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 001431 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/CEN 
SOUTHCOM ALSO FOR POLAD 
VANCOUVER FOR CG ARREAGA 
 
E.O. 12958: N/A 
TAGS: PGOV ELAB PREL EINV PM LABOR HUMAN RIGHTSPOLMIL
SUBJECT: PANAMA STRIKE LEADERS EXPLAIN OPPOSITION TO CSS 
REFORMS 
 
REF: A. PANAMA 0810 
     ¶B. PANAMA 1184 
 
SUMMARY 
------- 
¶1.  (SBU) Members of the anti-CSS-reform FRENADESSO coalition 
-- a mixed bag of ideological leftists and bread-and-butter 
trade unionists -- want the GOP to pay more and the people to 
pay less to reform Panama's CSS than the June 1 Law 17 
stipulates.  During recent meetings with PolOffs, leaders of 
the month-long anti-CSS (social security) reform strikes 
agreed that the GOP has asked for too much sacrifice.  They 
blamed CSS's troubles on alleged mismanagement, corruption, 
and outright theft that began nearly four decades ago under 
military rule (1968-1989) and continued under Panama's 
home-grown post-1989 "partidocracia," the so-called 
alternating rule by political party elites.  If the GOP 
wrecked CSS, they reason, the GOP should fix it.  Leftists 
within FRENADESSO -- including SUNTRACS radicals (Reftel A) 
-- have agitated for systemic changes and huge budget 
outlays.  But FRENADESSO's real center of gravity is occupied 
by moderate middle-class teachers and health care 
professionals, who have legitimate-sounding historical gripes 
and criticisms of the current law, and some constructive 
proposals.  The apparent reasonableness of many of 
FRENADESSO's criticisms demonstrates that President Torrijos 
may have blundered badly by rushing the passage of CSS-reform 
Law 17, thus exposing himself to criticism of conducting 
"rabiblanco" business as usual.  End Summary. 
 
FRENADESSO'S Wider Base 
----------------------- 
¶2.  (SBU) While the radical SUNTRACS construction union 
allegedly would like to highjack FRENADESSO (National Front 
to Defend Social Security) for its own ends, radicals do not 
hold the balance of power within the organization that led 
nearly five weeks of strikes against the GOP's Law 17 to 
reform Panama's social security system (CSS) -- See Reftel B. 
 The real power is held by moderate Panamanians, including 
32,000 middle-class public school teachers and 23,000 
doctors, nurses, medical technicians, and administrative CSS 
staff.  With the month-long anti-CSS strikes in quiesance 
since June 27, and as strike groups attend a GOP-sponsored 
National Dialogue, PolOffs visited strike leaders and union 
officials to learn their views. 
 
FRENADESSO on the "Partidocracia" 
--------------------------------- 
¶3.  (SBU) POL Counselor on June 28 met with FRENADESSO 
spokesmen Andres Rodriguez and Gabriel Castillo.  (Note: 
CONUSI is the labor umbrella group that includes the radical 
SUNTRACS construction union.  End note.)  Hardly earning his 
reputation as a rabble rouser, the unsophisticated, ingenuous 
Rodriguez calmly explained that Panamanians are discontented 
because decades of Panamanian governments have ignored them. 
Rodriguez claimed that many seasonally employed Panamanians 
never would reach Law 17's required level of 300 months of 
CSS contributions and never would be able to retire. 
Panamanians are fed up "to here" -- Rodriguez placed the edge 
of his hand level with his nose -- with the "partidocracia" 
(the rule of political elites who run the parties) that loots 
the state and produces many new millionaires at the end of 
every five-year presidential term.  Is the Torrijos 
government really different?  "Why hasn't Torrijos prosecuted 
Mireya Moscoso?" on corruption charges, Rodriguez demanded. 
"Is there any lack of evidence?" 
 
"The GOP Broke CSS, the GOP Should Pay to Fix It" 
--------------------------------------------- ---- 
¶4.  (SBU) Average Panamanians do not see why they must pay to 
fix a system the government broke, though inattention, abuse, 
fraud, and conspiracy, Rodriguez continued.  Panamanians are 
angry at past governments for badly mismanaging CSS funds, 
stealing CSS money, and generally treating CSS as a 
convenient piggy bank to finance projects on the cheap and to 
line their own pockets, Rodriguez and Castillo said.  In 
addition, companies that fail to enroll their workers in CSS 
or that enroll them but steal their contributions are never 
prosecuted, they maintained.  Castillo spoke of the need to 
"change the GOP's vision" at the National Dialogue.  "If the 
government wants to keep Law 17 as is, we'll be back on the 
streets," he said. 
 
The Case of the Missing $400 Million 
------------------------------------ 
¶5.  (SBU) In recent meetings with PolOff, moderate teacher 
and health union officials tied many of FRENADESSO's 
complaints to abuses of CSS allegedly committed by President 
Torrijos's father, the dictator Omar Torrijos.  To shore up 
his popular support during the 1970s, they said, Omar 
Torrijos opened CSS health benefits to spouses, children, and 
parents of CSS contributors but did nothing to increase 
funding.  As a result, fewer than 700,000 people currently 
contribute to CSS but over two million receive benefits. 
Many FRENADESSO members believe the 1968-1989 military 
dictatorship stole $400 million from a now-defunct special 
retirement program, which they accuse the 1994-1999 Perez 
Balladares administration of covering up.  At that time, the 
GOP issued bonds for the missing millions, a tactic that 
increased Panama's external debt and enriched bankers while 
impoverishing CSS. 
 
A Costly, Utopian Program 
------------------------- 
¶6.  (SBU) Rodriguez and Castillo presented a utopian program, 
one that would replace Panama's current pay-as-you-go CSS 
system (which continues under Law 17) with a "fully 
capitalized" one.  Further, Rodriguez and Castillo want 
Panama to adopt a "National Development Plan" that would 
commit all future Panamanian governments to improve health 
and education.  In addition, they would add to CSS the one 
million Panamanians who are currently not enrolled (although 
the teachers' and health unions probably would not agree). 
 
The money to fund such a project would come from 
 
-rescheduling Panama's international debt, which swallows 
21-22% of Panama's annual budget, much of which was obligated 
under military rule 
 
-administering Panama's fiber optic cable networks 
 
-Banco Nacional profits 
 
-profits from the reverted areas of the former Canal Zone, 
and 
 
-Canal profits.  (Comment: Many Panamanians believe, not 
unjustly, that they have seen no direct dividend from the 
Canal windfalls.  End Comment.) 
 
Drastic Drop in Teachers' Benefits 
---------------------------------- 
¶7.  (SBU) Law 17 will have a hugely negative economic impact 
on teachers, Teacher union officials told PolOff.  It also 
broke the GOP's past commitments to them, turning the 
teachers' special retirement plan (PRAA) on its head. 
According to union officials, Law 17 created an unexpected 
three-year gap in coverage (due to the increased retirement 
age).  Teachers who had been paying into the special system 
and were planning to retire suddenly found they could not. 
Under the old CSS law, teachers could collect a pension after 
15 years (180 months), but could increase their pension to 
82% of average salaries by working for an additional 15 
years.  Under the reforms, teachers cannot retire until they 
have contributed to CSS for 300 months (25 years) and their 
pension at that time will equal only 60% of their salary 
average. 
 
Medical Workers' Criticisms 
--------------------------- 
¶8.  (SBU) Similarly, CSS medical workers claim that Law 17 
does nothing to address poor administration or improve CSS 
autonomy, while hitting doctors disproportionately hard. 
According to a health worker union official, the reforms do 
nothing to curb either the Ministry of Health's 
administrative powers over CSS money and resources or CSS 
payments for referrals to private clinics in 
non-extraordinary cases. 
 
Further Increase in GOP Control of CSS 
-------------------------------------- 
¶9.  (SBU) Medical workers claim that Law 17 further 
politicizes the CSS by strengthening the president's 
discretionary powers.  Despite continued pleas by FRENADESSO 
member groups to make CSS more autonomous, Law 17 gives the 
presidentially appointed CSS Director carte blanche over the 
CSS administration.  An official representing 3,000 CSS 
physicians and health worker professionals (AMOACSS) said 
that even prior to Law 17, the president had never appointed 
an AMOACSS nominee to the CSS Board of Directors.  The 
AMOACSS official claimed that Law 17 permits the CSS Director 
to fire medical workers, cancel programs, and direct 
resources at his will, unconstrained by any input from 
stakeholders in the system. 
 
CSS Reforms Discriminate Against Doctors 
---------------------------------------- 
¶10.  (SBU) Physicians also complain that a provision in Law 
17 that requires them to give an ever increasing percentage 
of their income from private clinics to CSS will degrade 
their standard of living, compared with other professionals. 
While the new law requires doctors to pay 11% of their income 
(and more later) into CSS without receiving any additional 
benefit, an AMOACSS official said, other Panamanians who make 
more than $48,000 a year do not pay anything to CSS on their 
marginal income.  Physicians may be willing to pay more if 
other professional Panamanians do. 
 
Comment 
------- 
¶11.  (SBU) It is increasingly apparent that Law 17 will not 
survive the National Dialogue in its present form.  Not only 
will Torrijos probably have to agree to drop the required 
number of 300 monthly contributions, to 240 (180 under the 
old law), many observers also believe he probably will have 
to accept "fixing" CSS for less than the 40 years he had 
aimed for.  Panamanians just can't be convinced to make what 
they believe are unjustified sacrifices for some abstract 
"future."  Going forward, Torrijos will have to be mindful of 
his family "baggage" -- many of CSS's current problems 
originated during the rule of his dictator father Omar -- and 
of the bitter perception, increasingly shared by average 
Panamanians, of the injustice and inequality that they face 
in their daily lives.  As one wealthy, well known Panamenista 
politician put it, How can the government plead poverty when 
it spends close to $40 million a year on the National 
Assembly, and pays the 78 legislators $132,000 a year?  (The 
minimum wage is $200 a month.)  The people aren't stupid, he 
said.  If rich Panamanians keep building luxury beach houses, 
do not look out for their employees, and refuse to start 
reforming Panama's political and social system, then in five, 
ten, or twenty years, the poor Panamanians -- not us -- will 
be the ones who reform it. 
 
WATT