VZCZCXYZ0001
RR RUEHWEB

DE RUEHZP #0797/01 2961752
ZNR UUUUU ZZH
R 231752Z OCT 09
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 0013
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC

UNCLAS PANAMA 000797 
 
SIPDIS 
USTR PASS TO KENT SHIGATOMI 
COMMERCE PASS TO MATT GAISFORD 
 
E.O. 12958: N/A 
TAGS: USTR ETRD ECON PM
SUBJECT: RE: POST INPUT TO REPORT THE OPERATION OF THE CARIBBEAN 
BASIN ECONOMIC RECOVERY ACT 
 
REF: STATE 75599 
 
¶1. Below is post's response to reftel. 
 
 
 
Economic Review 
 
--------------------- 
 
¶2. (U) Panama is experiencing a period of extended economic growth, 
with 8.5 percent GDP growth in 2006, 11.5 percent in 2007, and 9.2 
percent in 2008.  However, due to the global economic crisis, its 
GDP growth rate was 2.4 percent in the first half of 2009. The main 
drivers of growth have been capital investment, port activity, 
tourism, construction, and goods and services exports. Panama's GDP 
is $39,990 million (purchasing power parity) or $24,754 million 
(current prices). 
 
 
 
¶3. (U) The estimated population of Panama is 3.45 million people. 
Unemployment in Panama as of September 2009 had fallen to 6.6 
percent.  The poverty rate is 28.5 percent.  Employers consistently 
report a lack of skilled labor, in particular a lack of 
English-speaking workers. 
 
 
 
¶4. (U) As of June 2009, the public debt was 43.7 percent of GDP 
versus 45.2 percent as of December 2008.  During the first half of 
2009, Panama posted a non-financial public sector deficit of 0.8 
percent of GDP.  The annual deficit for 2009 is projected to be 1.9 
percent of GDP. 
 
 
 
¶5. (U) The U.S. exported $4,887.3 million to Panama in 2008, and 
imported $379.1 million, resulting in a trade surplus of $4,508.2 
million.  US exports were dominated by oil and capital- and 
technology-intensive manufactured goods, such as aircraft, 
pharmaceuticals, machinery, medical equipment, and motor vehicles. 
Most US imports from Panama are seafood, including fresh fish and 
shrimp, and repaired goods. 
 
 
 
¶6. (U) Foreign direct investment (FDI) during 2007 reached $1,907.2 
million, down from $2,401.7 million in 2008; it received $386.9 
million in the first half of 2009.  In 2008, approximately 60 
percent of FDI was due to the government selling two radio spectrum 
bands.  US FDI in Panama is concentrated largely in the non-bank 
holding companies, energy, finance, insurance and wholesale trade 
sectors. 
 
 
 
Commitment to undertake WTO obligations and participate in 
negotiations toward the FTAA or another FTA 
 
--------------------------------------------- ---------------------- 
--------------------------------------------- --------------------- 
 
 
 
¶7. (U) Panama has been supportive of multilateral trade 
liberalization through negotiations in both the WTO and the FTAA. 
Panama played a constructive role in advancing the FTAA process at 
the November 2005 Summit of the Americas in Mar del Plata. In 
addition, Panama hosted the first ministerial meeting of the 
Pathways to Prosperity initiative in December 2008. 
 
 
 
¶8. (U) The United States and Panama signed a Trade Promotion 
Agreement (TPA) on June 28, 2007, which incorporated the provisions 
from the May 2007 New Trade Policy.  The Panamanian National 
Assembly ratified the TPA on July 11, 2007 by a vote of 58 to 4. 
The TPA is awaiting U.S. Congressional action. The TPA is a 
comprehensive free trade agreement.  Once implemented, the 
agreement significantly liberalizes trade in goods and services, 
including financial services.  The agreement also includes 
important disciplines in such key areas as: customs and trade 
facilitation, sanitary and phytosanitary measures, technical 
barriers to trade, government procurement, investment, 
 
 
telecommunications, electronic commerce, intellectual property 
rights, and labor and environmental protection.  Under the TPA, 
Panama would provide broader and deeper commitments to maintain a 
liberal market for services sector, extending well beyond its 
commitments under the WTO General Agreement on Trade in Services. 
Moreover, in connection with the TPA, Panama agreed to become a 
full participant in the WTO Information Technology Agreement. 
 
 
 
¶9. (U) Panama has actively pursued bilateral free trade agreements 
(FTAs) in recent years, having entered into effect FTAs with El 
Salvador (2003), Taiwan (2004), Singapore (2006), Chile (2008), and 
Costa Rica, Guatemala, and Honduras (2009).  It signed FTAs with 
Nicaragua in 2003 and with Canada in 2008, but neither are in 
force.  Panama is in exploratory FTA discussions with Mexico, the 
Mercosur countries, the Andean Community, the European Union, and 
CARICOM.  Panama has partial scope agreements with Mexico (1986), 
Colombia (1995), and Cuba (2009). 
 
 
 
Protection of Intellectual Property 
 
------------------------------------------- 
 
¶10. (U) Panama protects intellectual property rights standards 
above the minimum provided under the WTO TRIPS Agreement.  Panama 
is not included on any Special 301 lists that identify countries 
with particularly problematic IPR laws or enforcement practices. 
Intellectual property policy and practice in Panama is the 
responsibility of an Inter-institutional Committee for Intellectual 
Property (CIPI), which includes representatives from five 
government agencies - Colon Free Zone, Intellectual Property 
Registry, Ministry of Education (for copyrights), Customs, and the 
attorney general - 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 in 
2002 of a specialized prosecutor for intellectual property-related 
cases has strengthened the protection and enforcement of IPR in 
Panama. 
 
 
 
Provision of Internationally Recognized Worker Rights 
 
--------------------------------------------- ---------------------- 
- 
 
¶11. (U) Panama protects internationally recognized worker rights. 
Panama has ratified all eight of the ILO core labor conventions. 
These eight are Conventions 87 and 98 on freedom of association and 
collective bargaining, Conventions 29 and 105 on the elimination of 
forced and compulsory labor, Conventions 138 and 182 on the 
abolition of child labor, and Conventions 100 and 111 on the 
elimination of discrimination in respect of employment and 
occupation. 
 
 
 
¶12. (U) Among the major provisions of Panama's labor code are ones 
addressing freedom of association, the right to organize and 
bargain collectively, minimum wage, health and safety, hours of 
work requirements, the minimum age to work legally, and 
prohibitions against certain forms of child labor.  Panamanian law 
permits the establishment of unions in the private sector and 
allows organization and collective bargaining by most 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.  The law governing 
the Panama Canal Authority classifies the Canal as an essential 
international service, and prohibits the right to strike but does 
allow unions to organize and to bargain collectively.  The 
Panamanian labor code prohibits forced or compulsory labor by 
adults or children, including prohibiting forced labor by 
prisoners, and provides seafarers with the right to terminate their 
employment by giving reasonable notice.  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. 
 
 
¶13. (U) Some Panamanian labor leaders maintain that Panama's 
industry does not fully observe laws on workers' rights and working 
conditions in Panama, while 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.  The World Bank's October 2009 
Doing Business report ranked Panama 177 out of 183 countries for 
Employing Workers, which rates the difficulty of hiring and firing 
employees.  The ILO's Committee of Experts on the Application of 
Conventions and Recommendations has noted a number of discrepancies 
between Panamanian labor law and ILO conventions which the country 
has ratified, particularly with regard to freedom of association 
and collective bargaining.  The specific concerns are the lack of 
obligation on employers in export processing zones (EPZs) to comply 
with requests from a qualified employee representative to bargain 
collectively; thirty-five day cooling off periods before the 
commencement of a called strike in EPZs and the nation's call 
centers; and, the ability of employers to bargain directly with 
unorganized groups of workers.  The Government of Panama has noted 
difficulties in reaching consensus with worker and employer 
organizations about how to close some of these discrepancies. Many 
consider safety measures in the construction sector to be lax, 
resulting in approximately 25 deaths in 2007, 12 in 2008, and 13 
deaths through August 2009. 
 
 
 
¶14. (U) The GOP made significant progress in 2009 in addressing 
perceived shortcomings identified by the ILO. Executive Decree 17, 
also enacted May 20, clarified the criteria for legitimate 
subcontracting, required labor inspections to prevent contracting 
arrangements that undermined worker rights, ensured that 
subcontractors and employers in breach of the requirements were 
subject to sanctions and clarified the process for workers to file 
complaints and secure remedies.  Executive Decree 18, enacted on 
May 20, prohibited employers from entering into collective 
negotiations with non-unionized workers when a union existed, and 
prohibited employers from using a pre-existing agreement with 
non-unionized workers as grounds to refuse to negotiate with 
unionized workers.  Executive Decree 19, enacted May 20, required 
employers to provide objective proof of the grounds for using thQ 
exception in the Labor Code that allows successive temporary 
contracts.  Executive Decree 24, enacted June 5, established an 
enforcement plan to protect the rights of temporary workers, and 
included targeted inspections, a periodic and random review of 
temporary contracts, workers' rights education, and the outline of 
a process to receive and respond to workers' complaints.  Executive 
Decrees 25 and 26, enacted June 5, 2009, increased transportation 
workers' ability to strike by limiting the scope of strike 
restrictions on essential transportation services to those 
involving public passenger services. 
 
 
 
Commitments to Eliminate the Worst Forms of Child Labor 
 
--------------------------------------------- ---------------------- 
----- 
 
¶15. (U) Panama has implemented commitments to eliminate the worst 
forms of child labor. On October 31, 2000, Panama ratified ILO 
Convention No. 182. Panama established by law the list of the worst 
forms of child labor on June 19, 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. 
 
 
 
¶16. (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.  The GOP provides 
$1.22 million for the project. In 2008, 2,500 children participated 
in the program and received scholarships from the Institute for 
Human Resources, Capacity Building, and Vocational Training. 
 
 
¶17. (U) Panamanian law set the minimum working age at 14 years, but 
sets many restrictions on the amount of time and type of work 
children can perform until the age of 18.  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). 
Additionally, there is public concern over the employment of 
children, particularly indigenous children, in rural coffee and 
sugar plantations. 
 
 
 
¶18. (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 and vulnerable children, as well as children engaged in 
exploitative labor and the sex industry. MIDES also provides 
services 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. 
 
 
 
¶19. (U) The GOP participated in three specific programs funded by 
the ILO and US Department of Labor to combat child labor in rural 
areas.  These were the Direct Action Program for the Eradication of 
Child Labor in Commercial Agriculture in the Ngobe Bugle with a 
budget of almost $130,000, the Direct Action Program for the 
Eradication of Dangerous Child and Adolescent Labor in the Santiago 
District, Veraguas Province with a budget of almost $125,000, and 
the Direct Action Program for the Eradication of Dangerous Child 
and Adolescent Labor in Chorrera District, Panama Province, for 
almost $115,000.  Additionally, Panama completed in August its 
participation in a two-phase, seven year ILO program, which was 
received $2.6 million from the US DOL.  The program resulted in 
1,857 children being removed from the work force and prevented 
another 1,543 from entering the work force, in addition to 
strengthening GOP capacity to eradicate child labor.  Panama 
completed the second phase of an $8.6 million regional ILO project 
to prevent and eliminate the commercial sexual exploitation of 
minors in Central America, including Panama, and the Dominican 
Republic. 
 
 
 
Counter-Narcotics Cooperation 
 
------------------------------------------ 
 
¶20. (U) The Government of Panama was certified in March 2009 as 
having cooperated vigorously with the United States on 
counter-narcotics efforts.  Additionally, Panama has a 
comprehensive legal framework to detect, prevent, and combat money 
laundering and terrorist financing, and provides excellent 
cooperation with U.S. law enforcement agencies in combating drug 
trafficking, money laundering, and financial crimes.  However, by 
virtue of its geographic position and well- developed maritime and 
transportation infrastructure, Panama is a major logistics control 
and trans-shipment country for illegal drugs to the United States 
and Europe, and is used for money laundering purposes. 
 
 
 
Implementation of the Inter-American Convention Against Corruption 
(IACAC) 
 
--------------------------------------------- ---------------------- 
------------------------------ 
 
¶21. (U) Panama is a signatory to the 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, Panama 
signed the Declaration on the Mechanism for Follow-up of the 
Implementation of the Inter-American Convention Against Corruption 
(MESICIC).  The Government of Panama has established a National 
Council for Transparency against Corruption (CNTCC), which includes 
the Ministry of the President, Ministry of Economics and Finance, 
Attorney General, and the Comptroller General. 
 
 
¶22. (U) The Committee of Experts of MESICIC issued a Final Second 
Report on Panama's implementation of the IACAC based on information 
collected through May 25, 2007.  The report acknowledged progress 
by Panama in certain areas, and recommended the GOP strengthen the 
systems for addressing conflicts of interest, ensuring there is an 
oversight body with competence to establish through training then 
enforce ethics standards, and increasing public participation and 
monitoring of public administration.  On March 16-17, 2009, the 
CNTCC and the OAS held a workshop on the issues identified, and 
CNTCC issued a report in September 2009 outlining what steps it has 
taken to respond to the issues raised by the MESICIC reports.  They 
steps taken include adding to the CNTCC on July 21, 2009 the 
responsibility to examine the ethics training of public officials 
and announcing on November 19, 2008 that they will create an office 
in the Ministry of Social Development to increase public 
participation in public administrative matters. 
 
 
 
Transparency in Government Procurement 
 
--------------------------------------------- -------- 
 
¶23. (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.panamacornpra.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.  The GOP procured approximately $100 
million through sole-source contracts between July 1 and September 
25 under the 'urgency' exception; some of the contracts were for 
expansion of the coastal highway ($55 million), purchase of a 
Presidential airplane ($17 million), and procurement of 20 
ambulances ($1.7 million). 
 
 
 
¶24. (U) While Panama committed to become a party to the WTO 
Government Procurement Agreement at the time it joined the WTO, 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. 
 
 
 
Extradition 
 
-------------- 
 
¶25. (U) The United States and Panama are signatories to an 
extradition treaty, dated May 25, 1904 (entered into force May 8, 
1905), which provides for the extradition from Panama to the U.S. 
of U.S. citizens convicted of crimes. 
 
 
 
Nationalization/Expropriation 
 
------------------------------------- 
 
 
¶26. (U) The U.S. Embassy in Panama has not reported any 
nationalization or expropriation of any property held in the name 
of U.S. citizens since the publication of the previous CBERA 
Report. 
 
 
 
Arbitral Awards 
 
-------------------- 
 
¶27. (U) The U.S. Embassy in Panama has not reported any arbitral 
awards favoring U.S. citizens which Panama has actively failed to 
recognize since the publication of the previous CBERA Report. 
 
 
 
Market Access 
 
------------------ 
 
¶28. (U) Panama does not provide preferential treatment to any 
developed country that has had, or is likely to have, an adverse 
effect on U.S. commerce. 
STEPHENSON