PANAMA'S COLON: FLINT MICHIGAN ON THE CARIBBEAN

UNCLAS SECTION 01 OF 04 PANAMA 001591

SIPDIS

SENSITIVE

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

E.O. 12958: N/A
TAGS: PHUM PGOV PREL ECON SNAR PINR PM POLITICS FOREIGN POLICY
SUBJECT: PANAMA'S COLON: FLINT MICHIGAN ON THE CARIBBEAN

REF: PANAMA 0594

SUMMARY & COMMENT
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1. (SBU) When the USG began to draw down military forces
from its bases in the Panama Canal Zone in the 1970s, the
port city of Colon, on the Canal's northern terminus, was hit
hard, experiencing the same rapid decline that made one-time
car manufacturing center Flint, Michigan infamous. By the
2000 Canal hand-over, the fall of this former Caribbean jewel
was complete. Embassy Panama has succeeded in directing more
GOP attention to this strategically important city (reftel)
and Panama's politicians are just starting to devise policies
to solve Colon's "inner-city" social pathologies:
unemployment, deteriorating housing, family disintegration,
and crime, compounded by government inadequacy and racial
discrimination (see Para 13). Colon is a crucial focal point
for regional U.S. security initiatives, such as stopping the
flow of illegal arms, drugs, and money through the Canal and
Colon Free Zone. Economic growth, job creation, and GOP
remedies to decrease the broad gap in living standards
between Panama City and Colon are critical to U.S. long-term
security interests. End Summary and Comment.

A Culture of Entitlement
--------------

2. (SBU) Colon's problems are in part psychological. The
source of Colon's by-now-mythic prosperity was the U.S. Canal
Zone and its irreplaceable jobs. The departure of those jobs
left the city depressed economically, socially, and mentally,
perhaps not unlike the aftermath of the U.S military's
withdrawal from Clark and Subic Bay in the Philippines. That
depression is the flip side of Colon's sense of superiority
over the capital that prevailed during the 1900s. Its
passing has given rise to a paradoxical culture of
entitlement and dependency, as a younger generation often
refuses to come to terms with its changed circumstances.
Colon may be one of the few places in the world where the
unemployed have formed unions and regularly go on "strike."


3. (SBU) On July 13, 2005 President Torrijos announced in
Colon a virtually unprecedented $24 million infrastructure
development project for Colon province "to combat poverty and
unemployment," promising that it was only the beginning.
(The plan includes building a police center, road
improvements, buying fire engines, dredging projects and
improvement of aqueducts.) In addition, under GOP pressure
the U.S.-owned Manzanillo International Terminal (MIT) and
Panama Ports, two large Colon container port facilities,
agreed to donate millions of dollars to the Colon social
development fund as part of a port expansion deal. The total
$9-10 million MIT-PP donation (most of which is MIT money) is
ear-marked for education and health care initiatives. Local
university professors and students and unions of the
unemployed demonstrated against the GOP's $24 million plan,
calling it "insufficient."

Colon's 1950s-1970s Heyday
--------------

4. (U) U.S. spending was the foundation of Colon's economic
prosperity since 1903. In 1950s, 1960s, and early 1970s
heyday, beautiful, colonial, Caribbean Colon surpassed Panama
City in elegance and economic advancement, and Colon was
known for its civic pride. The U.S. military employed
hundreds of Colon residents, mostly English-speaking blacks
of West-Indian descent at nearby bases, particularly the
giant, sprawling Ft. Sherman. Wages were high, much higher
than the prevailing rate on Panama's economy, and benefits
were priceless. Base workers had free transportation and use
of the base post office and commissaries. Others got jobs as
maids, cooks, and gardeners. Until the early 1970s, Indian
merchants still offered the finest linen money could buy,
shops offered fine Lemoges china, and at least seven movie
theaters adorned the 16 tidy, grided streets of Colon's 2.9
square kilometers.

Age-Old Resentments...
--------------

5. (SBU) Other Panamanians resented Colon's superior
attitudes and derived a measure of schadenfreude from the
city's fall. Vindictive attitudes linger. During the Canal
Zone era, Colon residents got jobs faster than other
Panamanians because they spoke English. If Colon prospered
in the past, Panamanians reasoned, then Colon's current
misfortunes are just. While the Panama Canal Authority
continues to be a major employer in Panama, Colon job
applicants of West Indian descent tell stories of being told
"your time is over." But it's worth mentioning that some of
the GOP's key players -- including Minister of Government and
Justice Hector Aleman and Minister of the Presidency Ubaldino
Real, not to mention former Vice President Kaiser Bazan --
are from Colon.

Rapid Decline and Unemployment
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6. (U) In the 1970s, as the U.S. military draw-down
coincided with the shutdown of the Panama-Colon railroad and
the decline of the oil refinery industry, Colon deteriorated
rapidly. According to the Panamanian Census Bureau, in 1980
Colon had 46,000 residents over the age of ten and the
unemployment rate stood at 13.4%. By 2000, Colon's over-10
population had shrunk to 33,000, and unemployment had jumped
to 21.9%. As Colon's economy worsened, the black
middle-class fled for jobs in Panama City, often abandoning
buildings they could no longer rent or sell. Indigenous and
Latino farmers from nearby Colon province moved in.
Suddenly, squatter families began to occupy small rooms in
the dilapidated buildings, living without plumbing and
storing their beds in the rafters.

Creating a Ghetto
--------------

7. (U) In the late 1970s and early 1980s, the Panama's
military governments razed Colon's decaying but elegant
wooden structures and replaced them with unsightly cinder
block towers. What wasn't torn down, mysterious fires
continued to destroy, creating a war-zone atmosphere but
consoling owners that the squatters had to move. Walking
through Colon City today, the decay and poverty appear so
intractable it is hard to imagine the city's prosperity just
30 years ago.

Crime and Violence: Nowhere to Hide
--------------

8. (U) As Colon's decay became pronounced, crime and
violence increased. Colon City's four prosecutors currently
each receive about 30 cases of domestic violence per week and
the Ministry of Youth cannot find enough shelter for the
affected children. Despite contributions from the Embassy's
Narcotics Affairs Section (reftel),Colon City has few law
enforcement resources. Police investigators maintain only a
superficial presence in Colon, with 100 under-equipped
officers rotating in three shifts. Colon Prosecutor Yolanda
Austin attributed much of Colon's crime problem to lack of
resources combined with its small size. "With only 16
streets, everyone knows everyone and the police cannot
protect witnesses."

GOP Centralization: That Sucking Sound
--------------

9. (SBU) GOP centralization has reinforced Colon's problems
by removing resources and making Colon (and other Panamanian
cities) hard to govern because local politicians lack the
power of the purse. Tax revenues from the Colon Free Zone
and ports are distributed on a national level. Colon's
elected mayor does not have resources to fix Colon's
problems. Even Colon's GOP-appointed Governor Olgalina
Quijada has no budget for projects and must essentially beg
the GOP for funding. As a result, only one block separates
Colon's overwhelming poverty from the gleaming showrooms for
international wholesale buyers in the Free Zone. And one
cross street -- Calle Primera and Melendez -- separates the
homes of prosperous Indian and Arab Free Zone Merchants from
the Colon residents they do not employ.

Filling the Vacuum: The Unemployed Movement
--------------

10. (SBU) Many Colon-watchers name "the unemployed" as the
true power players in Colon. Indeed, for at least a decade,
being the head of an unemployed union was one way to get
ahead in Colon. While Governor Quijada has plans to phase
out the program, about 800 of the "unemployed" -- most of
them women -- are paid for make-work jobs, 75% of them in
positions within the public sector. The dissatisfied
unemployed frequently close the road leading to Colon and the
Free Zone in protest, most recently in April 2005 over the
high cost of gasoline.

A Legacy of Governmental Neglect
--------------

11. (SBU) Until the Torrijos administration took office in
2004, the Panama-Colon road (built by the U.S. military in
the 1940s) was not repaired once in ten years. Previous
administrations justified the inattention, saying that they
did not want the road to compete with the new Panama-Colon
toll road, a road that is still not complete. While the new
GOP wants to shift $2 million of Colon's $10 million in taxes
back to Colon programs, the GOP may struggle to overcome its
historic tendency to shift resources out of Colon. For
example, GOP acquisition of reverted land from the former
Canal Zone drained resources from Colon, as the Governor
moved out of Colon to a USG-era building located outside the
city. Similarly, the Ministry of Housing (MIVI) is using a
multi-million-dollar InterAmerican Development Bank loan to
renovate 14 colonial buildings in Colon as a pilot project
for reinvigorating Panama City.

GOP Outreach: Community Consultations
--------------

12. (SBU) The GOP is tackling its over-centralization
problem by conducting community consultations at the
provincial level that culminated in a July 9 "Community
Council" in Kuna Yala (Colon Province) attended by President
Torrijos and the cabinet. According to Governor Quijada,
consultations with Colon Province's five districts and 40
corregimientos yielded four priorities: Colon-Panama road
widening, improved water quality and waste management, more
housing, and more police. The consultations may succeed in
identifying local needs (Embassy will align its Colon efforts
to the outcome),they offer no long-term solution to
governmental inadequacy and over-centralization.

Racial Discrimination vs. Economic Dependency
--------------

13. (SBU) There is no doubt that racial discrimination plays
a part in Colon's problems. Colon is largely a "black" city.
One Free Zone contact told Human Rights Officer outright
that Colon residents are not good workers because they are
from the "black race." Many Panamanians in the capital, in
the Free Zone, and in the GOP believe that Colon residents
are lazy and don't want to work. Free Zone businesses in
Colon often hire workers almost exclusively from Panama City.
One middle class former Colon resident explained that people
from Colon often hide that fact when applying for a job
because businesses discriminate against them in hiring.


14. (SBU) The negative feedback loop that sets in between
Colon workers and employers serves to perpetuate the
stereotype. Indeed, so ingrained is the image of Colon
"laziness" that it is blamed for the results of GOP policies.
For example, as English-Spanish call centers become an
engine for job growth in Panama, some Panamanians lament
Colon residents' "laziness" for losing their English
mother-tongue. Forgotten are past GOP policies that forced
West Indians into Spanish language schools in the mid-1900s
and gave them "Spanish" names.

Only More Investment Will Solve Colon's Problems
-------------- ---

15. (SBU) Complicating the issue is the lack of employment
opportunities on a par with what was available to Colon
residents when the U.S. military bases operated at full
capacity. Although big investments have been made at
Manzanillo and Panama Ports, the hundreds of new dock jobs
pay only a fraction of what Colon workers earned in the past.
In addition, since the Panama Canal Authority (ACP) took
over Canal operations, its increased efficiency has decreased
its need for employees. The result is fewer, lower-quality,
lower-paying jobs. Only sustained private economic
investment outside the Free Zone can change Colon's
intractable culture of economic dependency on outside
authorities to sustain the standard of living.

DANILOWICZ