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RHMFISS/CDR USSOUTHCOM MIAMI FL
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RUEKJCS/SECDEF WASHDC

C O N F I D E N T I A L PANAMA 000290 
 
SIPDIS 
 
E.O. 12958: DECL: 03/30/2019 
TAGS: ECON PGOV PM PREL EWWT
SUBJECT: PANAMA: AMP SUB-ADMINISTRATOR RESIGNS, CRITICIZES 
"QUESTIONABLE" PRACTICES 
 
Classified By: Classified by: Ambassador Barbara J. Stephenson 
 
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Summary 
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¶1. (C) The Maritime Authority of Panama (AMP) is in the 
headlines following the resignation of sub-administrator 
Carlos Raul Moreno, who, as he headed out the door, denounced 
"questionable" practices designed to generate extra revenue 
from maritime flagging procedures at some Panamanian 
consulates.  While the GOP depends on consulates as 
generators of revenue and registering ships is a legal stream 
of revenue for consulates, Moreno pointed out that the use of 
intermediary businesses in the process allowed so-called 
"double invoicing (doble facturaciones)" to occur. 
Separately, the efforts of a company with direct links to 
second Vice-president Ruben Arosemena to retain indefinitely 
an AMP concession are raising eyebrows.  As the highest 
authority on all maritime matters, the AMP is responsible for 
port regulation, the registration of ships and seafarers 
licensed to Panama, and the oversight of services provided to 
ships.  Post has been pushing the GOP to modernize the AMP 
and to clean up its non-transparent registration and 
concession practices. While the recent media coverage will 
probably not compel the current government to take action, 
the negative attention may help make reform of this important 
institution a higher priority for the next administration. 
 
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Shape up or ship out 
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¶2. (C) "The only way to end (the consulates' irregular) 
registration practices is to order secret, rapid audits of 
the earnings from ship flaggings," said Moreno during his 
March 25 announcement of his resignation.  The statement 
alludes to so-called "double invoicing" processes facilitated 
by intermediary businesses to generate extra revenue for 
certain consulates, including Greece and Tokyo. (Note: Moreno 
did not define "double invoicing."  Although Post has heard 
differing views on what specifically he meant, it basically 
refers to a bookkeeping practice used to blend "fees" charged 
to registrants that apparently are not authorized by the GOP 
(e.g. an "after hours" fee) with the normal stream of 
revenue.  Intermediary businesses facilitate the process by 
carrying out legal and administrative services and acting as 
the go-between for the customer and the consulate, all for a 
fee.  The New York, Greece, and Tokyo consulates have 
undergone audits but the results have not been made public.) 
According to Panamanian daily "La Prensa," the AMP's latest 
report indicates that flag registrations generate over $200 
million annually, but the treasury receives only $70 million 
of that money; the rest is spread out in commissions to 
"individuals" and the consuls.  Moreno is no stranger to 
controversy himself: he is known in the media as the AMP 
"lackey" of President Torrijos's cousin Hugo Torrijos. 
Moreno raised eyebrows when he facilitated the granting of an 
AMP concession to Hugo Torrijos's company, Caribbean Pilots 
Services.  While he did not give a specific reason for his 
resignation, Moreno probably resigned ahead of the coming 
change in administration (Note: General elections will be 
held on May 3.) rather than due to indignation over 
registration practices.  (Note: Moreno later retracted his 
statement on a television program.  Maritime lawyer Iria 
Barrancos told POLOFF a few days later that double invoicing 
was far more common in the past, and that it is "almost 
impossible" to do today due to improved control measures. 
Nonetheless, the buzz over Moreno's headline-grabbing 
comments persists.) 
 
¶3. (SBU) Earlier in March, La Prensa carried two successive 
front-page stories on AMP concessions granted to Ships 
Incineration Services and Plus (Sisapsa), a company with 
direct family links to Panama's second Vice-president Ruben 
Arosemena.  The company was founded while Arosemena was 
simultaneously second VP and director of the AMP, and is 
headed by Arosemena's brother-in-law.  The brother of 
Dionisio Lymberopulos, another former AMP head, is also a 
Sisapsa partner.  Sisapsa in 2007 was granted an AMP 
concession to provide sanitation services to ships, and now 
seeks to retain that right indefinitely.  Arosemena has 
denied any conflict of interest by saying that the company 
deserves its concession because it carries out the 
requirements of the concession.  On March 10, former AMP head 
Jerry Salazar stole front-page headlines with the quote: "The 
 
management of the AMP is inadequate," and his comments that 
officials should not have business interests with the 
institutions they serve, clearly a shot at Sisapsa, 
Arosemena, and Lymberopulos. 
 
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AMP: Panama's supreme maritime authority 
---------------------------------------- 
 
¶4. (C) The AMP is Panama's supreme maritime authority, and is 
responsible for administering and regulating the plans and 
programs related to the marine sector.  This includes port 
regulation, and providing for the infrastructure and 
administrative necessities for services peripheral to Canal 
transition.  The AMP also administers the world's largest 
open ship registry - there are currently 8,250 (over 100 ton) 
ships flagged to Panama and 350,000 to 500,000 seafarers 
licensed to Panama - and the funds generated from the 
registry represent a significant contribution to Panama's 
economy.  While the administration of the Canal itself, 
through the Panama Canal Authority (ACP), is recognized as 
efficient and transparent, the AMP, as noted by Moreno and 
Salazar, suffers a lack of transparency, accountability, and 
capacity.  (Note: This is not lost on the business-oriented 
opposition; members of Ricardo Martinelli's economic team 
recently told ECONCOUNS that they were appalled by its 
corruption and would make cleaning out the AMP a priority.) 
The AMP hired Spanish information technology company Indra 
Sistemas to automate the registry, but work has stopped and 
it is unclear how much progress was made. 
 
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Nice work if you can get it 
--------------------------- 
 
¶5. (C) Panamanian consuls worldwide are legally entitled to 
receive, on top of their salaries, a percentage of the 
revenues generated from registrations, visas, passports, etc. 
 For example, according to Law 75 of 1990 a Panamanian consul 
who bills $20,000 in a month is entitled to an 8% commission, 
but a consul who bills $50,000 - $100,000 in a month pulls 
down a 10% commission.  A 1% additional commission is granted 
to monthly billing that exceeds $100,000.  Thus, consulates 
have an incentive to maximize their billing, and a consul at 
a high-billing consulate stands to earn -- completely legally 
-- tens of thousands of dollars on top of his salary.  The 
consulate positions in Panama's most profitable consulates, 
Greece and Tokyo, are filled by Revolutionary Democratic 
Party (PRD) loyalists.  In turn the party faithful that hold 
down these lucrative sinecures are often called upon to make 
political contributions to the PRD from the legitimate income 
they receive from their commissions.  The so-called double 
invoicing practice involving private businesses as 
intermediaries contributes to the AMP's poor reputation. 
Although online registrations have cut down on such 
"questionable" practices, our contacts (and Moreno) note that 
there remains room for enterprising consuls to line their 
pockets. 
 
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Comment 
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¶6. (C) The stories about shady dealings in the AMP in recent 
media articles are nothing new, but they do highlight a 
pattern of AMP behavior that reinforces Post's view that the 
institution suffers a transparency deficit.  The conflicts of 
interest and lack of oversight within the AMP lead to 
scandals that damage the GOP's image and can give the wrong 
impression about Panama's overall positive business 
environment and the ACP's smooth operation of the Canal. 
Post will continue to push the GOP to make reforms to the 
AMP, but Torrijos is unlikely to take much if any action this 
late in his tenure. (Note: His term will end on July 1.)  We 
are delighted to see the media's renewed attention on AMP 
funny business, not only because it may help make reform a 
higher priority for the next administration, but also because 
it shows democratic accountability at work, with the media 
raising the political price of shady dealings. 
STEPHENSON