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### Viewing cable 09PANAMA329, PANAMA: DOMESTIC POLITICS HAUNT FTA

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09PANAMA329 | 2009-04-23 18:26 | 2011-05-28 00:00 | SECRET//NOFORN | Embassy Panama

`

    VZCZCXYZ0000
    RR RUEHWEB

    DE RUEHZP #0329/01 1131826
    ZNY SSSSS ZZH
    R 231826Z APR 09
    FM AMEMBASSY PANAMA
    TO RUEHC/SECSTATE WASHDC 3308
    INFO RHMFISS/CDR USSOUTHCOM MIAMI FL
    RUEAIIA/CIA WASHDC
    RUCPDOC/DEPT OF COMMERCE WASHDC
    RUEKJCS/SECDEF WASHDC
    RUEHC/DEPT OF LABOR WASHDC
    RUEATRS/DEPT OF TREASURY WASHDC
    RHEFDIA/DIA WASHDC
    RHMFISS/JOINT STAFF WASHINGTON DC
    RHEHAAA/NSC WASHDC
    RHEHAAA/WHITE HOUSE WASHDC

` `

    S E C R E T PANAMA 000329

    SIPDIS
    NOFORN

    E.O. 12958: DNG: CO 04/19/2018
    TAGS: PGOV PREL ECON ETRD PM
    SUBJECT: PANAMA: DOMESTIC POLITICS HAUNT FTA

    REF: PANAMA 300

    Classified By: POLCOUNS Brian R. Naranjo.  Reasons:  1.4 (b) and (d).

    -------
    SUMMARY
    -------

    ¶1.  (S//NF) As Panama enters the final stretch of its general
    election campaign season, politics has come to haunt the
    U.S.-Panama Free Trade Agreement (FTA).  "Forget about the
    FTA," governing Revolutionary Democratic Party (PRD)
    presidential candidate Balbina Herrera declared on April 19
    to law students at the University of Panama.  Meanwhile,
    Alliance for Change presidential candidate Ricardo Martinelli
    stumbled in releasing a statement of support for the Torrijos
    Administration's efforts to put the FTA on a path to
    ratification in the U.S.  While the final version of the
    Martinelli statement avowed support for Torrijos' efforts to
    secure FTA ratification, an unauthorized draft published by
    Panama City daily La Estrella put down a marker warning the
    Torrijos Administration not to commit Martinelli to any
    course of action, including specifically regarding the
    exchange of banking information.  Increasingly, Panamanian
    opinion leaders are questioning what Panama's efforts --
    negotiations, high-level visits and engagement, and money
    spent on lobbying -- have gotten Panama.  There is still time
    to take advantage of a narrow window of opportunity in Panama
    to resolve outstanding FTA-related issues.  The Torrijos
    Administration remains committed to addressing labor concerns
    and immobilizing bearer shares.  The Torrijos Administration
    understands that it is under G-20/OECD pressure to conclude
    tax information exchange agreements (TIEAs), but does not
    have the political capital to tackle a TIEA with the U.S.
    during the less than seventy days that it will remain in
    office.  While the scenario for moving forward on these
    issues could become more difficult after the May 3 general
    elections, that scenario will only worsen after Martinelli is
    sworn in as president, as expected, on July 1.

    ---------------------------
    Balbina:  "Forget About It"
    ---------------------------

    ¶2.  (SBU)  Speaking to law students at the University of
    Panama while President Torrijos was at the Summit of the
    Americas in Port of Spain, Herrera responded to a question
    about the FTA, blurting out, "Forget about it."  She added,
    "I am an agronomist, and I'll tell you that people are going
    to learn to love the 'countryside (campo)'," referring to
    workers in Panama's agricultural sector.

    ------------------------------------------
    Martinelli Stumbles with Pro-FTA Statement
    ------------------------------------------

    ¶3. (S//NF) "We recognize the efforts of Panama's Foreign
    Minister, Samuel Lewis Navarro and our Ambassador in
    Washington, Federico Humbert . . . ," Martinelli declared on
    April 9 in a press statement entitled "Martinelli
    Congratulates the Foreign Minister."  In the version of this
    statement carried by Panama City daily La Estrella, but not
    in any other media, this opening sentence continues, stating,
    ". . . and we will always support (the Torrijos
    Administration) as long as they do not commit us to take
    future actions such as the exchange of banking information
    without consulting and reaching consensus with the private
    sector and the Alliance for Change."  Martinelli's lead
    campaign advisor Demetrio "Jimmy" Papadimitriu clarified for
    POLCOUNS on April 20 that La Estrella published an unapproved
    draft of the statement.  Papadimitriu said that this opening
    sentence in the approved final version ended as follows:  " .
    . . and we will continue to support an open and transparent
    process to obtain the ratification of the FTA."  Papadimitriu
    said that the campaign's press secretary had sent the
    erroneous draft, which made specific reference to the
    exchange of banking information, to La Estrella without his
    approval.  Papadimitriu changed the final wording of the
    opening lines to underscore the candidate's support for the
    FTA and his call for "an open and transparent process."

    -------------------------
    FTA Exhaustion Setting In
    -------------------------

    ¶4.  (C//NF) Meanwhile, Panama's chatter-atti and commentators
    have been giving popular voice to a growing FTA exhaustion.
    Essentially, the basic expression of this exhaustion boils
    down to: a plaintive review of the litany of the efforts to
    secure a FTA -- three years and ten rounds of negotiations,
    USD 6.2 mllion spent on lobbying efforts, and numerous
    high-level delegations back and forth between Washington and
    Panama -- that concludes with the rhetorical question, "Where
    has all this effort gotten Panama?"

    ---------------------------------------------
    Political Analyst Worried About Governability
    ---------------------------------------------

    ¶5.  (S//NF)  "Martinelli's victory is going to be like a
    seismic event in Panama's political order," political analyst
    Jose Blandon told POLCOUNS on April 21.  This PRD-friendly
    analyst asserted that Martinelli's victory would touch off a
    wave of in-fighting not only within the PRD, but also within
    the Panamenista Party, Panama's largest opposition party.
    Blandon cautioned though that a Martinelli Administration
    would not be fully stood up and capable of grappling with
    tough FTA-related issues for at least one year.  (Note:
    Martinelli's lead campaign advisor Jimmy Papadimitriu
    predicted that a prospective Martinelli Administration would
    need seven to eight months to find its sea legs.  (REFTEL))
    Blandon assessed that the PRD' electoral losses would be a
    traumatic event -- it would not only lose the presidency,
    but, he believed, lose a significant number of seats in the
    National Assembly -- that would touch off a struggle for
    control of the party among Torrijos, Herrera, Vice
    Presidential candidate Juan Carlos Navarro, former President
    Ernesto "El Toro" Perez Balladares, and National Assembly
    Deputy Hector Aleman.  In perhaps the first public move in
    the struggle to control the PRD, First VP and FM Samuel Lewis
    said in a radio interview that, once he stepped down from
    office, he would dedicate himself to his businesses and to
    grassroots political work, ostensibly to make a run for
    president in 2014.  Meanwhile, traumatized by its inability
    to secure top billing in a grand opposition alliance, the
    Panamenistas, though part of a winning Martinelli-led
    coalition, could also be torn apart by jockeying for position
    among former President Guillermo Endara (who already broke to
    form his own Moral Vanguard of the Nation party), former
    President Mireya Moscoso, Martinelli VP running mate Juan
    Carlos Varela, and former primary presidential candidate
    Alberto Vallarino.  "By scrambling the political structure of
    Panama," Blandon concluded, "Martinelli's victory raises real
    concerns about his ability to govern once he is inaugurated."

    -------
    Comment
    -------

    ¶5. (S//NF) Panama's campaign season is coming down to the
    wire.  Trailing badly in the polls and desperate to gain
    traction and forward momentum, Herrera is trying to tap into
    nationalism and rural voters who could suffer from the impact
    of lower tariffs on U.S. agricultural products by asserting
    that Panama should "forget about" the FTA and instead
    indulging in the notion of a romantic renaissance in the
    "campo."  Martinelli, focused on maintaining his alliance's
    unity and significant momentum in the polls, is thinking
    solely about victory at the polls, not governance issues such
    as securing ratification of the FTA.  Clearly though, there
    are powerful interest groups in the Martinelli camp that
    nearly succeeded in putting the candidate on record to block
    any Torrijos Administration deals on tax havens and the
    exchange of tax information.  Our own encounters with the
    lawyers who lead powerful business organizations have
    confirmed our fear that they see a Martinelli victory as an
    avenue to shut down movement to immobilize bearer shares and
    introduce transparency into the financial sector.  We note
    with dismay that these same forces did succeed in including
    in Martinelli's published platform a plank saying Panama
    would retaliate against countries who put Panama on a black
    list by denying corporations from countries that blacklist
    Panama the ability to compete in public sector bids (such as
    bids for work on the Panama Canal expansion project).
    Candidate Martinelli himself, on the eve of the G-20 Summit,
    stated for the cameras that Panama was not a tax haven.
    While we are grateful that he stopped short of Herrera's flat
    call to forget the FTA, we underscore that progress on the
    package of issues -- labor, bearer shares, enhanced exchange
    of banking information -- will be much harder after the new
    government takes office on July 1 than it is now, and it is
    not easy now.  FTA exhaustion has well and truly set in here
    in Panama.
    STEPHENSON

`