US embassy cable - 04PANAMA1116

S E C R E T SECTION 01 OF 03 PANAMA 001116 
 
SIPDIS 
 
 
NOFORN 
 
 
DEPARTMENT FOR WHA/CEN 
USTR FOR RVARGO, JWOLFE 
 
 
E.O. 12958: DECL: 05/04/2014 
TAGS: PREL PGOV ETRD EFIN EWWT PM CM CO TW, POL CHIEF 
SUBJECT: PANAMA: IMPLICATIONS OF THE TORRIJOS VICTORY FOR 
THE UNITED STATES 
 
Classified By: AMBASSADOR LINDA E. WATT FOR REASONS 1.4 (B) AND (D). 
 
 
SUMMARY 
------- 
1.  (C) Martin Torrijos, a 40-year-old politician with little 
national policy experience, scored a crushing electoral 
victory on May 2, while his Democratic Revolutionary Party 
(PRD) is positioned to control Panama's unicameral 
legislature.  After it takes office on September 1, the new 
government's foreign policy will focus on relations with the 
United States and Colombia, the Torrijos campaign has told 
us, and on maintaining, if not improving, the excellent 
cooperation we now enjoy with the government of Panama (GOP) 
on security and law enforcement matters.  Senior campaign 
officials have strongly suggested that Torrijos will take 
into account maintaining good bilateral cooperation in mind 
when making key appointments.  The PRD and Torrijos probably 
are closest to our views on trade and investment among 
Panama's political parties, and Torrijos likely will send 
observers to the next bilateral Free Trade Agreement (FTA) 
round.  The decade-long, $8-10 billion Canal expansion 
project, which will soon become a priority for the new 
government, has already heavily involved the U.S. Army Corps 
of Engineers in concept-design planning and will likely offer 
sizable commercial prospects for U.S. firms.  The GOP no 
doubt will ask U.S. "advice" to secure financing from 
commercial lenders.  We doubt that a Torrijos government will 
prove more congenial to our positions on Cuba or Israel in 
the United Nations than prior Panamanian governments have 
been.  Nonetheless, we hope to maintain positive momentum in 
our overall relationship with the new government.  Embassy 
plans frequent meetings with transition team officials in 
coming months.  End Summary. 
 
 
An Eye on Key Appointments 
-------------------------- 
2.  (C) Winning 47% of the vote in Panama's May 2 national 
election, while his PRD appears to have won a majority of the 
78 seats in Panama's unicameral legislature, Martin Torrijos 
proved his mastery of the Panama political scene and claimed 
a strong mandate to govern.  Torrijos, an unknown quantity in 
governing style and substance, has emphasized an interest in 
issues -- law enforcement, security, trade and investment -- 
that we share.  We have every reason to believe that Torrijos 
will prove responsive to our attention to key appointments, 
especially in security and foreign policy.  (Comment: We have 
made clear to Torrijos that the appointment of certain 
Noriega and Perez Balladares-era officials to sensitive 
positions could cause problems in our bilateral relations. 
Transition team officials understand that and pledged to 
avoid such appointments.  End Comment.)  The evidence is 
growing that the so-called "Friends of Martin" -- a high 
proportion of whom are Texas A&M grads -- will dominate 
ministerial positions.  A Texas Aggie collective in power in 
Panama will offer an obvious Texas connection for Washington. 
 
 
Law Enforcement and Security Policy 
----------------------------------- 
3.  (C) We expect to maintain or improve the already 
extraordinary level of access and cooperation we now enjoy 
with Panamanian officials on law enforcement and security 
policy.  The transition team has assured us that, if there is 
a change in the level of cooperation, it will be a change for 
the better.  We are currently assessing how to mitigate 
slowdowns in the first few months of the new administration 
due to transitions and learning curves.  In coming weeks and 
months, we plan to enhance and exploit our excellent contacts 
with Torrijos officials and to give the transition team as 
much detailed knowledge of our programs and policy priorities 
as is practicable.  Our core country team group charted 
Embassy's approach to the new government in an internal 
strategy meeting on May 7. 
 
 
Pol-Mil 
------- 
4.  (C) Some of our current Pol-Mil arrangements with the GOP 
are based on informal and ad-hoc understandings, which we 
will have to explain at length during the transition period. 
The PRD harbors a relatively large number of skilled maritime 
lawyers, who can be expected to place a premium on those 
issues, which include the Proliferation Security Initiative 
(PSI - due to be signed in Washington on May 12), High Seas 
Crimes, seafarer identification, etc.  We also have briefed 
the transition team on USG concerns regarding the Colon free 
trade zone. 
 
 
Darien, Atlantic Coast 
---------------------- 
5.  (C)   Torrijos is known to have a more pro-active 
attitude toward security on the Darien-Colombian border and 
the Atlantic coastal region and has proposed establishing a 
greater GOP presence in both regions.  The aim is to improve 
civilian-police relations in the Darien and to boost security 
in both areas.  The transition team has told us of plans to 
rehabilitate 20-30 WWII-era landing strips on the Atlantic 
Coast, along with a shift away from the use of helicopters to 
a much greater reliance on cheaper-to-operate single-engine 
airplanes.  By ensuring security at the landing fields, by 
improving communication with remote areas, and with plans to 
increase the number of rural teachers and medical personnel, 
the transition team hopes the new government will create 
goodwill in rural areas and gain an important intelligence 
capability and control that is now all but non-existent.  The 
Atlantic Coast is now in the hands of outlaws, the team has 
told us. 
 
 
Foreign Policy 
-------------- 
6.  (C) Torrijos has made clear that his foreign policy 
priorities are the United States and Colombia, and he has 
traveled recently to Bogota to meet president Uribe.  (He 
traveled to the United States in October as a presidential 
candidate to meet with State Department and Pentagon 
officials.)  One negative item on the agenda with Colombia is 
illegal immigration, estimated in excess of 100,000 people. 
The transition team believes that ordinary Panamanians are 
growing resentful of illegal Colombians because of job 
displacement, and team officials have said the new government 
will end illegal immigration practices. 
 
 
UN General Assembly 
------------------- 
7.  (C) In the UN General Assembly, we expect little change 
in Panama's basic voting patterns, which will conform to the 
broader NAM trajectory be generally uncongenial with U.S. 
positions on Cuba and Israel.  Nonetheless, we will work with 
the new government to make our case on the importance of UN 
voting patterns in our bilateral relations. 
 
 
No Change in Taiwan-PRC Relations 
--------------------------------- 
8.  (S/NF) Despite clandestine reporting to the contrary, we 
believe that Torrijos will continue Panama's long-standing 
official relations with Taiwan, and not with the People's 
Republic of China.  Torrijos probably accepted campaign 
contributions from both sides, and will probably continue 
Panama's policy of playing both sides of the fence to extract 
maximum advantage. 
 
 
Canal Expansion 
--------------- 
9.  (C) The first order of domestic business for the Torrijos 
government that concerns U.S. interests is Canal expansion. 
Now under active consideration, the Panama Canal Authority 
(ACP) is expected to announce its recommendations this summer 
for a project that could cost $8-10 billion in borrowed funds 
and take a decade to complete.  The Torrijos transition team 
sees Canal expansion as a motor for job creation and economic 
development for 10-15 years.  Canal expansion cannot be 
postponed if the viability of the all-water route between 
East Asia and the eastern U.S. seaboard is to continue, as 
the Canal may hit its maximum capacity by 2010.  Panama's 
constitution requires a referendum to approve a change of 
that magnitude in Canal finance, construction, and 
operations, which could involve new dams, new lakes, a higher 
water level, and displacement of hundreds of people. 
 
 
Commercial Loans 
---------------- 
10.  (C) Borrowing for the project is expected to be on 
commercial terms, assuming that the ACP and the GOP can 
convincingly separate their finances, as the Canal's own cash 
flow should cover most of the costs.  Local analysts say that 
the GOP must first overcome the imposing hurdle of fixing the 
growing insolvency of the Social Security fund (CSS), long 
overdue for painful and unpopular reform.  Doubtless the GOP 
eventually will request U.S. "advice" (and support) when 
approaching lending institutions. 
 
 
Commercial Opportunities 
------------------------ 
11.  (C) The U.S. Army Corps of Engineers is assisting the 
ACP in an advisory role at present (with the concept/design 
of a third set of locks on the Atlantic side) and probably 
can expect more future work when/if the project is approved. 
The Canal expansion project will offer large opportunities 
for U.S. contractors and exporters. 
 
 
Free Trade Agreement 
-------------------- 
12.  (SBU) The transition team has said that it plans to use 
the U.S.-Panama FTA to boost trade, investment, and market 
access, but also as a lever to increase transparency and rule 
of law, and to push an environmental agenda.  Team members 
confirmed that president Moscoso invited Torrijos to send 
representatives to the bargaining table at the next round. 
 
 
Comment 
------- 
13.  (C) All four of Panama's presidential candidates had 
their blemishes, but the Panamanian people gave Torrijos the 
largest electoral margin of victory in modern history.  They 
clearly expect great things from him, an expectation that the 
transition team seems to take very seriously.  He also was 
the most modern and most U.S.-oriented of the candidates. 
PRD leaders acknowledge that their party has a lot of baggage 
in its past relations with the United States but they insist 
that the policies and government appointments will prove that 
the "new PRD" is indeed a valuable ally.  Assuming no ghosts 
from the past get in the way, and he takes concrete measures 
early on to convince the electorate that he will run a 
considerably more honest government than his predecessors, he 
is in a position to accomplish a great deal.  As First Vice 
President-elect Samuel Lewis Navarro has told us, "We can't 
just run a good government...  The people are expecting a 
transformation." 
 
 
WATT