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### Viewing cable 04PANAMA2274, PANAMA: TAIWAN‐PRC RECOGNITION ISSUE SIMMERS AS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04PANAMA2274 | 2004-09-08 19:49 | 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 04 PANAMA 002274
    SIPDIS
    DEPT. FOR WHA/CEN, EAP/CM, AND EAP/TC
    E.O. 12958: DECL: 09/07/2014
    TAGS: PREL PINR PGOV PM CM TW POL CHIEF
    SUBJECT: PANAMA: TAIWAN‐PRC RECOGNITION ISSUE SIMMERS AS
    NEW GOVERNMENT TAKES OFFICE
    REF: A. BEIJING 13497
    ¶B. TAIPEI 2208
    ¶C. PANAMA 1953
    ¶D. 03 PANAMA 2895
    ¶E. 03 PANAMA 3211
    Classified By: Ambassador Linda E. Watt for reasons 1.5 (B) AND (D).

    SUMMARY AND INTRODUCTION
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

    ¶1. (C) With a new, more PRC‐friendly Panama government in
    office on September 1, the question of whether newly
    inaugurated President Martin Torrijos might drop Panama's
    long‐standing diplomatic recognition of the Republic of China
    (Taiwan) in favor of the People's Republic of China (PRC)
    continues to simmer. Taiwan, Panama, and the PRC all agree
    that Panama is Taiwan's most important formal diplomatic
    relationship, and the PRC would like to pluck it out of
    Taiwan's grasp (Ref B). Panama has deftly leveraged its
    relations with both sides to extract maximum resources, in
    particular from Taiwan. As a modernizing Panamanian
    government (GOP) with a heavy economic agenda that includes
    expanding the Panama Canal takes power, Panama will
    increasingly see PRC‐vs.‐Taiwan through the prism of its
    global interests, which include Canal traffic, shipping,
    container ports, trade, and investment, all areas where the
    PRC is becoming increasingly prominent.

    ¶2. (C) The Democratic Revolutionary Party (PRD) of President
    Torrijos (who took office on September 1) is closer
    historically to the PRC than the Arnulfista Party of outgoing
    President Mireya Moscoso. Torrijos and his team have sent
    mixed messages on PRC‐vs.‐Taiwan, sometimes seeming to lean
    toward the PRC (saying that he would "reevaluate" PRC‐Taiwan
    relations), then backtracking and leaning the other way
    (saying that he has no intention of changing relations).
    Despite showing clear interest in the issue, Torrijos has not
    signaled that he actually is considering derecognizing
    Taiwan. Also, the incoming foreign minister has assured that
    he will consult the Embassy if and when serious internal
    discussions on PRC‐vs.‐Taiwan take place. The Embassy's
    bottom line has not changed: We do not expect Panama to
    derecognize Taiwan in the near future. (See Reftel C.) In
    the medium term (during the 2004‐2009 Torrijos
    administration), we only would expect Panama to derecognize
    Taiwan if Panama's cost/benefit analysis of PRC‐vs.‐Taiwan
    relations also changes. For now, the calculus still favors
    Taiwan. This message will analyze the issue and report
    recent Embassy meetings with the main players. End
    Introduction.

    June 2004 Visit of PRC Vice FM Zhou Accomplishes Little
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ ‐‐‐‐‐‐‐‐‐‐

    ¶3. (C) PRC Vice Foreign Minister Zhou Wenzhong's June 18,
    2004 pre‐Presidential‐inauguration visit to Panama was
    disappointing from the PRC perspective, apparently
    accomplishing little besides raising speculation. In a
    recent meeting, China‐Panama Commercial Development
    Representative Yang Fajin told PolCouns that Zhou got
    noncommittal responses from the Torrijos inner circle on his
    pitch to derecognize Taiwan and was denied access to top GOP
    policy makers.

    ¶4. (C) Torrijos and Foreign Minister‐designate Lewis both
    refused to meet with VFM Zhou, Yang said. Instead, Zhou met
    with (now Minister of the Presidency) Ubaldino Real (former
    foreign minister Jorge Ritter and former Torrijos campaign
    manager (and first cousin) Hugo Torrijos also may have been
    present). With the Panamanians in listening mode, Zhou told
    them that the PRC wants to establish formal diplomatic
    relations with Panama, if Panama will cut all official
    contacts with Taiwan, although Panama could still maintain
    "civil" relations with Taiwan. Zhou also suggested that
    formal Panama‐PRC relations would bring increased economic
    cooperation.

    ¶5. (C) In response to a question from PolCouns, Yang denied
    reports that the PRC was willing to assist Panama with Canal
    expansion but emphasized recent newspaper reporting that
    Taiwan would provide Panama US$ 7 billion in private and
    government financing for Canal expansion. Yang added that
    Vice FM Minister Zhou met with 22 members of the local
    Chinese expatriate community to discuss the peaceful
    reunification of China. (Comment: Reports about the PRC's
    willingness and deep pockets to finance Canal expansion
    appeared in the Panama press last March, during the
    presidential election campaign. End Comment.)

    PRC Vice FM Zhou Meets Minister Jacome
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

    ¶6. (C) If anything, Zhou's interaction with the Moscoso
    government was even less satisfying. Yang's negotiations
    with then‐Foreign Minister Harmodio Arias only yielded a
    meeting for Zhou with then‐Minister of Commerce and
    Industries Joaquin Jacome ‐‐ but as Zhou only wanted to talk
    politics, Jacome replied that was not his area of competence
    and expertise but promised to forward Zhou's comments to
    President Moscoso.

    ¶7. (C) According to Yang, the 20‐minute Zhou‐Jacome meeting
    was a one‐way tirade of complaints about the Moscoso
    government's "poor treatment" of the PRC. Zhou criticized
    the Moscoso administration for failing to invite Yang to
    official events in Panama and for shunning PRC‐hosted
    functions, such as China national day celebrations.
    Reminding Jacome that PRC officials regularly attend events
    hosted by Panama's "unofficial" representatives in Beijing,
    Zhou blamed Panamanian former Vice Minister of Foreign
    Affairs Nivia Rossana Castrellon for enacting and enforcing
    the Moscoso government's "anti‐PRC" policy. Zhou also
    complained that Panama was denying visa applications of PRC
    citizens unless the applicants already had U.S. visas in
    their passports, which he blamed on Taiwan pressure on
    President Moscoso.

    Will Relations Hinge on Chen Shui‐bian's Visit?
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ ‐‐

    ¶8. (C) Yang believes that President‐elect Martin Torrijos
    has not yet decided anything about PRC‐vs.‐Taiwan and is
    waiting to see what kind of inducement package Taiwan
    President Chen Shui‐bian may offer during his August
    31‐September 1 visit to Panama's September 1, 2004
    inauguration. Yang noted that an August 13 La Prensa story
    reported that President‐elect Torrijos had announced the
    formation of a Panama‐Taiwan working group to study Taiwan's
    interest in investing in Canal expansion and "alternative
    financing" options.

    ¶9. (C) Yang added that the Taiwan Ambassador and his staff
    in Panama are politically linked to Taiwan's former
    Guomintang government and may not enjoy close relations with
    the present government in Taipei. The PRC has no plans for
    ministerial visits in the near future, Yang continued, but
    PRC commercial delegations will continue to come to Panama.
    Yang added that the PRC government is encouraging Chinese to
    invest overseas, adding that Panama is a location of much
    interest. According to Yang, President Torrijos has visited
    the PRC twice, but not since the mid‐1980s.

    A "Non‐Substantive" Meeting
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

    ¶10. (C) Samuel Lewis Navarro, now Foreign Minister,
    corroborated much of Yang's account, in a recent meeting with
    PolCouns. Lewis described Deputy Foreign Minister Zhou's
    June 18 meeting with Ubaldino Real as "non‐substantive" and
    sought to downplay its importance. "He's the same as the
    other Chinese who come through here. They always say the
    same thing: 'You're on the wrong side of the issue.' They
    want to intensify relations," he explained. Prior to
    Panama's May 2, 2004 national elections, Lewis continued,
    Martin Torrijos said there is no reason to change our
    relations with Taiwan, "and that was it."

    No Plans, No Discussions...
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

    ¶11. (C) Lewis insisted that Panama has no plans, imminent or
    otherwise, to alter its current formal diplomatic
    relationship with Taiwan in favor of China, adding that the
    Torrijos team had not yet held any discussions on the matter.
    He assured PolCouns that the United States is Panama's most
    important foreign relationship and that his government would
    consult closely with the Embassy if discussions on China and
    Taiwan take place. (Comment: Lewis's denial of "internal
    discussions" somewhat contradicts his June 30 query to the
    Ambassador asking for U.S. views on such a change. See
    Reftel C. End Comment.)

    But Lots of Pressure... and "Shrinkage"
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

    ¶12. (C) Asked whether Panama is one of Taiwan's most
    important diplomatic relationships, Lewis said he thought it
    is the most important one. Both sides had placed a lot of
    pressure on the Torrijos team, Lewis said. He added that
    some of Taiwan's methods made him uncomfortable, implying
    that Taiwan had made some "non‐transparent" offers.
    ¶13. (C) In a separate meeting with Ambassador, Lewis claimed
    Taiwan had given US$ 75 million in official and non‐official
    contributions to Panama during the Moscoso administration and
    noted that significant "shrinkage" had occurred. Lewis
    recounted that at a recent meeting he had attended with
    then‐First Lady Ruby Moscoso (President Moscoso's sister) and
    Taiwan Ambassador David Hu, Amb. Hu had vocally insisted
    several times that the funds that Taiwan had donated to the
    Office of the First Lady must remain after Ruby Moscoso
    departs. Apparently Ruby Moscoso wanted to keep those funds
    for her private foundation, Lewis explained, while in‐coming
    First Lady Vivian Torrijos equally wanted to ensure that the
    funds remained available for her use after September 1.

    Taiwan Ambassador Clams Up
    ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

    ¶14. (C) In a separate meeting with PolCouns, Taiwan
    Ambassador David Hu apparently was unwilling to reveal
    anything of substance. He called the formation of a
    Panama‐Taiwan Canal Working Group "a fiction" and cast doubt
    on Taiwan's intention to help finance Canal expansion. (See
    para 16.) Besides confirming that a Chen‐Torrijos meeting
    would take place, Hu claimed to know nothing about President
    Chen's plans for discussions with the Torrijos government.
    Also, Hu denied that Panama was Taiwan's most important
    formal diplomatic relationship, saying all the Central
    American countries that recognize Taiwan are equal. (Note:
    Taiwan's embassy in Panama has 13 officers, Hu said, and
    15‐16 Taiwanese technical cooperation volunteers working in
    Panama. End note.) Hu betrayed some uneasiness about the
    incoming PRD government, trying to paint it as having
    "socialist" sympathies and organization. (Note: The PRC's
    Commercial Development Office in Panama was established under
    the 1994‐1999 PRD administration of Ernesto Perez Balladares.
    End note.)

    ¶15. (C) Hu called relations with Panama "excellent" and
    cooperation "marvelous," though he acknowledged that his
    Embassy traditionally had had little contact with the PRD,
    Panama's new ruling party. He noted that many countries
    (including France, China, and Brazil) have interests in the
    Canal but suggested that the PRC would seek to increase its
    "influence" in the Panamanian government (GOP). Hu doubted
    the PRC government had the ability to support expanding the
    Canal or that was prepared to offer significant sums to aid
    Panama in financing Canal expansion. The new Torrijos
    government will be occupied with economic issues, Hu said.
    (Comment: In a later meeting with PolCouns,
    Chinese‐Panamanian Cultural Center President Jose Chong‐Hon
    suggested that Ambassador Hu is reluctant to share
    information with U.S. officials because the lack of
    diplomatic relations between the U.S. and Taiwan. For
    instance, Chong‐Hon affirmed the existence of the bilateral
    working group. End Comment.)

    COMMENT
    ‐‐‐‐‐‐‐

    ¶16. (C) Successive Panamanian governments skillfully have
    used the carrot and stick of diplomatic recognition to
    extract maximum resources from both sides of the Taiwan
    straits. (See Reftels D and E.) The GOP is aware that it
    will lose the ability to play one side off against the other
    if it derecognizes Taiwan. Despite the recent conclusion of
    a Panama‐Taiwan Free Trade Agreement, some observers believe
    Panama may derecognize Taiwan due to burgeoning PRC‐Panama
    commercial relations but others disagree. The skeptics point
    out that PRC trade with the eastern U.S. seaboard has no
    alternative to using the Panama Canal, whatever Panama's
    diplomatic orientation. Also, they dismiss suggestions that
    lack of formal relations with Panama would deter serious PRC
    investors and point out that a Hong Kong company (Hutchinson
    Whampoa) already owns 51% of two of Panama's large container
    ports. According to Yang, the primary obstacle to PRC
    investment in Panama is the PRC's ban on investment by
    Chinese state‐owned enterprises in countries which have
    relations with Taiwan.

    ¶17. (C) Panama has a large, widely dispersed ethnic Chinese
    population, estimated to comprise up to 5% of Panama's 3
    million people. The local Chinese community traditionally is
    oriented toward Taiwan (increasingly because of Taiwan's
    democracy), but the community is politically inactive and
    probably would play a minimal role in any GOP decision to
    switch sides.

    ¶18. (C) PRC officials will find many more sympathetic ears
    in the new Torrijos government than under President Moscoso
    and may well be able to increase their influence and access.
    For instance, PRC Representative Yang noted that he has many
    influential Panamanian friends, who include: Hugo Giraud (now
    PRD Presdient), Juan Jose Amado (former ambassador to Japan
    and the U.S., former Minister of Foreign Affairs, and former
    Minister of Commerce and Industry), Marco Ameglio (Arnulfista
    legislator, former Assembly President, former Foreign
    Relations Commission President), and Arturo Vallarino
    (out‐going First Vice President).
    WATT

`