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C O N F I D E N T I A L PANAMA 000185 
 
SIPDIS 
 
SIPDIS 
 
NSC FOR FISK AND CARDENAS 
 
E.O. 12958: DECL: 02/02/2017 
TAGS: PREL PGOV ECON ETRD SNAR KJUS UNSC PM
SUBJECT: PANAMA:  SCENESETTER FOR PRESIDENT TORRIJOS' 
FEBRUARY 14-16 VISIT TO WASHINGTON 
 
REF: A. (A) PANAMA 61 
 
     ¶B. (B) PANAMA 72 
     ¶C. (C) PANAMA 85 
     ¶D. (D) PANAMA 112 
     ¶E. (E) PANAMA 147 
     ¶F. (F) PANAMA 148 
 
Classified By: Ambassador William A. Eaton.  Reasons:  1.4 (a), (b) and 
 (d) 
 
------- 
Summary 
------- 
 
¶1.  (C) Panamanian President Martin Torrijos will visit 
Washington February 14-16 for a meetings with the President 
and the Secretary of Defense, outreach to the AFL/CIO, 
business leaders, and the Hill to lobby for adoption of the 
U.S.-Panama Trade Promotion Agreement (TPA). Indeed, 
advancing the TPA will top Torrijos' agenda in Washington. 
Equally high on Torrijos' agenda will be promoting expansion 
of the Panama Canal -- both the opportunities this enormous 
construction project will offer and the eventual enhanced 
benefits for international commerce that it will entail. 
Torrijos will also likely seek to discuss a number of 
regional issues including Nicaragua, Venezuela, Colombia, and 
Cuba and may brief a Panamanian proposal for an add-on 
activity for the PANAMAX 2007 multilateral military exercise 
scheduled for September.  Torrijos may feel compelled -- by 
either political or press attention -- to raise Panama's 
request to extradite ex-general Manuel Noriega and Panama's 
claim that the U.S. has not completed its promised clean-up 
of unexploded ordnance (UXO) on former U.S. military ranges 
in Panama.  Finally, Torrijos may seek to appeal significant 
cuts in U.S. assistance to Panama that are anticipated in the 
future.  End summary. 
 
--------- --------------------------------- 
Torrijos:  Politically Confident and Strong 
--------- --------------------------------- 
 
¶2.  (C) Washington will receive a very confident Torrijos who 
enjoys the strongest political standing of his tenure and who 
is looking toward a bright future for Panama.  (In addition 
to First Lady Vivian de Torrijos, 1st VP and FM Samuel Lewis 
and Minister of Trade and Industry Alejandro Ferrer will 
accompany Torrijos to Washington.)  Over the past four 
months, he has chalked up two major victories:  winning a 
referendum in October 2006 that authorizes the USD 5.25 
billion expansion of the Panama Canal and completing 
negotiation of the U.S.-Panama Trade Promotion Agreement 
(TPA).  Torrijos is soaring in the polls, enjoying 
astronomically high general approval ratings of over seventy 
percent.  For 2007, Torrijos has laid out an aggressive 
governing agenda  (REFTEL A) -- public transportation reform, 
healthcare reform, judicial reform, and education reform -- 
that will put him in direct conflict with entrenched 
interests, particularly unions.  While he has made 
significant advancements in enhancing the safety of public 
buses, Torrijos efforts to achieve broader judicial reform by 
calling a special session of the National Assembly have 
bogged down, even requiring that he extend the length of the 
special session. 
 
¶3.  (C) Torrijos' Revolutionary Democratic Party (PRD) 
dominates the political landscape and governmental 
institutions and faces a fractured opposition.  This summer 
Torrijos will need to focus more time and energy on what is 
shaping up to be a bruising internal PRD fight for control of 
the party and its nominee for the 2009 presidential 
elections.  Torrijos, who is also the PRD Secretary General, 
is putting Housing Minister Balbina Herrera forward to be PRD 
President running her against former President Ernesto "El 
 
Toro" Perez Balladares.  Perez Balladares, 1st VP and FM 
Samuel Lewis, and Panama City Mayor Juan Carlos Navarro are 
all vying to be the PRD's presidential candidate.  Torrijos 
hopes to navigate this summer's PRD political schedule to 
secure the presidential nomination for Lewis while 
maintaining a unified PRD.  The frayed opposition is 
salivating at the prospect of a brutal fight inside the PRD 
that might split the PRD and open political space for the 
opposition.  Though he made some progress fulfilling his 
campaign pledge to put Panama's financial house in order, 
Torrijos has made few inroads fulfilling his "zero 
corruption" pledge and only some progress in creating more 
employment.  Corruption remains endemic and, and employment 
remains the most important issue in the minds of voters.  We 
should urge the GOP to accelerate its fight against 
corruption, particularly through prosecutions. 
 
---------------------- ------------------------------ 
Strong Economic Grown, but High Poverty Rates Persist 
---------------------- ------------------------------ 
 
¶4.  (C) Strong growth in trade, maritime and banking 
services, and construction continue to drive an economic boom 
that has pushed Panama's USD 15 billion economy to current 
annual growth of about 8 percent.  Although official 
unemployment has dipped to 8.6 percent (down from previous 
levels of 12 to 14 percent), most job creation remains 
outside the formal economy.  Moreover, despite impressive 
economic growth, Panama's poverty level stubbornly persists 
at nearly  40 percent and income disparities remain among the 
region's worst. 
 
¶5.  (C)  The Torrijos Administration hopes that sustained 
growth resulting from the Panama Canal expansion project and 
the prospective U.S.-Panama TPA will push Panama forward into 
"first world" status.  However, neither the Canal expansion 
nor the TPA is a panacea, as Panama's advancement remains 
hindered by public institutions (e.g., ministries, regulatory 
agencies, courts, political parties, schools, healthcare 
systems) that remain weak and in need of significant reform. 
Torrijos pushed through tough fiscal and social security 
reforms during his first two years that have already 
delivered results.  We should encourage Torrijos to build on 
his popular support and solid economic track record by 
pressing forward with the tough institutional reforms and 
anti-corruption efforts needed to ensure that Panama's 
economic gains translate into meaningful reductions in 
poverty and improved income distribution. 
 
------------------------------------- 
Panama Seeks to Build Support for TPA 
------------------------------------- 
 
¶6.  (SBU) Torrijos closed 2006 on a high note with the 
December 19 conclusion of the TPA negotiations with USTR. 
Minister of Trade Alejandro Ferrer, who will accompany 
Torrijos to Washington, has built broad support for the TPA 
among Panamanian producer groups.  As a result, the GOP is 
confident that the pact will be ratified by Panama's National 
Assembly, as TPA opponents have so far gained little 
traction.  In addition to solidifying domestic support for 
the TPA, the GOP is working to build bipartisan support for 
the pact on the Hill.  We should stress that the GOP's strict 
follow-through on related commitments, particularly the 
bilateral agreement on sanitary and phytosanitary measures is 
vital to enhancing the TPA's prospects for Congressional 
approval. 
 
-------------------------------------- 
Panama Engaged Globally and Regionally 
-------------------------------------- 
 
¶7.  (C) Panama's election to the UN Security Council (UNSC) 
and hosting of the Organization of American States General 
Assembly (OASGA) in June have not only elevated Panama's 
international profile, but also validated Torrijos' foreign 
policy aimed at sustaining friendly relations with all 
nations, particularly its hemispheric neighbors.  Having 
emerged only in late 2006 as the Hemisphere's consensus 
candidate to break the deadlock between Venezuela and 
Guatemala, Panama was not initially prepared for the 
responsibility of UNSC membership, but now has its UNSC team 
in place and is gradually learning the ropes.  Panama 
supported adoption of a resolution on Burma (blocked by 
Chinese and Russian vetoes), chairs UNSC's Counterterrorism 
Committee, and is striving to play a constructive role on 
renewal of the MINUSTAH peacekeeping operation (PKO) for 
Haiti by urging Beijing and Taipei to refrain allowing their 
conflict to have a deleterious effect on this essential PKO. 
Panama has also counseled Haiti to avoid antagonizing 
Beijing.  Panama, inclined to run for the center and to find 
the emerging consensus, will be nervous about staking out 
clear positions that put its ability to be everybody's friend 
at risk.  Panama will host the OASGA on the thirtieth 
anniversary of the signing of the Panama Canal Treaties at 
OAS headquarters in Washington and has made hemispheric 
energy security a centerpiece of this OASGA's agenda. 
Regionally, Panama has positioned itself to be an 
intermediary capable of talking to all sides. 
 
¶8.  (C) Torrijos will raise a number of regional issues 
(REFTEL E) during his visit and is likely to be eager to 
serve as an intermediary for the U.S.: 
 
-- Venezuela:  When the UNSC elections deadlocked between 
Guatemala and Venezuela, Panama was one of the few countries 
in the hemisphere capable of bridging this polarizing divide 
and uniting the hemisphere behind its candidacy.  Torrijos 
visited Guatemala in November to thank President Berger for 
stepping aside and plans to travel to Venezuela to pay his 
respects to Chavez for doing the same.  Torrijos recently 
sent emissaries to Caracas to try to finalize a date for his 
on-again/off-again visit, and Torrijos's visit to Caracas is 
now scheduled for March 2, Lewis told Ambassador on Feburary 
¶5.  Lewis has voiced serious concerns about Chavez's threat 
to independent media and to expropriate strategic industries 
and companies.  Should Torrijos visit Caracas, we should 
underscore that Torrijos cannot remain silent on Chavez's 
continued undermining of democratic norms and accumulation 
and exercise of authoritarian powers. 
 
-- Colombia:  Torrijos may request USG assistance managing 
pressure from Colombian President Uribe.  Lewis told 
Ambassador January 30 that Uribe was refusing to take no for 
an answer in response to Uribe's constant pressure to build 
the Pan-American Highway through the Darien and was directly 
linking relief for Panama's Colon Free Zone to progress on 
the highway. 
 
-- Nicaragua:  Panama has offered to play a role in engaging 
Nicaragua, a role that Torrijos has been willing to take on. 
 
-- Cuba:  In discussing transition on the island, Panama 
stresses stability over progress towards democracy.  Doubting 
the Cuban people's desire for or ability to take on 
democracy, Torrijos is likely to stress that the Cuban people 
must decide their own future as outside pressure to move 
toward democracy would risk instability.  Panama often points 
to a younger generation of Cuban apparatchik (e.g., Felipe 
Perez Roque) as the kind of people the U.S. should engaging 
to ensure stability and a gradual opening in Cuba in the wake 
of Castro's death. 
 
-------- ----------------------------- 
PANAMAX:  Addressing Terrorist Threats 
-------- ----------------------------- 
 
¶9.  (C)  Lewis hosted a briefing on January 17 for the 
Ambassador on a Panamanian proposal to expand the annual 
PANAMAX exercises to include a table top exercise to examine 
ways to deal with the asymmetric threats posed by terrorists 
and narcotraffickers to Panama and its canal (REFTEL D). 
SOUTHCOM Commander ADM Stavridis was also briefed on Panama's 
proposals during his January 18-19 visit (REFTEL C).  The 
Panamanians envision an exercise that brings together police, 
intelligence, emergency response, military and other 
capabilities to meet these threats and that includes 
participation from all countries that currently participate 
in PANAMAX.  Panama has laid out an extremely ambitious time 
line aiming to have a multilateral table-top exercise ready 
to go by August 2007.  While managing Panamanian 
expectations, we should nonetheless seek to take advantage of 
Panama's opening to engage more broadly and creatively on 
these security threats as it reflects a growing serious, 
confidence, and maturity in providing for its own security. 
 
-------------- ------------------------------ 
Watch Out For:  Noriega, UXO, U.S. Assistance 
-------------- ------------------------------ 
 
¶10.  (C) Noriega:  The extradition of Panamanian ex-strongman 
Manuel Noriega, scheduled to be released from U.S. federal 
custody on September 9, 2007, to "face justice in Panama" has 
recently grabbed the headlines in Panama.  While he made 
strong statements insisting Noriega be extradited to Panama, 
1st VP and FM Lewis has also re-stated to Ambassador that 
Panama does not want Noriega back.  Presidential aspirant 
Lewis though will be tempted to grandstand on Noriega to fend 
off opposition attacks and to burnish his image as "new PRD." 
 
¶11.  (C) UXO:  No sooner was Torrijos' meeting with the 
President announced, then press reporting began to speculate 
that Torrijos would assert its case that the U.S. had not 
fulfilled its treaty commitments to clean former U.S. 
military ranges of unexploded ordinance.  We have repeatedly 
underscored that the U.S. has fulfilled its treaty 
obligations on this matter and stressed that we consider this 
matter closed.  Likewise, we remind Panama that they rejected 
our offer to help finance the clean-up of San Jose Island, 
for which we have no treaty obligations whatsoever. 
 
¶12.  (C)  U.S. Assistance:  Torrijos is aware that U.S. 
assistance to Panama will be significantly reduced in the 
near future.  GOP officials have been especially concerned 
about dramatic reductions in economic development programs. 
Lewis has recently inquired, knowing Panama does not meet the 
requirements of the program, whether Panama could participate 
in the Millennium Challenge process.  Lewis has noted that 
while Panama's high level of per capita GDP disqualifies it, 
Panama continues to face significant poverty and development 
challenges, and would like continued USG support to help 
address these issues. 
Eaton