US embassy cable - 05PANAMA1496

C O N F I D E N T I A L SECTION 01 OF 03 PANAMA 001496 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN AND WHA/AND 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 07/12/2015 
TAGS: PREL, PGOV, EFIN, EAIR, EPET, PM, VE, OAS, IDB, POL CHIEF 
SUBJECT: PANAMA-VENEZUELA RELATIONS STUCK ON INTERNAL 
SECURITY CONCERNS, HIGH OIL PRICES 
 
REF: A. PANAMA 1415 
     B. PANAMA 1423 
 
Classified By: AMBASSADOR LINDA WATT FOR REASONS 1.4 (B) AND (D). 
 
SUMMARY 
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1.  (C) Panamanian concerns about suspected Venezuelan 
meddling in Panama's internal politics and domestic headaches 
due to high oil prices prompted Panamanian Vice 
President/Foreign Minister Samuel Lewis and two GOP cabinet 
officials to meet Venezuelan Foreign Minister Ali Rodriguez 
in Caracas on July 6.  (Minister of Government and Justice 
Hector Aleman (MOGJ) and Minister of Commerce and Industries 
(MOCI) Alejandro Ferrer accompanied Lewis.  See Reftel B.) 
In recent conversations with POL Counselor, FM Lewis and MOCI 
Ferrer both complained that GOV officials were not prepared 
to discuss substance and treated the visit as a press 
event/photo-op.  MOGJ Aleman told A/DCM that he wanted to 
explore what the GOV could offer on oil sales to stop 
Panamanian bus operators from going on strike for higher 
fares and prevent further internal political turmoil in 
Panama.  To add insult to injury, GOV officials at the last 
moment canceled a sub-cabinet-level meeting planned for July 
12 in Panama.  The only thing GOP officials could say for 
sure is that Hugo Chavez is supposed to attend the July 28-29 
Caribbean summit in Panama.  The backdrop for the Caracas 
visit is the GOP's perceived need to isolate seditious union 
activists following the June 22 suspension of Law 17 on CSS 
(social security) reform.  (See Reftel A.)  End Summary. 
 
Concerns About Domestic Stability 
--------------------------------- 
2.  (C) Panamanian FM Lewis and MOCI Ferrer separately told 
POL Counselor that their July 6 meeting with Venezuelan 
Foreign Minister Ali Rodriguez in Caracas was prompted by 
concerns that Venezuela might be sending financial aid to the 
GOP's radical opposition and to explore what the GOV might be 
willing to offer Panama on oil.  The question in everyone's 
mind, FM Lewis explained, is whether Venezuela is supporting 
the GOP's most strident opponents -- the leftist SUNTRACS 
construction union and its eminence grise, former CSS boss 
Juan Jovane -- who recently have led attempts to derail 
CSS-social security reform.  Given the poor state of 
Panama-Venezuela relations, Lewis said it was time to improve 
communications with the GOV.  In addition, Lewis and MOGJ 
Aleman wanted to signal both the Venezuelans and SUNTRACS 
that the GOP will be closely watching for any signs of 
foreign financial support.  Also, Lewis explained, the high 
price of oil has potential implications for domestic 
political stability.  SUNTRACS is trying to convince angry 
Panamanian bus operators and taxi drivers to strike for 
permission to hike fares, which the GOP has refused.  To head 
off such a strike, which would be debilitating, the GOP wants 
to lower the cost of gasoline or at least be seen trying to 
do so. 
 
GOP Advises Chavez Not To Meddle 
-------------------------------- 
3.  (C) Lewis said that Venezuelan President Hugo Chavez had 
suggested the idea for visit at the June 18 MERCOSUR summit 
in Asuncion, Paraguay.  According to MOGJ Aleman, Chavez 
asked Lewis, then in Asuncion representing Torrijos (who had 
stayed in Panama due to anti-CSS reform strikes), why 
bilateral relations were not better.  Chavez noted he was a 
legitimately elected President and questioned why Panama had 
given him the cold shoulder.  That was the genesis for the 
invitation to visit Caracas.  Aleman said when he and Lewis 
told Chavez they would not tolerate Venezuelan meddling in 
Panama's internal affairs, Chavez denied supporting the 
radicals but added that he could not guarantee that no one 
else in Venezuela (such as governors or mayors) was 
"free-lancing."  Later, in a pull aside in Caracas on July 6, 
FM Lewis and MOGJ Aleman told Venezuelan FM Rodriguez that, 
although they had no firm proof, they were watching the 
situation closely for evidence of Venezuelan support for 
radical groups in Panama.  Lewis explained that he and Aleman 
wanted to put FRENADESSO (anti-CSS-reform activists) on 
warning that the GOP has its own means of tracking their 
alleged foreign sponsors. 
 
Diplomacy By Photo-Op 
--------------------- 
4.  (C) The July 6 Caracas visit quickly became a comedy of 
errors for the Panamanians, who complained about the GOV's 
management abilities.  "I never saw people so disorganized in 
my life," Ferrer said.  First, the Panamanians had to 
scramble to arrive on July 6 because the Venezuelans gave 
them just three days notice.  Unexpectedly, on that day the 
Caracas airport temporarily closed.  The Panamanians had to 
land in Maracaibo and spent several hours waiting to fly to 
Caracas.  The meeting planned for 9 a.m. did not begin until 
2 p.m.  When the GOP delegation arrived, the Venezuelan 
ministers concerned with housing, health, and social issues, 
who were supposed to meet them, already had left.  Lewis had 
a 20-minute, ceremonial meeting with Venezuelan Vice 
President Jose Vicente Rangel.  From there, the Venezuelans 
led them directly into a news conference, where they had to 
face reporters' questions about their "discussions." 
 
The Joint Statement 
------------------- 
5.  (C) The two-hour Lewis-Rodriguez meeting that followed 
achieved little of substance and apparently was devoted to 
editing the joint statement released after the visit.  Ferrer 
and Lewis said they objected when the Venezuelans wanted to 
make reference to ALBA (the anti-FTAA Alternativa 
Bolivariana) and PetroCaribe, which the two sides had never 
discussed.  The Panamanians agreed to include a reference to 
Venezuela's right to request the extradition of Luis Posada 
Carriles.  Lewis said the message to FM Rodriguez on 
suspected Venezuelan support for Panamanian radicals was 
accomplished in a pull-aside.  On July 11, GOV officials 
faxed Panama to cancel their return visit without further 
explanation.  (Note: In August 2004, a day or two before she 
left office, Panamanian President Mireya Moscoso pardoned 
Cuban-born Posada Carriles, now in the United States, and 
three Cuban-Americans, all of whom had been tried, convicted, 
and jailed in Panama for their roles in an alleged plot to 
assassinate Fidel Castro at the Ibero-American Summit in 
November 2000.  That action led to a rupture of diplomatic 
relations with Cuba that continues and a temporary upset of 
relations with Venezuela.  End Note.) 
 
GOV Denies Agrement To Panama's Ambassador 
------------------------------------------ 
6.  (C) Lewis said that he did not want Panama's poor 
relations with Venezuela to "make it easy" for Venezuela to 
channel money to the GOP's internal radical opposition. 
Lewis explained that he had inherited bad relations with 
Venezuela from the Moscoso government.  Venezuela recently 
denied Agrement to Panama's choice for ambassador to Caracas, 
career diplomat Jose Maria Cabrera, due to his allegedly 
strong ties to former Venezuelan president Carlos Andres 
Perez, Lewis said.  That action may have been tit-for-tat, as 
the Moscoso government had let a GOV November 2003 Agrement 
request for Venezuelan General de Division Eugenio Antonio 
Gutierres Ramos lapse after 60 days, as the GOP thought the 
choice of a military officer inappropriate as an ambassador 
to Panama, a country without a military.  On July 12, 2005 a 
new Venezuelan ambassador, Jose Luis Perisse (formerly vice 
minister of infrastructure in 2002, then ambassador to 
Algeria and Tunisia, not a military officer), arrived in 
Panama to replace ambassador Flavio Granados, who served for 
three years.  Aleman noted that Panama was unusual in Latin 
America in not having open lines of communication with 
Venezuela, adding that Colombia, Argentina, Brazil, and the 
Dominican Republic all maintained ties. 
 
2000 Caracas Agreement, COPA, Tax Havens, Chiriqui Oil 
Pipeline 
--------------------------------------------- ----------------- 
7.  (C) Ferrer said he was "not optimistic" about reaching 
agreements with the Venezuelans.  "For them, it's all about 
optics," he said.  On July 6, Ferrer said he had planned to 
discuss the November 2000 Caracas Agreement, which Panama 
wants to implement.  The Caracas Agreement offers 
concessionary Venezuelan financing for Panamanian oil 
purchases.  Ferrer also wanted to see what price breaks were 
on offer on oil, if any.  Panama is not interested in joining 
PetroCaribe, Ferrer said, adding that the GOV never raised 
the issue.  Also, COPA Airlines would like to increase its 
flight frequencies to Caracas to 21 a week (from 14 now).  In 
addition, Ferrer said he wanted to convince Venezuela to take 
Panama off its tax havens "black list."  Finally, 
GOV-proposed renovations to a U.S.-operated pipeline in 
western Panama to carry Venezuelan crude to a Pacific Ocean 
port were never raised on July 6, Ferrer said. 
 
No Middle Ground 
---------------- 
8.  (C) Aleman told A/DCM that polarization within Venezuela, 
with families divided between Chavista and opposition, 
reminded him of the situation in Panama in the late 1980s. 
He said there was no middle ground in Venezuela.  Chavez's 
social programs are gaining support for the regime, and 
Aleman thought Chavez likely to win an election in 2007. 
Thus, the GOP reckons that Chavez may be around until 2012 
and that Panama will have to deal with him. 
 
"Pact With the Devil?" 
---------------------- 
9.  (C) To POL Counselor's query on whether Panama was making 
a "pact with the devil" by looking for concessionary oil 
prices from the Chavez government, Lewis said the high price 
of oil is causing great stress in Panama. 
Sixty-dollar-a-barrel oil kills economies like ours, Lewis 
explained, and puts small countries in a desperate position. 
It probably was inevitable that someone like Chavez would try 
to use his "outrageous wealth" to try to become a regional 
godfather, Lewis continued.  With PetroCaribe, Chavez will be 
trying to control 14 votes at the OAS and eight at the IDB. 
But what's the alternative?  The oil price issue by itself 
could make some countries ungovernable, he added.  Panama's 
case is different because Panama "will not change its 
trajectory, we're committed to open markets," he said, but 
Panama is also interested in lower prices.  If oil prices 
turn around, Lewis said, those guys (the Venezuelans) will be 
in trouble.  The GOV is banking on prices of $80-100 per 
barrel by the end of 2005 and "they're pissing it away like 
there's no tomorrow."  Every dollar added to the oil price 
represents another billion dollars in annual oil revenues for 
Venezuela, he said. 
 
Comment 
------- 
10.  (C) Lewis's July 6 trip to Caracas raised eyebrows at 
the Embassy and in Washington, as the GOP knew it would. 
That is why FM Lewis contacted POL Counselor on July 5 with a 
heads up about the visit.  (See Reftel B.)  POL Counselor 
told MOCI Ferrer and FM Lewis separately that Washington was 
concerned about the optics of the visit.  Both were at pains 
to palliate our concerns, except that Panama wants to find a 
way to lower the price of gasoline and head off the potential 
for a crippling bus and taxi strike.  In any case, the 
estrangement, not to say the antipathy between the two 
governments may prove resistant to a quick fix.  Given the 
low level of engagement reported, it seems unlikely that in 
the short term the GOP will accomplish much more than laying 
down a marker on internal security. 
 
WATT