VZCZCXYZ0000
RR RUEHWEB

DE RUEHZP #1089/01 1772127
ZNY CCCCC ZZH
R 262127Z JUN 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 0695
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0169
RUEHCV/AMEMBASSY CARACAS 1140
RUEHIN/AIT TAIPEI 0123
RHMFISS/CDR USSOUTHCOM MIAMI FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHMFISS/JOINT STAFF WASHINGTON DC
RHEHAAA/NSC WASHDC
RUEKJCS/OSD WASHDC
RUEKJCS/SECDEF WASHDC

C O N F I D E N T I A L PANAMA 001089 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 06/22/2017 
TAGS: PREL PGOV EAID ECON PM TW
SUBJECT: PANAMA:  TAIWANESE SEEK CLOSER COORDINATION WITH 
USG 
 
REF: PANAMA 964 
 
Classified By: POLCOUNS Brian R. Naranjo.  Reason:  1.4 (b) and (d) 
 
¶1.  (U)  This is an action request.  See para 6. 
 
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Summary 
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¶2.  (C) "Taiwan and the U.S. should coordinate more closely 
on assistance to Panama," Taiwanese Ambassador to Panama 
Ping-Fu Hou told POLCOUNS on June 11.  "Working together we 
can ensure that the chavista threat does not take root in 
Panama."  Underscoring this message, the Director of the 
Taiwanese International Cooperation and Development Fund 
(ICDF), Fung-Yen Liu, urged POLCOUNS and Acting AID Director 
that the U.S. and Taiwan should develop joint projects in 
Panama.  "Divided our forces are not as effective, but 
working together Taiwan and the U.S. can have a bigger 
impact," Liu said.  POLCOUNS and Acting AID Director, noting 
that it was useful to learn more about Taiwan's assistance 
programs, underscored that post could not undertake any 
formal or informal joint activities without direct 
authorization and approval from Washington.  Both Hou and 
former Panamanian FM Oyden Ortega, head of a pro-Beijing 
advocacy group, separately told POLCOUNS that they did not 
believe that Panama would switch relations from Taipei to 
Beijing while approval of the U.S.-Panama Trade Promotion 
Agreement (TPA) was pending before the U.S. Congress.  Hou 
and Liu seek to graft together Taiwanese and U.S. assistance 
programs in the hopes of building an additional firewall to 
forestall a Panamanian switch of its diplomatic recognition 
to Beijing.  End Summary. 
 
-------------------------------------- 
Taiwanese Ambassador Plays Chavez Card 
-------------------------------------- 
 
¶3.  (C) Taiwanese Ambassador to Panama Hou asserted to 
POLCOUNS on June 11 that the U.S. and Taiwan should work 
together more closely "to prevent a Chavez from emerging in 
Panama."  In the wake of Costa Rica's switch of its 
diplomatic recognition from Taipei to Beijing and resigned to 
the likelihood that Nicaragua will do the same, Hou 
acknowledged that Taiwan would be trying to shore up its 
diplomatic relations in the region.  Hou said that Taiwanese 
VP Annette Lu would visit in July and would announce new 
assistance projects, including the construction of a hospital 
and a water supply system for a combined cost of USD 60 
million.  Hou himself recently donated funds to First Lady 
Vivian Fernandez de Torrijos and Minister of Education Miguel 
Angel Canizales to construct eighty-nine schools in rural 
areas, providing direct support to the First Lady's 
high-profile "Dignified Schools (Escuelas Dignas)" program to 
replace dilapidated and sub-standard schools with more 
adequate facilities.  In another politically astute step, Hou 
delivered to Minister of Housing Balbina Herrera -- perhaps 
the most dynamic politician today in the governing 
Revolutionary Democratic Party (PRD) and believed to be 
considering a presidential run -- a donation to construct a 
model community of three hundred pre-fabricated bamboo homes 
for indigenous communities. 
 
¶4.  (C) Hou said that he did not believe that Panama would 
switch its diplomatic recognition to Beijing while the 
U.S.-Panama Trade Promotion Agreement (TPA) was pending U.S. 
congressional approval lest Panama alienate pro-Taiwan U.S. 
Congressmen.  Separately, former FM Oyden Ortega, an active 
advocate for Panama to recognize Beijing, told POLCOUNS on 
June 13 that there would be no switch in diplomatic relations 
while the TPA was under consideration by the U.S. Congress. 
Furthermore, Ortega said Panama was unlikely to switch until 
the end of Panamanian President Torrijos' tenure in 2009. 
Ortega noted that Panama's business community was 
increasingly lobbying the GOP to switch its diplomatic 
recognition to China to advance further Panama's growing 
commercial ties with the mainland. 
 
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Extensive Taiwanese Assistance Programs 
--------------------------------------- 
 
¶4.  (SBU) The following week, Panama-based ICDF Director Liu 
contacted acting USAID director to request a meeting to 
discuss possible future U.S.-Taiwanese joint activities. 
Underscoring that ICDF was a "technical cooperation 
organization," Liu shared with POLCOUNS and acting USAID 
director on June 22 a comprehensive overview of ICDF's 
activities in Panama as of the first quarter of 2007: 
 
-- an organic agriculture project; 
-- extensive training, agricultural including fruit trees, 
vegetable gardens, greenhouses, and ornamental plants; 
-- a sustainable "artisan" fishery management project; 
-- a regional fish farming and training project; 
-- extensive microcredit activities; 
-- an exotic tropical fruit project; and 
-- the establishment of an agroindustrial center to produce 
fruit juices, preserves, and other processed fruit products. 
 
Liu went to great lengths to explain the controls and 
oversight that ICDF required for its projects and emphasized 
that the GOP and local beneficiaries had to put up matching 
funds for these projects.  "If they buy in," Liu said, "they 
are more likely to work to make the projects succeed."  Liu 
clarified, with some disdain, that recently reported 
multi-million dollar Taiwanese donations to the First Lady's 
office and to the Minister of Housing were "handled by the 
Embassy, not ICDF" and did not have the same accountability 
and oversight mechanism's like IDF's "technical assistance." 
 
¶5.  (SBU) Liu said that Taiwan and the U.S. should find ways 
to work on projects jointly.  Acting USAID director explained 
that USAID's activities in Panama were shrinking due to 
 
budget constraints and that the U.S. generally ran its own 
projects to ensure accountability, though a particular 
project might be in conjunction with others working on a 
large effort.  POLCOUNS noted that the U.S., of course, would 
need to take into account the special nature of its 
relationship with Taiwan before entering into any formal or 
informal activities.  Both POLCOUNS and acting USAID director 
underscored that post could not contemplate any joint 
activities without express guidance from Washington. 
 
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Action Request 
-------------- 
 
¶6.  (SBU) Action Request:  Post requests guidance from 
Department and USAID regarding further engagement with the 
Taiwanese Embassy in Panama regarding this matter. 
 
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Comment 
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¶7.  (C) The Taiwanese seek to work closely with Embassy in 
the hopes of building another firewall to prevent Panama from 
switching its diplomatic recognition to Beijing.  Once U.S. 
congressional action on the TPA is concluded, a significant 
brake on such a switch will be removed.  The "technical work" 
of the ICDF in Panama is greatly overshadowed by the 
high-profile, politically astute donations handed out by the 
Taiwanese Ambassador.  Additionally, memories of Taiwan's 
multi-million dollar donations to sketchy associations during 
the previous administration led by former President Mireya 
Moscoso are still fresh in many Panamanian minds.  Indeed, 
Ambassador Hou himself has previously told POLCOUNS that he 
was transferred to Panama to put Taiwanese-Panamanian 
relations on a more firm footing by moving beyond the 
Moscoso-era scandals by introducing more transparency and 
accountability to Taiwan's donations to Panama.  To a large 
extent, Hou has succeeded as evidenced by the high-level 
contacts between the two governments over the past nine 
months. 
Given the highly political nature of Taiwanese foreign 
assistance in Panama -- both from a Taiwanese-Panamanian 
bilateral prospective and from a Panamanian domestic 
prospective -- post recommends steering clear of Taiwanese 
proposals to coordinate formally or informally USG assistance 
to Panama. 
 
EATON