safety and security issues are properly
addressed. If such issues are not properly addressed during
the construction phase, remediation may be extremely
difficult or impossible.

--------------------------------------------- ----------
More traffic will bring greater risks to U.S. interests
--------------------------------------------- ----------

9. (SBU) With the ever increasing amount of traffic
transiting the canal (over 14,000 transits in 2006 and a 4%
increase in transit through the second quarter of 2007), the
safety and security of the canal is more important than
ever. With approximately two-thirds of the cargo transiting
the canal arriving at or departing from a U.S. port, the
importance of the canal's safety and security to the U.S.
economy is greater than ever. The CGB serves a strategic
purpose in providing continuous ACP and USG coordination on
safety and security matters. The CGB provides an immediate
and direct point of contact, particularly crucial in the
event of any natural or man-made disasters striking the canal.

--------------------------------------------- --------
Billet serves as the USG,s eyes and ears in the canal
--------------------------------------------- --------

9. (C) The CGB serves as the eyes and ears of the USG within
the ACP. The CGB would allow the USG to have real time
assessment not only of the safety and security matters
affecting the canal, but the progress of the expansion
project, the influence of other governments on the ACP, and
the operational and management challenges faced by the ACP.
The value of this arrangement has been recognized by other
governments. We heard from ACP sources that the French had
protested about the presence of USCG officer in the bowels of
the ACP.

10. (SBU) The completion of the ACP organizational
restructuring has resulted in placing the CGB within the ACP
operational structure. The assignment of the CGB to the
Operations Division eliminates some of the ambiguity of the
CGB function and would allow for a more efficient use of its
expertise. The current assignment ends a long period of when
the CGB was, in Aleman's words,
in "limbo".

Other arrangements seem less efficient

11. (SBU) It is not clear whether a Coast Guard consulting
arrangement with the ACP would be inadequate to serve U.S.
and ACP needs. By definition a consulting arrangement would
be a project specific, time specific assignment. A
consulting arrangement would eliminate the daily contact with
the ACP and endangers the institutional memory between the
USG and ACP. Additionally, a consulting arrangement risks
having the Coast Guard relationship with the ACP being
usurped by other national maritime agencies or various
private consulting firms.

12. (SBU) Transferring the functions of the CGB to Post is
not feasible because Post does not have the expertise to

assess or respond to ACP safety and security issues. Also,
the current Coast Guard Attache at Post devotes a
significant time to drug enforcement matters. Such
individual would not have the time or resources to address
the ACP matters.

13. (SBU) Between the time the current CGB contract possibly
is terminated and the time a new consulting arrangement could
be negotiated and approved by the ACP Board, a significant
time gap could occur. The longer this time gap persist, the
less likely an arrangement between the Coast Guard and the
ACP would be concluded. There is a risk that inertia will
allow the process to stall.

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