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### Viewing cable 08PANAMA574, PANAMA POST: EDITION 12; VOLUME II

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08PANAMA574 | 2008-07-11 20:39 | 2011-05-31 00:00 | CONFIDENTIAL | Embassy Panama

`

    VZCZCXYZ0001
    RR RUEHWEB

    DE RUEHZP #0574/01 1932039
    ZNY CCCCC ZZH
    R 112039Z JUL 08
    FM AMEMBASSY PANAMA
    TO RUEHC/SECSTATE WASHDC 2277
    INFO RHMFISS/CDR USSOUTHCOM MIAMI FL
    RUEAIIA/CIA WASHDC
    RHEFDIA/DIA WASHDC
    RHMFISS/JOINT STAFF WASHINGTON DC
    RHEHAAA/NSC WASHDC
    RUEKJCS/SECDEF WASHDC

` `

    C O N F I D E N T I A L PANAMA 000574

    SIPDIS

    E.O. 12958: DECL: 07/09/2018
    TAGS: PREL PGOV ECON PM
    SUBJECT: PANAMA POST:  EDITION 12; VOLUME II

    REF: PANAMA 493 (AND PREVIOUS)

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

    -------
    Summary
    -------

    ¶1. (C)  Juan Carlos Varela's landslide victory in the
    Panamenista primary on July 6, defeating Alberto Vallarino by
    over 20 points, was the defining political development for
    the week.  The focus quickly turned to Varela's efforts to
    unify Panama's largest opposition party and to renewed
    discussions regarding opposition alliances.  In this week's
    Panama Post, our leading stories are:

    -- Former President Mireya Moscoso's on Panamenista unity;
    -- Billy Ford:  "Patriotic Union is leaning towards an
    alliance with Ricardo Martinelli" of Democratic Change (CD);
    -- Martinelli aide believes Martinelli may need to be
    prepared to go it alone; and
    -- Martinelli op-ed sheds light on economic views.

    ----------------------------------
    Moscoso Prepared to Support Varela
    ----------------------------------

    ¶2. (C) Former President Mireya Moscoso was prepared to
    support Juan Carlos Varela as the Panamenista presidential
    candidate, Moscoso aide Eduardo Quiros told POLCOUNS on July
    ¶11.  "It could mean the death of Panamenismo if the
    opposition loses in 2009, and the Panamenista candidate needs
    to be at the top of the ticket," Quiros explained.  Varela's
    landslide victory over Vallarino put Varela in perhaps the
    best position to unify the party in recent memory and to
    build a strong opposition alliance, according to Quiros.
    Moscoso wanted to beat the PRD, so now the Panamenista party
    needed to close ranks behind Varela.  Acknowledging that
    Moscoso and Varela were not on speaking terms and that Varela
    to a large extent defined his efforts to renew the party by
    contrasting himself sharply with Moscoso, Quiros said that
    nonetheless both Varela and Moscoso were sending out feelers.
     Jose Luis "Popi" Varela, Varela's brother and closest
    political advisor, had met recently with Moscoso in an effort
    to broker a rapprochement.  Quiros stated clearly, however,
    that in building bridges to the old-line chieftains of the
    Panamenista party, Varela would have to remain committed to
    leading an opposition ticket, not settling for second billing.

    ¶3. (C) Comment: Quiros described a very ruthlessly pragmatic
    Moscoso in laying out her desire to shift from Vallarino,
    whom she backed in the primaries, to Varela.  She wants the
    Panamenistas to lead the opposition and to defeat the
    governing Revolutionary Democratic Party (PRD).  Only time
    will tell how successful Varela will be in putting real
    substance behind the symbolic party unity he has already
    achieved.  (Varela joined his primary opponents on July 10
    for the formal declaration that he had won the primary at
    which Vallarino and Marco Ameglio promised to "close ranks"
    behind Varela.)

    -----------------------------------------
    Ford:  UP Leaning Toward Alliance with CD
    -----------------------------------------

    ¶4. (C) "Listen, my presidential campaign is about trying to
    keep my party together," Patriotic Union President and
    declared presidential candidate Guillermo "Billy" Ford told
    POLCOUNS on July 9.  "I am going to step down to help form
    the strongest opposition alliance possible.  I do not think
    that a grand opposition alliance of all parties is likely,
    but right now the momentum in Patriotic Union (UP) is to join
    with Ricardo Martinelli" of Democratic Change (CD).  Ford
    explained that UP needed to take care of its candidates for
    National Assembly and local positions.  Since Martinelli
    "owns and directs" his party, Ford explained, that it was
    easier for Martinelli to make space in an alliance for UP
    candidates.  In contrast, dealing with the Panamenista Party
    was like dealing with a corporation with corporate boards and
    stockholders that needed to be satisfied.  Also, the
    Panamenistas had just elected on July 6 its slate of
    candidates for these lower level positions.  As for a broader
    alliance, Ford speculated that Juan Carlos Varela's landslide
    two to one victory over Alberto Vallarino to win the
    Panamenista presidential nomination had made it less likely
    that Varela and Martinelli would be able to come to terms on
    a "grand opposition alliance."  "There'll be three candidates
    in the general elections:  two opposition candidates,
    Martinelli and Varela, and one (governing Revolutionary
    Democratic Party) PRD candidate, Balbina" Herrera.  Ford
    added that no alliances were likely to be announced until
    September or possibly even October.  Describing Vallarino as
    a "poor loser" and bitter, Ford noted that Varela would have
    his work cut out for him bringing the Panamenista Party
    together.

    ¶5. (C) Comment:  Ford was not enthused about an alliance with
    "my friend" Martinelli, but did see it as the best deal that
    he could secure for UP.  Ford discussed alliance formation in
    terms of securing and using the greatest amount of leverage
    for UP.

    --------------------------
    Martinelli May Go It Alone
    --------------------------

    ¶6. (C) "One has to respect Varela for his impressive victory
    over Vallarino,"  Martinelli political advisor Jimmy
    Papadimitriu told POLCOUNS July 7.  "Nobody predicted that he
    would clobber Vallarino by such a margin." Papadimitriu
    acknowledged that the strength of Varela's victory would
    probably incline Varela to make a drive for the presidency,
    not take second billing on a Martinelli-led ticket.  "You
    know though, for some time I've believed that Ricardo can't
    rely on Varela, and I think that he may need to go it alone,"
    Papadimitriu said.  "We'll pick up an alliance partner or
    two, but there will probably be two opposition candidates."

    ¶7. (C) Comment: Papadimitriu has been trying to convince
    Martinelli for some time that Varela may not be his friend
    and that Martinelli may need to prepare to campaign against
    him.  Though at his campaign launch in May Martinelli trained
    most of his fire primarily on the PRD, Martinelli did make
    the argument that both the PRD and the Panamenista Party have
    had ample opportunity to try to address the needs of the
    people over the past forty years of their various
    administrations.  On television and radio on July 8,
    Martinelli dismissed questions regarding alliances by noting,
    "My alliance is with the Panamanian people.  I won't enter
    into that old political alliance game.  Instead, I want to
    talk about real solutions to solve real problems, the
    problems in education, health care, law and order,
    employment, and wages."  Papadmitriu noted that Varela was
    now humming the "change" mantra and said he was struck by the
    powerful response of the Panamenista rank and file to this
    message.  Martinelli's team clearly believes that Martinelli
    holds the edge in being the change agent that they believe
    the Panamanian public seeks.

    --------------------------------------------- -
    Martinelli Op-Ed Sheds Light on Economic Views
    --------------------------------------------- -

    ¶8. (U) In a June 18 op-ed entitled "The Decline of the
    Traditional Politicians (El Desgaste de los politicos
    tradicionales)" in paper-of-record "La Prensa," Martinelli
    laid out his economic views.  In his opening lines, he
    stated, "The country's principal problems for Panamanian
    families are the high cost of living and unemployment.  Both
    are related to economics and cannot be solved by people who
    do not understand how things are interrelated or by people
    who have never generated any job openings."  He then declared
    that he understood how the economy worked and how things were
    interrelated.  Other highlights follow:

    -- Eliminate the tax on diesel and cut in half the tax on
    gasoline:  Martinelli state that the high cost of petroleum
    affected the high cost of goods and services that Panama
    produced.  By eliminating the tax on diesel and cutting in
    half the tax on gasoline, Martinelli wrote, "This is the way
    to help lower the cost of living."

    -- Implement a flat tax:  Acknowledging that the Torrijos
    Administration had presided over economic growth and a
    reduction of unemployment, Martinelli nonetheless stated,
    "What these numbers do not show is that every day the salary
    that Panamanians earn goes less as far and there is a
    difference between employment and under employment."  To
    attack this problem, it was imperative to lower the taxes on
    enterprises and workers.  "International studies prove that a
    reduction of taxes on businesses translates into an increase
    in salaries for their employees and a lowering of the costs
    of goods and services."  Arguing that some sectors could have
    zero tax burden while some banks paid seven percent and small
    and medium enterprises paid 30 percent, Martinelli wrote, "I
    propose to implement a fixed level of taxes system -- flat
    tax -- so that all enterprises pay the same percentage in
    taxes."

    -- Reduce the size of government:  To continue progressing,
    Martinelli asserted that the size of government had to be
    reduced and that more resource needed to be dedicated to
    things that would improve productivity and the quality of
    life such as infrastructure investment, transportation,
    education and health.

    -- Focus on things that add value:  Over the medium and long
    term, Martinelli argued that to transform Panama's economy,
    the focus had to be on producing goods and services that had
    greater added value.  By doing so, Martinelli wrote that
    salaries would improve.  To achieve this goal, Martinelli
    wrote that Panama's education system had to churn out more
    engineers, scientists and professionals in "specialized
    careers" and fewer "social science" graduates.  Furthermore,
    incentives to encourage business to invest in research and
    development had to be created.

    ¶9. (U) Concluding his article, Martinelli writes, "Panama is
    living a historic moment of which we are failing to take
    advantage.  The politicians and political parties that we
    have always had do not want things to change because they
    need a poor public so that they can live off the needs of the
    people and continue with political clientalism  Rejecting
    "falling into the trap" of "taking from the rich to give to
    the poor," Martinelli writes, "What needs to be done is
    generating more wealth and giving the same opportunity to all
    so that they can partake of that wealth."

    ¶10. (C) Comment:  The conservative orthodox economic
    proposals laid out in this op-ed will fly over the heads of
    most Panamanians, including the relatively elite readership
    of La Prensa.  Martinelli's political message will resonate:
    Panama is not taking advantage of its extraordinary moment in
    history, needs to grow the economic pie and ensure full
    access to economic opportunity for all, and needs an
    experienced job creator at the helm.  His proposal to reduce
    the tax on diesel and halve the tax on gasoline will be very
    popular regardless of social-economic status, but his
    proposal to implement a flat tax, reduce the size of
    government, and to focus on value-added activities will be
    too esoteric for the average Panamanian voter.  Post expects
    that Martinelli will continue to push the basic political
    message of this op-ed in other fora.
    MESA

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