VZCZCXYZ1326
RR RUEHWEB

DE RUEHZP #0914/01 3501914
ZNR UUUUU ZZH
R 161913Z DEC 09
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 0187
INFO RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHGT/AMEMBASSY GUATEMALA
RUEHME/AMEMBASSY MEXICO 0045
RUEHMU/AMEMBASSY MANAGUA
RUEHOT/AMEMBASSY OTTAWA
RUEHPE/AMEMBASSY LIMA
RUEHSG/AMEMBASSY SANTIAGO
RUEHSJ/AMEMBASSY SAN JOSE
RUEHSN/AMEMBASSY SAN SALVADOR
RUEHTG/AMEMBASSY TEGUCIGALPA 0043
RUEHZP/AMEMBASSY PANAMA

UNCLAS PANAMA 000914 
 
SENSITIVE 
SIPDIS 
USTR PASS TO DAVID OLIVER 
COMMERCE PASS TO MATT GAISFORD 
 
E.O. 12958: N/A 
TAGS: PGOV ECON PM ETRD PREL USTR
SUBJECT: CODEL Boehner Warmly Recieved in Panama to Discuss Security 
and FTA 
 
¶1. (SBU) Summary.  From December 11 to 14, CODEL Boehner was 
received like an old friend by the Government of Panama as the 
first U.S. Congressional delegation to visit since the July 1 
inauguration of the Martinelli Administration.  The message from 
the President and his ministers to the CODEL was straightforward - 
the government and people of Panama are the best friends and allies 
of the United States in the region, Panama faces significant 
security/organized crime challenges which the government is 
fighting with USG assistance, and it hopes that the US-Panama Free 
Trade Agreement can win Congressional approval so it can assist 
Panama obtain foreign direct investment.  End Summary. 
 
 
 
¶2. (SBU) CODEL Boehner was in Panama December 11-14, and was 
composed of House Minority Leader John Boehner (R-OH), Rep. Dan 
Boren (D-OK), Ranking Rules Committee Member David Dreier (R-CA), 
Ranking Foreign Affairs Committee Member Ileana Ros-Lehtinen 
(R-FL), Rep. Kevin Brady (R-TX), Rep. Devin Nunes (R-CA), Rep. 
Peter Roskam (R-IL), and staff.  The delegation met with President 
Martinelli, Vice President and Foreign Minister Varela, and other 
key Cabinet officials for a series of in-depth briefings and 
question and answer on Saturday afternoon.  President Martinelli 
demonstrated his hospitality and the depth of the close bilateral 
relations by hosting drinks on Friday night at the Presidential 
Palace and dinner on Sunday with a large portion of the Cabinet. 
The delegation also met with representatives of the American 
Chamber of Commerce and visited the Panama Canal. 
 
 
 
Security is a Challenge but GOP is Facing It with USG Assistance 
 
--------------------------------------------- ---------------------- 
--------------- 
 
¶3.  (SBU) President Martinelli reiterated that Panama is a good 
friend of the United States and a reliable partner in the fight 
against drug trafficking.  Minister of Government and Justice 
Mulino stated that the GOP, with significant USG assistance, is on 
track to seize around 60 tons of cocaine, or almost 6 percent of 
estimated global production.  [Comment: Post believes the final 
figure for this calendar year will be closer to 50.]  However, he 
recognized that more must be done to counter the flow of narcotics, 
and outlined the GOP plan to establish eleven coast guard bases. 
He said that the GOP's goal is to push drug traffickers out of 
Panamanian territorial waters and into international waters where 
"more developed actors" (i.e. the United States) can interdict. 
Mulino explained that the drug trafficking taking place in Panama's 
territorial waters and on land have caused the spike in the murder 
rate and gang activity over the past 18 months. While not as 
violent as its northern neighbors, he said that Panama has seen its 
murder rate double since 2006 to 730 murders so far in 2009 (press 
estimates 799 murders to date), of which he estimated 85 to 90 
percent were drug and/or gang-related executions; he noted there 
were approximately 220 gangs with 3,500 members in Panama. 
Security issues top polls as the number one concern of the 
Panamanian people.  Mulino said that he is very pleased with the 
collaboration with Southcom, the Joint Inter-Agency Task 
Force-South (JIATF-South), and the Embassy, especially the daily 
interaction with DEA.  Minister of the Presidency Papadimitriu said 
that the GOP recognizes that unless it addresses this security 
threat, it will not achieve its economic goals. 
 
 
 
Economy is Strong 
 
------------------------ 
 
¶4. (SBU) President Martinelli and Minister for Economy and Finance 
Vallarino trumpeted the economic policies which have allowed Panama 
to continue recording positive economic growth and plan to become 
the Singapore of Latin America.  For 2009, the GOP estimates 3 
 
percent GDP growth and is projecting 5 percent growth for 2010, 
both above Latin America average growth rate.  As a result of this 
growth, government deficit as a percentage of GDP has dropped to 43 
percent in 2009, which has been a key reason Standard and Poors has 
granted them a BB+ positive rating (one step below investment 
grade, which Vallarino hopes will be granted by the end of 2010). 
The GOP plans to introduce tax reform and increase collection 
efforts to reduce the national deficit in order to achieve a 
debt/GDP ratio below 30 percent within ten years. That said, the 
President said that they will have next month five to six billion 
dollars in the Treasury which they need to push into the economy. 
Vallarino said that the GOP would focus their domestic 
infrastructure investment and attention on achieving growth in 
financial services, luxury tourism, high value agriculture, and 
value-added logistical services. 
 
 
 
FTA Remains Important, but Redlines Exist 
 
--------------------------------------------- --------- 
 
¶5. (SBU) President Martinelli informed the CODEL that the main 
reason Panama remains interested in the FTA is to attract foreign 
direct investment.  Speaking frankly, he admitted that Panama's 
judiciary system is not reliable (a view backed by World Bank and 
World Economic Forum analysis) so the investor-State dispute 
settlement mechanism is a key factor for increasing investor 
confidence.  President Martinelli reiterated his willingness to 
sign a tax information exchange agreement.  However, he said that 
Panamanian unions object to decreasing the number of employees 
required to establish a union from 40 to 20.  Minister of Commerce 
(Trade) Henriquez elaborated by saying that lead trade negotiator 
Alvarez De Soto will be in Washington to deliver four letters from 
leading Panamanian unions objecting to the change.  Additionally, 
he said that there were deadly protests the last two times the 
government opened the labor code, so while he is willing to make 
other labor changes, he cannot change the 40-20 rule.  While 
Henriquez said that the FTA is the most important bilateral issue, 
he said that Panama is not standing still while the United States 
considers the FTA.  He said that they will open negotiations with 
Colombia and Mexico soon and are continuing to press for inclusion 
in the Central America-EU FTA negotiations.  He also asked why the 
United States would not do an FTA with its best and most reliable 
ally in Latin America who stands up against the radical left in the 
region, particularly if the agreement won't cost American jobs. 
Minority Leader Boehner expressed his doubts that the FTA would 
move soon, and Rep. Boren, the lone Democrat on the delegation, 
said that President Obama would need to advocate for the FTA if the 
necessary 60 Democrats are to vote for it.  Rep. Brady advised the 
Panamanians to be prepared to move quickly on the FTA, but not to 
get their hopes up in the short term. 
 
 
 
Canal is a Modern Technical (and Profit) Marvel 
 
--------------------------------------------- --------------- 
 
¶6. (SBU) The delegation visited the Panama Canal where they 
observed ongoing operations and were briefed on the expansion. 
Canal Authority officials told the delegation that the construction 
of the third set of locks is on schedule to be completed by 2014. 
They estimate that Canal revenues will increase from $2 billion in 
2014 to almost $5 billion in 2024 once the expansion is completed. 
 
 
 
¶7. (SBU) CODEL Boehner did not clear this message before departing 
post. 
STEPHENSON