VZCZCXYZ0002
RR RUEHWEB

DE RUEHZP #2111/01 3001411
ZNY CCCCC ZZH
R 271411Z OCT 06
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 9243
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEAUSA/DEPT OF HHS WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUCPDOC/DEPT OF COMMERCE WASHDC

C O N F I D E N T I A L PANAMA 002111

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/03/2016
TAGS: ECON EINV EFIN BTIO CASC KMRS PM
SUBJECT: AMCIT V. AMCIT IN PANAMA'S BOCAS DEL TORO

REF: A. PANAMA 317

     ¶B. PANAMA 319

Classified By: CDA L. Arreaga for reasons 1.4 (d) and (e)

¶1. (SBU) SUMMARY.  Panama's Bocas del Toro archipelago is a
complex region of islands, mainland bays, rivers and forested
mountain slopes on the Caribbean side of the Panamanian
isthmus 20 miles from the Costa Rican border.  The area has a
high diversity of marine and terrestrial ecosystems and is
home to a Smithsonian Tropical Research Institute (STRI)
site.  Bocas is also the location of fisheries, agriculture,
endangered sea turtles and manatees, and tourism/residential
tourism, particularly of American citizen investors and
retirees.  The region's tiny government presence is hard
pressed to cope with increasing demand for water, sewage,
roads and environmental management.  The local judiciary is
subject to undue influence related to property disputes.  The
complexity of impending large scale development is
challenging a weak regulatory environment and threatens to
alter the character of the area irreparably, pitting American
citizens against each other.  However, interminable
construction delays hinder the area's bigger projects, and
offer a window of opportunity to put in place a regulatory
framework for sustainable development. END SUMMARY.

---------------------
DEVELOPER'S GRAVEYARD
---------------------

¶2. (SBU) Bocas del Toro's main island is Isla Colon where the
town of Bocas del Toro is located.  A few minutes by boat
from town, the failed remains of multiple attempts at small
scale resort development can be seen.  Pylons stick out of
the water from a former British investor who began building
over the water villas without any of the requisite permits.
On the cliff top sits an abandoned villa built by an Italian
investor who never completed the project.  On the island of
Isla Solarte is one of the area's first attempts at large
scale residential development, the stalled project of
American investor Sheppard Johnson.  Although 150 of the 183
homesites were sold, only 8 buyers have successfully
constructed homes.

---------------------------------
CONTROVERSIES ENTANGLE DEVELOPERS
---------------------------------

¶3. (C) Isla Solarte buyers allege Mr. Johnson failed to
complete the infrastructure (golf cart paths, landscaping,
etc.) promised in the sales cycle, will not transfer over
titles to buyers who have paid in full nor sign the proposed
Homeowner's Association regulations.  Thirty to forty Amcit
residents have filed fraud charges against Mr. Johnson in
Panama and there is a Panamanian warrant ("order of
apprehension") for his arrest.  Mr. Johnson was also the
subject of an expose piece on Panamanian television claiming
he sold land to which he did not have title.  Post continues
to monitor the legal progress of this case. Mr. Johnson
(currently residing in Sacramento, CA) told Econoff that the
criminal complaints are false and he is the subject of
defamation by his buyers and his own legal counsel.

¶4. (C) On the island of Isla Bastimentos is the largest and
best known development in the area, Red Frog Beach.  After
three years of construction, however, the worker's quarters
and model home remain incomplete.  Initially financed by the
presale of 300 homesites, the developers appear to seek
funding through a second phase (of almost 500 units) and
loans as construction delays, labor strikes and environmental
protests have dragged out the project timeline.  The
expansion of this project has brought a firestorm of
environmental opposition (led by local Amcit residents) as
the project now includes a golf course and the new home sites
approach a national park.  Red Frog's Amcit developers state
they have made every effort to comply with Panama's
environmental agency (ANAM) requirements and are constructing
in an environmentally responsible manner.

¶5. (C) Red Frog Foundation Director Aaron Jones told Econoff
he feared for the indigenous populations in the area.  (The
Foundation runs a number of social projects using donations
from Red Frog buyers and matching grants from the
development.)  The Red Frog development includes a 250 boat
marina to be built where members of the Ngobe Bugle tribe
currently reside.  Jones believes the Ngobe Bugle may abandon
the area completely or ultimately become employees of the
resort.

¶6. (SBU) On the Island of Colon, American developers Ross and
Phil Hagan are building Sunset Point, a development of 108
homes and 66 condominiums on 200 acres near the STRI
facilities.  This development involves the digging of
significant channels to provide boat parking for most of the
properties.  Media reports state that when questioned about
the environmental impact of the development Phil Hagen said
they had all the requisite environmental permits and rejected
Smithsonian claims that the project damages the surrounding
reefs and mangroves.

¶7. (SBU) Two other major projects on Isla Colon by Panamanian
developers, Bocas del Drago (Starfish Beach) and a rumored
Decameron Resort at Bluff Beach are believed to be in the
planning stage.  Bocas del Drago investors allegedly include
President Torrijos who visits the area regularly courtesy of
his friend and fellow investor, Jorge Romero.

¶8. (SBU) The proposed site of the Decameron Resort is
actually the location of several existing homesites.  A well
connected Panamanian family (Sofer) who abandoned the land
some 30 years earlier is challenging the subsequent
subdivision and sale of this land in 2003 by the intervening
resident to the current owners (including some American
citizens).  However, the intervening resident appears to have
established "prescriptive rights" under Panamanian law by
residing and caring for the land for over 15 years and the
new buyers are in possession of Rights of Possession
certificates issued by the GOP authorities at the time of the
sale.  The local court has ruled in favor of the family who
abandoned the land 30 years ago and the cases are in appeal.

-------------------------
MAYOR CALL FOR "TIME OUT"
-------------------------

¶9. (SBU)  Bocas del Toro Mayor Eligio Binns told Econoff that
his primary concern is the 13,000  ordinary citizens of the
area.  While he acknowledged the employment opportunities
brought by development, he asserted the resulting
urbanization would not provide improved economic conditions.
He said local government was not receiving the economic
benefits from large development.  The taxes, permit fees and
other government charges are collected by federal level
agencies but are not necessarily redistributed to the local
offices of federal agencies or the municipality
proportionately.  He proposes stopping all large projects
which have not yet received approval until April 2007 to
allow time to develop an ecologically sustainable development
plan for the area.

---------------------------------
U.S. INTERESTS PULLED IN TWO WAYS
---------------------------------

¶10. (SBU)  Comment: The struggle for the soul of Bocas del
Toro will continue for several years.  Moreover, the
conflicting interests of resident American citizens and
American developers will likely intensify, potentially
pulling the Embassy in divergent directions as each side
seeks USG support.  Meanwhile, the locals may have more time
than they think as construction delays are significant and
existing projects have yet to demonstrate financial
viability.  Early indications are that developers vastly
underestimate the time and cost of their projects.  Unable to
go back to presale buyers for additional funds, their choices
are to abandon their projects, cut back on delivery, or
expand further to capture additional sales.  Project
expansions can create a pyramid scheme and invite further
environmental controversy.  Because ANAM and its local
representation appear unprepared to properly regulate large
development in this delicate area, the rules and regulations
are constantly evolving.  Remaining "compliant" while the
goal posts are moving creates uncertainty and increases costs
for the developers but may be the region's only hope to
protect the local populations and ecosystem from irreparable
transformation.
ARREAGA