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UNCLAS PANAMA 000306 
 
SENSITIVE 
SIPDIS 
 
WHSR PLEASE PASS TO USTR 
PASS TO H 
 
E.O. 12958: N/A 
TAGS: OREP EWWT OVIP PREL PGOV ECON ETRD EINV PM
SUBJECT: PANAMA: SCENESETTER FOR CODEL LEVIN 
 
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SUMMARY 
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¶1. (SBU) The fate of the U.S./Panama Free Trade Agreement 
(FTA) will determine the trajectory of our bilateral 
relationship through the foreseeable future. Congressional 
passage and a successful implementation of the FTA would 
serve to maintain extraordinary, yet vulnerable, U.S. 
influence in Panama and drive further reforms. A failed FTA 
will be a blow to reformers and will strengthen both 
traditional and nationalist (anti-United States) voices in 
Panama and those in a new generation who simply call for 
fewer American-centric policies. Failure could also increase 
uncertainty about the $6.2 billion stock of U.S. investment 
in Panama. President Torrijos who will leave office on June 
30 has the will and the influence in the National Assembly to 
push through labor and contentious bearer share reforms. 
However, the FTA process in Panama almost certainly will 
falter if additional conditions from the U.S. are demanded at 
this time or if the legislative changes do not occur under 
the Torrijos Administration. The next administration, which 
will likely be led by supermarket tycoon Ricardo Martinelli, 
will not be as politically invested in the FTA and may not 
have the legislative muscle to push through the labor and 
bearer share legislation, especially in the short term. 
Indeed, for those invested in strengthening labor standards 
and practices and promoting transparency in Panama, the next 
80 days provide a unique window of opportunity. End Summary. 
 
--------------------------------- 
Panama After Operation Just Cause 
--------------------------------- 
 
¶2. (SBU) Since the 1989 restoration of democracy, Panama has 
established and consolidated a democratic, stable and 
responsive government; accelerated economic growth through 
open markets; and strived to ensure that the benefits of that 
growth reach all citizens. While a hemispheric leader in 
progress on these fronts, Panama today stands at a 
crossroads. Its political establishment is fast approaching 
its fourth presidential election since 1990, yet cynicism 
abounds. Panama has leveraged its superb stewardship of the 
Canal and central location to create an economic and 
logistical architecture that is yielding now comparatively 
stellar economic growth and a substantial reduction in 
poverty. However, opportunities created by the growth remain 
elusive to many Panamanians due to continued income 
inequality fostered by lack of access to quality education 
and inadequate public infrastructure (especially 
transportation and health). 
 
--------------- 
May 3 Elections 
--------------- 
 
¶3. (SBU) Panama will hold general elections on May 3, 2009, 
to choose a president and to fill every elected seat in 
Panama's National Assembly. We fully expect this date to 
herald the fourth free and fair election since Operation Just 
Cause in December 1989 restored democracy in Panama. 
According to polls, a population focused on insecurity from 
the rising rate of crime and lingering economic insecurity 
from the now abating rate of inflation has grown cynical 
about its government's ability to deliver security and 
sustained social and economic progress. The race is now 
basically a two-person race, with opposition Democratic 
Change (CD) party candidate Ricardo Martinelli enjoying a 
steady 12-15% lead in the polls over the candidate of 
President Torrijos' Revolutionary Democratic Party (PRD), 
former Housing Minister Balbina Herrera. Martinelli has thus 
far successfully positioned himself as the candidate for 
change, in part as a result of an impressive campaign 
financed in part from his substantial fortune (Martinelli 
owns a major supermarket chain in Panama). Herrera has been 
campaigning on a platform of continuity with Torrijos' 
successful administration, but has suffered from several 
political missteps by the Torrijos administration, and by her 
past association with Manuel Noriega, and her reputation as a 
left wind firebrand in the past. The explosion of the Murcia 
(a Colombian pyramid scheme kingpin who operated in Panama) 
case has roiled the political landscape in the wake of his 
credibly detailed public description of funneling $6 million 
to the PRD (including Herrera) and Herrera's assertion that 
Martinelli through his business laundered money for Murcia. 
 
---------------------- 
Torrijos wants the FTA 
---------------------- 
 
¶4. (SBU) President Torrijos, who leaves office July 1, 
asserts he fulfilled all major campaign promises, but one - 
the FTA. The FTA is a legacy issue; President Torrijos 
desires a 'book-end' to his father's Canal treaties. Thus 
President Torrijos and his administration are willing to 
spend political capital to legislatively address labor and 
bearer share issues brought up by the U.S. legislative and 
executive branches. However, this late in his administration, 
that capital, while still powerful, is limited. Due to the 
timing of the election, the choreography of the potential 
movement of the FTA through Congress and synchronization with 
potential Panamanian reforms is difficult. The U.S. 
legislative and executive branches must signal to he 
Panamanians that the U.S. Congress will vote on the FTA in 
order to rally the PRD majority in the National Assembly to 
pass legislation on labor issues and bearer shares during the 
Panamanian lame duck session (after the May 3 elections, but 
before the July 1 transfer of power). The legislation is 
politically difficult. On labor, President Torrijos' 
center-left majority can muster the votes, but cannot appear 
to be kowtowing to the United States. On bearer shares, the 
Torrijos Administration faces powerful and persistent 
opposition by lawyers who issue those shares, two of whom are 
former Panamanian ambassadors to the United States, and many 
of whom are stalwart contributors to the PRD. If additional 
conditions are requested by the United States (such as the 
completion of a TIEA), the Torrijos Administration will lack 
the influence to push all necessary legislation through the 
National Assembly. 
 
¶5. (SBU) After July 1, a new Administration assumes power. A 
hypothetical Martinelli administration, based on a small and 
weak party (Democratic Change), will spend considerable 
effort merely maintaining an unwieldy four party coalition to 
govern. Even if Martinelli's Alliance for Change coalition 
wins a National Assembly majority, his coalition would likely 
splinter if forced to vote on labor reforms. Should Herrera 
win, it is likely that she will strive to maintain the same 
good relations with the U.S. as Torrijos has, though her 
advisors tend to be more left-wing and anti-American than 
Torrijos'. For any incoming administration, the immediate 
challenges of governing will be daunting. On May 3, every 
elected seat in national and local government will contested 
in a once-every-five-year poll. Once the dust settles on the 
elections, members of the new government will find little 
continuity, as the Panama's civil service remains small and 
almost non-existent in most major non-security related 
ministries. 
 
-------------------------- 
Panamanian Reforms - Labor 
-------------------------- 
 
¶6. (SBU) The Panamanian Government indicated to USTR, 
Secretary Clinton, Majority Leader Hoyer, and other Members 
of Congress that legislation will be passed during a lame 
duck National Assembly in order to adjust the Panamanian 
labor code to comply with standards of the International 
Labor Organization (ILO). Torrijos enjoys a broad labor 
support, as embodied in Panama's unanimous election to the 
ILO Presidency at the 2008 ILO World Conference. Currently, 
USTR and the Panamanian Government are negotiating the 
details. 
 
------------------------------ 
Panamanian Reforms - Tax Haven 
------------------------------ 
 
¶7. (SBU) Many sources have labeled Panama as a tax haven. 
However, Panama is not the stereotypical post office box 
destination for corporations seeking to avoid U.S. taxation. 
Rather, the vast majority of U.S. companies that locate 
subsidiaries in Panama do so to expand market share in Latin 
America. U.S. businesses are attracted to Panama due to the 
use of the U.S. dollar, modem banking system, Colon Free 
Zone, and transportation/logistical architecture that 
includes the Panama Canal, Panama Canal railroad, major 
ports, and a regional air hub. Companies use Panama as a 
marketing and distribution platform to expand brand awareness 
and sales in the region, often leading to increased 
employment in the United States. 
 
¶8. (SBU) The reason Panama does not fit into this stereotype 
is that Panama has effective anti-money 
laundering/anti-terrorist finance banking regulation. 
Additionally, Although Panama has substantially bolstered its 
anti-money laundering/terrorist finance regime, especially in 
the well-regulated banking sector, transparency issues 
remain, concentrated in the corporate practices of Panama's 
loosely regulated legal profession. Under Panamanian law, 
lawyers are the only group empowered to establish 
corporations, including shell corporations that issue bearer 
shares. Bearer shares serve as an extremely powerful 
'cloaking device' for financial crimes. Held anonymously by 
"the bearer," these instruments allow the persons possessing 
them to store and transfer funds with little risk of 
detection. Often wealthy individuals or companies will open 
an "anonymous society" corporation in Panama. The President 
and Directors of the company are random people paid a nominal 
sum to sign a legal document that allows them to be the 
"leadership" of the anonymous society corporation. However, 
true ownership lies in the person who physically controls the 
bearer shares. The person who physically controls bearer 
shares likely will not be able to deposit them in a 
Panamanian bank without strict disclosure requirements, as 
the banks are tightly bound by know-your-customer rules. 
However, nothing stops bearer shares holders from traveling 
to a country with lax banking regulations and opening bank 
accounts through an attorney or other proxy (who can hide the 
identity of the holder of the bearer shares). 
 
¶9. (SBU) After substantial engagement from the U.S. 
Government, the Government of Panama announced on April 7 
that it intends to regulate bearer shares. This breakthrough, 
when fully executed, will fulfill the USG's most prominent 
financial crimes regulatory recommendation, and remedy 
Panama's sole grave remaining anti-money 
laundering/counter-terrorism finance (AML/CFT) deficiency. 
Without the effective regulation of bearer shares through 
immobilization (registration), disclosures under any future 
Tax Information Exchange Agreement (TIEA) will remain 
incomplete - blocked by the secrecy of beneficial ownership 
of the corporation. Immobilization requires the registration 
of the beneficial owners of those shares -- as opposed to 
mere disclosure of directors and resident agents of anonymous 
society corporations issuing the shares. The GOP's statement 
does not specifically mention immobilization. However, it 
telegraphs this measure by mandating formation of a "working 
team" to "propose concrete actions" to "increase levels of 
responsibility and transparency with respect to the titling 
of anonymous societies." Responding to Congressional 
concerns, the USG has also engaged on a TIEA, we believe that 
in light of recent G20/OECD efforts in this area (as well as 
the related commitments of peer nations) that a TIEA is 
inevitable - but not achievable in the Torrijos 
Administration. The GOP committed to acceding to the OECD 
Model Convention on Double Taxation (Chapter 26 of which 
includes a TIEA regime) in a March 25 letter to the OECD 
Secretary General. However, without the intermediate step of 
regulation of bearer shares, a TIEA is of nominal value and 
would do little to address the closely related law 
enforcement and money laundering issues. Dealing with the 
TIEA via the G20 would be vastly more effective as this route 
would diffuse the issue of nationalist and sovereignty 
rhetoric. 
 
------------------------------------------- 
Limits of the President's Political Capital 
------------------------------------------- 
 
¶10. (SBU) The Torrijos Administration has the political 
capital to implement the labor and bearer shares reforms. 
However, the ability to pass a TIEA or other additional 
conditions likely is not achievable, because President 
Torrijos would need to overcome the opposition of additional 
interest groups and newly inflamed sovereignty emotions 
stemming from that fact that Panama would be the single 
country required to negotiate a TIEA as a precondition to an 
FTA - after FTA negotiations had been completed.. The 
resulting perception in Panama is likely to be that the FTA 
failed due to "onerous" demands from the gringos (after the 
FTA was already signed by the respective governments). The 
nondemocratic and nationalistic segments of Panamanian 
society will be strengthened by using a caricature of an 
imperialistic America that is turning its back on the 
Panamanian people. While Panamanian society as a whole will 
not follow these segments of society, American influence with 
a small, but important ally, that effectively manages a 
strategic waterway, will be diminished. 
 
¶11. (U)  End Scenesetter. Below are short fact sheets on the 
Panama's Economy, U.S./Panama Trade, Counter-Narcotics, 
Merida and Panama, and Security/Counter-Terrorism. 
 
---------------- 
PANAMA'S ECONOMY 
---------------- 
 
¶12. (SBU) Behind the construction cranes and traffic jams is 
an expanding economic/logistical architecture. Its foundation 
is the Canal through which passes roughly 5% of world 
commerce. The Panama Canal Authority (ACP) has embarked on a 
$5.25 billion dollar expansion, the centerpiece of which is a 
third set of locks capable of handling the largest class of 
container vessels. A growing network of ports, including 
Manzanillo International Terminal in Colon (partially owned 
by U.S. firm Carrix), facilitates trans-isthmian logistics 
along with revitalized Kansas City Southern Railway between 
Panama City and Colon. Panama Ports (Hutchison Port holdings, 
Inc. of Hong Kong) launched a $240 million expansion of its 
Pacific and Caribbean terminals, augmenting the GOP's 
construction of the $215 million Panama-Colon Highway. The 
Colon Free Zone generated over $19 billion in trade last 
year. It serves as a hemispheric "one-stop shop" for 
sourcing, financing, and delivering products (mostly from 
Asia) to Latin American markets. 
 
¶13. (SBU) Panama's robust financial center, with 90 banks and 
$63 billion in assets fuels the purchase and movement of 
cargo and facilitates the absorption of robust foreign direct 
investment (FDI) inflows that totaled $2.4 billion for 2008. 
Through generally prudent management, it has been able to 
finance construction projects and consumer spending, key 
drivers of GDP growth - 11.5% last year and roughly 9% in 
¶2008. Although the global financial crisis will impact 
Panama, growth is expected to be 1-3% - one of the only 
countries in the hemisphere expecting positive growth. 
 
¶14. (SBU) In recent years, Panama has reached beyond its 
traditional maritime and financial networks to build 
connectivity of data and knowledge, and people. Panama lies 
at the junction of five high bandwidth submarine fiber optic 
cables, placing Panama City second only to New York City in 
bandwidth availability. This feature was key in the decisions 
of Dell and Hewlett-Packard to locate regional headquarters 
at the former Howard Air Base, which is undergoing a $705 
million transformation as a regional manufacturing and 
distribution hub. 
 
¶15. (SBU) Panama's tourism industry has similarly mushroomed 
in the past five years, with tourist arrivals increasing from 
600,000 to 1.6 million between 2000 and 2008. Arrivals at 
Tocumen International Airport reflect a similar trend, 
climbing from over 2.1 million in 2000 to an estimated 4.5 
million in 2008. Tocumen recently completed an $85 million 
expansion of its international terminal, complimented by the 
concurrent growth in its flag carrier, Copa (which codeshares 
with Continental Airlines). A recent United Nations report 
highlighted true progress in poverty reduction from 2001 to 
2007 - overall poverty fell from 37% to 29% and extreme 
poverty fell from 19% to 12%. Yet, the distribution of 
Panama's wealth and income remains highly skewed, and Panama 
has one of the highest degrees of inequality in the Americas. 
This situation creates palpable resentment as BMWs and Land 
Rovers zip past hot, crowded, buses that subject riders to 
unreliable multi-hour commutes. Most inhabitants of Panama 
City have never visited an indigenous area or the Darien, 
where poverty predominates, and government services are 
minimal. 
 
-------------------------- 
UNITED STATES/PANAMA TRADE 
-------------------------- 
 
¶16. (SBU) The U.S. goods trade surplus with Panama was $4.5 
billion in 2008. U.S. goods exports in 2008 were $4.9 
billion. U.S. exports to Panama have grown by 130% from 2005 
to 2008.  The stock of U.S. foreign direct investment (FDI) 
in Panama was $6.2 billion in 2007 (latest data available). 
U.S. FDI in Panama is concentrated largely in the nonbank 
holding companies and finance sectors. 
 
FREE TRADE AGREEMENT 
formerly known as Trade Promotion Agreement) 
 
¶17. (SBU) On June 28, 2007, the United States and Panama 
signed a Free Trade Agreement (FTA).  Panama approved the FTA 
on July 11, 2007.  The FTA is a comprehensive free trade 
agreement. When/if implemented, the FTA will result in 
significant liberalization of trade in goods and services, 
including financial services. The FTA also includes important 
disciplines relating to: customs administration and trade 
facilitation, technical barriers to trade, government 
procurement, investment, telecommunications, electronic 
commerce, intellectual property rights, transparency and 
anti-corruption, financial services, and labor and 
environmental protection. Under the FTA, Panama will be 
obligated 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 it has made specific 
exceptions. Moreover, in connection with the FTA, Panama 
agreed to become a full participant in the WTO Information 
Technology Agreement, and entered into an agreement with the 
United States that resolved a number of regulatory barriers 
to trade in agricultural goods ranging from meat and poultry 
to processed products, including dairy and rice. 
Tariffs 
 
¶18. (SBU) Panama's maximum tariff on industrial goods is 20 
percent. Panama's tariffs on agricultural goods range from 10 
percent to more than 250 percent. When/if the FTA enters into 
force, 88 percent of U.S. exports of consumer and industrial 
goods will enter Panama duty free, with remaining tariffs 
phased out over periods of 5 years or 10 years. The FTA 
includes "zero-for-zero" immediate duty free access for key 
U.S. sectors and products, including agricultural and 
construction equipment, information technology products, and 
medical and scientific equipment. Other key U.S. export 
sectors such as motor vehicles and parts, paper and wood 
products, and chemicals also will obtain significant access 
to Panama's market as duties are phased out. The FTA provides 
for immediate duty free treatment for more than half of U.S. 
agricultural exports to Panama, including high quality beef, 
certain pork and poultry products, cotton, wheat, soybeans 
and soybean meal, most fresh fruits and tree nuts, distilled 
spirits and wine, and a wide assortment of processed 
products. Duties on other agricultural goods will be phased 
out within 5 years to 12 years, and for the most sensitive 
products within 15 years to 20 years. The FTA also provides 
for expanded market access opportunities through tariff-rate 
quotas (TRQs) for agricultural product such as pork, chicken 
leg quarters, dairy products, corn, rice, refined corn oil, 
dried beans, frozen French fries, and tomato products. These 
TRQs will permit immediate duly free access for specified 
quantities that will increase as over-quota duties are phased 
out over the course of the implementation period. 
 
¶19. (SBU) Apparel products made in Panama will be duty free 
under the FTA if they use U.S. or Panamanian fabric and yarn, 
thereby supporting U.S. fabric and yarn exports and jobs. 
Strong customs cooperation commitments between the United 
States and Panama under the FTA will allow for verification 
of claims of origin or preferential treatment, and denial of 
preferential treatment or entry if claims cannot be verified. 
Panama Counter-Narcotics Overview 
 
¶20. (SBU) Panama is one of the USG's most important partners 
in the fight against the drug trade, and its close 
counter-narcotics cooperation with the U.S. in 2008 led to 
the seizure of 5l metric tons of cocaine, following seizures 
of 60 tons in 2007 and 40 tons in 2006. These were the 
highest seizure figures in the region by far. Police also 
seized over $3 million in cash linked to drug trafficking, 
confiscated $1.5 million from 42 bank accounts, and arrested 
126 people for international drug-related offenses. The 
seizure rates reveal that Panama continues to be a major 
trans-shipment country for illegal drugs to the United States 
and Europe, as a result of its geographic position in the 
drug trafficking "transit zone." Drugs are shipped by go-fast 
outboard-motor boats through Panama's territorial waters on 
the Pacific and Caribbean coasts - an area that is two times 
the size of Panama's land mass - and overland through the 
dense forests of Panama's Darien province. The drugs are 
trafficked by Colombian and Mexican drug trafficking 
organizations (DTOs), and by elements of the FARC and the 
remnants of paramilitary organizations. These organizations 
have protagonized a significant increase in violent crime in 
Panama this year, a fact that has led to increasing social 
alarm in Panama. As a result of this, the Government of 
Panama called a meeting of the presidents of Panama, 
Colombia, Mexico and Guatemala in late 2008 to promote 
greater cooperation in the struggle against international 
organized crime and drug trafficking. As a result, the four 
governments are working on concrete plans to confront the 
DTOs through law enforcement cooperation and information 
sharing. 
 
¶21. (SBU) Panama has limited resources to confront the drug 
traffickers. Having disbanded its military in 1989, following 
the U.S. invasion, Panama has a National Police (PNP) force 
of approximately 15,000. Security reforms were implemented in 
2008 to try to increase Panama's ability to confront the drug 
traffickers, including the creation of a coast guard- like 
National Aero-Naval Service (SENAN), and breaking off a 
National Frontier Service from the police to cover the 
boarders. These forces are in their infancy, however, and 
Panama still has very limited air and sea assets with which 
to adequately control its territorial waters. The U.S. Coast 
Guard has the right to enter Panama's territorial waters in 
pursuit of drug traffickers, and has had success seizing 
go-fasts. However, USCG does not have sufficient available 
assets to shut down the coastal route either. 
 
¶22. (SBU) Post plans to use Merida Initiative funds to build 
up Panama's capacity to deal with this serious 
drug-trafficking threat, and its growing gang problem. NAS 
funds will be used to retrain the PNP in community policing 
techniques, while USAID administered Economic Support Funds 
(ESF) are used to develop an effective community-based gang 
violence prevention program. The prevention program will 
focus on the two major urban centers, Panama City and Colon, 
and on the rural communities of the Darien, which suffer from 
significant drug trafficking activities. Post's program will 
work to build ties between the community based organizations 
and the police, so that the two parts of the strategy support 
one another, and create a self-reinforcing circle of success. 
At the same time, Post will continue with our traditional 
assistance to Panama's counter-narcotics efforts, including 
highly effective vetted-units, Coast Guard-SENAN cooperation, 
and support for Panamanian efforts to tighten control of its 
borders, ports and airports. 
 
----------------- 
MERIDA and PANAMA 
----------------- 
 
¶23. (SBU) Panama is a major transit location for the drug 
trade between Colombia and the U.S. and Europe. Huge amounts 
of cocaine transit through its territorial waters and over 
the Pan- American Highway everyday. Panama is taking decisive 
action against traffickers, and is one of the top countries 
in Latin America in terms of drug seizures. This is due 
primarily to its excellent collaborative CN relationship with 
the U.S., and the work of a small group of elite police 
officers. 
 
¶24. (SBU) While Panama's security apparatus rakes up 
impressive drug seizures, the Panamanian public is alarmed by 
a perceived wave of crime and insecurity. This is largely a 
result of Panama's nascent gang problem. Indigenous youth 
gangs are developing in all of Panama's slums, especially in 
Panama City, Colon and David in the west. This gang activity 
is the result of enduring poverty and poor education leaving 
young people without the skills to succeed in Panama's 
rapidly growing economy. Meanwhile, Colombian and Mexican 
drug traffickers offer increasing opportunities for criminal 
groups to make money by stealing from drug dealers (tumbos), 
selling drugs on the local market and by acting as paid 
killers. While Panamanian authorities insist that the recent 
wave of killings is mostly among youth gangs and drug 
dealers, the public is nevertheless seriously concerned about 
the perceived erosion of security in Panama's streets. 
Embassy Panama believes that it is essential to help the GOP 
confront the gang problem now. The gangs are becoming more 
entrenched and sophisticated all the time according to local 
prosecutors, and could eventually offer the drug cartels a 
ready made local structure, should they decide to move their 
operations to Panama. Panama is potentially a very attractive 
location for the drug cartels to re-locate to once the Merida 
Initiative makes operating in Mexico more difficult, due to 
its world-class banking system, miles of unpopulated 
coastline in the middle of the transit zone, and highly 
developed shipping and cargo infrastructure sitting on one of 
the most important shipping lanes in the world. Getting the 
gang problem under control now is the best way to prevent the 
cartels from eventually bringing their brand of terror and 
violence to Panama, potentially threatening one of the most 
important commercial hubs in the world. 
 
¶25. (SBU) Embassy Panama proposes a holistic, integrated 
inter-agency approach to the problem, using Merida funding to 
give life to a strategy, rather than building a strategy 
around funding streams. The foundation for our strategy is 
community policing. Post believes that the gang problem 
cannot be brought under control unless and until the police 
and the community come together to reclaim the streets of 
Panama's poor neighborhoods. Many of these neighborhoods have 
suffered for years from a scarce police presence. When 
present, police are a foreign presence, due to short tours of 
duty meant to avoid corruption. Post is working with the 
Panamanian National Police (PNP) to implement a Community 
Police strategy, in conjunction with the Miami Dade Police 
Department, to indoctrinate the highest level of the police 
leadership in the concept of community policing. At the same 
time we are implementing a "culture of lawfulness" program to 
build up the PNP's ability to police itself. Community 
organizations are also being reestablished to interact with 
the police, not just to identify criminal activities, but to 
report on police corruption and malfeasance. Post will use 
additional funds allotted through Merida to strengthen the 
PNP's ability to investigate and discipline internal 
corruption as a prerequisite for effective community 
policing. ILEA funds will also be used to strengthen the PNP' 
s leadership, and prepare them to lead an organization which 
is ready to work with the community to aggressively target 
criminal gangs, without violating the democratic foundations 
of the state, and the rule of law. 
 
¶26. (SBU) Post will also work with the courts and prosecutors 
to increase their ability to investigate, prosecute and try 
gang activities. This will be increasingly difficult as 
Panama transfers to the accusatorial system over the next 
five years. While in the long run this transformation will be 
positive, and help to avoid the long and unnecessary 
incarcerations of suspects which frequently lead to the 
creation of youth gangs in prison for self- protection, it 
will be a traumatic change over if the justice system is not 
adequately prepared. The Central American Finger Print 
Exchange will be a valuable tool for prosecutors, as they 
face the need to provide independent evidence besides police 
testimony to gain convictions. Post will work to see if 
creative use of this system can meet requests we have 
received for help setting up a "tattoo" data bank to help 
prosecute gang suspects. Post will also use available USG 
assets, including training seminars by TDY feder