US embassy cable - 05PANAMA1729

C O N F I D E N T I A L SECTION 01 OF 05 PANAMA 001729 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 08/20/2015 
TAGS: PREL, PGOV, ETRD, PINR, PM, POL CHIEF 
SUBJECT: PANAMANIAN INSIDERS ACCUSE TORRIJOS GOVERNMENT OF 
POOR PLANNING AND PUBLIC RELATIONS, PROCRASTINATION, AND 
BAD POLITICAL JUDGMENT AS "PATRIA NUEVA" ENTERS ITS SECOND 
YEAR IN OFFICE -- AN ANALYSIS.  (PART 1) 
 
REF: A. PANAMA 0277 
     B. PANAMA 1377 
     C. PANAMA 1423 
     D. PANAMA 1496 
     E. PANAMA 1184 
     F. PANAMA 0629 
     G. PANAMA 1645 
     H. PANAMA 1613 
     I. 04 PANAMA 2613 
 
Classified By: Charge d'Affaires Luis Arreaga for reasons 1.4 (B) AND ( 
D). 
 
1.  (SBU) This message is the first in a three-part series on 
views of the Torrijos administration's performance as it 
approaches its September 1 first anniversary. 
 
SUMMARY AND INTRODUCTION 
------------------------ 
2.  (C) Martin Torrijos's reform-minded, modernizing 
government -- "Patria Nueva" or New Homeland as it styles 
itself -- is in danger of losing its way and putting at risk 
its principal objectives -- such as social security reform, a 
referendum on Canal widening, ending official corruption, and 
concluding a U.S.-Panama Free Trade Agreement -- due to poor 
leadership at the top.  A picture emerges from Embassy 
Political Section discussions with sharply critical 
government insiders and others close to the action: Torrijos 
dislikes public appearances, interviews, or confrontations; 
cannot focus on more than one thing at a time; has no plan 
for governing; habitually procrastinates; keeps his own 
counsel while his cabinet guesses his intentions; and has a 
political "tin ear."  Panama's worst crisis under Torrijos so 
far -- in June over social security reform legislation -- is 
indicative of shortcomings in his style of leadership.  After 
twice publicly refusing demands for a national dialogue on 
CSS, Torrijos received a shock when "old guard" elements 
within his ruling Democratic Revolutionary Party told him to 
back down or face a crumbling of presidential authority, 
according to Embassy contacts.  In the unlikely worst case, 
Torrijos possibly would lose his ability to govern 
effectively, open a political space for leftist/populist 
electoral participation, lose a referendum on Canal widening, 
and permit former President Ernesto Perez Balladares to make 
a political comeback, all of which would harm U.S. interests. 
 It is possible that the Torrijos government will learn from 
its mistakes.  At the least, his government's first year, 
with a few exceptions, likely will be remembered for mediocre 
performance, dashed expectations, and squandered 
opportunities.  END SUMMARY AND INTRODUCTION. 
 
Great Expectations 
------------------ 
2.  (C) The problem with Torrijos's performance and the 
record of his government as they enter their second year in 
power on September 1, 2005 is rather one of dashed 
expectations. The public, opinion makers, and insiders widely 
assume that the sky-high expectations that Torrijos created 
for himself and which swept him into the Presidential Palace 
will be unmet.  The spreading impression is that Torrijos 
will fail, perhaps badly, at fulfilling the high standards 
and high hopes that he set for himself when he entered office 
and which he seemed uniquely placed to achieve. 
 
Promises, Promises... 
--------------------- 
3.  (C) Torrijos and Patria Nueva came into office promising 
jobs and an end to official corruption.  Torrijos said he 
would modernize the government, the infrastructure, bring 
Panama into the twenty-first century, and make it a "First 
World" country.  After holding a constitutionally mandated 
referendum, the new administration would expand the Canal, a 
10-to-20-year, multi-billion-dollar project that, official 
sources say, would create thousands of jobs and boost the 
economy.  Along with the promise to eliminate official 
corruption came stated intentions to make the government more 
efficient by raising revenues and drastically cutting 
official debt and the government payroll.  A new tourist 
industry would be launched.  Panama's transportation system 
would be upgraded and modernized.  Also, Patria Nueva was to 
be a government with a social conscience that would reduce or 
eliminate poverty.  Torrijos's approval ratings were close to 
80% at the time of his inauguration. 
 
Down, But Not Out? 
------------------ 
4.  (C) If those expectations were impossibly high, it was 
because Panamanian voters wanted to believe what Torrijos 
told them.  In fairness, if Patria Nueva is underperforming, 
it probably is not notably worse than its predecessors. 
Torrijos has stumbled badly in his first year, with his 
approval ratings falling to just over 20% in June, following 
a month of strikes and public protests to the Social Security 
(CSS) reform law, he may yet recover.  By mid-August they had 
improved to nearly 50%. 
In Mitigation 
------------- 
5.  (C) The Torrijos government does not suffer from lack of 
good intentions.  In fairness, it already has several 
achievements under its belt, such as a constitutional reform, 
a not-quite implemented fiscal reform, continuing reductions 
in the government payroll, and a half-accomplished reform of 
CSS, now being re-negotiated, to put CSS on a sounder 
financial footing and save it from impending bankruptcy.  It 
has also proved, on the whole, friendly, cooperative, and 
highly responsive to U.S. interests. 
 
In mitigation of the critics, it can be argued that 
 
-The young and inexperienced Torrijos team found getting 
things done much harder than it imagined 
 
-Patria Nueva inherited a frankly bad fiscal situation from 
the previous government, a grotesquely swollen payroll, and a 
looming crunch in the social security system 
 
-The Torrijos cabinet is notably less corrupt than its 
predecessors, at least so far, although the real 
opportunities for graft will come later with awarding Canal 
expansion contracts 
 
-Torrijos and his inner circle say they are counting on a 
deliberate, considered approach to changing the Supreme 
Court, relying on making two new appointments by 2006, to 
avoid attacking the Court head-on and so risk undermining the 
state's legitimacy. 
 
However, Martin Torrijos is proving himself to be a much less 
astute and skilled politician than Mireya Moscoso. 
 
(We will expand the government's point of view and U.S. 
interests in the second message in this series.) 
 
A Politician Who Dislikes Politics 
---------------------------------- 
6.  (C) Torrijos's communication problems with his top 
officials have been so pronounced that insiders themselves 
are not sure whose advice Torrijos listens to or how Torrijos 
reaches decisions.  They describe the president as shy and 
risk averse, an arch-procrastinator who continually waits for 
the "right" moment to take action on an issue or announce a 
decision taken weeks or months earlier, instead of taking the 
lead to mold public opinion and campaigning to create a more 
favorable political climate for himself.  A member of the 
government has told POL Counselor that Torrijos has "a method 
of working that no one understands."  Torrijos disdains the 
rough and tumble, the cajoling, the arm twisting, the 
shmoozing, the backroom bargaining sessions with opponents or 
antagonists that other politicians seem to relish.  In fact, 
Torrijos often acts like a politician who dislikes politics. 
 
Missed Opportunities 
-------------------- 
7.  (C) As a result, as political consultant Jose Blandon, 
Sr. recently pointed out to POL Counselor, coordination 
problems abound, time passes, and opportunities are missed or 
bungled.  People increasingly doubt not the president's good 
intentions but his political judgment, his talent as a 
political decision maker, and his skill as a politician. 
Procrastination -- on judicial reform promised in the 
campaign, on a government shakeup (which Torrijos first began 
to consider in April), the U.S.-Panama Free Trade Agreement 
(FTA) talks begun by the previous government (now suspended 
by mutual agreement) -- feeds on itself.    The GOP's public 
relations incompetence has been "enormous."  June would have 
been a good time for a government shakeup (which was first 
rumored in April), Blandon continued, but added that Torrijos 
probably would delay and procrastinate further.  Delay also 
creates uncertainty and more reasons to continue to 
procrastinate.  New, more difficult circumstances arise while 
projects remain undone, making them harder to accomplish. 
Government planning increasingly becomes prey to unforeseen 
events, the calendar gets more and more crowded as time 
passes, difficult decisions postponed become more difficult, 
and the "right" time to make a move recedes into the 
distance. 
 
"He's Not Doing It" 
------------------ 
8.  (C) One example, Blandon, said, is the run-up in oil 
prices, which generally coincided with Panama's May-June 
social security crisis, and which continued through the 
summer.  Blandon recalled that the Social security issue 
originally was on Torrijos's calendar for November 2004. 
Rising pump prices puts pressure on bus owners, who the GOP 
will not permit to raise fares (currently 25 cents) but 
instead must grant unsustainable subsidies.  Torrijos's 
mishandling of CSS reform, Blandon said, his failure to 
consult, his post-crisis weakness left him short of political 
capital and in a more delicate situation vis-a-vis the bus 
owners and bus riders than before.  The president himself 
must sit down with Panamanian business leaders, politicians, 
professionals but he is not doing it, Blandon said. 
 
Energy Market Intervention 
-------------------------- 
9.  (C) In fact, he appears to be doing the opposite, as the 
GOP reportedly will announce new, interventionist energy 
policies on August 22, giving it the power to interfere in 
Panama's private energy market.  The measures have been 
developed with minimal consultation with private companies 
and reflect the government's desperation to avoid a transport 
strike. 
 
Relations With Venezuela, Cuba 
------------------------------ 
10.  (C) (Comment: Suddenly, improving relations with 
Venezuela and seeking a deal on fuel finance costs have 
become a GOP priority, as Torrijos needs to show he is doing 
all he can do to moderate fuel costs.  Torrijos is programmed 
to visit Chavez in Caracas in several weeks and also to meet 
Chavez and Fidel Castro in Havana August 20-21.  Although 
nobody can control the price of oil, one can speculate 
whether Torrijos would have had to make either of those trips 
had his internal political position been more secure.  The 
high price of oil may yet complicate whether and to what 
extent Torrijos can get his way on CSS reform, which comes 
due in early October.  See Reftel C, "Senior Panamanian 
Officials To Visit Caracas July 6 Seeking Oil Deal," PANAMA 
1423 and Reftel D, "Panama-Venezuela Relations Stuck On 
Internal Security Concerns, High Oil Prices," PANAMA 1496.) 
 
Delays And More Delays 
---------------------- 
11.  (C) The Canal referendum, once penciled in for early 
2005 now probably will not take place until mid-2006 at the 
earliest.  The bilateral FTA, which Panama could have 
concluded in the fall of 2004, now looks increasingly awkward 
for 2005, given the government's sensitivity to political 
criticism in the wake of the anti-CSS reform strikes. 
Specifically, the GOP fears uniting its critics from 
sensitive agricultural sectors with radical trade unionists 
and other protesting CSS reforms, Trade Minister Alejandro 
Ferrer recently told POL and ECON Counselors (See Reftel G, 
"Panama Trade Minister Wants To Meet USTR On FTA; Timing A 
Dilemma," PANAMA 1645.)  Since appointing a commission to 
study judicial reform in April 2005, at the height of public 
outcry at perceived abuses at the Supreme Court, Torrijos has 
said almost nothing about it, though he will be forced to 
react when the commission makes its report on September 10. 
(See Paras 14-17.)  One month later, October 5, is the date 
that the National Dialogue on CSS reform ends. 
 
A Secretive Autocrat? 
--------------------- 
12.  (C) At the same time, Torrijos has a tendency to act in 
ways that seem secretive, autocratic or high-handed, as in 
the midnight passage of both the fiscal reform bill (January 
31) and the (June 1) CSS reform law known locally as "el 
madrugonazo" (something done when people are asleep).  (Note: 
See Reftel A, "Fiscal Reform Passes With A Grimace," PANAMA 
0277 and Reftel B, "Panama President Bows To Labor Pressure 
But Not Low Enough To Suit His Opponents," PANAMA 1377) 
Those actions have unfortunate echoes to the times of 
Martin's dictator dad, Omar Torrijos, when Panama was a 
military dictatorship.  In truth, U.S.-educated Martin 
Torrijos probably has nothing in common with his father's 
political outlook, though in some quarters his Democratic 
Revolutionary Party (PRD) still bears a fading stigma for 
being the party of the dictators. 
 
In The Dead Of the Night 
------------------------ 
13.  (C) With the PRD's clear majority in the Assembly, why 
push the (CSS) bill through at midnight? Presidential advisor 
Jorge Ritter said to POL Counselor recently.  "It gives the 
impression of doing something dirty and underhanded," Ritter 
said.  Torrijos thought passage of the bill would end the 
strikes, but he miscalculated, Ritter said.  Instead, 
Torrijos himself was forced to back down on granting 
permission for a national dialogue of social security reform, 
an idea he had twice pledged not to allow.  See Reftel D and 
Reftel E, "Panama's CSS Reform Package Passes With Minor 
Changes," Panama 1184.) 
 
No Action On Anti-Corruption 
---------------------------- 
14.  (C) In almost 12 months since taking office, the 
Torrijos administration has yet to try, let alone jail, 
anyone on a myriad of egregious, high-profile corruption 
cases left over from the 1999-2004 Moscoso administration, 
even though it was elected on a platform of "zero 
corruption."  That and other evidence lends credence to 
charges that Torrijos has made a political "non-aggression 
pact" with the Panamenista Party of Mireya Moscoso, known as 
the "Pacto Ma-Mi" (Martin-Mireya) in local argot.  The 
shameful spectacle of continuing official impunity past, 
present, and future, paints an ugly picture of Panama's 
rulers -- a parasitic political class that gives its members 
"Get Out Of Jail Free" cards, while alternating in power, 
with mutual and reciprocal permission to carve up state 
assets.  Impunity corrodes the legitimacy of the Torrijos 
government and Panamanian democracy, critics say, and creates 
an opening for radicals and populists who will find ready 
audiences for their accusations. 
 
Prados Del Este And Bolivar Pariente 
------------------------------------ 
15.  (C) (Comment: The sole exception to the continuation of 
official impunity is the jailing of Bolivar Pariente, the 
former head of Banco Nacional de Panama, who was implicated 
in loan and other irregularities in the September 2004 Prados 
del Este scandal.  The scandal -- which involved the 
allegedly illegal construction and financing of a housing 
development on a flood plain -- erupted shortly after 
Torrijos took power when a flood destroyed the neighborhood 
and left several dead.  The reason Bolivar Pariente is in 
jail at all, cynics say, is that he made the Torrijos 
government look bad, by fleeing the country when he was 
called in for questioning, then trying to negotiate the terms 
of his surrender from abroad.  Embassy had taken a sanguine 
view of Torrijos's efforts to change Panama's culture of 
official and non-official corruption but his continuing 
inaction has led us to reassess.  See Reftel I, "Panama: 
Torrijos Government Gets Fast Start On Anti-Corruption," 04 
PANAMA 2613.  End Comment.) 
 
Kicking The Can On The Supreme Court 
------------------------------------ 
16.  (C) In recent discussions, Presidential Secretary for 
Goals and Planning Ibrahim Asvat (protect) told POL Counselor 
that the GOP has no strategy on what to do about the Supreme 
Court.  The six-month compact with civil society groups to 
"solve" the Supreme Court issue ("State Pact for Justice" 
that expires on September 5, 2005) is simply an instance of 
"kicking the can."  The Harvard-educated Asvat said he argued 
at a cabinet meeting (that included Jorge Ritter, Dani 
Kuzniecky, Jorge Snchez, Ubaldino Real, Hector Alemn, and 
Martin Torrijos) that asking the legislature to investigate 
Justice Arjona's accusations against Justices Oyos, Salas, 
and Spadafora probably would produce enough evidence and 
public outcry to make it possible to impeach them.  (See 
Reftel F, "Panamanian Supreme Court Fracas Blurs Government 
Focus On Social Security Reform," Panama 0629.)  The cabinet 
reached no conclusion, he said. 
 
CEMIS Intrudes... 
----------------- 
17.  (C) The Supreme Court "crisis" thus represents a big 
opportunity for the GOP to firmly establish its 
anti-corruption credentials, Asvat continued.  Asvat's 
impression was that the cabinet wanted to go easy on the 
Court because it was afraid of getting dragged down by the 
unresolved 2002 CEMIS scandal (possibly Panama's most 
notorious corruption scandal of recent memory) and did not 
want to motivate the Court to counter-investigate the 
legislature on CEMIS, which is now before the Court.  The PRD 
probably took around $900,000 in bribes on CEMIS, he said. 
(Note: That amount is within the ballpark of what has been 
widely assumed.  End Note.)  Asvat decried permitting NGOs 
and civil society to set the public agenda.  The president 
should set the agenda, he said.  (See Reftel G, Panama 
Attorney General Tests Torrijos Administration, Reopens CEMIS 
and Supreme Court Bribery Cases," PANAMA 0778.) 
 
"Legacy" Issues 
--------------- 
18.  (C) Dani Kuzniecky, possibly the most idealistic member 
in a government of optimists, also is critical of the 
president.  Although it is aware of its priorities, painfully 
so, he told POL Counselor in recent conversations, the 
government has no real plan to achieve them.  (See Reftel H, 
"Panamanian Comptroller General Dani Kuzniecky Disenchanted 
With Torrijos, Mulls Calling It Quits," PANAMA 1613.) 
Kuzniecky said he keeps telling Torrijos that he must 
concentrate on five main "legacy" issues which are his and 
his alone and which only his direct intervention and 
participation can accomplish -- Tourism, Canal Modernization, 
Airport Expansion, Port Investment, and Jobs/Employment 
Creation.  The president himself must take the lead on those 
issues and should ensure that they are done or are on their 
way to being done when he leaves office, Kuzniecky said, 
adding "I always remind him of that."  Kuzniecky said he also 
always reminds Torrijos that he has a unique opportunity, 
perhaps not to be repeated, to accomplish great things in 
Panama and to really put the country on a new footing and 
path.  The trouble is, Kuzniecky implied, it's just not 
happening... 
 
Next Installments 
----------------- 
19.  (SBU) Part 2 of this message will present the 
government's views, review U.S. interests, and analyze more 
critical observations.  Part 3 will provide a first-year 
score card on Panama's economic performance under the 
Torrijos administration. 
 
ARREAGA