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### Viewing cable 05PANAMA2162, PANAMANIAN OFFICIALS OPTIMISTIC THAT CANAL

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05PANAMA2162 | 2005-10-27 14:21 | 2011-05-31 00:00 | CONFIDENTIAL | Embassy Panama

`

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

` `

    C O N F I D E N T I A L SECTION 01 OF 05 PANAMA 002162

    SIPDIS

    DEPARTMENT ALSO FOR WHA/CEN, WHA/AND, AND WHA/CAR
    SOUTHCOM ALSO FOR POLAD

    E.O. 12958: DECL: 10/27/2025
    TAGS: PREL PGOV ETRD ECON PM POL CHIEF
    SUBJECT: PANAMANIAN OFFICIALS OPTIMISTIC THAT CANAL
    EXPANSION WILL LIFT ALL BOATS, BOOST POLITICAL PROSPECTS,
    DEFINE LEGACY AS PATRIA NUEVA ENTERS SECOND YEAR IN OFFICE
    -- AN ANALYSIS (PART 2)

    REF: A. PANAMA 1729
         ¶B. PANAMA 2141

    Classified By: CDA LUIS ARREAGA FOR REASONS 1.4 (B) AND (D).

    ¶1.  (SBU) This message is the second in a three-part series
    on views of the Torrijos administration's performance as it
    passes its September 1, 2005 first anniversary.  Part One
    (Reftel A) evaluated the performance of the Panamanian
    government (GOP), citing the views of critics outside and
    inside the GOP.  Part Two elaborates on the GOP's view of
    itself; analyzes reasons for its domestic failures; and
    examines the interplay between the GOP's domestic performance
    and U.S.-Panamanian bilateral issues.  It also reviews how
    U.S. interests, especially security and the Canal, may be
    affected by GOP initiatives and political prospects, in the
    context of the November 6-7 visit to Panama of President
    Bush.  Part Three will examine the Torrijos administration's
    progress in achieving its economic priorities.

    SUMMARY AND INTRODUCTION
    ------------------------

    ¶2.  (C) As it tries to find its political moorings following
    what was widely seen as political ineptitude during its first
    year, the Panamanian government (GOP) of Martin Torrijos is
    actively leveraging its relations with the United States.  It
    is counting on President Bush's November 6-7 visit and a
    November 7 bilateral statement, with possible mention of
    "secure trade and transportation" and a Free Trade Agreement
    (FTA), to help its domestic political prospects.  Given the
    GOP's self-perceived vulnerabilities, the key for the USG
    will be to find a formulation of shared interests that boosts
    the GOP without highlighting its failures, such as its
    failure to conclude the FTA.

    ¶3.  (C) The GOP is friendly to U.S. interests (and the
    population is over-90% pro-American) but its aura of weakness
    encourages its domestic opponents.  That weakness, combined
    with the "Chavez factor" -- the constant spectacle of Hugo
    Chavez trying to poke his finger in Uncle Sam's' eye -- in
    turn encourages local extremists.  Given the GOP's weakened
    domestic position and the president's under-50%-approval
    ratings, hopes to cultivate Torrijos as a foil to Hugo Chavez
    in an increasingly unstable region probably are far-fetched.
    Torrijos does not have a secure enough domestic platform --
    or fire in the belly -- to be a high-profile democratic
    crusader in the "anti-Chavez" mold.  On the contrary, the GOP
    is cautiously courting Chavez to buy oil products on credit.
    In general, Torrijos wants good relations with Chavez and
    Fidel Castro, to allay its fears of Venezuelan and Cuban
    meddling in local politics.

    ¶4.  (C) As the Torrijos government emphasizes Panama's
    traditional reliance on its geographical endowments as an
    epicenter of world trade and its relations with the U.S., its
    lack of direction domestically is a major impediment to
    foreign and domestic policy objectives.  Torrijos probably
    can recoup his internal position by building on the momentum
    he gains from President Bush's November 6-7 visit, but only
    if he moves quickly to wrap up CSS-Social Security reform and
    finalize a U.S.-Panama FTA, which are intended to improve the
    government's finances and its attractiveness to investors.
    Torrijos is betting his government's  political prospects and
    his legacy on expanding the Canal -- and on winning a 2006 or
    2007 referendum to expand it -- confident that the massive
    infrastructure project will set off a long economic boom.
    End Summary and Introduction.

    The Torrijos Dilemma
    --------------------

    ¶5.  (C) Operationally, the Torrijos government often seems to
    be at sea.  The government's poor decision-making apparatus
    and its public relations deficit partly are to blame, as is
    Torrijos's "government of rookies," where his close friends
    hold a lot of the important jobs.  With friendship playing so
    large a role, Torrijos hesitates to fire or criticize them,
    as became clear in September's half-hearted cabinet
    reshuffle.  For example, replacing his school chum Javier
    Acha with Leonel Solis at Panama's intelligence-gathering
    Consejo was arguably the biggest change Torrijos made, with
    the result that Acha and Torrijos were not on speaking terms
    for some time, and their friendship is strained.

    Foreign Minister Lewis: Gravitas
    --------------------------------

    ¶6.  (C) (Comment: Son of a respected former foreign minister
    and ambassador to Washington, whose well-connected family
    once hosted the Shah of Iran on Contadora Island, Vice
    president/Foreign Minister Samuel Lewis is a businessman with
    politics in his blood.  He is close to every major decision
    that the Torrijos government makes.  For lack of a better
    word, Lewis's broad judgment and perspective lends gravitas
    to the administration, although he is better versed on
    foreign affairs than internal politics.  A 2009 presidential
    hopeful, Lewis is not politically disinterested.  That may be
    an advantage because his political fate is closely tied to
    Torrijos, thus he may give the best advice the president
    gets.  Political consultant Jose Blandon, Sr. told POL
    Counselor he agrees that Lewis probably is Martin Torrijos's
    best advisor but he wonders, as the president's close
    personal friend, whether Lewis "pulls his punches" to avoid
    offending Martin and is more eager to preserve his friendship
    than engage in "hard talk".  Others suspect that Lewis's
    business interests at times may influence GOP decisionmaking.
     End comment.)

    No Chief Of Staff
    -----------------

    ¶7.  (C) Minister of the Presidency Ubaldino Real, a political
    neophyte, is a leading Friend of Martin.  Real's excellent
    access and personal relations with Torrijos combined with his
    ministerial position mean he is uniquely placed to be the
    president's chief of staff, to combine, as one wag put it,
    the roles of the president's alter-ego and cabron (heavy).
    But Real has chosen not to do it and the president has not
    insisted.  Instead, Real concentrates on a myriad of special
    projects.  Without a chief of staff Torrijos has no orderly,
    dependable method of receiving information or making
    decisions.  The decision-making "process," then, relies on
    the haphazard order that issues reach the president's desk
    (or not), how they happen to be presented, and on his mood.
    That means no one, including Torrijos himself, is pushing the
    president's agenda in an orderly, coherent way.  And no one
    is pushing the president to make decisions.  (Note: Lucho
    Melo, Torrijos's personal assistant, is not a chief of staff.
     End note.)  In effect, the GOP has no self-regulating
    mechanism, no rudder.

    Security To The Fore
    --------------------

    ¶8.  (C) In contrast to its lethargy and indirection in its
    internal political strategy, the GOP has been almost
    hyperactive on security policy.  The GOP's "Panama Secure
    Trade & Transportation Initiative" (PST&TI), which pitches
    improvements to Panama's security and border preparedness and
    closer Panama-U.S. security cooperation and enhanced
    security-related information sharing and training is one
    example.  (Note: A DAS-level inter-agency USG team came to
    Panama to discuss the proposal in late September.  End note.)
     Further, the GOP wants to split off the so-called
    "paramilitary" border units of the Panamanian National Police
    (PNP) and place them in a new PNP "border force."  The
    National Air (SAN) and National Maritime (SMN) Services also
    are to be merged into a new "Coast Guard."  All are
    interesting proposals but resources to make the new systems
    "go" are lacking.  Most of the credit for these initiatives
    belongs to Minister of Government and Justice Hector Aleman,
    although whether he will get the money he needs to pay for
    new patrol boats, aircraft, training, and maintenance is far
    from clear.  If he does not, then a combined SAN-SMN will
    make little difference.

    Regional Role?
    --------------

    ¶9.  (C) Minister Aleman wants Panama to play a bigger role
    regionally and spur regional security coordination as Panama
    chairs SICA (CentAm Integration System) for the next 12
    months.  Meanwhile, the Embassy's access to high-level
    Panamanian officials, including President Torrijos, remains
    unmatched, while the level of cooperation between Panamanian
    and U.S. drug enforcement, immigration, and security
    officials, in many ways is even better under Torrijos than it
    was under President Moscoso.  But given the GOP's sensitivity
    to criticism from local anti-military opinion (the GOP is
    routinely accused of planning to re-militarize Panama), the
    GOP seems to have two minds about how much attention to draw
    to its forward thinking on security.  That, combined with
    lack of progress on the bilateral FTA, could make it awkward
    for Presidents Bush and Torrijos to say much of substance on
    security or trade on November 7, frustrating important U.S.
    objectives.

    Minister of Presidency Real: Intentions vs. Performance
    --------------------------------------------- ----------

    ¶10.  (C) Nowhere are the Torrijos administration's
    contradictions between good intentions and performance, and
    its confusion of strategy with wishful thinking more apparent
    than in a discussion with Ubaldino Real.  In his final
    meeting with Ambassador Watt late June, following weeks of
    noisy, sometimes violent demonstrations protesting the GOP's
    CSS-reform law, Real complained that the government faced a
    situation where it had no allies.  What was happening in the
    streets was contrary to all the advice and predictions that
    the GOP had received, he said, but "We still know we're doing
    the right thing."  "Don't explain this to me," the Ambassador
    said bluntly.  "Explain it to the Panamanian people.  You've
    got to get your president out there," she rejoined.

    Public Relations Deficit
    ------------------------

    ¶11.  (C) Real acknowledged the GOP's long-standing public
    relations problem, which begins at the top, with President
    Torrijos.  In reply to implorings for Torrijos to get out the
    government's message, Real admitted, Torrijos "doesn't
    communicate well" and comes across as "wooden."  Telling Real
    that the PRD's possible political fragmentation is "the
    biggest problem you've got," the Ambassador reminded him that
    Torrijos's political opponents, especially former president
    Ernesto Perez Balladares, is "trying to peel off your people."

    Poverty: The Single Biggest Problem
    -----------------------------------

    ¶12.  (C) Poverty is the biggest single threat to Panama's
    democracy, Real said at the June meeting, a point he also
    emphasized with Ambassador Eaton during a mid-September
    courtesy call.  In June Real said that he is more worried
    about the poorest 40-plus-percent of the population who are
    not covered by Social Security than those who are, adding
    that he is "amazed we don't have more unrest with our levels
    of poverty."  Real did not explain how the government plans
    to reduce poverty levels.  In his September meeting with
    Ambassador Eaton, Real implied that Canal expansion would
    provide a way out.

    Economic Boom Is Coming
    -----------------------

    ¶13.  (C) The proposed Panama Canal expansion -- a massive,
    multi-billion-dollar infrastructure project, billed as the
    biggest in Latin America -- will set off a decades-long
    economic boom, Real claimed.  The GOP will hold a referendum
    on Canal widening in September 2006, Real told Ambassador
    Eaton.  Although polls show that 60% of the public will vote
    "yes," Real quickly added that the government must approach
    the issue (and the date for the vote) "carefully and calmly."
     Real agreed with Ambassador Eaton's suggestion that a visit
    by President Bush to the Canal during his November visit
    could help the GOP's referendum prospects.  (Comment: The
    GOP's inability thus far to resolve the CSS issue and other
    internal problems has led it to continually postpone the date
    for the Canal referendum.  Also, the Panama Canal Authority
    (ACP) has been reluctant so far to reveal its plans and
    financing ideas.  In a separate late-June meeting with
    Ambassador Watt, Real had said the Canal referendum would be
    held in March 2006.  End comment.)  Real also said that
    "99.9%" of Panamanians favor an FTA with the United States (a
    wishful figure, at best) and vowed that the GOP would not
    hold it up "just for a small group."

    "We're Not Bolivia"
    -------------------

    ¶14.  (C) One of the GOP's pillars and strongest defenders,
    Vice President/Foreign Minister Samuel Lewis often insists,
    as does Real, that he is "very optimistic" about the GOP's
    political prospects.  In a July meeting with POL Counselor,
    Lewis emphasized that he is "absolutely positive" that the
    GOP will fulfill its agenda.  President Torrijos is
    politically "savvy" and knows what he wants to do, Lewis
    said.  "Panama is not Bolivia," he said, adding that Panama
    is not unstable.  But Lewis also recited a long list of GOP
    mistakes, including several failures to consult widely and
    well in advance (on the still-pending fiscal reform and
    CSS-social security), ministerial incompetence in allaying
    discontent among teachers and health workers, broken promises
    from professional groups, costly missteps in timing (that led
    to the midnight passage of the CSS bill), failures in
    judgment in dealing with the leftist opposition, all of which
    damaged the government's credibility and led to a mass
    rejection of the CSS bill, which was passed at midnight on
    June 1.  The GOP's ill-considered actions forced it to lower
    its expectations on what it could accomplish on CSS reform,
    Lewis acknowledged, who also said that fixing CSS is the key
    to the GOP's financial well being.

    The Leftist Agenda
    ------------------

    ¶15.  (C) Leftist forces -- specifically the SUNTRACS
    construction union bosses Genaro Lopez and Saul Mendez and
    ally, former CSS director Juan Jovane (fired in 2003) -- have
    quietly prepared for years to use the CSS issue as a
    battleground to mobilize wide support, Lewis said.  With the
    connivance of former president Moscoso, Lewis claimed, Jovane
    padded the CSS payroll with thousands of former SUNTRACS
    workers or spouses.  (Note: According to Lewis, Moscoso's
    quid pro quo was that Jovane would add one of her nominees to
    the CSS payroll for every two of his.  End note.)  At the
    same time, Jovane accelerated the CSS crisis by pushing it
    closer to bankruptcy.  The leftist "rejectionists," Lewis
    continued, want to make changes to the state and overthrow
    Panama's democratic political system.  No other issue --
    Canal expansion, Free Trade Agreement, fiscal reform -- is as
    useful to them.  Lewis believes the GOP now has the leftists
    in a box, as it may be on the verge of striking separate
    deals with teacher and health practitioners -- whose
    interests diverge sharply from SUNTRACS -- depriving the
    radicals of their mass support.  One of the GOP's best
    achievements during the May 2005 anti-CSS FRENADESSO strike
    was police restraint, Lewis said.  "We created no martyrs."

    "A Leaf On A Pond"
    ------------------

    ¶16.  (C) GOP Secretary of Goals and Planning Ebrahim Asvat
    described Panama for POL Counselor as a country like a leaf
    on the surface of a pond being blown by the wind, due to lack
    of far-sighted leadership.  Things take much too long to get
    done, Asvat complained.  About 80% of what a president needs
    to do is communicate, he added.  The political process
    depends on the president making decisions, formulating
    strategy, and identifying political allies, but by moving
    slowly, the government has lost control over time, he griped.
     Consultant Blandon told POL Counselor on October 20 that the
    government usually does not explain things, and when it does
    explain, it explains badly.  "Who tells Martin the truth?" he
    asked.  (Comment: A consistent low-key critic of Torrijos,
    Asvat is a member of the Popular Party, a PRD-ally, and
    briefly served as Panamanian National Police Director in the
    1989-1994 Endara government.  Formerly the editor of the
    tabloid El Siglo, Asvat retains the strong opinions of a
    newspaper editorialist.  In the Torrijos government, Asvat
    does not hold cabinet minister rank.  he is more like a
    presidential advisor.  End comment.)

    Torrijos's PR Problem
    ---------------------

    ¶17.  (C) The GOP's press coordinator is Jorge Sanchez,
    rumored to be on the way out since November 2004.  Sanchez
    (who holds U.S., Spanish, and Panamanian passports) has no
    public relations experience.  His main qualification for PR
    chief is that he is childhood friend of Martin Torrijos.  As
    a local businessman told POL Counselor, a competent PR chief,
    could have avoided the week-long public relations gaffe,
    during which Torrijos could not decide whether to attend the
    April 2005 funeral of Pope John Paul II.  Torrijos finally
    went to Rome, but not before many ordinary Panamanians were
    saying, "Panama is a Catholic country and our president is
    not going to the Pope's funeral?"  A competent PR chief or
    chief of staff also could have corrected Torrijos when he is
    reported to have said, "I don't care if fiscal reform costs
    me 20 points in my popularity" or could have questioned his
    appointment of Sandra Noriega, Manuel Noriega's daughter, as
    consul in Santo Domingo.

    Comment
    -------

    ¶18.  (C) Explicit mention of "security cooperation" in the
    joint bilateral statement on November 7 would send a strong
    signal to regional troublemakers (read Chavez and Castro) by
    seeming to place a "virtual" U.S. security umbrella over
    Panama.  Late indications are that the GOP is nervous about a
    joint statement on security (despite its forward-leaning
    activity on security matters) due to its local security
    sensitivities, which are exacerbated by not having anything
    to "balance" mention of security, such as sufficient progress
    on the FTA.  Most local critics fault Panama, not the United
    States, for failure to conclude a timely agreement.  Torrijos
    an unlikely candidate to play an "anti-Chavez" regional
    democratic heavyweight role.  Worse, the GOP at this moment
    is fighting hard to keep local focus on President Bush's
    visit from shifting to a "negative" agenda, such as the still
    unresolved issue (from Panama's point of view) of unexploded
    ordnance (UXO) on former U.S. Canal Zone firing ranges or
    failure to conclude the FTA.

    ¶19.  (C) GOP officials are clearly torn over the coming
    referendum to widen the Canal, which they say will preserve
    the Canal (whose biggest user is the United States) as a
    major international trade transit point.  They would like to
    think of the inherently chancy referendum as "too big to
    fail."  On the other hand, the GOP's hallmark procrastination
    (and worry over losing the vote) repeatedly has pushed back
    the referendum until mid-2006 or possibly 2007, when it will
    become prey to as-yet-unanticipated storm and stress.  One
    looming stress is the PRD's 2007 convention to choose a new
    secretary general.  Former president Ernesto Perez
    Balladares, who is hostile to Torrijos, is openly angling for
    the job (and to become president again).  The convention
    could distract the GOP's already ADD-afflicted concentration
    for months.

    ¶20.  (C) Torrijos is doing little to address Panama's primary
    structural issue -- its 40-plus-percent poverty rate.  What's
    needed is investment-driven job creation (which would imply
    attacking corruption and costly education and social outlays,
    as discussed in Reftel B), which Canal expansion will not
    resolve by itself.  Nor does Torrijos seem likely to look for
    legal means to rid the Supreme Court of several of its most
    egregiously corrupt Justices (such as encouraging them to
    resign after starting impeachment procedures), or to
    prosecute corrupt former officials.  That means he has not
    yet convinced ordinary Panamanians that the people running
    the country are not crooks.  (A recent poll showed 90% of
    Panamanians believe changes are needed at the Supreme Court.)

    ¶21.  (C) While the Torrijos government may ultimately prove
    to be mediocre, especially by the high standards that it set
    for itself coming into office, a government that does no harm
    is not the worst possible outcome for Panama.  What could be
    disappointing for the United States is that Panama -- as one
    of only several, relatively prosperous, pro-U.S. Latin
    American democracies -- may not be ready to play a stronger
    and more prominent regional role to counter Chavista
    destabilization.

    Arreaga

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