VZCZCXYZ0002
RR RUEHWEB

DE RUEHZP #1900/01 3551349
ZNR UUUUU ZZH
R 211349Z DEC 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 1586
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RHMFISS/CDR USSOUTHCOM MIAMI FL
RUEAIIA/CIA WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHEFDIA/DIA WASHDC
RHMFISS/JOINT STAFF WASHINGTON DC
RHEHAAA/NSC WASHDC
RUEKJCS/SECDEF WASHDC

UNCLAS PANAMA 001900 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB PGOV ECON SOCI PM
SUBJECT: PANAMA:  DOCTORS' STRIKE ENDS WITH 26.8 PERCENT 
RAISE 
 
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SUMMARY 
------- 
 
¶1. (SBU)  Ending 39 days on strike, the National Medical 
Commission of Negotiation (COMENAL) reached agreement with 
the GOP on a 26.8% raise, on December 14.  COMENAL, which 
launched its strike on November 6 with demands for a 60% 
raise, has also agreed to make up the estimated 600 thousand 
appointments lost during the strike.  COMENAL's economic 
advisor Dr. Alexis Soto explained to POLOFF on December 11 
that, despite reforms in 2005 to  Panama's social security 
system (Caja de Seguro Social - CSS), the CSS could not 
handle over the long-term a raise of more than 18% for health 
workers.  Soto pointed out that the GOP would need to 
increase the level of overall contributions to the CSS, which 
currently solely relies on payroll deductions, to ensure the 
long-term sustainability of the system.  This raise 
undermines the GOP's 2005 reform of the CSS, as the CSS would 
now face insolvency in 2011 instead of 2016.  This will force 
the next administration to address the CSS's solvency 
challenges, including consideration of direct GOP budgetary 
support for the system. 
 
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Background 
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¶2. (U) In 2005, the GOP realized that its social security 
system would be insolvent by 2009 and proposed raising 
mandatory payroll contributions while simultaneously striving 
to incorporate more workers in the system.  The Torrijos 
Administration's efforts to put the CSS on more sound 
financial footing ran head-long into strong public protests. 
To secure the support of healthcare works, the GOP offered 
them raises ranging from 30% to 60%. Only one nurse, however, 
actually  received a raise of 60% due to a unique convergence 
of criteria, the most salient of which was that she had been 
in the healthcare system for more than 30 years.  This sole 
outlier was the genesis of COMENAL's initial negotiating 
position to seek an across the board 60% raise. 
 
¶3.  (U) Striking healthcare workers were also motivated by 
opposition to the GOP's proposal to establish a Unified 
Health System (Sistema Unica de Salud) that would combine the 
Ministry of Health's and the CSS's healthcare systems. This 
proposal included provisions that would privatize the social 
security system, transfer more responsibility from the GOP's 
Ministry of Health to the CSS, facilitate the entry of 
foreign doctors to Panama, and outsource certain services. 
As a result, the workers have feared that merging into a 
unified system would lead the GOP to eliminate many 
positions. 
 
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CSS Cannot Support More Than 18% Raise 
-------------------------------------- 
 
¶4. (U)  Soto maintained that the CSS system is overburdened 
with 800,000 workers supporting a population 3.3 million 
Panamanians.  According to Soto, the GOP was transferring the 
responsibility of providing nationwide healthcare to the CSS 
without transferring the necessary funding.  The expanding 
responsibilities of CSS could not be sufficiently financed 
solely with payroll contributions, Soto asserted. The GOP's 
reform of the CSS through Law 51 of Dec 27, 2005 extended the 
solvency of the system from 2009 to 2016 via increases in 
payroll contributions.  As the salaries of public health 
workers come from this funding pool, an increase of 18% under 
the current structure would jeopardize the solvency of CSS by 
¶2011. 
 
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COMENAL Resist the Involvement of Radicals 
------------------------------------------ 
 
¶5. (SBU) Soto explained that radical groups, such as the 
SUNTRACS construction worker's union and the "FRENADESSO" 
group created to fight the GOP's earlier CSS reform efforts, 
had sought to join COMENAL's strike activities.  They had 
 
apparently believed that COMENAL could become isolated and 
weakened by a prolonged strike and, therefore, susceptible to 
outside influence.  However, COMENAL resisted their overtures 
and, following President Torrijos' initial personal 
intervention at a December 10th meeting, COMENAL and the GOP 
ultimately settled the strike on December 14.  During the 
December 10th meeting in which COMENAL's leadership rejected 
an offer of 20%, one of the doctors outside of the leadership 
spoke up saying they would accept a 25% raise.  This may have 
been the pivotal moment that broke the ice. 
 
 
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COMMENT 
-------- 
 
¶6. (U) COMENAL achieved a significant victory on two fronts. 
One, it secured a sizable pay raise (about double the 14% 
increase of the minimum wage recently agreed upon in a 
private deal struck by industry and other labor unions.) 
Second, COMENAL also forestalled the radicalization that was 
knocking at its doors.  Conversely, the Torrijos 
Administration's settlement with COMENAL could be costly.  By 
granting CSS a raise of 26.8%, the GOP has undermined one of 
its signal achievements, i.e., ensuring the CSS's solvency. 
This puts the future of the CSS and its workers on a 
collision course with fiscal realities, but that will be a 
matter for the next administration to address. 
ARREAGA