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Cablegate: Panama, the G4 and "Plan Puebla"

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

C O N F I D E N T I A L SECTION 01 OF 03 PANAMA 002937

SIPDIS


DEPARTMENT FOR WHA/CEN/PIERCE
SOUTHCOM ALSO FOR POLAD


E.O. 12958: DECL: 11/24/2014
TAGS: PREL PGOV ETRD ECON ENRG PM CO VZ LABOR HUMAN RIGHTSPOLMIL
SUBJECT: PANAMA, THE G4 AND "PLAN PUEBLA"

REF: PANAMA 02452


Classified By: Ambassador Linda Watt for reasons 1.4 (b) & (d).


-------
SUMMARY
-------


1. (C) Mexican President Vicente Fox publicly endorsed
Panama's inclusion in the G3 (Venezuela, Colombia and Mexico)
during his November 2-3 visit to Panama. According to MFA
Advisor Nils Castro and International Organizations Director
Javier Bonagas, the GOP's primary interest in joining the G4
is to integrate Panama's economy with the much bigger G3
markets and thereby make Panama an economic bridge between
the Andean countries and Mexico. Panamanian policy makers
believe joining an informal G4 grouping will help them meet
Panama's foreign relations objectives (see reftel) of
developing the economy, attracting foreign investment and
improving job opportunities. One drawback to joining the G4
is that the GOP is wary of expanding economic ties with
Mexico to the point that its farmers drown in a tidal wave of
Mexican agricultural products. Joining the G4 may increase
economic ties with Colombia, but also bring unwanted
Colombian proposals to extend the Pan-American highway
through the Darien gap, which Panama is trying to fend off.
Panama and Colombia are also discussing natural gas and
electrical links with Venezuela. End Summary.


--------------
JOINING THE G4
--------------


2. (C) During his November 2-3 visit to Panama, Mexican
President Vicente Fox encouraged Panama to join the (G3)
Group of Three (Venezuela, Colombia and Mexico) which began
with a three-way FTA in 1995 and had its first summit in
April 2001. While Colombia initially opposed Panama's
membership, at a November 5 meeting in Brazil, Panama Vice
President Samuel Lewis Navarro joined Venezuelan President
Hugo Chavez, Colombian Present Alvaro Uribe and President
Vincente Fox to formally announce Panama's inclusion in the
Group of Four (G4). From Panama's view, MFA Advisor Nils
Castro told PolOff on November 24 that while the G4 is a
political, social and economic agreement, Panama mainly wants
to use the G4 as a four-way FTA. Ultimately, Panama wants to
expand its relations to the Andes region and negotiate FTAs
with Peru, Ecuador and possibly Chile.


---------------
COURTING MEXICO
---------------


3. (C) In truth, Castro continued, Chile is a much better
FTA partner for Panama because the two countries cultivate
different agricultural products making their markets
complementary, rather than competitive. Mexico by contrast
produces many of the same products as Panama, but with
greater resources and 30 times the population, so Panamanian
farmers could not compete. Panama must have safeguards to
protect a large sector of its work force that relies on
commercial agriculture, explained Castro. Mexico is offering
some sweeteners to Panama, for instance, extended
professional visas for Panamanian businessmen and possible
removal of Panama from a taxation "black list." More than a
dozen big-name Mexican investors accompanied Fox to Panama.
They included Carlos Slim, who owns Carso Group; Lorenza
Zambrano, Latin America's richest man according to La Prensa,
who owns Cemex (one of the world's largest cement
manufacturers); Ricardo Salinas Pliego, owner of Azteca
Television; Bernardo Quintana, founder of Civil Engineers
Association, Inc., and others. Fox claimed that Mexican
investment in Panama currently totals $1.2B.


4. (C) During a recent meeting, Mexican Embassy Political
Officer Armando Obregon Jimenez told PolOff that Mexico's
interest in including Panama in the G4 is linked to another
regional initiative, Mexico's Inter-American Development Bank
proposal, Plan Puebla Panama (PPP). PPP includes eight
counties: Belize, Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, Mexico and Panama. PPP is an integrated
social and economic proposal to spur development of Central
American infrastructure including trade, disaster response,
regional utilities, roads and other public works projects,
using Inter-American Development Bank funding. PPP began
with the 1991 Tuxtla Agreement between Mexico and seven
Central American nations and was formally launched ten years
later on June 15, 2001. Mexico sees Panama's inclusion in
both the G4 and the PPP as critical for regional development
due to its central geographical location.


--------------------------
AVOID THE ROAD TO COLOMBIA
--------------------------


5. (C) In a resolution signed November 18 in San Jose,
Colombia joined the PPP as an observer. Both the PPP and G4
give Colombia more avenues to pressure Panama for a road
through the Darien gap. Nils Castro, the GOP's PPP
representative, said that the GOP is seeking alternative
solutions to avoid the highway discussion but continue with
other links. One option is sub-oceanic gas and electric
pipelines from Venezuela, through Colombia and along the
Caribbean coast of Panama. That route would maintain the
integrity of the Darien gap, which acts as a natural barrier
against hoof and mouth disease, malaria, screw worm and other
diseases. Already facing problematic illegal immigration and
narco-arms trafficking from Colombia, Panama is less than
eager to open a new immigration route to Colombia. Panama
environmentalists also strongly oppose building a road
through the Darien. Castro explained that the GOP is working
on alternate plans of ferry transport along the Caribbean
coast and/or new air freight routes between the two nations
for commercial goods. Currently, he said Panama-to-Colombia
air connections are passenger flights.


6. (C) Eventually, Castro said, a road to Colombia will be
built. However, the GOP hopes to wait until they have
developed enough of a tax base to reinforce their customs,
immigrations and public forces to ensure security at the
Colombia-Panama border crossing when it opens. He voiced
concern about public reaction to a road. Panamanians
currently associate Colombia with violence, drugs,
kidnappings and illegal immigrations. They will not tolerate
discussion of a road now, Castro explained.


-----------------------------------
VENEZUELAN GASOLINE AND NATURAL GAS
-----------------------------------


7. (C) Panama has high hopes of using the G4 to reduce the
high cost of fuel. Panamanian Public Forces (PPF) and the
National System of Civil Protection (SINAPROC) frequently
complain that they can not respond to floods or suspicious
aircraft or boats due to the lack of fuel. While the
government is currently operating under an austerity budget,
the additional problem is that the cost of fuel is high and
officials have been announcing regularly in the press that
they intend to seek assistance from Venezuela to lower the
cost of fuel in Panama. Castro also said that Panama must
look for alternate fuels and mentioned natural gas-operated
bus systems in other countries. Castro said that GOP
priorities for Venezuela are primarily for natural gas.
Newspaper reports indicate that relations with Venezuela
could lower fuel prices. Castro said the GOP has no other
commercial relations with Venezuela.


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COMMENT
-------


6. (C) The GOP accurately sees Panama as a minnow swimming
with whales and is trying to advance its foreign relations
and economic agendas to expand its economic base without
getting crushed in the process. Senior GOP officials,
including Minister of the Presidency Ubaldino Real and
Minister of Trade and Industry Alejandro Ferrer, have
extolled the benefits that NAFTA has brought to Mexico as a
way of pushing a pro-free trade agenda. Given the "thinness"
of expertise at the top, the GOP risks overextending itself
in joining the G4. The G4, the PPP, Colombia's pressure for
a road, and Mexico's pressure to open the Panama market all
present positive and negative possibilities which Panama is
struggling to manage politically.


WATT

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