VZCZCXYZ0014
RR RUEHWEB

DE RUEHZP #1762/01 3182248
ZNR UUUUU ZZH
R 142248Z NOV 07
FM AMEMBASSY PANAMA
TO SECSTATE WASHDC 1392

UNCLAS PANAMA 001762 
 
SIPDIS 
 
SIPDIS 
 
FOR STATE WHA/CEN - TELLO 
FOR USTR - SHIGEMTOMI 
 
E.O. 12958: N/A 
TAGS: AMGT ECON ETRD XK XL
SUBJECT: PANAMA: INPUT FOR 2007 CBERA OPERATION REPORT - 
PART 1 OF 2 
 
REF: STATE 143212 
 
¶1. (U) SUMMARY.  Below is Part 1 of 2 of Post's report on 
Panama's current performance with respect to the Caribbean 
Basin Economic Recovery Act (CBERA), as amended by the 
Caribbean Basin Trade Partnerhsip Act (CBTPA).  Part 1 
responds to the questions set forth in reftel paragraph 6. 
Part 2 responds to the questions set forth in reftel 
paragraph 7.Panama appears to be in substantial compliance 
with respect to CBERA and CBPTPA eligibility criteria.  END 
SUMMARY. 
 
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RESPONSES TO CBERA SECTION 212(B) AND (C) CRITERIA 
--------------------------------------------- ----- 
 
--------------------------------------------- --------------- 
Commitment to WTO Obligations Under or Ahead of Schedule and 
Participation in Free Trade Negotiations 
--------------------------------------------- --------------- 
 
¶2. (U) Panama completed its ascension to the WTO in 1997. 
Panama has sought and received, on July 26, 2006, a waiver 
under Article IX of the WTO Agreement with respect to 
Introduction of Harmonized System 1996 changes into WTO 
Schedules of Time Limits until April 2007. 
 
¶3. (U) Historically, U.S. exporters encountered frequent 
problems in the GOP's non-science based use of sanitary and 
phto-sanitary (SPS) restrictions to bar the entry of U.S. 
food products into Panama.  On December 20, 2006, the U.S. 
and Panama signed a far-reaching bilateral agreement on SPS 
measures and technical standards. Panama has implemented this 
agreement through a series of resolutions and decrees. Under 
this agreement, Panama has recognized the equivalence of the 
U.S. meat and poultry inspection systems and of the U.S. 
regulatory system for processed food products (including 
diary products) thereby eliminating plant-by-plant and 
shipment-by-shipment inspection requirements. In addition, 
Panama has provided access for all U.S. beef and beef 
products (including pet food), and all U.S. poultry and 
poultry products, consistent with international standards. 
Panama has lifted all import certification and licensing 
requirements, except those agreed with the United States 
(specifically, sanitary certificate requirements) and 
formalized its recognition of the U.S. beef grading system 
and cuts nomenclature.  Additionally, Panamanian authorities 
will notify U.S. authorities within 24 hours of any detention 
of a U.S. shipment due to suspected SPS concerns.   Finally, 
Panama has eliminated its time-consuming and costly product 
registration procedures, and agreed to an automatic, 
cost-free and quick registration process for the small group 
of agricultural products not exempted. 
 
¶4. (U) Both the U.S. and Panama are subject to the WTO 
Technical Trade Barriers obligations.  Panama's application 
of its technical regulations and conformity assessment 
procedures for nonagricultural goods conform with WTO 
guidelines.  Panama maintains a transparent standards 
development process which permits the participation of 
foreign countries and individuals in standards development 
activities.  Labeling and testing requirements are primarily 
limited to food products.  Products that comply with U.S. 
labeling and marketing requirements are generally accepted 
for sale in Panama. 
 
¶5. (U) In the context of its WTO accession, Panama revised 
its export subsidy policies in 1997-98. The government 
originally had stated its intention to phase out its Tax 
Credit Certificate (CAT), which was given to firms producing 
certain non-traditional exports, by the end of 2001. However, 
during the WTO Ministerial Conference in November 2001, the 
government of Panama asked for and received an extension for 
the use of CATs. The WTO extended this waiver until December 
2006, allowing exporters to receive CATs equal to 15 percent 
of the export's national value added. Legislation enacted in 
2004 aimed at eliminating the CAT and replacing it with 
another form of subsidy has been repealed. The CAT program 
has been extended until September 30, 2009 allowing exporters 
to receive CATs equal to 5 percent of the export's value 
added, or 15 per cent through 2007, 10 percent through 2008 
and 5 per cent through September 30, 2009. The certificates 
are transferable and may be used to pay tax obligations to 
the government, or they can be sold in secondary markets at a 
discount. The government has, however, become stricter in 
defining national value added, in an attempt to reduce the 
amount of credit claimed by exporters. 
 
¶6. (U) Panama and the U.S. signed a Trade Promotion Agreement 
(TPA) on June 28, 2007.  The Panamanian National Assembly 
 
 
ratified the TPA on July 11, 2007 and is awaiting U.S. 
Congressional action. 
 
¶7. (U) Under the TPA, Panama would be committed to liberalize 
the services sector beyond its commitments under the WTO 
General Agreement on Trade in Services by adopting a negative 
list approach where all sectors are covered except where 
specific exceptions are made.  The TPA also emphasizes the 
importance, and reinforces the provisions of, the WTO 
Agreement on Technical Barriers to Trade.  As a result of the 
TPA, Panama agreed to become a full participant in the WTO 
Information Technology Agreement.  The telecommunications 
portion of the TPA provides for commitments in excess of 
those required by the WTO for all suppliers of public 
telecommunications services, including interconnection, 
resale, number portability and dialing parity.  The TPA 
contains a provision similar to the WTO Moratorium on Customs 
Duties on Electronic Transmissions pursuant to which the 
parties agree not to impose custom duties or fees or other 
charges on digital products transmitted electronically. 
 
--------------------------------------- 
Intellectual Property Rights Protection 
--------------------------------------- 
 
¶8. (U) By virtue of Panama's ascension to the WTO in 1997 as 
a developed country, it was obliged to have TRIPS-compliant 
legislation in force upon such ascension.  Industry experts 
and legal experts are in broad agreement that Panama has made 
progress in setting intellectual property rights standards 
above the minimum afforded under TRIPS.  Neither Panama nor 
the Colon Free Zone, the world's second largest free zone, 
are included on any USG Special 301 lists that identify 
countries with particularly problematic intellectual property 
right (IPR) laws or enforcement practices. 
 
¶9. (U) Intellectual property policy and practice in Panama is 
the responsibility of an "Inter-institutional" Committee. 
This committee consists of representatives from six 
government agencies and operates under the leadership of the 
Ministry of Commerce and Industry. It coordinates enforcement 
actions and develops strategies to improve compliance with 
the law. The creation of a specialized prosecutor for 
intellectual property-related cases has strengthened the 
protection and enforcement of IPR in Panama. However, given 
Panama's role as a transshipment point, industry is concerned 
that Panama will become susceptible to trading in pirated and 
counterfeit goods.  The issue of pirated and counterfeit 
goods in the Colon Free Zone is increasingly of concern to 
certain members of the private sector and U.S. Customs 
officials at Post. 
 
¶10. (U) The bilateral TPA provides for improved standards for 
the protection and enforcement of a broad range of 
intellectual property rights, which are consistent with U.S. 
standards of protection and enforcement and with emerging 
international standards. Such improvements include 
state-of-the-art protections for digital products such as 
U.S. software, music, text and videos; stronger protection 
for U.S. patents, trademarks and test data, including an 
electronic system for the registration and maintenance of 
trademarks; and further deterrence of piracy and 
counterfeiting. 
 
¶11. (U) The TPA would require Panama to affirm its commitment 
to the Doha Declaration on the TRIPS Agreement and Public 
Health.  The TPA would also require, among other protections, 
implementation of the WIPO Treaties in a manner consistent 
with the U.S. digital Millennium Copyright Act. 
 
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Provision of Internationally Recognized Worker Rights 
--------------------------------------------- -------- 
 
¶12. (U) Panama ratified all eight fundamental International 
Labor Organization (ILO) conventions on workers' rights 
between June 3, 1958 and October 31, 2000.  Panama maintains 
relatively stringent workers' rights protections, having 
established and enforced legislation on labor issues such as 
the right to organize and bargain collectively, minimum wage 
and age requirements and prohibitions against certain forms 
of child labor.  However, some Panamanian labor leaders 
maintain that Panama's industry does not fully observe laws 
on workers' rights and working conditions in Panama.  Parts 
of Panama's business community view the labor code as 
extremely rigid, particularly with respect to the dismissal 
of employees, and believe the labor code is a deterrent to 
operating in Panama.  According to the International Trade 
Commission's Report on the TPA, Panama's labor laws are 
reportedly stronger than those maintained by other Central 
 
American countries. 
 
¶13. (U) Panama ratified the Rights of Association 
(Agriculture) Convention, 1921, on June 19, 1970; the Freedom 
of Association and Protection of the Rights to Organize 
Convention, 1948 (No. 87), on June 3, 1958; and the Right to 
Organize and Collective Bargaining Convention, 1949 (No. 98), 
on May 15, 1966.  Panamanian law permits the establishment of 
unions in the private sector and allows organization and 
collective bargaining by certain public-sector and all 
private-sector employees. The law sets the minimum size of 
private sector unions at 40 workers and permits one union per 
establishment.  Umbrella unions based on skill groups may 
also operate in the same establishment.  The law provides for 
a conciliation section within the Labor Ministry to resolve 
private labor complaints and a procedure for mediation. In 
June 2006, the Committee of Experts on the Application of 
Conventions and Recommendations (CEACR) noted that there 
exists discrepancies between Panamanian labor law and 
practice, and the terms of Conventions No. 87 and 98.  The 
CEACR notes that the GOP said it was not in a position to 
amend the Panamanian labor code without the support of both 
labor and employer organizations.  The GOP believes a 
consensus between the two groups is highly improbable in the 
short term.  The CEACR noted that some of the serious 
restrictions imposed by the labor code are the requirement of 
trade union unity for public institutions, the legal 
requirement that trade union leaders be Panamanian, the 
limitations on strikes in certain circumstances affecting 
public services (25% of administrative personnel and 50% of 
essential public servcies employees must remain on duty 
during a strike) and reducing the number of minimum public 
sector employees required (currently 50) to form a union. 
Ther are no reliable statistics on the percent of the total 
labor force that was unionized.  Private labor lawyer Carlos 
Ayala Montero estimates that about 26% of the labor force was 
organized between 1990 and 2000.  The law governing the 
Panama Canal Authority prohibits the right to strike but does 
allow unions to organize and to bargain collectively. 
 
¶14. (U) Panama ratified the Forced Labor Convention, 1930 
(No. 29), on May 16, 1955 and the Abolition of Force Labor 
Convention, 1957 (no. 105), on May 16, 1966.  The Panamanian 
labor code prohibits forced or compulsory labor by adults or 
children.  In 1998, the GOP amended its administrative code 
to prohibit forced labor by prisoners and provide seafarers 
with the right to terminate their employment by giving 
reasonable notice.  Post is unaware of any instances of 
forced labor. 
 
¶15. (U) Panama ratified the Minimum Age Convention, 1973 (No. 
138), on October 31, 2000.  Panamanian law set the minimum 
working age at 14 years.  Children who have not completed 
primary school may not begin work until 15 years.  The law 
permits children 12 to 14 to perform light domestic and 
agricultural labor as long as the work does not interfere 
with schooling.  CEACR noted that the law does not provide 
clear regulations for the conditions under which 12 to 14 
year olds may engage in light labor.  The law prohibits 14 to 
18 year olds from engaging in potentially hazardous work or 
work that would impede their school attendance.  The law 
identifies such hazardous work to include work with electric 
energy, explosives, flammable and toxic or radioactive 
substances; work underground, work on railroads, airplanes or 
boats; and work in nightclubs bars and casinos.  Some of this 
work may be performed as part of a training program.  Youth 
under 16 years may work no more than 6 hours a day or 36 
hours a week, while those 16 and 17 years may work no more 
than 7 hours a day or 42 hours a week.  Children under 18 may 
not work between 6:00 pm and 8:00 am.  Businesses that employ 
an underage child are subject to civil fines, while employers 
who endanger the physical or mental health of a child can 
face 2 to 6 years of imprisonment. Notwithstanding these 
laws, there are media reports of child labor in the 
agricultural sector, particularly among indigenous children 
in rural areas, and children working in the informal sector 
can be observed in the major cities (principally selling 
goods and menial services).  A 2005 ILO survey, the most 
recent available, estimated that 52,000 children between the 
ages of five and 17 worked in the informal sector. 
 
¶16. (U) Panama ratified the Minimum Wage - Fixing Machinery 
Convention, 1928 (No. 30), on June 19, 1970, the Holiday with 
Pay Convention, 1936 (No. 52), on June 3, 1958, the 
Protection of Wage Convention, 1949 (No. 95), on June 19, 
1970, the Night Work (Women) Convention, 1948 (No. 89), on 
June 19, 1970.  Panama ratified the Hours of Work (Commerce 
and Office) Convention, 1930 (No. 30), on February 16, 1959. 
Panama ratified the White Lead Paint Convention, 1921 (No. 
13), on June 19, 1970, the Underground Work (Women) 
 
Convention, 1935 (No. 45), on February 16, 1959, and the 
Hygiene (Commerce and Office) Convention, 1962 (No. 117), on 
June 4, 1971.  Panamanian law establishes standards regarding 
worker health and safety, the length of the work week and 
overtime.  Panamanian law provides for the inspection of 
businesses to ensure compliance with such laws.  The labor 
law establishes minimum wage rates for specific regions and 
for most categories of work, excluding public sector 
employees.  As of November 2007, the minimum wage ranged from 
$0.89 to $1.68 per hour, depending on region and sector.  A 
worker working 40 hours per week 50 weeks a year and earning 
at the midpoint of the minimum wage would earn approximately 
$2,360, which well exceeds the estimated poverty level of 
annual income of approximately $953.  The law establishes a 
standard work week of 48 hours with at last one 24 hour rest 
period weekly.  The law establishes premium pay for overtime, 
limits on the number of hours worked per week and prohibits 
excessive or compulsory overtime.  The Labor Ministry is 
responsible for setting and enforcing health and safety 
standards.  Inspectors from the Labor and the occupational 
health section of the Social Security Administration conduct 
periodic inspections of work sites.   Safety measures in the 
construction sector are notriously lax, resulting in 
approximately 22 deaths so far in 2007 (January to October). 
 
 
--------------------------------------------- ----- 
Commitment to Eliminate Worst Forms of Child Labor 
--------------------------------------------- ----- 
 
¶17. (U) On October 31, 2000, Panama ratified ILO Convention 
No. 182.  President Martin Torrijos signed an Executive 
Decree to legalize Panama's list of the worst forms of child 
labor as stipulated by ILO Convention No. 182.  This Decree 
became law on June 29, 2006.  The law lists 17 classes of 
work considered hazardous by their nature and 12 considered 
hazardous by their conditions.  Panama is an ILO-IPEC 
participating country. 
 
¶18. (U) In June 2006, Panama adopted its National Plan 
Against Child Labor (2007-2011).  The Plan was developed by 
the National Commission for the Elimination of Child Labor 
and the Protection of the Adolescent Worker.  The Plan's 
components are: raising awareness of child labor issues, 
harmonizing national legislation with international 
conventions, enforcing child labor laws, improving national 
capacity to inspect and monitor child labor violations, 
improving the conditions of parents of working children, 
promoting the education and health of working children, 
promoting recreational activities for children, and creating 
and maintaining a database of credible information. 
 
¶19. (U) Panama participates in the second phase of a 
USDOL-funded $2 million program implemented by ILO-IPEC that 
aims to combat child labor in the informal sector.  The first 
phase ended in June 2006, and withdrew 967 children and 
prevented another 570 from engaging in exploitative labor. 
The second phase aims to withdraw 750 children and prevent 
another 750 from engaging in exploitative labor. 
 
¶20. (U) Panama participates in a USDOL $8.8 million regional 
ILO-IPEC project to combat the commercial sexual exploitation 
of children.  The projects aims to withdraw or prevent 230 
children from the commercial sex industry in Panama. 
 
¶21. (U) Panama participates in a USDOL $3 million project 
with Creative Associates International to combat child labor 
through education.  The project aims to withdraw 2,420 
children from exploitative work in agriculture and prevent 
another 675 from such work. 
 
¶22. (U) Panama also participated in a USDOL $3 million 
regional ILO-IPEC project to combat hazardous child labor in 
agriculture.  The project ended in June 206.  Panama 
participated in policy and capacity building programs.  No 
children were targeted for withdrawal or prevention in this 
project. 
 
¶23. (U) The Ministry of Labor, through its Child Labor Unit, 
is responsible for enforcing child labor laws.  The Ministry 
of Government and Justice is responsible for developing 
policies to combat trafficking in persons.  The Ministry of 
Social Development (MIDES) provides shelter and related 
services to trafficking victims.  MIDES also provides 
services to vulnerable children, children engaged in 
exploitative labor and the sex industry.  MIDES also provides 
service s to families in extreme poverty, which includes a 
monthly stipend to female heads of households who commit to 
keep their school-aged children in school and participate in 
school activities. 
 
 
¶24. (U) Panama an extensive legal framework to combat the 
worst forms of child labor, including a prohibition on 
employment of minors under the age of 14, as well as 
prohibitions on child prostitution, sex tourism and 
trafficking.  The ILO's Committee of Experts on the 
Application of Conventions and Recommendations has noted that 
Panamanian law does not provide clear regulations for the 
conditions under which 12-to-14 year olds may engage in light 
labor.  There is public concern over the employment of 
children, particularly indigenous children, in rural coffee 
and sugar plantations and the urban informal sector. 
 
----------------------------- 
Counter Narcotics Cooperation 
----------------------------- 
 
¶25. (U) The President has identified Panama as a major drug 
transit country since 2002.  Panama and the U.S. have had a 
long and extensive history of cooperation on 
counter-narcotics efforts, and as such as been certified by 
the President as cooperating with the USG on 
counter-narcotics efforts. 
 
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Implementation of the Inter-American Convention Against 
Corruption 
--------------------------------------------- --------------- 
 
¶26. (U) Panama is a signatory to the Inter-American 
Convention Against Corruption (IACAC), having ratified the 
convention on July 20, 1998 and deposited it with the 
Organization of American States on October 8, 1998. On June 
4, 2001, Panana signed the Declaration on the Mechanism for 
Follow-up of the Implementation of the Inter-American 
Convention Against Corruption (MESICIC).  On February 6, 
2004, the Committe of Experts of MESICIC issued a Final Reprt 
on Panama's implementation of the IACAC.  The Final Report 
acknowledged progress by Panama in certain areas, but made 
recommendations regarding standards of conduct to prevent 
conflict of interests the system for disclosure of income, 
assets and liabilities, strengthening oversight bodies, 
greater participation of civil society and NGOs in the fight 
against corruption, and greater training of public officials 
on anti-corruption matters. 
 
¶27. (U) To date, Panama has yet to comply fully with all of 
its obligations to implement the various provisions of the 
IACAC.  While the GOP claims it has made great progress in 
fulfilling the terms of the IACAC, various civil 
organizations focused on anti-corrruption issues believe the 
GOP has not acted vigorously enough to implement the terms of 
the IACAC. Notwithstanding the IACAC, and amid persistent 
allegations of corruption in the government, particularly in 
the judiciary, the Torrijos administration campaigned in 2004 
on a promise to "eradicate corruption." The government 
continues to assert its commitment to combating corruption as 
part of its overall agenda of institutional reform.  For 
example, it has instituted a number of new online systems 
aimed at bringing greater transparency and efficiency to 
government limitations, contracting, and business start-up 
procedures.  The long-term sustainability and efficacy of 
these systems remains to be seen. Moreover, the government 
has been slow to deliver concrete results in enforcing 
anti-corruption laws. 
 
¶28. (U) To date, the Torrijos administration has yet to 
prosecute any high-level governmental corruption cases.  In 
addition, various Panamanian laws tend to inhibit the 
prosecution of corruption cases.  For example, existing law 
allows legislators and judges to sue journalists for libel 
and slander, whether or not what they publish is the truth. 
Other laws provide that only the National Assembly may 
initiate corruption investigations against Supreme Court 
judges and that only the Supreme Court could initiate 
investigations against members of the National Assembly, 
thereby encouraging, in effect, a "non aggression pact" 
between these two branches of government.  Supreme Court 
judges are typically nominated to 10-year terms on the basis 
of political consideration as opposed to recommendations from 
civil society.  Post has received credible allegations of 
judicial corruption that have appeared to affect U.S. 
investors adversely. 
 
---------------------- 
Government Procurement 
---------------------- 
 
¶29. (U) Panamanian Law 22 of 2006 regulates government 
procurement and other related issues. Law 22 was intended to 
 
 
streamline and modernize Panama's contracting system. It 
establishes, among other things, an Internet-based 
procurement system (www.panamacompra.gob.pa) and requires 
publication of all proposed government purchases. The 
Panamacompra program requires publication of all government 
purchases on the Internet; evaluation of proposals and 
monitoring of the procurement process; consultation of public 
bids, including technical specifications and tender 
documents; classification of purchases by different 
government institutions and gathering and analysis of data. 
The law also created an administrative court to handle all 
public contracting disputes. The rulings of this 
administrative court are subject to review by the Panamanian 
Supreme Court. The Panamanian government has generally 
handled bids in a transparent manner, although occasionally 
U.S. companies have complained that certain procedures have 
not been followed. 
 
¶30. (U) While Panama committed to become a party to the World 
Trade Organization (WTO) Government Procurement Agreement 
(GPA) at the time of its WTO accession, it remains an 
observer and not a signatory.  Its efforts to accede to the 
GPA have stalled. Under the TPA, Panama would guarantee a 
fair and transparent process for procurement covered by the 
TPA.  The TPA provides that U.S. suppliers will be permitted 
to bid on procurement by a wide range of Panamanian 
government entities, including the Panama Canal Authority, 
over a certain threshold amounts on the same basis as 
Panamanian suppliers.  The TPA would strengthen rule of law 
and fight corruption by criminalizing bribery in government 
procurements and establishing at least one impartial 
administrative or judicial authority to receive and review 
supplier challenges.   Disputes relating to Panama Canal 
Authority procurement will continue to be addressed through 
the authority's existing procedures. 
EATON