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RHMFISS/JOINT STAFF WASHINGTON DC
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C O N F I D E N T I A L PANAMA 000574 
 
SIPDIS 
 
E.O. 12958: DECL: 07/09/2018 
TAGS: PREL PGOV ECON PM
SUBJECT: PANAMA POST:  EDITION 12; VOLUME II 
 
REF: PANAMA 493 (AND PREVIOUS) 
 
Classified By: POLCOUNS Brian R. Naranjo.  Reasons:  1.4 (b), 
(c) and (d). 
 
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Summary 
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¶1. (C)  Juan Carlos Varela's landslide victory in the 
Panamenista primary on July 6, defeating Alberto Vallarino by 
over 20 points, was the defining political development for 
the week.  The focus quickly turned to Varela's efforts to 
unify Panama's largest opposition party and to renewed 
discussions regarding opposition alliances.  In this week's 
Panama Post, our leading stories are: 
 
-- Former President Mireya Moscoso's on Panamenista unity; 
-- Billy Ford:  "Patriotic Union is leaning towards an 
alliance with Ricardo Martinelli" of Democratic Change (CD); 
-- Martinelli aide believes Martinelli may need to be 
prepared to go it alone; and 
-- Martinelli op-ed sheds light on economic views. 
 
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Moscoso Prepared to Support Varela 
---------------------------------- 
 
¶2. (C) Former President Mireya Moscoso was prepared to 
support Juan Carlos Varela as the Panamenista presidential 
candidate, Moscoso aide Eduardo Quiros told POLCOUNS on July 
¶11.  "It could mean the death of Panamenismo if the 
opposition loses in 2009, and the Panamenista candidate needs 
to be at the top of the ticket," Quiros explained.  Varela's 
landslide victory over Vallarino put Varela in perhaps the 
best position to unify the party in recent memory and to 
build a strong opposition alliance, according to Quiros. 
Moscoso wanted to beat the PRD, so now the Panamenista party 
needed to close ranks behind Varela.  Acknowledging that 
Moscoso and Varela were not on speaking terms and that Varela 
to a large extent defined his efforts to renew the party by 
contrasting himself sharply with Moscoso, Quiros said that 
nonetheless both Varela and Moscoso were sending out feelers. 
 Jose Luis "Popi" Varela, Varela's brother and closest 
political advisor, had met recently with Moscoso in an effort 
to broker a rapprochement.  Quiros stated clearly, however, 
that in building bridges to the old-line chieftains of the 
Panamenista party, Varela would have to remain committed to 
leading an opposition ticket, not settling for second billing. 
 
¶3. (C) Comment: Quiros described a very ruthlessly pragmatic 
Moscoso in laying out her desire to shift from Vallarino, 
whom she backed in the primaries, to Varela.  She wants the 
Panamenistas to lead the opposition and to defeat the 
governing Revolutionary Democratic Party (PRD).  Only time 
will tell how successful Varela will be in putting real 
substance behind the symbolic party unity he has already 
achieved.  (Varela joined his primary opponents on July 10 
for the formal declaration that he had won the primary at 
which Vallarino and Marco Ameglio promised to "close ranks" 
behind Varela.) 
 
----------------------------------------- 
Ford:  UP Leaning Toward Alliance with CD 
----------------------------------------- 
 
¶4. (C) "Listen, my presidential campaign is about trying to 
keep my party together," Patriotic Union President and 
declared presidential candidate Guillermo "Billy" Ford told 
POLCOUNS on July 9.  "I am going to step down to help form 
the strongest opposition alliance possible.  I do not think 
that a grand opposition alliance of all parties is likely, 
but right now the momentum in Patriotic Union (UP) is to join 
with Ricardo Martinelli" of Democratic Change (CD).  Ford 
explained that UP needed to take care of its candidates for 
National Assembly and local positions.  Since Martinelli 
"owns and directs" his party, Ford explained, that it was 
easier for Martinelli to make space in an alliance for UP 
candidates.  In contrast, dealing with the Panamenista Party 
was like dealing with a corporation with corporate boards and 
stockholders that needed to be satisfied.  Also, the 
Panamenistas had just elected on July 6 its slate of 
candidates for these lower level positions.  As for a broader 
alliance, Ford speculated that Juan Carlos Varela's landslide 
two to one victory over Alberto Vallarino to win the 
Panamenista presidential nomination had made it less likely 
that Varela and Martinelli would be able to come to terms on 
a "grand opposition alliance."  "There'll be three candidates 
in the general elections:  two opposition candidates, 
Martinelli and Varela, and one (governing Revolutionary 
Democratic Party) PRD candidate, Balbina" Herrera.  Ford 
added that no alliances were likely to be announced until 
September or possibly even October.  Describing Vallarino as 
a "poor loser" and bitter, Ford noted that Varela would have 
his work cut out for him bringing the Panamenista Party 
together. 
 
¶5. (C) Comment:  Ford was not enthused about an alliance with 
"my friend" Martinelli, but did see it as the best deal that 
he could secure for UP.  Ford discussed alliance formation in 
terms of securing and using the greatest amount of leverage 
for UP. 
 
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Martinelli May Go It Alone 
-------------------------- 
 
¶6. (C) "One has to respect Varela for his impressive victory 
over Vallarino,"  Martinelli political advisor Jimmy 
Papadimitriu told POLCOUNS July 7.  "Nobody predicted that he 
would clobber Vallarino by such a margin." Papadimitriu 
acknowledged that the strength of Varela's victory would 
probably incline Varela to make a drive for the presidency, 
not take second billing on a Martinelli-led ticket.  "You 
know though, for some time I've believed that Ricardo can't 
rely on Varela, and I think that he may need to go it alone," 
Papadimitriu said.  "We'll pick up an alliance partner or 
two, but there will probably be two opposition candidates." 
 
¶7. (C) Comment: Papadimitriu has been trying to convince 
Martinelli for some time that Varela may not be his friend 
and that Martinelli may need to prepare to campaign against 
him.  Though at his campaign launch in May Martinelli trained 
most of his fire primarily on the PRD, Martinelli did make 
the argument that both the PRD and the Panamenista Party have 
had ample opportunity to try to address the needs of the 
people over the past forty years of their various 
administrations.  On television and radio on July 8, 
Martinelli dismissed questions regarding alliances by noting, 
"My alliance is with the Panamanian people.  I won't enter 
into that old political alliance game.  Instead, I want to 
talk about real solutions to solve real problems, the 
problems in education, health care, law and order, 
employment, and wages."  Papadmitriu noted that Varela was 
now humming the "change" mantra and said he was struck by the 
powerful response of the Panamenista rank and file to this 
message.  Martinelli's team clearly believes that Martinelli 
holds the edge in being the change agent that they believe 
the Panamanian public seeks. 
 
--------------------------------------------- - 
Martinelli Op-Ed Sheds Light on Economic Views 
--------------------------------------------- - 
 
¶8. (U) In a June 18 op-ed entitled "The Decline of the 
Traditional Politicians (El Desgaste de los politicos 
tradicionales)" in paper-of-record "La Prensa," Martinelli 
laid out his economic views.  In his opening lines, he 
stated, "The country's principal problems for Panamanian 
families are the high cost of living and unemployment.  Both 
are related to economics and cannot be solved by people who 
do not understand how things are interrelated or by people 
who have never generated any job openings."  He then declared 
that he understood how the economy worked and how things were 
interrelated.  Other highlights follow: 
 
-- Eliminate the tax on diesel and cut in half the tax on 
gasoline:  Martinelli state that the high cost of petroleum 
affected the high cost of goods and services that Panama 
produced.  By eliminating the tax on diesel and cutting in 
half the tax on gasoline, Martinelli wrote, "This is the way 
to help lower the cost of living." 
 
-- Implement a flat tax:  Acknowledging that the Torrijos 
Administration had presided over economic growth and a 
reduction of unemployment, Martinelli nonetheless stated, 
"What these numbers do not show is that every day the salary 
that Panamanians earn goes less as far and there is a 
difference between employment and under employment."  To 
attack this problem, it was imperative to lower the taxes on 
enterprises and workers.  "International studies prove that a 
reduction of taxes on businesses translates into an increase 
in salaries for their employees and a lowering of the costs 
of goods and services."  Arguing that some sectors could have 
zero tax burden while some banks paid seven percent and small 
and medium enterprises paid 30 percent, Martinelli wrote, "I 
propose to implement a fixed level of taxes system -- flat 
tax -- so that all enterprises pay the same percentage in 
taxes." 
 
-- Reduce the size of government:  To continue progressing, 
Martinelli asserted that the size of government had to be 
reduced and that more resource needed to be dedicated to 
things that would improve productivity and the quality of 
life such as infrastructure investment, transportation, 
education and health. 
 
-- Focus on things that add value:  Over the medium and long 
term, Martinelli argued that to transform Panama's economy, 
the focus had to be on producing goods and services that had 
greater added value.  By doing so, Martinelli wrote that 
salaries would improve.  To achieve this goal, Martinelli 
wrote that Panama's education system had to churn out more 
engineers, scientists and professionals in "specialized 
careers" and fewer "social science" graduates.  Furthermore, 
incentives to encourage business to invest in research and 
development had to be created. 
 
¶9. (U) Concluding his article, Martinelli writes, "Panama is 
living a historic moment of which we are failing to take 
advantage.  The politicians and political parties that we 
have always had do not want things to change because they 
need a poor public so that they can live off the needs of the 
people and continue with political clientalism  Rejecting 
"falling into the trap" of "taking from the rich to give to 
the poor," Martinelli writes, "What needs to be done is 
generating more wealth and giving the same opportunity to all 
so that they can partake of that wealth." 
 
¶10. (C) Comment:  The conservative orthodox economic 
proposals laid out in this op-ed will fly over the heads of 
most Panamanians, including the relatively elite readership 
of La Prensa.  Martinelli's political message will resonate: 
Panama is not taking advantage of its extraordinary moment in 
history, needs to grow the economic pie and ensure full 
access to economic opportunity for all, and needs an 
experienced job creator at the helm.  His proposal to reduce 
the tax on diesel and halve the tax on gasoline will be very 
popular regardless of social-economic status, but his 
proposal to implement a flat tax, reduce the size of 
government, and to focus on value-added activities will be 
too esoteric for the average Panamanian voter.  Post expects 
that Martinelli will continue to push the basic political 
message of this op-ed in other fora. 
MESA