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 001992 
 
SIPDIS 
 
 
SENSITIVE 
 
 
DEPT FOR WHA/CEN DAVID LINDWALL AND INL/LP MARIO FERNANDEZ 
NSC FOR MIKE DEMPSEY 
SOUTHCOM FOR BRIGADIER GENERAL BENJAMIN MIXON, AMBASSADOR 
DANIEL JOHNSON 
SECDEF FOR ROGER PARDO-MAUER 
DHS FOR REAR ADMIRAL JAMES UNDERWOOD AND COMMANDER PAUL 
THORNE 
 
 
E.O. 12958: N/A 
TAGS: OVIP PREL MASS PGOV PM LABOR HUMAN RIGHTSPOLMIL
SUBJECT: PANAMA: SCENESETTER FOR USG DELEGATION TO THE 
NATIONAL SECURITY PLANNING WORKSHOP AUG. 10-14 
 
 
This message is sensitive but unclassified.  Please protect 
accordingly. 
 
 
¶1.  (SBU) US Embassy Panama welcomes the USG delegation to 
the National Security Planning Workshop, Aug. 11-13, which is 
designed to assist the incoming PRD government headed by 
President-elect Torrijos who assumes office September 1.  You 
will have the opportunity to reiterate USG commitment to 
improve security cooperation, expand training programs shared 
between our two countries, continue focus on civilian 
controlled security forces, and enhance transparency and rule 
of law within Panama's institutions.  Panama was an early 
member of the Coalition of the Willing, has signed and 
ratified a bilateral Article 98 Agreement, is a strong 
anti-narcotics ally, and is a strong supporter of US maritime 
security/trade-security initiatives.  The Canal is well-run 
and efficient.  Although the Moscoso government's reputation 
has been tarnished by corruption and ineffectual 
administration, Panama has been a good friend and ally. 
Demonstrations protesting Panama's negotiation of a bilateral 
Free Trade Agreement (FTA) with the US have made front-page 
news here in recent weeks. 
 
 
-------------------------- 
National Security Workshop 
-------------------------- 
 
 
¶2.  (SBU) This Embassy, in conjunction with the Center for 
Hemispheric Defense Studies (CHDS) and representatives of the 
incoming Torrijos administration, is organizing an August 
11-13 bilateral "National Security Planning Workshop" to 
encourage the new administration to plan strategically its 
approach to security issues related to its borders, the 
Canal, public security (i.e. crime), and counter-narcotics, 
and focus on ways to cooperate with the USG.  Torrijos' 
Democratic Revolutionary Party (PRD) is the Panamanian party 
most focused on security matters, but Torrijos planners admit 
that they have not progressed very far in terms of their 
overall security strategy.  This workshop presents a unique 
opportunity for the USG to support Panama's strategic 
security planning while it is being formulated and position 
ourselves to participate in its implementation.  Your 
contribution to this important endeavor is greatly 
appreciated. 
 
 
------------------ 
New Administration 
------------------ 
 
 
¶3.  (SBU) President-elect Martin Torrijos, due to take office 
on September 1, is pushing an energetic and ambitious 
transition agenda featuring clear-cut goals in foreign policy 
(with a priority on the US and Colombia), security 
(cooperation with US objectives, new attention to the 
Caribbean coast), the economy (employment generation, a Free 
Trade Agreement with the US, Canal expansion, social security 
reform, and making Panama a regional focal point for 
investment, eco-tourism, and logistics), and politics 
(constitutional reform).  Torrijos campaigned on a strong 
anti-corruption platform and hopes to clean up Panama's 
politicized Supreme Court.  Thus far, Torrijos' cabinet 
appointments have been mostly respected professionals without 
excessive baggage from the PRD's close ties to Panama's 
21-year dictatorship and its anti-US faction, a promising 
sign.  Despite the good intentions of the Torrijos 
administration, anticipated pressures from a well-entrenched 
oligarchy could frustrate its ambitious reform plans. 
 
 
--------------- 
Canal Expansion 
--------------- 
 
 
¶4.  (SBU) The Torrijos team plans to make Canal expansion a 
top priority.  It expects this $4-10 billion (estimates vary 
widely and the Canal Authority has been deliberately silent), 
10-year project to be a transforming event for Panama that 
will provide jobs and set the tone economically for years to 
come.  The US Army Corps of Engineers (USACE) has provided 
feasibility and engineering studies for one set of locks for 
the proposed expansion and looks forward to further 
involvement with the ACP (Authority of the Canal of Panama) 
as the project moves forward.  A national referendum on the 
issue is likely in 2005.  Actual groundbreaking, if the 
referendum passes, could be three years off. 
 
 
--------------------------------------------- ----- 
International Ship and Port Facility Security Code 
--------------------------------------------- ----- 
 
 
¶5.  (SBU) On July 1, Panama announced that it had met the 
deadline for implementing its International Ship and Port 
Facility Security Code (ISPS) obligations.  According to 
Captain Luiz Perez Salamero, the departing Deputy 
Administrator of Panama's Maritime Authority (AMP), all ships 
that call on US ports have completed the International Ship 
Security Certification (ISSC) process; however, some will 
have onboard either a short-term certificate (valid for five 
months) or an interim certificate during the first months 
after July 1.  Final ISSCs will be issued to those ships as 
quickly as possible and prior to expiration of the 
Interim/Short-term certificates.  The AMP has developed an 
on-line database (www.amp.gob.pa) listing all Panamanian 
flagged vessels with issued ISSCs, which is intended to 
assist countries with the certificate validation process. 
Controversy dogged this process, as some maritime lawyers and 
shipping companies protested the designation of a sole firm 
as Panama's ISPS certifier. 
 
 
--------------------------- 
Toward a Democratic Culture 
--------------------------- 
 
 
¶6.  (SBU) The recent US visa revocation of the former 
Minister of Public Works as a result of President Bush's 
initiative to deny US visas to corrupt public officials, has 
captivated the press.  That is only the latest in a series of 
high-profile media coverage of transparency-in-governance 
issues.  Last month, the Ambassador's speech on poverty and 
the need for government action generated a series of positive 
responses as well as a pro forma rebuttal from the Foreign 
Minister.  The Ambassador's September 29, 2003 speech to 
Panama's Chamber of Commerce, Industry and Agriculture, 
launching this Embassy's Good Governance Initiative (GGI), 
resonated 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.  To encourage public demand for 
reform in the judicial sector, AID Panama has extended grants 
totaling US$150,000 to civil society organizations for 
projects designed to address structural barriers to the 
administration of justice. Numberous Embassy sections and 
agencies promote good governance as a focused mission-wide 
priority. 
 
 
---------------------------- 
A Mixed Macroeconomic Record 
---------------------------- 
 
 
¶7.  (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 US 
cruise ships, which surpassed 200 port calls in Panama this 
year.  Panama's overall economy went flat when nearly 30,000 
US military personnel and their dependents left during the 
late 1990s, privatization slowed, and the 2001 global 
recession took hold which perpetuated the country's estimated 
13.4% unemployment rate.  Also, Panama has failed to attract 
large investment into the former Canal Zone.  Poverty, income 
disparity (second only to Brazil in the Hemisphere), an 
actuarially bankrupt social security system and a heavy 
sovereign debt load are arguably the biggest internal 
challenges facing Panama today.  Since mid-2003, however, 
economic growth has picked up, primarily as a result of tax 
incentives given to a booming construction sector, low 
interest rates, and a global economic recovery.  Panama's 
growth rate for 2003 reached about 4%. 
 
 
---------------------------------- 
International Trade and Investment 
---------------------------------- 
 
 
¶8.  (SBU) Economic issues are prominent in Panama's agenda 
with the United States.  The fourth round of bilateral free 
trade negotiations will take place August 9-13 in Tampa, 
Florida.  Negotiators will try to overcome several 
outstanding differences, including agricultural protections 
and Intellectual Property Rights.  Should additional rounds 
be necessary, the two sides hope to finish the negotiations 
by October.  The GOP views the FTA as a vehicle to lock in 
the status quo or better in US import programs for 
agricultural and manufacturing products, improve market 
access in niche areas (e.g., banking, maritime, 
non-traditional agricultural products and sugar), and most 
importantly to attract significant US and other foreign 
investment. 
 
 
-------------------------------------- 
Passenger Vessels Services Act concern 
-------------------------------------- 
 
 
¶9.  (SBU) The GOP has long argued for Panama's re-designation 
from a "near foreign port" to a "distant foreign port" under 
the US Passenger Vessels Services Act (PVSA), to capture a 
larger share of the cruise ship trade.  The USG is studying 
the possibility of a re-designation, but US domestic maritime 
interests are creating political impediments.  The GOP 
estimates that Panama's growing tourism sector could gain up 
to US$50M annually from such a re-designation. 
 
 
WATT