Identifier
Created
Classification
Origin
05PANAMA1431
2005-07-06 19:32:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Panama
Cable title:  

PANAMA STRIKE LEADERS EXPLAIN OPPOSITION TO CSS

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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
-------
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