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### Viewing cable 05PANAMA1431, PANAMA STRIKE LEADERS EXPLAIN OPPOSITION TO CSS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05PANAMA1431 | 2005-07-06 19:32 | 2011-05-29 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Panama

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 03 PANAMA 001431

    SIPDIS

    SENSITIVE

    STATE FOR WHA/CEN
    SOUTHCOM ALSO FOR POLAD
    VANCOUVER FOR CG ARREAGA

    E.O. 12958: N/A
    TAGS: PGOV ELAB PREL EINV PM LABOR HUMAN RIGHTSPOLMIL
    SUBJECT: PANAMA STRIKE LEADERS EXPLAIN OPPOSITION TO CSS
    REFORMS

    REF: A. PANAMA 0810
         ¶B. PANAMA 1184

    SUMMARY
    -------
    ¶1.  (SBU) Members of the anti-CSS-reform FRENADESSO coalition
    -- a mixed bag of ideological leftists and bread-and-butter
    trade unionists -- want the GOP to pay more and the people to
    pay less to reform Panama's CSS than the June 1 Law 17
    stipulates.  During recent meetings with PolOffs, leaders of
    the month-long anti-CSS (social security) reform strikes
    agreed that the GOP has asked for too much sacrifice.  They
    blamed CSS's troubles on alleged mismanagement, corruption,
    and outright theft that began nearly four decades ago under
    military rule (1968-1989) and continued under Panama's
    home-grown post-1989 "partidocracia," the so-called
    alternating rule by political party elites.  If the GOP
    wrecked CSS, they reason, the GOP should fix it.  Leftists
    within FRENADESSO -- including SUNTRACS radicals (Reftel A)
    -- have agitated for systemic changes and huge budget
    outlays.  But FRENADESSO's real center of gravity is occupied
    by moderate middle-class teachers and health care
    professionals, who have legitimate-sounding historical gripes
    and criticisms of the current law, and some constructive
    proposals.  The apparent reasonableness of many of
    FRENADESSO's criticisms demonstrates that President Torrijos
    may have blundered badly by rushing the passage of CSS-reform
    Law 17, thus exposing himself to criticism of conducting
    "rabiblanco" business as usual.  End Summary.

    FRENADESSO'S Wider Base
    -----------------------
    ¶2.  (SBU) While the radical SUNTRACS construction union
    allegedly would like to highjack FRENADESSO (National Front
    to Defend Social Security) for its own ends, radicals do not
    hold the balance of power within the organization that led
    nearly five weeks of strikes against the GOP's Law 17 to
    reform Panama's social security system (CSS) -- See Reftel B.
     The real power is held by moderate Panamanians, including
    32,000 middle-class public school teachers and 23,000
    doctors, nurses, medical technicians, and administrative CSS
    staff.  With the month-long anti-CSS strikes in quiesance
    since June 27, and as strike groups attend a GOP-sponsored
    National Dialogue, PolOffs visited strike leaders and union
    officials to learn their views.

    FRENADESSO on the "Partidocracia"
    ---------------------------------
    ¶3.  (SBU) POL Counselor on June 28 met with FRENADESSO
    spokesmen Andres Rodriguez and Gabriel Castillo.  (Note:
    CONUSI is the labor umbrella group that includes the radical
    SUNTRACS construction union.  End note.)  Hardly earning his
    reputation as a rabble rouser, the unsophisticated, ingenuous
    Rodriguez calmly explained that Panamanians are discontented
    because decades of Panamanian governments have ignored them.
    Rodriguez claimed that many seasonally employed Panamanians
    never would reach Law 17's required level of 300 months of
    CSS contributions and never would be able to retire.
    Panamanians are fed up "to here" -- Rodriguez placed the edge
    of his hand level with his nose -- with the "partidocracia"
    (the rule of political elites who run the parties) that loots
    the state and produces many new millionaires at the end of
    every five-year presidential term.  Is the Torrijos
    government really different?  "Why hasn't Torrijos prosecuted
    Mireya Moscoso?" on corruption charges, Rodriguez demanded.
    "Is there any lack of evidence?"

    "The GOP Broke CSS, the GOP Should Pay to Fix It"
    --------------------------------------------- ----
    ¶4.  (SBU) Average Panamanians do not see why they must pay to
    fix a system the government broke, though inattention, abuse,
    fraud, and conspiracy, Rodriguez continued.  Panamanians are
    angry at past governments for badly mismanaging CSS funds,
    stealing CSS money, and generally treating CSS as a
    convenient piggy bank to finance projects on the cheap and to
    line their own pockets, Rodriguez and Castillo said.  In
    addition, companies that fail to enroll their workers in CSS
    or that enroll them but steal their contributions are never
    prosecuted, they maintained.  Castillo spoke of the need to
    "change the GOP's vision" at the National Dialogue.  "If the
    government wants to keep Law 17 as is, we'll be back on the
    streets," he said.

    The Case of the Missing $400 Million
    ------------------------------------
    ¶5.  (SBU) In recent meetings with PolOff, moderate teacher
    and health union officials tied many of FRENADESSO's
    complaints to abuses of CSS allegedly committed by President
    Torrijos's father, the dictator Omar Torrijos.  To shore up
    his popular support during the 1970s, they said, Omar
    Torrijos opened CSS health benefits to spouses, children, and
    parents of CSS contributors but did nothing to increase
    funding.  As a result, fewer than 700,000 people currently
    contribute to CSS but over two million receive benefits.
    Many FRENADESSO members believe the 1968-1989 military
    dictatorship stole $400 million from a now-defunct special
    retirement program, which they accuse the 1994-1999 Perez
    Balladares administration of covering up.  At that time, the
    GOP issued bonds for the missing millions, a tactic that
    increased Panama's external debt and enriched bankers while
    impoverishing CSS.

    A Costly, Utopian Program
    -------------------------
    ¶6.  (SBU) Rodriguez and Castillo presented a utopian program,
    one that would replace Panama's current pay-as-you-go CSS
    system (which continues under Law 17) with a "fully
    capitalized" one.  Further, Rodriguez and Castillo want
    Panama to adopt a "National Development Plan" that would
    commit all future Panamanian governments to improve health
    and education.  In addition, they would add to CSS the one
    million Panamanians who are currently not enrolled (although
    the teachers' and health unions probably would not agree).

    The money to fund such a project would come from

    -rescheduling Panama's international debt, which swallows
    21-22% of Panama's annual budget, much of which was obligated
    under military rule

    -administering Panama's fiber optic cable networks

    -Banco Nacional profits

    -profits from the reverted areas of the former Canal Zone,
    and

    -Canal profits.  (Comment: Many Panamanians believe, not
    unjustly, that they have seen no direct dividend from the
    Canal windfalls.  End Comment.)

    Drastic Drop in Teachers' Benefits
    ----------------------------------
    ¶7.  (SBU) Law 17 will have a hugely negative economic impact
    on teachers, Teacher union officials told PolOff.  It also
    broke the GOP's past commitments to them, turning the
    teachers' special retirement plan (PRAA) on its head.
    According to union officials, Law 17 created an unexpected
    three-year gap in coverage (due to the increased retirement
    age).  Teachers who had been paying into the special system
    and were planning to retire suddenly found they could not.
    Under the old CSS law, teachers could collect a pension after
    15 years (180 months), but could increase their pension to
    82% of average salaries by working for an additional 15
    years.  Under the reforms, teachers cannot retire until they
    have contributed to CSS for 300 months (25 years) and their
    pension at that time will equal only 60% of their salary
    average.

    Medical Workers' Criticisms
    ---------------------------
    ¶8.  (SBU) Similarly, CSS medical workers claim that Law 17
    does nothing to address poor administration or improve CSS
    autonomy, while hitting doctors disproportionately hard.
    According to a health worker union official, the reforms do
    nothing to curb either the Ministry of Health's
    administrative powers over CSS money and resources or CSS
    payments for referrals to private clinics in
    non-extraordinary cases.

    Further Increase in GOP Control of CSS
    --------------------------------------
    ¶9.  (SBU) Medical workers claim that Law 17 further
    politicizes the CSS by strengthening the president's
    discretionary powers.  Despite continued pleas by FRENADESSO
    member groups to make CSS more autonomous, Law 17 gives the
    presidentially appointed CSS Director carte blanche over the
    CSS administration.  An official representing 3,000 CSS
    physicians and health worker professionals (AMOACSS) said
    that even prior to Law 17, the president had never appointed
    an AMOACSS nominee to the CSS Board of Directors.  The
    AMOACSS official claimed that Law 17 permits the CSS Director
    to fire medical workers, cancel programs, and direct
    resources at his will, unconstrained by any input from
    stakeholders in the system.

    CSS Reforms Discriminate Against Doctors
    ----------------------------------------
    ¶10.  (SBU) Physicians also complain that a provision in Law
    17 that requires them to give an ever increasing percentage
    of their income from private clinics to CSS will degrade
    their standard of living, compared with other professionals.
    While the new law requires doctors to pay 11% of their income
    (and more later) into CSS without receiving any additional
    benefit, an AMOACSS official said, other Panamanians who make
    more than $48,000 a year do not pay anything to CSS on their
    marginal income.  Physicians may be willing to pay more if
    other professional Panamanians do.

    Comment
    -------
    ¶11.  (SBU) It is increasingly apparent that Law 17 will not
    survive the National Dialogue in its present form.  Not only
    will Torrijos probably have to agree to drop the required
    number of 300 monthly contributions, to 240 (180 under the
    old law), many observers also believe he probably will have
    to accept "fixing" CSS for less than the 40 years he had
    aimed for.  Panamanians just can't be convinced to make what
    they believe are unjustified sacrifices for some abstract
    "future."  Going forward, Torrijos will have to be mindful of
    his family "baggage" -- many of CSS's current problems
    originated during the rule of his dictator father Omar -- and
    of the bitter perception, increasingly shared by average
    Panamanians, of the injustice and inequality that they face
    in their daily lives.  As one wealthy, well known Panamenista
    politician put it, How can the government plead poverty when
    it spends close to $40 million a year on the National
    Assembly, and pays the 78 legislators $132,000 a year?  (The
    minimum wage is $200 a month.)  The people aren't stupid, he
    said.  If rich Panamanians keep building luxury beach houses,
    do not look out for their employees, and refuse to start
    reforming Panama's political and social system, then in five,
    ten, or twenty years, the poor Panamanians -- not us -- will
    be the ones who reform it.

    WATT

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