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

C O N F I D E N T I A L SECTION 01 OF 02 PANAMA 002141 
 
SIPDIS 
 
DEPT FOR WHA/CEN - SCHIFFER 
ALSO FOR WHA/EPSC 
USDOC/MAC FOR GAISFORD 
USTR FOR VARGO AND MALITO 
 
E.O. 12958: DECL: 10/25/2015 
TAGS: ECON ETRD PREL PM ECONOMIC AFFAIRS
SUBJECT: PANAMA'S BUSINESS LEADERS FRET THAT INEQUALITY MAY 
SPUR BOLIVARIAN MISCHIEF 
 
Classified By: Ambassador William A. Eaton for Reasons 1.4 (b and d) 
 
¶1. (C) Summary:  Worried that Panamanians can no longer "live 
in Switzerland and Haiti at the same time," local business 
leaders blame Venezuelan and Cuban-influenced agitators for 
stalling the GOP's reform agenda and for flirting with 
anarchy.  In recent meetings with the Ambassador, these 
business leaders have urged strong U.S. support for Panama's 
democratic institutions and economic competitiveness to help 
counter negative trends.  They maintain that combating 
corruption, concluding a bilateral Free Trade Agreement 
(FTA), and expanding the Panama Canal are crucial to Panama's 
ability to resist the populist appeals of "false messiahs" as 
the country must focus on improving income distribution, 
creating jobs, and alleviating poverty.  The question is 
whether Panama's business elites and GOP leaders can muster 
the will and the money put an end to a culture of corruption 
and official impunity underlying these challenges.  End 
summary. 
 
Panama: Divided by the Canal and by Income 
------------------------------------------ 
 
¶2. (U) Panama is divided by more than the Canal.  Panama 
City's modern appearance and a growing trade and 
services-dominated economy obscure the second-worst income 
distribution pattern in Latin America, persistent poverty (40 
percent overall, higher than 90 percent in some rural areas), 
and stubbornly high unemployment (officially about 12 
percent, with 20-25 percent underemployment).  Panama's solid 
GDP growth in recent years (6.2% in 2004, about 5.7% so far 
in 2005) and pursuit of trade liberalization do not translate 
into broadly shared prosperity.  As one Panamanian 
businesswoman told the Ambassador on Oct. 7, "We can no 
longer live in Switzerland and Haiti at the same time." 
 
¶3. (SBU) Since arriving at Post last month, the Ambassador 
has met with dozens of Panama's top business leaders, 
including the Panama Chamber of Commerce, the National 
Council for Private Enterprise (CONEP - the "chamber of 
chambers"), the American Chamber of Commerce, the Association 
of Panamanian Business Executives (APEDE), and others.  The 
business community stressed that combating corruption, 
securing a bilateral Free Trade Agreement (FTA), and moving 
forward with Panama Canal expansion are key to ensuring 
Panama's ability to create jobs, alleviate poverty, and 
improve income distribution.  (Comment: This may be wishful 
thinking on their part.  See further comments in para 8.) 
 
Strong Suspicions of "Bolivarian" Mischief 
------------------------------------------ 
 
¶4. (SBU) A number of business leaders believe that leftists 
are increasingly better organized and financed.  Though none 
point to hard evidence, they maintain that Chavez-inspired 
"Bolivarian circles" are supporting efforts by certain labor 
and student groups to foment a sense of crisis and anarchy in 
Panama.  For example, they are convinced that the "National 
Front for Defense of Social Security ("Frenadesso") is trying 
to sabotage Panama's ongoing "national dialog" on social 
security reform.  Likewise, they think they see a Venezuelan 
shadow behind recent student protests, ostensibly over rising 
gasoline prices and other issues. 
 
¶5. (SBU) Panama's business leaders stress that their 
criticisms of President Torrijos are intended to strengthen 
the government, not to bring him down.  Some of them 
suggested that a "weak" or "nave" Torrijos administration 
has unwittingly opened the way for Venezuelan and 
Cuban-influenced agitators to stall the GOP's agenda of 
fiscal and social security reform.  Expecting that these same 
elements will likewise aim at torpedoing a future proposal to 
expand the Panama Canal, some business groups hope to 
discredit and possibly neutralize Frenadesso and other 
radical elements.  Failing that, they fear that Panama could 
succumb to the populist appeals of "false messiahs" and "end 
up like Bolivia."  In appealing for strong U.S. support to 
build on "shared values," one businessman told the Ambassador 
on Oct. 7, "Don't believe that democracy is not threatened." 
Others urged the U.S. to help persuade the GOP that these 
threats are real.  Some suggested that the U.S. offer 
"matching opportunities" to counter Cuba's 
medical education for poor Panamanians.  They said they want 
to emulate successful Cold War-era partnerships between the 
U.S. and the private sector to counter the former Soviet 
Union's influence in the region. 
 
All Eyes (if not "Ayes") on FTA and Canal Expansion 
--------------------------------------------- ------ 
 
6.(U) Although some worry that the FTA will hit particular 
agricultural sectors especially hard (e.g., rice growers), on 
balance, the vast majority of business leaders see an FTA as 
a net plus for Panama.  They believe it will boost Panama's 
investment climate, promote jobs creation, and bolster GOP 
efforts to combat corruption and modernize the government. 
Encouraged by signs of renewed GOP engagement with USTR, 
leading business groups are discussing ways to work with each 
other and with responsible labor leaders to help the Torrijos 
administration "sell" the FTA to the Panamanian public and 
the National Assembly. 
 
¶7.  (U) Likewise, local business leaders widely expect that 
future Panama Canal expansion would create thousands of new 
jobs.  Many were dismayed by a U.S. Defense Dept. officials 
recent suggestion that the project could cost $15-$25 
billion, which is two to three times greater than local 
(unofficial) estimates.  As any Canal expansion proposal 
would be subject to a referendum, they worry that this 
suggestion could undermine the Panamanian public's confidence 
the GOP's credibility and erode their support for possible 
Canal expansion. 
 
Comment: Are Panama's Elites Ready to Change? 
--------------------------------------------- 
 
¶8.  (C) Despite the lack of hard evidence of "Bolivarian" 
influence, the Panamanian business community rightly sees the 
country's poor income distribution and high rates of poverty 
and unemployment as ticking time bombs.  The question is 
whether Panama's business elites and GOP leaders can muster 
the will to defuse these threats effectively.  Canal 
expansion and an FTA, on their own, will likely do little to 
close the yawning gap in living standards and income between 
Panama's rich and poor.  A serious effort to reduce poverty 
must include greater spending on education and infrastructure 
and much higher levels of investment.  In turn, to accomplish 
these goals, Panama's elites must be willing to put up the 
money and put an end to a culture of corruption and official 
impunity.  There are probably few who are willing to gulp 
that hard. 
EATON