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Cablegate: Panama Post: Edition 12; Volume Ii

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DE RUEHZP #0574/01 1932039
ZNY CCCCC ZZH
R 112039Z JUL 08
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 2277
INFO RHMFISS/CDR USSOUTHCOM MIAMI FL
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RHEFDIA/DIA WASHDC
RHMFISS/JOINT STAFF WASHINGTON DC
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C O N F I D E N T I A L PANAMA 000574

SIPDIS

E.O. 12958: DECL: 07/09/2018
TAGS: PREL PGOV ECON PM
SUBJECT: PANAMA POST: EDITION 12; VOLUME II

REF: PANAMA 493 (AND PREVIOUS)

Classified By: POLCOUNS Brian R. Naranjo. Reasons: 1.4 (b),
(c) and (d).

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Summary
-------

1. (C) Juan Carlos Varela's landslide victory in the
Panamenista primary on July 6, defeating Alberto Vallarino by
over 20 points, was the defining political development for
the week. The focus quickly turned to Varela's efforts to
unify Panama's largest opposition party and to renewed
discussions regarding opposition alliances. In this week's
Panama Post, our leading stories are:

-- Former President Mireya Moscoso's on Panamenista unity;
-- Billy Ford: "Patriotic Union is leaning towards an
alliance with Ricardo Martinelli" of Democratic Change (CD);
-- Martinelli aide believes Martinelli may need to be
prepared to go it alone; and
-- Martinelli op-ed sheds light on economic views.

----------------------------------
Moscoso Prepared to Support Varela
----------------------------------

2. (C) Former President Mireya Moscoso was prepared to
support Juan Carlos Varela as the Panamenista presidential
candidate, Moscoso aide Eduardo Quiros told POLCOUNS on July
11. "It could mean the death of Panamenismo if the
opposition loses in 2009, and the Panamenista candidate needs
to be at the top of the ticket," Quiros explained. Varela's
landslide victory over Vallarino put Varela in perhaps the
best position to unify the party in recent memory and to
build a strong opposition alliance, according to Quiros.
Moscoso wanted to beat the PRD, so now the Panamenista party
needed to close ranks behind Varela. Acknowledging that
Moscoso and Varela were not on speaking terms and that Varela
to a large extent defined his efforts to renew the party by
contrasting himself sharply with Moscoso, Quiros said that
nonetheless both Varela and Moscoso were sending out feelers.
Jose Luis "Popi" Varela, Varela's brother and closest
political advisor, had met recently with Moscoso in an effort
to broker a rapprochement. Quiros stated clearly, however,
that in building bridges to the old-line chieftains of the
Panamenista party, Varela would have to remain committed to
leading an opposition ticket, not settling for second billing.

3. (C) Comment: Quiros described a very ruthlessly pragmatic
Moscoso in laying out her desire to shift from Vallarino,
whom she backed in the primaries, to Varela. She wants the
Panamenistas to lead the opposition and to defeat the
governing Revolutionary Democratic Party (PRD). Only time
will tell how successful Varela will be in putting real
substance behind the symbolic party unity he has already
achieved. (Varela joined his primary opponents on July 10
for the formal declaration that he had won the primary at
which Vallarino and Marco Ameglio promised to "close ranks"
behind Varela.)

-----------------------------------------
Ford: UP Leaning Toward Alliance with CD
-----------------------------------------

4. (C) "Listen, my presidential campaign is about trying to
keep my party together," Patriotic Union President and
declared presidential candidate Guillermo "Billy" Ford told
POLCOUNS on July 9. "I am going to step down to help form
the strongest opposition alliance possible. I do not think
that a grand opposition alliance of all parties is likely,
but right now the momentum in Patriotic Union (UP) is to join
with Ricardo Martinelli" of Democratic Change (CD). Ford
explained that UP needed to take care of its candidates for
National Assembly and local positions. Since Martinelli
"owns and directs" his party, Ford explained, that it was
easier for Martinelli to make space in an alliance for UP
candidates. In contrast, dealing with the Panamenista Party
was like dealing with a corporation with corporate boards and
stockholders that needed to be satisfied. Also, the
Panamenistas had just elected on July 6 its slate of
candidates for these lower level positions. As for a broader
alliance, Ford speculated that Juan Carlos Varela's landslide
two to one victory over Alberto Vallarino to win the
Panamenista presidential nomination had made it less likely
that Varela and Martinelli would be able to come to terms on
a "grand opposition alliance." "There'll be three candidates
in the general elections: two opposition candidates,
Martinelli and Varela, and one (governing Revolutionary
Democratic Party) PRD candidate, Balbina" Herrera. Ford
added that no alliances were likely to be announced until
September or possibly even October. Describing Vallarino as
a "poor loser" and bitter, Ford noted that Varela would have
his work cut out for him bringing the Panamenista Party
together.

5. (C) Comment: Ford was not enthused about an alliance with
"my friend" Martinelli, but did see it as the best deal that
he could secure for UP. Ford discussed alliance formation in
terms of securing and using the greatest amount of leverage
for UP.

--------------------------
Martinelli May Go It Alone
--------------------------

6. (C) "One has to respect Varela for his impressive victory
over Vallarino," Martinelli political advisor Jimmy
Papadimitriu told POLCOUNS July 7. "Nobody predicted that he
would clobber Vallarino by such a margin." Papadimitriu
acknowledged that the strength of Varela's victory would
probably incline Varela to make a drive for the presidency,
not take second billing on a Martinelli-led ticket. "You
know though, for some time I've believed that Ricardo can't
rely on Varela, and I think that he may need to go it alone,"
Papadimitriu said. "We'll pick up an alliance partner or
two, but there will probably be two opposition candidates."

7. (C) Comment: Papadimitriu has been trying to convince
Martinelli for some time that Varela may not be his friend
and that Martinelli may need to prepare to campaign against
him. Though at his campaign launch in May Martinelli trained
most of his fire primarily on the PRD, Martinelli did make
the argument that both the PRD and the Panamenista Party have
had ample opportunity to try to address the needs of the
people over the past forty years of their various
administrations. On television and radio on July 8,
Martinelli dismissed questions regarding alliances by noting,
"My alliance is with the Panamanian people. I won't enter
into that old political alliance game. Instead, I want to
talk about real solutions to solve real problems, the
problems in education, health care, law and order,
employment, and wages." Papadmitriu noted that Varela was
now humming the "change" mantra and said he was struck by the
powerful response of the Panamenista rank and file to this
message. Martinelli's team clearly believes that Martinelli
holds the edge in being the change agent that they believe
the Panamanian public seeks.

--------------------------------------------- -
Martinelli Op-Ed Sheds Light on Economic Views
--------------------------------------------- -

8. (U) In a June 18 op-ed entitled "The Decline of the
Traditional Politicians (El Desgaste de los politicos
tradicionales)" in paper-of-record "La Prensa," Martinelli
laid out his economic views. In his opening lines, he
stated, "The country's principal problems for Panamanian
families are the high cost of living and unemployment. Both
are related to economics and cannot be solved by people who
do not understand how things are interrelated or by people
who have never generated any job openings." He then declared
that he understood how the economy worked and how things were
interrelated. Other highlights follow:

-- Eliminate the tax on diesel and cut in half the tax on
gasoline: Martinelli state that the high cost of petroleum
affected the high cost of goods and services that Panama
produced. By eliminating the tax on diesel and cutting in
half the tax on gasoline, Martinelli wrote, "This is the way
to help lower the cost of living."

-- Implement a flat tax: Acknowledging that the Torrijos
Administration had presided over economic growth and a
reduction of unemployment, Martinelli nonetheless stated,
"What these numbers do not show is that every day the salary
that Panamanians earn goes less as far and there is a
difference between employment and under employment." To
attack this problem, it was imperative to lower the taxes on
enterprises and workers. "International studies prove that a
reduction of taxes on businesses translates into an increase
in salaries for their employees and a lowering of the costs
of goods and services." Arguing that some sectors could have
zero tax burden while some banks paid seven percent and small
and medium enterprises paid 30 percent, Martinelli wrote, "I
propose to implement a fixed level of taxes system -- flat
tax -- so that all enterprises pay the same percentage in
taxes."

-- Reduce the size of government: To continue progressing,
Martinelli asserted that the size of government had to be
reduced and that more resource needed to be dedicated to
things that would improve productivity and the quality of
life such as infrastructure investment, transportation,
education and health.

-- Focus on things that add value: Over the medium and long
term, Martinelli argued that to transform Panama's economy,
the focus had to be on producing goods and services that had
greater added value. By doing so, Martinelli wrote that
salaries would improve. To achieve this goal, Martinelli
wrote that Panama's education system had to churn out more
engineers, scientists and professionals in "specialized
careers" and fewer "social science" graduates. Furthermore,
incentives to encourage business to invest in research and
development had to be created.

9. (U) Concluding his article, Martinelli writes, "Panama is
living a historic moment of which we are failing to take
advantage. The politicians and political parties that we
have always had do not want things to change because they
need a poor public so that they can live off the needs of the
people and continue with political clientalism Rejecting
"falling into the trap" of "taking from the rich to give to
the poor," Martinelli writes, "What needs to be done is
generating more wealth and giving the same opportunity to all
so that they can partake of that wealth."

10. (C) Comment: The conservative orthodox economic
proposals laid out in this op-ed will fly over the heads of
most Panamanians, including the relatively elite readership
of La Prensa. Martinelli's political message will resonate:
Panama is not taking advantage of its extraordinary moment in
history, needs to grow the economic pie and ensure full
access to economic opportunity for all, and needs an
experienced job creator at the helm. His proposal to reduce
the tax on diesel and halve the tax on gasoline will be very
popular regardless of social-economic status, but his
proposal to implement a flat tax, reduce the size of
government, and to focus on value-added activities will be
too esoteric for the average Panamanian voter. Post expects
that Martinelli will continue to push the basic political
message of this op-ed in other fora.
MESA

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