US embassy cable - 04PANAMA1949

UNCLAS SECTION 01 OF 03 PANAMA 001949 
 
SIPDIS 
 
 
SENSITIVE 
 
 
TO GENERAL HILL FROM AMBASSADOR WATT 
 
 
E.O. 12958: N/A 
TAGS: OVIP, PREL, MASS, PGOV, PM, POL CHIEF 
SUBJECT: PANAMA: SCENE SETTER FOR GEN. HILL'S AUG. 12 VISIT 
 
This message is sensitive but unclassified.  Please protect 
accordingly. 
 
 
1.  (SBU) I warmly welcome your August 12 visit to Panama. 
You will have the opportunity to reiterate USG commitment to 
expanding training programs shared between our two countries, 
and to press for continuing focus on civilian controlled 
security forces, transparency and anti-corruption within 
Panama's institutions.  Panama's negotiation of a bilateral 
Free Trade Agreement (FTA) with the US and the September 1 
inauguration of a new administration will reign paramount in 
the minds of many of your interlocutors.  It is worth noting 
that 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 a 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. 
 
 
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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 
traditionally 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 
appreciated. 
 
 
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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 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 reform plans. 
 
 
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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 (www.amp.gob.pa) 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 visa revocation of a US visa to 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.  This is only the latest 
in a series of high-profile media coverage of 
transparency-in-governance issues.  Last month, my speech 
concerning poverty and the need for government action 
generated a series of positive responses as well as a pro 
forma rebuttal from the Foreign Minister.  Last year, my 
September 29 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 and other Embassy 
sections promote good governance as a focused mission-wide 
priority. 
 
 
---------------------------- 
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 top Panama's agenda with the United 
States.  The fourth round of bilateral free trade 
negotiations will take place in Florida in August.  There are 
several outstanding obstacles to closing the agreement, 
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 investment. 
 
 
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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. 
 
 
WATT