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DE RUEHZP #0533/01 0831750
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O 241750Z MAR 06
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7678
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RUEHAD/AMEMBASSY ABU DHABI 0020
RUEHBO/AMEMBASSY BOGOTA 2221
RUEHCV/AMEMBASSY CARACAS 0974
RUEHPE/AMEMBASSY LIMA 0611
RUEHQT/AMEMBASSY QUITO 0849

C O N F I D E N T I A L PANAMA 000533

SIPDIS

SIPDIS

DEPT FOR WHA/CEN - PIERCE
ALSO FOR WHA/EPSC - URS, GUMBINER, AND YOUNG
ALSO FOR EB/TPP/BTA - LAMPRON
STATE PASS USTR - SCHWAB, CROWDER, LATIMER, AND MALITO
ALSO PASS USDA/FAS/ITP - SPITZER
USDOC/MAC - GAISFORD

E.O. 12958: DECL: 03/24/2016
TAGS: ETRD EAGR ECON EWWT PGOV PM
SUBJECT: GOP STRUGGLES TO RESOLVE FTA STUMBLING BLOCKS

REF: PANAMA 0233

Classified By: Ambassador William A. Eaton - Reasons 1.5(b and d)

¶1.  (C) Summary: Panama's trade minister remains convinced
the GOP is within reach of an FTA with the U.S.  However,
First Vice President/Foreign Minister Samuel Lewis Navarro
(SLN) fears the deal may be "dead" and hinted that the GOP
might turn its near-term focus to the proposed expansion of
the Panama Canal.  The GOP also frets that DP World's likely
bid on an upcoming "mega port" project could complicate the
U.S. Congress' outlook on an FTA with Panama.  End Summary.

VP/ForMin Does Not Share Trade Minister's Optimism on FTA
--------------------------------------------- ------------

¶2.  (C) Trade Minister Alejandro Ferrer told Ambassador on
March 23 that he remains convinced that an FTA with the U.S.
is within reach.  He said the GOP is prepared to go along
with the USG's terms on outstanding sanitary and
phytosanitary (SPS) issues.  Following his March 22 telephone
conversations with senior USTR officials, Ferrer said he
planned to provide USTR with a clearer indication what the
GOP could or could not accept on the USG's SPS points.
Despite his disappointment at being unable to reach agreement
with USTR by now, Ferrer hoped that the two sides could
engage, perhaps through a brief digital video conference, to
sort out the "real" vs. merely "cosmetic" differences.  He
plans to provide USTR with a "cleaned up" revision of the
package the GOP sent to Washington on March 15.

¶3.  (C) In a separate March 23 meeting with Ambassador and
ECON Chief, Panamanian First Vice President/Foreign Minister
Samuel Lewis Navarro (SLN) said he feared an FTA with the
U.S. may be "dead," based on Ferrer's read-out from his March
22 conversations.  SLN vented his feeling that Washington
appears unwilling to help the GOP deal with its domestic
political constraints.  The Ambassador and ECON Chief
stressed the USG's understanding of Panama's constraints, but
pointed out that we, too, have constraints.  They also
recalled the long history we have had with the GOP's abuse of
SPS measures to block trade, as well as the USG's indulgence
in extending negotiations on a bilateral FTA through nine
rounds.  SLN said that failure to conclude an FTA would be a
"big blow to one of America's staunchst allies in the
region." SLN expected to discuss possible next steps with
President Torrijos.  He hinted that the GOP might defer their
efforts on FTA until after Panamanians vote on a referendum
on the proposed expansion of the Panama Canal (now expected
for November 2006). SLN suggested that, unlike others in the
region, an FTA with the U.S. is not ultimately a "live or die"
issue for Panama, as it would nonetheless continue to grow its
services-based economy.

UAE's "DP World" May Bid on "Mega Port" Project
--------------------------------------------- --

¶4.  (C) Minster of the Presidency Ubaldino Real and SLN said
that the GOP expects the UAE's "DP World" to be among several
bidders on Panama's proposed "Mega Port" project near the
Pacific entrance of the Panama Canal.  Noting that U.S. firms
will also likely bid and that the GOP would be "delighted" to
see a U.S. operator handle the project, Real fretted that DP
World's possible bid could complicate the U.S. Congress'
outlook on an FTA with Panama.

Comment
-------

¶5.  (C) Despite the GOP's growing focus on promoting the
Canal expansion and internal GOP divisions on the advantages
of putting the FTA on ice until after a Canal referendum
(reftel), President Torrijos has yet to pull his FTA
negotiators back from using the additional two to three weeks
that Ferrer thinks he needs to close the deal.  However, as
SLN has been one of Ferrer's strongest backers in the
Administration's internal debates on the issue, if he defects
to the GOP's "Canal now, FTA later" camp, it could tip the
balance against Ferrer.
EATON