This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 PANAMA 000633 
 
SIPDIS 
 
 
SENSITIVE 
 
 
FROM AMBASSADOR LINDA WATT TO DHS AMBASSADOR CRIS ARCOS 
 
 
E.O. 12958: N/A 
TAGS: EWWT KNNP PTER ETTC PREL PM ECONOMIC AFFAIRS
SUBJECT: SCENESETTER: AMBASSADOR ARCOS' VISIT TO PANAMA 
 
 
REF: PANAMA 325 
 
 
 This message is sensitive but unclassified.  Please protect 
accordingly. 
 
 
¶1. (U) I warmly welcome your March 23-25 visit to Panama. 
You will have the opportunity to reiterate USG appreciation 
for the ongoing maritime security cooperation between our two 
countries, and to press for continuing focus on this as well 
as aviation security (and increasingly cruise ship security). 
 Your visit highlights our governments' mutual interest in 
the strategic issues of counterterrorism capabilities, 
combating international criminal networks, and expanding 
trade and investment.  Designation for Panama as a "distant 
foreign port" under the Passenger Vessels Services Act 
(PVSA), possible inclusion of Panama's ports in the DHS 
Container Security Initiative (CSI), and upcoming 
negotiations for a bilateral free trade agreement (FTA) with 
the US will reign paramount in the minds of many of your 
interlocutors.  Cancellation of visas of corrupt public 
officials may also arise.  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, and supported 
the USG at the WTO Ministerial in Cancun, Mexico.  Panama has 
proven itself a good friend and ally. 
 
 
------------------ 
May 2004 Elections 
------------------ 
 
 
¶2. (U) Panama will hold its next national elections on May 2, 
¶2004.  Candidates are vying for the presidency, 78 
legislative seats, and all mayoral and local representative 
positions.  Democratic Revolutionary Party (PRD) candidate 
Martin Torrijos maintains a small lead over third-party 
candidate and former Panamanian President Guillermo Endara 
(1989 to 1994).  Both are well ahead of ruling Arnulfista 
party candidate and former Foreign Minister Jose Miguel 
Aleman (1999 to 2003) and minor Democratic Change (CD) party 
candidate Ricardo Martinelli.  Panama's elections should not 
warrant extensive monitoring or observation. 
 
 
---------------------------- 
A Mixed Macroeconomic Record 
---------------------------- 
 
 
¶3. (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 U.S. 
cruise ships, which will surpass 200 port calls in Panama 
this year.  But Panama's overall economy went flat when 
nearly 30,000 US military personnel and their dependents left 
during the late 1990s, and the 2001 global recession has 
perpetuated the country's estimated 13.4% unemployment. 
Also, Panama has failed to attract large investments into the 
former Canal Zone. Poverty, economic disparity, and 
unemployment are arguably the biggest internal challenges 
facing Panama today.  Since mid-2003, however, the economy 
appears to have picked up, primarily as a result of tax 
incentives given to a now booming construction sector, low 
interest rates, and a global economic recovery.  Panama's 
growth rate for 2003 is expected came in at around 4 percent. 
 
 
---------------------------- 
Towards a Democratic Culture 
---------------------------- 
 
 
¶4. (SBU) Ambassador Watt's September 29 speech to Panama's 
Chamber of Commerce, Industry and Agriculture, launching 
Embassy's Good Governance Initiative (GGI), resonated firmly 
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.  Panama's "spoils system" allows politicians to 
use the entire state bureaucracy as a patronage base.  The 
country's criminal libel laws, left over from military rule, 
impose enormous costs and risks on whistle-blowers. 
Legislative immunity is often abused, as elsewhere in the 
region.  The Embassy currently supports good governance 
activities directed toward judicial reform, civic education, 
business ethics, and strengthening anti-corruption 
prosecutors' institutional capacity, and is reviewing 
implementation of President Bush's inititiative to cancel 
travel visas to the United States of corrupt public officials. 
 
 
---------------- 
Our Third Border 
---------------- 
 
 
¶5. (SBU) Panamanians have become increasingly willing to 
accept military-to-military security training, equipment and 
other assistance to enhance their capabilities to protect the 
Canal and borders.  Although the present terrorist threat to 
the Canal is considered low and Panamanian planning, layered 
defenses and security resources are generally well regarded, 
the Canal remains vulnerable. Continued U.S. training, 
equipment and other assistance are vital to preempt a major 
terrorist attack. 
 
 
---------------------------- 
Fighting International Crime 
---------------------------- 
 
 
¶6. (SBU) Law enforcement cooperation with Panama is 
excellent.  The Moscoso Administration set up a new, GoP- 
interagency counternarcotics vetted unit; expanded upon the 
basic shiprider agreement to facilitate maritime/air 
operations in pursuit of drug, arms and explosives smuggling 
(and may soon include WMD); expedited thirty-eight maritime 
drug prisoner transfers to USG custody (saving U.S. taxpayers 
US$1 million per event); and captured and expelled seventeen 
fugitives from US justice (most recently, on January 14, 
Colombian drug kingpin Arcangel de Jesus Henao Montoya, 
wanted in New York for smuggling five tons of cocaine). 
Panama is working much more closely with Colombian President 
Uribe's government against narco-terrorists.  The GoP has 
also welcomed USG assistance-- DoD special operations forces 
(training National Police (PNP) border units) and AID 
community development (enhancing productive capacity and 
governmental presence in the Darien border province). 
 
 
¶7. (U) The GoP revamped its legal and administrative 
structures to fight money laundering, becoming a model for 
other countries, such as Russia, that are trying to bring 
their regimes up to grade.  Panama assisted the USG in the 
prosecution of money laundering cases and provided crucial 
information against former Nicaraguan President Arnoldo 
Aleman.  However, at the 2004 Summit of the Americas in 
Monterrey, Mexico, several hemispheric neighbors chided 
Panama for recently granting "asylee" status to a 
formerEcuadorian cabinet  minister, who is charged with 
embezzlement of government funds. 
 
 
---------------------------------- 
International Trade and Investment 
---------------------------------- 
 
 
¶8. (SBU) Economic issues top Panama's agenda with the United 
States.  First, for political and economic reasons, President 
Moscoso is pushing for quick negotiation on a bilateral FTA. 
(Note: the USG announced its intention to negotiate an FTA 
with Panama in November 2003 at the Miami FTAA ministerial, 
with a view to begin negotiations during the second quarter 
of 2004. End Note).  Second, the GOP has long argued for 
Panama's re-designation from a "near foreign port" to a 
"distant foreign port," under the U.S. Passenger Vessels 
Services Act (PVSA), in order to capture a larger share of 
the cruise ship trade.  The USG is studying the possibility 
of a re-designation.  The GoP estimates that up to US$50 
million per year could be gained for Panama's growing tourism 
sector.  Third, over the last several months, we have seen a 
marked improvement in the GoP's willingness to make progress 
on a number of U.S. investment cases, to address bilateral 
trade issues, including agricultural concerns, and to enhance 
cooperation/coordination in regional and multilateral trade 
fora.  The USG has asked Panama to continue its progress on 
resolving investment disputes and improving its investment 
climate through responsiveness to investor concerns, clear 
rules of the game, predictability, and transparency in 
decision-making. 
 
 
¶9. (U) Panama's $12 billion economy is based primarily on a 
well-developed services sector that accounts for 
approximately 78 percent of GDP.  Services include the Panama 
Canal, banking and financial services, legal services, 
container ports, the Colon Free Zone (the 2nd largest in the 
world) and flagship registry.  Panama also maintains one of 
the most liberalized trade regimes in the hemisphere. 
Bilateral trade with Panama came to $2.2 billion in 2003. 
U.S. exports were $1.85 billion and imports were $301 
million.  The stock of U.S. Foreign Direct Investment (FDI) 
in 2001 was $25.3 billion.  U.S. FDI is primarily 
concentrated in the financial sector. 
 
 
---------------------------- 
Our Maritime Security Agenda 
---------------------------- 
 
 
¶10. (SBU) The 9/11 attacks called significant attention to 
the potential for terrorist exploitation of Panama,s leading 
maritime position. Panama has the world,s largest flag state 
registry with approximately 6300 vessels over 500 gross 
metric tons and approximately 300,000 seafarers. 
Additionally, approximately two-thirds of Canal traffic 
originates or terminates at U.S. ports, roughly 13% of U.S. 
seaborne trade.  Nearly, 27 percent of foreign-flagged cargo 
ships arriving at U.S. ports are Panamanian.  Moreover, 
approximately 150 U.S. military vessels, including 
nuclear-powered U.S. submarines ("high value transits"), 
visit Panamanian ports and/or transit the Canal each year. 
Port services have grown dramatically from about 200,000 
containers per year in the early 1990s to almost two million 
by 2002, giving Panama Latin America's leading port complex. 
(Note: Although a large number of containers transit the 
Panama Canal, the number that actually are shipped and 
transhipped from Panama are substantially less -- around 90 
thousand.) 
 
 
¶11. (SBU) Given these equities, the Embassy, through its 
Maritime Security Working Group and in coordination with 
Washington agencies, has undertaken a broad Maritime Security 
agenda with the GoP. We have seen a strong willingness on the 
part of the Moscoso Administration for Panama to meet its 
responsibilities as a major maritime player.  Progress has 
been particularly good since President Moscoso's appointment 
in June 2003 of Panama,s Public Security and National 
Defense Council ("the Consejo") Executive Secretary Ramiro 
Jarvis to coordinate maritime security matters.  Key 
components of the agenda include: making Panama,s seafarer 
document more secure, protecting U.S. forces, port security 
(including for cruise ships), container security, export 
controls, proliferation security, and strengthening GoP 
institutions. Progress by the GoP has been good on all of the 
fronts however, we will have to keep the pressure on the GoP 
to follow-through, in particular, on ISPS implementation and 
new seafarer documents.  The fact that this is an election 
year in Panama will not facilitate things, but should also 
not hinder progress too much. 
 
 
¶12.  (SBU) On several points of the agenda, the ball is in 
our court to move ahead.  For example, DHS headquarters is 
currently reviewing language for a Declaration of Principles 
with Panama for the Container Security Initiative (CSI).  A 
CSI assessment team visited Panama in mid-January and the 
formal report of outcomes is pending.  Additionally, the 
Coast Guard is exploring the possibility of sending a USCG 
"audit" team to measure GoP progress towards ISPS 
implementation and discuss the status of Panama,s seafarer 
document.  The Embassy is also reviewing the possibility of 
using Narcotics Affairs Section funds to support GoP efforts 
to strengthen cruise ship port security. 
 
 
------------------------ 
Suggested Talking Points 
------------------------ 
 
 
¶13. (U) Talking points for meetings with GoP interlocutors 
(additional points for press opporuntities will be delivered 
upon arrival): 
 
 
- Express appreciation for Panama,s excellent cooperation on 
maritime security. 
 
 
- Press for continued focus on ISPS implementation. 
 
 
- Urge for increased attention to airport security at 
Panama's Tocumen International Airport and security for 
cruise ships at Panama's main ports. 
 
 
- Note USG willingness to work with the GoP on initiatives of 
mutual interest, including cruise ship security and 
initiatives like CSI. 
WATT