US embassy cable - 05PANAMA2162

C O N F I D E N T I A L SECTION 01 OF 05 PANAMA 002162 
 
SIPDIS 
 
DEPARTMENT ALSO FOR WHA/CEN, WHA/AND, AND WHA/CAR 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 10/27/2025 
TAGS: PREL, PGOV, ETRD, ECON, PM, POL CHIEF 
SUBJECT: PANAMANIAN OFFICIALS OPTIMISTIC THAT CANAL 
EXPANSION WILL LIFT ALL BOATS, BOOST POLITICAL PROSPECTS, 
DEFINE LEGACY AS PATRIA NUEVA ENTERS SECOND YEAR IN OFFICE 
-- AN ANALYSIS (PART 2) 
 
REF: A. PANAMA 1729 
     B. PANAMA 2141 
 
Classified By: CDA LUIS ARREAGA FOR REASONS 1.4 (B) AND (D). 
 
1.  (SBU) This message is the second in a three-part series 
on views of the Torrijos administration's performance as it 
passes its September 1, 2005 first anniversary.  Part One 
(Reftel A) evaluated the performance of the Panamanian 
government (GOP), citing the views of critics outside and 
inside the GOP.  Part Two elaborates on the GOP's view of 
itself; analyzes reasons for its domestic failures; and 
examines the interplay between the GOP's domestic performance 
and U.S.-Panamanian bilateral issues.  It also reviews how 
U.S. interests, especially security and the Canal, may be 
affected by GOP initiatives and political prospects, in the 
context of the November 6-7 visit to Panama of President 
Bush.  Part Three will examine the Torrijos administration's 
progress in achieving its economic priorities. 
 
SUMMARY AND INTRODUCTION 
------------------------ 
2.  (C) As it tries to find its political moorings following 
what was widely seen as political ineptitude during its first 
year, the Panamanian government (GOP) of Martin Torrijos is 
actively leveraging its relations with the United States.  It 
is counting on President Bush's November 6-7 visit and a 
November 7 bilateral statement, with possible mention of 
"secure trade and transportation" and a Free Trade Agreement 
(FTA), to help its domestic political prospects.  Given the 
GOP's self-perceived vulnerabilities, the key for the USG 
will be to find a formulation of shared interests that boosts 
the GOP without highlighting its failures, such as its 
failure to conclude the FTA. 
 
3.  (C) The GOP is friendly to U.S. interests (and the 
population is over-90% pro-American) but its aura of weakness 
encourages its domestic opponents.  That weakness, combined 
with the "Chavez factor" -- the constant spectacle of Hugo 
Chavez trying to poke his finger in Uncle Sam's' eye -- in 
turn encourages local extremists.  Given the GOP's weakened 
domestic position and the president's under-50%-approval 
ratings, hopes to cultivate Torrijos as a foil to Hugo Chavez 
in an increasingly unstable region probably are far-fetched. 
Torrijos does not have a secure enough domestic platform -- 
or fire in the belly -- to be a high-profile democratic 
crusader in the "anti-Chavez" mold.  On the contrary, the GOP 
is cautiously courting Chavez to buy oil products on credit. 
In general, Torrijos wants good relations with Chavez and 
Fidel Castro, to allay its fears of Venezuelan and Cuban 
meddling in local politics. 
 
4.  (C) As the Torrijos government emphasizes Panama's 
traditional reliance on its geographical endowments as an 
epicenter of world trade and its relations with the U.S., its 
lack of direction domestically is a major impediment to 
foreign and domestic policy objectives.  Torrijos probably 
can recoup his internal position by building on the momentum 
he gains from President Bush's November 6-7 visit, but only 
if he moves quickly to wrap up CSS-Social Security reform and 
finalize a U.S.-Panama FTA, which are intended to improve the 
government's finances and its attractiveness to investors. 
Torrijos is betting his government's  political prospects and 
his legacy on expanding the Canal -- and on winning a 2006 or 
2007 referendum to expand it -- confident that the massive 
infrastructure project will set off a long economic boom. 
End Summary and Introduction. 
 
The Torrijos Dilemma 
-------------------- 
5.  (C) Operationally, the Torrijos government often seems to 
be at sea.  The government's poor decision-making apparatus 
and its public relations deficit partly are to blame, as is 
Torrijos's "government of rookies," where his close friends 
hold a lot of the important jobs.  With friendship playing so 
large a role, Torrijos hesitates to fire or criticize them, 
as became clear in September's half-hearted cabinet 
reshuffle.  For example, replacing his school chum Javier 
Acha with Leonel Solis at Panama's intelligence-gathering 
Consejo was arguably the biggest change Torrijos made, with 
the result that Acha and Torrijos were not on speaking terms 
for some time, and their friendship is strained. 
 
Foreign Minister Lewis: Gravitas 
-------------------------------- 
6.  (C) (Comment: Son of a respected former foreign minister 
and ambassador to Washington, whose well-connected family 
once hosted the Shah of Iran on Contadora Island, Vice 
president/Foreign Minister Samuel Lewis is a businessman with 
politics in his blood.  He is close to every major decision 
that the Torrijos government makes.  For lack of a better 
word, Lewis's broad judgment and perspective lends gravitas 
to the administration, although he is better versed on 
foreign affairs than internal politics.  A 2009 presidential 
hopeful, Lewis is not politically disinterested.  That may be 
an advantage because his political fate is closely tied to 
Torrijos, thus he may give the best advice the president 
gets.  Political consultant Jose Blandon, Sr. told POL 
Counselor he agrees that Lewis probably is Martin Torrijos's 
best advisor but he wonders, as the president's close 
personal friend, whether Lewis "pulls his punches" to avoid 
offending Martin and is more eager to preserve his friendship 
than engage in "hard talk".  Others suspect that Lewis's 
business interests at times may influence GOP decisionmaking. 
 End comment.) 
 
No Chief Of Staff 
----------------- 
7.  (C) Minister of the Presidency Ubaldino Real, a political 
neophyte, is a leading Friend of Martin.  Real's excellent 
access and personal relations with Torrijos combined with his 
ministerial position mean he is uniquely placed to be the 
president's chief of staff, to combine, as one wag put it, 
the roles of the president's alter-ego and cabron (heavy). 
But Real has chosen not to do it and the president has not 
insisted.  Instead, Real concentrates on a myriad of special 
projects.  Without a chief of staff Torrijos has no orderly, 
dependable method of receiving information or making 
decisions.  The decision-making "process," then, relies on 
the haphazard order that issues reach the president's desk 
(or not), how they happen to be presented, and on his mood. 
That means no one, including Torrijos himself, is pushing the 
president's agenda in an orderly, coherent way.  And no one 
is pushing the president to make decisions.  (Note: Lucho 
Melo, Torrijos's personal assistant, is not a chief of staff. 
 End note.)  In effect, the GOP has no self-regulating 
mechanism, no rudder. 
 
Security To The Fore 
-------------------- 
8.  (C) In contrast to its lethargy and indirection in its 
internal political strategy, the GOP has been almost 
hyperactive on security policy.  The GOP's "Panama Secure 
Trade & Transportation Initiative" (PST&TI), which pitches 
improvements to Panama's security and border preparedness and 
closer Panama-U.S. security cooperation and enhanced 
security-related information sharing and training is one 
example.  (Note: A DAS-level inter-agency USG team came to 
Panama to discuss the proposal in late September.  End note.) 
 Further, the GOP wants to split off the so-called 
"paramilitary" border units of the Panamanian National Police 
(PNP) and place them in a new PNP "border force."  The 
National Air (SAN) and National Maritime (SMN) Services also 
are to be merged into a new "Coast Guard."  All are 
interesting proposals but resources to make the new systems 
"go" are lacking.  Most of the credit for these initiatives 
belongs to Minister of Government and Justice Hector Aleman, 
although whether he will get the money he needs to pay for 
new patrol boats, aircraft, training, and maintenance is far 
from clear.  If he does not, then a combined SAN-SMN will 
make little difference. 
 
Regional Role? 
-------------- 
9.  (C) Minister Aleman wants Panama to play a bigger role 
regionally and spur regional security coordination as Panama 
chairs SICA (CentAm Integration System) for the next 12 
months.  Meanwhile, the Embassy's access to high-level 
Panamanian officials, including President Torrijos, remains 
unmatched, while the level of cooperation between Panamanian 
and U.S. drug enforcement, immigration, and security 
officials, in many ways is even better under Torrijos than it 
was under President Moscoso.  But given the GOP's sensitivity 
to criticism from local anti-military opinion (the GOP is 
routinely accused of planning to re-militarize Panama), the 
GOP seems to have two minds about how much attention to draw 
to its forward thinking on security.  That, combined with 
lack of progress on the bilateral FTA, could make it awkward 
for Presidents Bush and Torrijos to say much of substance on 
security or trade on November 7, frustrating important U.S. 
objectives. 
 
Minister of Presidency Real: Intentions vs. Performance 
--------------------------------------------- ---------- 
10.  (C) Nowhere are the Torrijos administration's 
contradictions between good intentions and performance, and 
its confusion of strategy with wishful thinking more apparent 
than in a discussion with Ubaldino Real.  In his final 
meeting with Ambassador Watt late June, following weeks of 
noisy, sometimes violent demonstrations protesting the GOP's 
CSS-reform law, Real complained that the government faced a 
situation where it had no allies.  What was happening in the 
streets was contrary to all the advice and predictions that 
the GOP had received, he said, but "We still know we're doing 
the right thing."  "Don't explain this to me," the Ambassador 
said bluntly.  "Explain it to the Panamanian people.  You've 
got to get your president out there," she rejoined. 
 
Public Relations Deficit 
------------------------ 
11.  (C) Real acknowledged the GOP's long-standing public 
relations problem, which begins at the top, with President 
Torrijos.  In reply to implorings for Torrijos to get out the 
government's message, Real admitted, Torrijos "doesn't 
communicate well" and comes across as "wooden."  Telling Real 
that the PRD's possible political fragmentation is "the 
biggest problem you've got," the Ambassador reminded him that 
Torrijos's political opponents, especially former president 
Ernesto Perez Balladares, is "trying to peel off your people." 
 
Poverty: The Single Biggest Problem 
----------------------------------- 
12.  (C) Poverty is the biggest single threat to Panama's 
democracy, Real said at the June meeting, a point he also 
emphasized with Ambassador Eaton during a mid-September 
courtesy call.  In June Real said that he is more worried 
about the poorest 40-plus-percent of the population who are 
not covered by Social Security than those who are, adding 
that he is "amazed we don't have more unrest with our levels 
of poverty."  Real did not explain how the government plans 
to reduce poverty levels.  In his September meeting with 
Ambassador Eaton, Real implied that Canal expansion would 
provide a way out. 
 
Economic Boom Is Coming 
----------------------- 
13.  (C) The proposed Panama Canal expansion -- a massive, 
multi-billion-dollar infrastructure project, billed as the 
biggest in Latin America -- will set off a decades-long 
economic boom, Real claimed.  The GOP will hold a referendum 
on Canal widening in September 2006, Real told Ambassador 
Eaton.  Although polls show that 60% of the public will vote 
"yes," Real quickly added that the government must approach 
the issue (and the date for the vote) "carefully and calmly." 
 Real agreed with Ambassador Eaton's suggestion that a visit 
by President Bush to the Canal during his November visit 
could help the GOP's referendum prospects.  (Comment: The 
GOP's inability thus far to resolve the CSS issue and other 
internal problems has led it to continually postpone the date 
for the Canal referendum.  Also, the Panama Canal Authority 
(ACP) has been reluctant so far to reveal its plans and 
financing ideas.  In a separate late-June meeting with 
Ambassador Watt, Real had said the Canal referendum would be 
held in March 2006.  End comment.)  Real also said that 
"99.9%" of Panamanians favor an FTA with the United States (a 
wishful figure, at best) and vowed that the GOP would not 
hold it up "just for a small group." 
 
"We're Not Bolivia" 
------------------- 
14.  (C) One of the GOP's pillars and strongest defenders, 
Vice President/Foreign Minister Samuel Lewis often insists, 
as does Real, that he is "very optimistic" about the GOP's 
political prospects.  In a July meeting with POL Counselor, 
Lewis emphasized that he is "absolutely positive" that the 
GOP will fulfill its agenda.  President Torrijos is 
politically "savvy" and knows what he wants to do, Lewis 
said.  "Panama is not Bolivia," he said, adding that Panama 
is not unstable.  But Lewis also recited a long list of GOP 
mistakes, including several failures to consult widely and 
well in advance (on the still-pending fiscal reform and 
CSS-social security), ministerial incompetence in allaying 
discontent among teachers and health workers, broken promises 
from professional groups, costly missteps in timing (that led 
to the midnight passage of the CSS bill), failures in 
judgment in dealing with the leftist opposition, all of which 
damaged the government's credibility and led to a mass 
rejection of the CSS bill, which was passed at midnight on 
June 1.  The GOP's ill-considered actions forced it to lower 
its expectations on what it could accomplish on CSS reform, 
Lewis acknowledged, who also said that fixing CSS is the key 
to the GOP's financial well being. 
 
The Leftist Agenda 
------------------ 
15.  (C) Leftist forces -- specifically the SUNTRACS 
construction union bosses Genaro Lopez and Saul Mendez and 
ally, former CSS director Juan Jovane (fired in 2003) -- have 
quietly prepared for years to use the CSS issue as a 
battleground to mobilize wide support, Lewis said.  With the 
connivance of former president Moscoso, Lewis claimed, Jovane 
padded the CSS payroll with thousands of former SUNTRACS 
workers or spouses.  (Note: According to Lewis, Moscoso's 
quid pro quo was that Jovane would add one of her nominees to 
the CSS payroll for every two of his.  End note.)  At the 
same time, Jovane accelerated the CSS crisis by pushing it 
closer to bankruptcy.  The leftist "rejectionists," Lewis 
continued, want to make changes to the state and overthrow 
Panama's democratic political system.  No other issue -- 
Canal expansion, Free Trade Agreement, fiscal reform -- is as 
useful to them.  Lewis believes the GOP now has the leftists 
in a box, as it may be on the verge of striking separate 
deals with teacher and health practitioners -- whose 
interests diverge sharply from SUNTRACS -- depriving the 
radicals of their mass support.  One of the GOP's best 
achievements during the May 2005 anti-CSS FRENADESSO strike 
was police restraint, Lewis said.  "We created no martyrs." 
 
"A Leaf On A Pond" 
------------------ 
16.  (C) GOP Secretary of Goals and Planning Ebrahim Asvat 
described Panama for POL Counselor as a country like a leaf 
on the surface of a pond being blown by the wind, due to lack 
of far-sighted leadership.  Things take much too long to get 
done, Asvat complained.  About 80% of what a president needs 
to do is communicate, he added.  The political process 
depends on the president making decisions, formulating 
strategy, and identifying political allies, but by moving 
slowly, the government has lost control over time, he griped. 
 Consultant Blandon told POL Counselor on October 20 that the 
government usually does not explain things, and when it does 
explain, it explains badly.  "Who tells Martin the truth?" he 
asked.  (Comment: A consistent low-key critic of Torrijos, 
Asvat is a member of the Popular Party, a PRD-ally, and 
briefly served as Panamanian National Police Director in the 
1989-1994 Endara government.  Formerly the editor of the 
tabloid El Siglo, Asvat retains the strong opinions of a 
newspaper editorialist.  In the Torrijos government, Asvat 
does not hold cabinet minister rank.  he is more like a 
presidential advisor.  End comment.) 
 
Torrijos's PR Problem 
--------------------- 
17.  (C) The GOP's press coordinator is Jorge Sanchez, 
rumored to be on the way out since November 2004.  Sanchez 
(who holds U.S., Spanish, and Panamanian passports) has no 
public relations experience.  His main qualification for PR 
chief is that he is childhood friend of Martin Torrijos.  As 
a local businessman told POL Counselor, a competent PR chief, 
could have avoided the week-long public relations gaffe, 
during which Torrijos could not decide whether to attend the 
April 2005 funeral of Pope John Paul II.  Torrijos finally 
went to Rome, but not before many ordinary Panamanians were 
saying, "Panama is a Catholic country and our president is 
not going to the Pope's funeral?"  A competent PR chief or 
chief of staff also could have corrected Torrijos when he is 
reported to have said, "I don't care if fiscal reform costs 
me 20 points in my popularity" or could have questioned his 
appointment of Sandra Noriega, Manuel Noriega's daughter, as 
consul in Santo Domingo. 
 
Comment 
------- 
18.  (C) Explicit mention of "security cooperation" in the 
joint bilateral statement on November 7 would send a strong 
signal to regional troublemakers (read Chavez and Castro) by 
seeming to place a "virtual" U.S. security umbrella over 
Panama.  Late indications are that the GOP is nervous about a 
joint statement on security (despite its forward-leaning 
activity on security matters) due to its local security 
sensitivities, which are exacerbated by not having anything 
to "balance" mention of security, such as sufficient progress 
on the FTA.  Most local critics fault Panama, not the United 
States, for failure to conclude a timely agreement.  Torrijos 
an unlikely candidate to play an "anti-Chavez" regional 
democratic heavyweight role.  Worse, the GOP at this moment 
is fighting hard to keep local focus on President Bush's 
visit from shifting to a "negative" agenda, such as the still 
unresolved issue (from Panama's point of view) of unexploded 
ordnance (UXO) on former U.S. Canal Zone firing ranges or 
failure to conclude the FTA. 
 
19.  (C) GOP officials are clearly torn over the coming 
referendum to widen the Canal, which they say will preserve 
the Canal (whose biggest user is the United States) as a 
major international trade transit point.  They would like to 
think of the inherently chancy referendum as "too big to 
fail."  On the other hand, the GOP's hallmark procrastination 
(and worry over losing the vote) repeatedly has pushed back 
the referendum until mid-2006 or possibly 2007, when it will 
become prey to as-yet-unanticipated storm and stress.  One 
looming stress is the PRD's 2007 convention to choose a new 
secretary general.  Former president Ernesto Perez 
 
SIPDIS 
Balladares, who is hostile to Torrijos, is openly angling for 
the job (and to become president again).  The convention 
could distract the GOP's already ADD-afflicted concentration 
for months. 
 
20.  (C) Torrijos is doing little to address Panama's primary 
structural issue -- its 40-plus-percent poverty rate.  What's 
needed is investment-driven job creation (which would imply 
attacking corruption and costly education and social outlays, 
as discussed in Reftel B), which Canal expansion will not 
resolve by itself.  Nor does Torrijos seem likely to look for 
legal means to rid the Supreme Court of several of its most 
egregiously corrupt Justices (such as encouraging them to 
resign after starting impeachment procedures), or to 
prosecute corrupt former officials.  That means he has not 
yet convinced ordinary Panamanians that the people running 
the country are not crooks.  (A recent poll showed 90% of 
Panamanians believe changes are needed at the Supreme Court.) 
 
21.  (C) While the Torrijos government may ultimately prove 
to be mediocre, especially by the high standards that it set 
for itself coming into office, a government that does no harm 
is not the worst possible outcome for Panama.  What could be 
disappointing for the United States is that Panama -- as one 
of only several, relatively prosperous, pro-U.S. Latin 
American democracies -- may not be ready to play a stronger 
and more prominent regional role to counter Chavista 
destabilization. 
 
Arreaga