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O 102300Z MAY 06
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TO RUEHC/SECSTATE WASHDC IMMEDIATE 8038
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C O N F I D E N T I A L PANAMA 000897 
 
SIPDIS 
 
SIPDIS 
 
FOR ASSISTANT SECRETARY SHANNON FROM AMBASSADOR EATON 
 
E.O. 12958: DECL: 05/10/2016 
TAGS: PGOV PREL ETRD PM CU VE CH
SUBJECT: PANAMA SNAPSHOT FOR PRESIDENT TORRIJOS'S VISIT TO 
TEXAS 
 
Classified By: AMBASSADOR WILLIAM EATON FOR REASONS 1.4 (B) AND (D). 
 
¶1.  (U) This message is intended as a scenesetter for A/S 
Shannon and former President Bush's May 11 meeting with 
President Torrijos. 
 
SUMMARY 
------- 
¶2.  (C) The Embassy's relations with the Torrijos government 
(GOP) are warm and bilateral cooperation on security and 
anti-narcotics matters remain strong.  At the same time, 
local political calculations surrounding a planned referendum 
on Canal widening have hobbled chances for a bilateral FTA. 
We also find disquieting recent trends in the increasing 
prominence of former Noriega cronies within the GOP and in 
the GOP's apparent eagerness to improve relations with Cuba 
and Venezuela.  Amid a residential boom in Panama City, where 
high-rises are under construction seemingly on every corner, 
increasing poverty, want, and inequality are receiving little 
attention.  End Summary. 
 
Canal Widening in Focus 
----------------------- 
¶3.  (SBU) At the moment, the Panamanian government's (GOP) 
central policy objective is winning a yet-to-be-scheduled 
referendum on widening the Canal to permit much larger ships 
to pass than 106-foot-wide Panamax vessels.  Supposedly 70% 
of Panamanians favor the referendum, which may be held as 
early as November though many influences could soften that 
support as the date approaches.  The Canal Authority (ACP) 
has said that the $5.25 billion project will take eight years 
to complete and directly create 7000 jobs.  The project is to 
be financed directly through ACP revenues and bridge loans. 
 
FTA Gets Short Shrift 
--------------------- 
¶4.  (SBU) With all its resources and attention focused on an 
upcoming referendum to widen the Panama Canal, the GOP has 
de-emphasized an important item on the bilateral agenda, 
namely the Free Trade Agreement (FTA).  Although FTA 
negotiators have completed nine rounds of talks, the GOP 
appears nervous about possible opposition to the FTA, which 
could harm passage of the Canal referendum.  As a result, the 
GOP is  reluctant to satisfy all of USTR's requirements on 
sanitary and phytosanitary issues (SPS), at least until after 
the Canal referendum.  Meanwhile, USG "fast track" 
negotiating authority expires in June 2007.  The outlook is 
grim. 
 
Security/Anti-Corruption Cooperation 
------------------------------------ 
¶5.  (C) Our security priorities of anti-narcotics and 
mil-to-mil cooperation remain strong, though probably not at 
the level we enjoyed under the 1999-2004 Moscoso government. 
Unlike the Moscoso government, the current GOP has a 
plausible attorney general, who is willing to cooperate on 
anti-corruption issues.  Like Moscoso, the Torrijos 
government has undertaken no notable anti-corruption 
prosecutions whatever.  It is willing to talk but not act. 
In 2005, on the Embassy's advice, the USG revoked the visa of 
Supreme Court magistrate Winston Spadafora under 212(f) 
corruption provisions.  More revocations are being considered. 
 
Noriega-era Figures Return 
-------------------------- 
¶6.  (C) In general, U.S. relations with the GOP are warm but 
following the November visit of President Bush, we have noted 
trends in the GOP's ideological coloration and orientation 
that we find disturbing.  First, Noriega-era figures, such as 
former "dignity battalions" chief Benjamin Colamarco 
(recently named Public Works minister), the presumed killer 
of U.S. service member Zak Hernandez, Pedro Miguel Gonzalez 
-- and a host of former Panamanian Defense Force (PDF) 
officers and others -- are gaining prominence within the GOP 
and the ruling PRD.  Colamarco's appointment in particular 
casts serious doubt on the GOP's anti-corruption credibility. 
 Despite the ascendancy of Noriega's, the GOP has announced 
its intention to jail Noriega after his planned release from 
U.S. custody in November 2007. 
 
Cuba-Venezuela-China Relations 
------------------------------ 
¶7.  (C) Second, the GOP has devoted steadily increasing 
effort to improving relations with Cuba and Venezuela.  (On 
May 9 Panama voted for both countries at the UN Human Rights 
Council, not to mention China.)  Martin Torrijos made a 
high-profile visit to Cuba immediately following the November 
2005 President Bush visit, his second after the September 
2005 resumption of bilateral relations (repairing the August 
2004 rupture following Moscoso's surprise pardon, release, 
and flight of convicted anti-Castro plotter Luis Posada 
Carriles).  A steady stream of senior GOP officials have 
since traveled to Havana, many of them more than once. 
Separately, the GOP has given indications that it intends to 
switch diplomatic recognition to China from Taiwan at an 
appropriate moment. 
 
Operacion Milagro 
----------------- 
¶8.  (C) Also, the GOP has facilitated the widely popular 
Operacion Milagro (Operation Miracle), a Cuban-Venezuela 
joint-venture which brings low-income Panamanians to Cuba for 
cataract and other eye operations.  While Cuba and Venezuela 
reap a public relations windfall, the GOP has tried to bask 
in the glow.  In a related development, the GOP recently 
waived visa requirements for Cuban diplomats and permitted 
Milagro to open offices in Panama City. 
 
Widespread Income Inequality, Poverty Amid Plenty 
--------------------------------------------- ---- 
¶9.  (SBU) Panama remains riven by the Hemisphere's 
second-worst income distribution and a 40-plus percent 
poverty rate, despite consistently high rates of economic 
growth and billions of dollars in investment in so-called 
"residential tourism" projects funded by American and 
European citizens.  While rich Panamanians enjoy one of the 
highest standards of living in Latin America, the ranks of 
the poor are increasing.  Aside from a program of subsidies 
and handouts, the GOP has no credible strategy to create jobs 
and to drastically improve education, health, and other 
social indicators.  Few observers believe that Canal 
expansion will "trickle down" to make a significant 
difference to Panama's disadvantaged.  The issue remains a 
time bomb with a shorter and shorter fuse. 
 
EATON