Cablegate: Panama: Scenesetter for Usg Delegation to The

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A

This message is sensitive but unclassified. Please protect

1. (SBU) US Embassy Panama welcomes the USG delegation to
the National Security Planning Workshop, Aug. 11-13, which is
designed to assist the incoming PRD government headed by
President-elect Torrijos who assumes office September 1. You
will have the opportunity to reiterate USG commitment to
improve security cooperation, expand training programs shared
between our two countries, continue focus on civilian
controlled security forces, and enhance transparency and rule
of law within Panama's institutions. Panama was an early
member of the Coalition of the Willing, has signed and
ratified a bilateral Article 98 Agreement, is a strong
anti-narcotics ally, and is a strong supporter of US maritime
security/trade-security initiatives. The Canal is well-run
and efficient. Although the Moscoso government's reputation
has been tarnished by corruption and ineffectual
administration, Panama has been a good friend and ally.
Demonstrations protesting Panama's negotiation of a bilateral
Free Trade Agreement (FTA) with the US have made front-page
news here in recent weeks.

National Security Workshop

2. (SBU) This Embassy, in conjunction with the Center for
Hemispheric Defense Studies (CHDS) and representatives of the
incoming Torrijos administration, is organizing an August
11-13 bilateral "National Security Planning Workshop" to
encourage the new administration to plan strategically its
approach to security issues related to its borders, the
Canal, public security (i.e. crime), and counter-narcotics,
and focus on ways to cooperate with the USG. Torrijos'
Democratic Revolutionary Party (PRD) is the Panamanian party
most focused on security matters, but Torrijos planners admit
that they have not progressed very far in terms of their
overall security strategy. This workshop presents a unique
opportunity for the USG to support Panama's strategic
security planning while it is being formulated and position
ourselves to participate in its implementation. Your
contribution to this important endeavor is greatly

New Administration

3. (SBU) President-elect Martin Torrijos, due to take office
on September 1, is pushing an energetic and ambitious
transition agenda featuring clear-cut goals in foreign policy
(with a priority on the US and Colombia), security
(cooperation with US objectives, new attention to the
Caribbean coast), the economy (employment generation, a Free
Trade Agreement with the US, Canal expansion, social security
reform, and making Panama a regional focal point for
investment, eco-tourism, and logistics), and politics
(constitutional reform). Torrijos campaigned on a strong
anti-corruption platform and hopes to clean up Panama's
politicized Supreme Court. Thus far, Torrijos' cabinet
appointments have been mostly respected professionals without
excessive baggage from the PRD's close ties to Panama's
21-year dictatorship and its anti-US faction, a promising
sign. Despite the good intentions of the Torrijos
administration, anticipated pressures from a well-entrenched
oligarchy could frustrate its ambitious reform plans.

Canal Expansion

4. (SBU) The Torrijos team plans to make Canal expansion a
top priority. It expects this $4-10 billion (estimates vary
widely and the Canal Authority has been deliberately silent),
10-year project to be a transforming event for Panama that
will provide jobs and set the tone economically for years to
come. The US Army Corps of Engineers (USACE) has provided
feasibility and engineering studies for one set of locks for
the proposed expansion and looks forward to further
involvement with the ACP (Authority of the Canal of Panama)
as the project moves forward. A national referendum on the
issue is likely in 2005. Actual groundbreaking, if the
referendum passes, could be three years off.

--------------------------------------------- -----
International Ship and Port Facility Security Code
--------------------------------------------- -----

5. (SBU) On July 1, Panama announced that it had met the
deadline for implementing its International Ship and Port
Facility Security Code (ISPS) obligations. According to
Captain Luiz Perez Salamero, the departing Deputy
Administrator of Panama's Maritime Authority (AMP), all ships
that call on US ports have completed the International Ship
Security Certification (ISSC) process; however, some will
have onboard either a short-term certificate (valid for five
months) or an interim certificate during the first months
after July 1. Final ISSCs will be issued to those ships as
quickly as possible and prior to expiration of the
Interim/Short-term certificates. The AMP has developed an
on-line database ( listing all Panamanian
flagged vessels with issued ISSCs, which is intended to
assist countries with the certificate validation process.
Controversy dogged this process, as some maritime lawyers and
shipping companies protested the designation of a sole firm
as Panama's ISPS certifier.

Toward a Democratic Culture

6. (SBU) The recent US visa revocation of the former
Minister of Public Works as a result of President Bush's
initiative to deny US visas to corrupt public officials, has
captivated the press. That is only the latest in a series of
high-profile media coverage of transparency-in-governance
issues. Last month, the Ambassador's speech on poverty and
the need for government action generated a series of positive
responses as well as a pro forma rebuttal from the Foreign
Minister. The Ambassador's September 29, 2003 speech to
Panama's Chamber of Commerce, Industry and Agriculture,
launching this Embassy's Good Governance Initiative (GGI),
resonated with Panamanians and generated front-page
headlines. Venality, conflict of interest, nepotism, and
lack of transparency are ingrained in Panama's political
culture and institutions. To encourage public demand for
reform in the judicial sector, AID Panama has extended grants
totaling US$150,000 to civil society organizations for
projects designed to address structural barriers to the
administration of justice. Numberous Embassy sections and
agencies promote good governance as a focused mission-wide

A Mixed Macroeconomic Record

7. (SBU) Since the turnover of Canal operations and US
military bases in 1999, Panama has had a mixed record of
economic success. The Canal is run more efficiently, safely
and profitably than under USG administration. Canal-related
industries, especially cargo transshipment through ports at
both ends of the Canal, have boomed, as have visits by US
cruise ships, which surpassed 200 port calls in Panama this
year. Panama's overall economy went flat when nearly 30,000
US military personnel and their dependents left during the
late 1990s, privatization slowed, and the 2001 global
recession took hold which perpetuated the country's estimated
13.4% unemployment rate. Also, Panama has failed to attract
large investment into the former Canal Zone. Poverty, income
disparity (second only to Brazil in the Hemisphere), an
actuarially bankrupt social security system and a heavy
sovereign debt load are arguably the biggest internal
challenges facing Panama today. Since mid-2003, however,
economic growth has picked up, primarily as a result of tax
incentives given to a booming construction sector, low
interest rates, and a global economic recovery. Panama's
growth rate for 2003 reached about 4%.

International Trade and Investment

8. (SBU) Economic issues are prominent in Panama's agenda
with the United States. The fourth round of bilateral free
trade negotiations will take place August 9-13 in Tampa,
Florida. Negotiators will try to overcome several
outstanding differences, including agricultural protections
and Intellectual Property Rights. Should additional rounds
be necessary, the two sides hope to finish the negotiations
by October. The GOP views the FTA as a vehicle to lock in
the status quo or better in US import programs for
agricultural and manufacturing products, improve market
access in niche areas (e.g., banking, maritime,
non-traditional agricultural products and sugar), and most
importantly to attract significant US and other foreign

Passenger Vessels Services Act concern

9. (SBU) The GOP has long argued for Panama's re-designation
from a "near foreign port" to a "distant foreign port" under
the US Passenger Vessels Services Act (PVSA), to capture a
larger share of the cruise ship trade. The USG is studying
the possibility of a re-designation, but US domestic maritime
interests are creating political impediments. The GOP
estimates that Panama's growing tourism sector could gain up
to US$50M annually from such a re-designation.


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