US embassy cable - 05PANAMA1948

C O N F I D E N T I A L SECTION 01 OF 03 PANAMA 001948 
 
SIPDIS 
 
DEPARTMENT FOR WHA/CEN 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 09/16/2015 
TAGS: PGOV, PREL, PM, CM, TW, POLITICS & FOREIGN POLICY 
SUBJECT: PANAMA TURNING TOWARD TAIWAN 
 
Classified By: Charge d'Affaires Luis Arreaga for reasons 1.4 (b)&(d) 
 
Summary 
-------- 
1. (C) Panamanian President Martin Torrijos's last-minute 
September 22 announcement that he would attend a September 26 
Taiwan-Central America Summit in Managua comes on the heels 
of First Vice President and Foreign Minister Samuel Lewis's 
September 19 remarks to Chinese Foreign Minister Li Zhaoxing 
in New York that Panama plans no changes in its relations 
with Taiwan.  These two events confirm the picture emerging 
from recent meetings with Taiwan diplomats in Panama that the 
GOP is moving closer to Taiwan, apparently reversing what had 
been a recent trend toward China.  According to Taiwan 
Embassy officials, the GOP has made a series of public and 
private overtures since July that have left the Taiwans 
hopeful of improved relations.  The Taiwans cite several GOP 
assurances, starting with the GOP's spin on its late-July 
refusal to receive an early September visit by Taiwan 
President Chen Shui-bian.  The assurances include an apparent 
180-degree public turn-about by First Lady Vivian Torrijos in 
support of the Taiwan-funded Museo del Tucan and informal GOP 
offers to resume budget information-sharing to earmark Taiwan 
aid, both of which were in deep-freeze for most of the past 
year.  The Taiwans also claim that Panama balked at an 
alleged PRC ploy to swap concessions in the one-year-long 
Panama Ports Corporation (PPC) investment dispute for 
diplomatic recognition.  End Summary. 
 
High-Level Signals 
------------------ 
2. (C) On August 19, PolOff met with Cristobal Song Maw Tsaur 
of the Taiwan Embassy and Jose Chong-Hon, President of the 
pro-Taiwan Chinese Panamanian Cultural Center.  Tsaur said 
that the Taiwan Embassy had received public and private 
"signals" from "high-level" sources in the GOP that the 
Torrijos administration has taken initial steps toward 
reestablishing the warm relations that had existed between 
Taiwan and the former Moscoso administration.  Taiwan 
Political Counselor Jaime Chen (Chen Hsin Dong) confirmed 
this view in an August 26 meeting with PolOff. 
 
3. (C) Note:  The Torrijos administration has publicly and 
privately held Taiwan Embassy officials at arms length since 
taking office.  Millions of dollars in Taiwan aid money was 
personally appropriated by former President Mireya Moscoso 
and her sister, some of which was used to build the now empty 
Museo del Tucan.  President Torrijos, opposition leader 
during the Moscoso years, viewed Taiwan's support for Moscoso 
as a personal political slight.  End Note. 
 
Chen's Trip Blocked 
------------------- 
4. (C) Panamanian press July 29 quoted Foreign Minister 
Samuel Lewis that the GOP had turned down Taiwan President 
Chen Shui-bian's offer to visit Panama on September 1 as part 
of his Central American tour because the trip would interfere 
with President Torrijos' one-year inauguration anniversary 
celebrations.  According to Tsaur, when the Taiwans sought an 
explanation, "high-level" GOP officials told them that the 
time was "not yet right" to receive President Chen, but not 
to worry.  Tsaur understood this message to mean that the 
Torrijos administration was not ready to confront potential 
public disapproval over the still unresolved Moscoso-era 
corruption scandal, but that the GOP had no plans to shift 
diplomatic recognition to China.  (Note:  During his 
mid-September trip to the opening of the UN General Assembly, 
FM Lewis met in New York with PRC Foreign Minister Li 
Zhaoxing to discuss strengthening commercial ties.  According 
to the GOP, Lewis told Li that he did not foresee changes in 
GOP's current diplomatic relationship with Taiwan and 
commercial relationship with the PRC.  End Note.)  After a 
trip to Singapore in early September, Minister of the 
Presidency Ubaldino Real quietly stopped over in Taipei, 
possibly to meet with Taiwan officials regarding Torrijos's 
up-coming trip to the September 26 Taiwan-Central America 
Summit in Managua. 
 
Spanish Showdown 
---------------- 
5. (C) Both Jaime Chen and Tsaur said that a decisive 
behind-the-scenes meeting between the GOP, PPC, and PRC 
officials took place in Spain (possibly Madrid) in July. 
With PRC officials apparently present, the GOP and PPC 
allegedly discussed a final monetary figure that would 
constitute PPC's settlement of a dispute with the Torrijos 
government about the sweetheart investment deal PPC received 
from the Moscoso administration, allegedly in return for 
bribes.  The Moscoso government exempted Hutchinson-Whampoa 
from an estimated $11 billion in taxes over 40 years and gave 
it the land and port facilities that it occupied for nothing. 
 At Madrid, China's attempt to leverage the deal by asking 
Panama to confer diplomatic recognition on China for an 
undisclosed settlement appears to have backfired.  (Comment: 
PPC is owned by the Hutchinson-Whampoa Corporation, in which 
the PRC government is an important stockholder.  Minister of 
Trade and Industry Alejandro Ferrer, the GOP negotiator, has 
championed the GOP cause in correcting what he sees as an 
unjust deal.  Ferrer told Ambassador on September 19 that he 
was able to hold firm in negotiating with PPC because he had 
strong backing from Torrijos and because he was convinced 
that he was doing the right thing for the Panamanian people 
to reverse a deal that had been strongly opposed by the 
public.  A crass attempt to trade recognition for a PPC 
payoff would likely have angered Ferrer.  End Comment.) 
 
Panama Bests PPC 
---------------- 
6. (C) The Taiwans said that the Panamanians refused Chinese 
overtures but agreed to a deal with PPC which would be 
released piecemeal to the press, possibly to save face for 
PPC and to show the GOP holding a hard line.  Press reports 
of the negotiations seem to bear this out.  At the time of 
PolOff's August meetings with the Taiwans, the press reported 
the PPC offer hovered at $53 million.  It has settled at $102 
million in addition to payment of annual port facility fees 
of $22.2 million plus 10% of annual revenue and a PPC 
agreement to invest a further $1 billion that will allow them 
to remain competitive with the other port facilities.  This 
settlement amounts to a major victory for Ferrer and the GOP. 
 According to Tsaur, the PRC openly used PPC to leverage its 
interests in Panama.  Tsaur winced at the mention of 
Taiwan-based Evergreen's alliance with China-based COSCO, 
commenting that Taiwanese investment in mainland China was 
"our problem." 
 
Museo del Tucan 
--------------- 
7. (C) In early August, First Lady Vivian Torrijos announced 
her support for the movement of one of Panama's most 
important collections of archaeological and anthropological 
artifacts from the decrepit Reina Torres de Arauz Museum, to 
the new Taiwan-funded Museo del Tucan, which has stood empty 
since construction was completed in 2004.  When President 
Torrijos was first elected, First Lady Vivian Torrijos was an 
outspoken critic of the Museo del Tucan.  The empty museum, 
built by the Moscoso administration with Taiwan-donated 
money, was conceived as a children's museum, but the money to 
fill its elegant structure with art was effectively skimmed 
and embezzled by the former administration.  Tsaur said that 
his Embassy saw Vivian Torrijos' recent change of heart as a 
positive public sign that the GOP was tacitly dropping its 
antagonism toward Taiwans. 
 
Budget Sharing for Future Aid 
----------------------------- 
8. (C) Jaime Chen said that recently the GOP had expressed 
interest in sharing budget information for the purpose of 
planning what aid Taiwan could offer Panama in the future. 
According to Jaime Chen, prior to the Torrijos administration 
taking office in 2004, the Panamanian government regularly 
shared its proposed budget plan with the Taiwans in the 
planning stages.  The Taiwans would send this information 
back to the Legislative Yuan.  The Taiwans and Panamanians 
would then decide how much Taiwan would donate to Panama and 
how to spend it.  Chen said that this process was transparent 
and therefore should have exonerated the Taiwans from any 
suspicion of involvement in Moscoso's appropriation of Taiwan 
charitable donations.  (Other Taiwan diplomats have 
acknowledged that Moscoso pressed them for a bribe, which 
they paid.)  Torrijos completely shut down budget planning 
after September 1, 2004. 
 
Party Lines 
----------- 
9. (C) The Taiwans understand that, for now, the GOP wants to 
maintain a "low profile" relationship with Taiwan, fearing 
that demonstrably warm relations with Taiwan would still be a 
contentious issue in the Panamanian press.  Though the 
Taiwans are currently hopeful that their relationship with 
the GOP is on the upswing, they appear to take even positive 
signs with a grain of salt.  The Taiwans believe a number of 
key GOP advisors are pushing a pro-PRC agenda, including 
presidential advisor and former Noriega-era Foreign Minister 
Jorge Ritter, Ministry of Foreign Affairs Foreign Relations 
Director Dario Chiru (who served in Beijing and prior to his 
current position started a business and government exchange 
program with China,) and possibly Oyden Ortega (a former 
Minister of Foreign Relations and Labor Minister under 
Noriega, also one-time legislator since 1989, considered to 
be a moderate PRD).  Foreign Minister Sam Lewis has played a 
somewhat enigmatic role, identified by some as supporting the 
pro-PRC group behind the scenes while supporting the GOP line 
on Taiwan in public.  (There was speculation that diplomatic 
relations with the PRC would benefit Lewis's banana box 
business because the PRC had offered to buy up surplus 
Panamanian bananas.)  Muddying the waters, two of Lewis's 
closest MFA staff, IO Director Javier Bonagas and Foreign 
Mister's Office Director Guido Fuentes (a rising PRD) 
maintain good relationships with the Taiwans according to 
Jaime Chen. 
 
Comment 
------- 
10. (C) The Taiwans' message with Embassy contacts over the 
past few weeks has been consistent--they believe the GOP is 
planning to patch-up strained relations with Taiwan.  They 
still fear that the GOP ultimately will shift recognition to 
the PRC.  The GOP seems to be moving to stabilize its 
traditionally strong foreign relationships to shore up its 
currently weakened domestic political position (one August 
poll put Torrijos's approval rating at 34%.)  Taiwan policy 
is part and parcel of this strategy.  Although the 
possibility of a shift to the PRC in the long-term cannot be 
ruled out, Panama has no real financial incentive to do so. 
Chinese investment in Panama and its use of the Canal will 
continue to grow regardless of diplomatic ties but Taiwan aid 
will flow only as long as Panama maintains diplomatic 
relations with Taiwan.  As FM Lewis told Panamanian 
television a few days ago, it serves Panama's interests to 
maintain its current position on this matter.  Rumblings that 
began even before Torrijos was elected of a Torrijos-era 
shift toward China based on the PRD's leftist leanings have 
not been totally disproved.  But they contrast with 
Torrijos's pragmatic, close-lipped approach to the 
Taiwan-China issue.  What has been proved is the deftness 
with which the Panamanians have leveraged the issue thus far. 
 
 
ARREAGA