PANAMANIAN INSIDERS ACCUSE TORRIJOS GOVERNMENT OF

C O N F I D E N T I A L SECTION 01 OF 05 PANAMA 001729

SIPDIS

DEPARTMENT FOR WHA/CEN
SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 08/20/2015
TAGS: PREL PGOV ETRD PINR PM POL CHIEF
SUBJECT: PANAMANIAN INSIDERS ACCUSE TORRIJOS GOVERNMENT OF
POOR PLANNING AND PUBLIC RELATIONS, PROCRASTINATION, AND
BAD POLITICAL JUDGMENT AS "PATRIA NUEVA" ENTERS ITS SECOND
YEAR IN OFFICE ‐‐ AN ANALYSIS. (PART 1)
REF: A. PANAMA 0277

B. PANAMA 1377

C. PANAMA 1423

D. PANAMA 1496

E. PANAMA 1184

F. PANAMA 0629

G. PANAMA 1645

H. PANAMA 1613

I. 04 PANAMA 2613

Classified By: Charge d'Affaires Luis Arreaga for reasons 1.4 (B) AND (
D).


1. (SBU) This message is the first in a three‐part series on
views of the Torrijos administration's performance as it
approaches its September 1 first anniversary.

SUMMARY AND INTRODUCTION
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2. (C) Martin Torrijos's reform‐minded, modernizing
government ‐‐ "Patria Nueva" or New Homeland as it styles
itself ‐‐ is in danger of losing its way and putting at risk
its principal objectives ‐‐ such as social security reform, a
referendum on Canal widening, ending official corruption, and
concluding a U.S.‐Panama Free Trade Agreement ‐‐ due to poor
leadership at the top. A picture emerges from Embassy
Political Section discussions with sharply critical
government insiders and others close to the action: Torrijos
dislikes public appearances, interviews, or confrontations;
cannot focus on more than one thing at a time; has no plan
for governing; habitually procrastinates; keeps his own
counsel while his cabinet guesses his intentions; and has a
political "tin ear." Panama's worst crisis under Torrijos so
far ‐‐ in June over social security reform legislation ‐‐ is
indicative of shortcomings in his style of leadership. After
twice publicly refusing demands for a national dialogue on
CSS, Torrijos received a shock when "old guard" elements
within his ruling Democratic Revolutionary Party told him to
back down or face a crumbling of presidential authority,
according to Embassy contacts. In the unlikely worst case,
Torrijos possibly would lose his ability to govern
effectively, open a political space for leftist/populist
electoral participation, lose a referendum on Canal widening,
and permit former President Ernesto Perez Balladares to make
a political comeback, all of which would harm U.S. interests.
It is possible that the Torrijos government will learn from
its mistakes. At the least, his government's first year,
with a few exceptions, likely will be remembered for mediocre
performance, dashed expectations, and squandered
opportunities. END SUMMARY AND INTRODUCTION.

Great Expectations
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2. (C) The problem with Torrijos's performance and the
record of his government as they enter their second year in
power on September 1, 2005 is rather one of dashed
expectations. The public, opinion makers, and insiders widely
assume that the sky‐high expectations that Torrijos created
for himself and which swept him into the Presidential Palace
will be unmet. The spreading impression is that Torrijos
will fail, perhaps badly, at fulfilling the high standards
and high hopes that he set for himself when he entered office
and which he seemed uniquely placed to achieve.

Promises, Promises...
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3. (C) Torrijos and Patria Nueva came into office promising
jobs and an end to official corruption. Torrijos said he
would modernize the government, the infrastructure, bring
Panama into the twenty‐first century, and make it a "First
World" country. After holding a constitutionally mandated
referendum, the new administration would expand the Canal, a
10‐to‐20‐year, multi‐billion‐dollar project that, official
sources say, would create thousands of jobs and boost the
economy. Along with the promise to eliminate official
corruption came stated intentions to make the government more
efficient by raising revenues and drastically cutting
official debt and the government payroll. A new tourist
industry would be launched. Panama's transportation system
would be upgraded and modernized. Also, Patria Nueva was to
be a government with a social conscience that would reduce or
eliminate poverty. Torrijos's approval ratings were close to
80% at the time of his inauguration.

Down, But Not Out?
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4. (C) If those expectations were impossibly high, it was
because Panamanian voters wanted to believe what Torrijos
told them. In fairness, if Patria Nueva is underperforming,
it probably is not notably worse than its predecessors.
Torrijos has stumbled badly in his first year, with his
approval ratings falling to just over 20% in June, following
a month of strikes and public protests to the Social Security
(CSS) reform law, he may yet recover. By mid‐August they had
improved to nearly 50%.

In Mitigation
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5. (C) The Torrijos government does not suffer from lack of
good intentions. In fairness, it already has several
achievements under its belt, such as a constitutional reform,
a not‐quite implemented fiscal reform, continuing reductions
in the government payroll, and a half‐accomplished reform of
CSS, now being re‐negotiated, to put CSS on a sounder
financial footing and save it from impending bankruptcy. It
has also proved, on the whole, friendly, cooperative, and
highly responsive to U.S. interests.
In mitigation of the critics, it can be argued that
‐The young and inexperienced Torrijos team found getting
things done much harder than it imagined
‐Patria Nueva inherited a frankly bad fiscal situation from
the previous government, a grotesquely swollen payroll, and a
looming crunch in the social security system
‐The Torrijos cabinet is notably less corrupt than its
predecessors, at least so far, although the real
opportunities for graft will come later with awarding Canal
expansion contracts
‐Torrijos and his inner circle say they are counting on a
deliberate, considered approach to changing the Supreme
Court, relying on making two new appointments by 2006, to
avoid attacking the Court head‐on and so risk undermining the
state's legitimacy.
However, Martin Torrijos is proving himself to be a much less
astute and skilled politician than Mireya Moscoso.
(We will expand the government's point of view and U.S.
interests in the second message in this series.)

A Politician Who Dislikes Politics
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6. (C) Torrijos's communication problems with his top
officials have been so pronounced that insiders themselves
are not sure whose advice Torrijos listens to or how Torrijos
reaches decisions. They describe the president as shy and
risk averse, an arch‐procrastinator who continually waits for
the "right" moment to take action on an issue or announce a
decision taken weeks or months earlier, instead of taking the
lead to mold public opinion and campaigning to create a more
favorable political climate for himself. A member of the
government has told POL Counselor that Torrijos has "a method
of working that no one understands." Torrijos disdains the
rough and tumble, the cajoling, the arm twisting, the
shmoozing, the backroom bargaining sessions with opponents or
antagonists that other politicians seem to relish. In fact,
Torrijos often acts like a politician who dislikes politics.

Missed Opportunities
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7. (C) As a result, as political consultant Jose Blandon,
Sr. recently pointed out to POL Counselor, coordination
problems abound, time passes, and opportunities are missed or
bungled. People increasingly doubt not the president's good
intentions but his political judgment, his talent as a
political decision maker, and his skill as a politician.
Procrastination ‐‐ on judicial reform promised in the
campaign, on a government shakeup (which Torrijos first began
to consider in April),the U.S.‐Panama Free Trade Agreement
(FTA) talks begun by the previous government (now suspended
by mutual agreement) ‐‐ feeds on itself. The GOP's public
relations incompetence has been "enormous." June would have
been a good time for a government shakeup (which was first
rumored in April),Blandon continued, but added that Torrijos
probably would delay and procrastinate further. Delay also
creates uncertainty and more reasons to continue to
procrastinate. New, more difficult circumstances arise while
projects remain undone, making them harder to accomplish.
Government planning increasingly becomes prey to unforeseen
events, the calendar gets more and more crowded as time
passes, difficult decisions postponed become more difficult,
and the "right" time to make a move recedes into the
distance.

"He's Not Doing It"
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8. (C) One example, Blandon, said, is the run‐up in oil
prices, which generally coincided with Panama's May‐June
social security crisis, and which continued through the
summer. Blandon recalled that the Social security issue
originally was on Torrijos's calendar for November 2004.
Rising pump prices puts pressure on bus owners, who the GOP
will not permit to raise fares (currently 25 cents) but
instead must grant unsustainable subsidies. Torrijos's
mishandling of CSS reform, Blandon said, his failure to
consult, his post‐crisis weakness left him short of political
capital and in a more delicate situation vis‐a‐vis the bus
owners and bus riders than before. The president himself
must sit down with Panamanian business leaders, politicians,
professionals but he is not doing it, Blandon said.

Energy Market Intervention
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9. (C) In fact, he appears to be doing the opposite, as the
GOP reportedly will announce new, interventionist energy
policies on August 22, giving it the power to interfere in
Panama's private energy market. The measures have been
developed with minimal consultation with private companies
and reflect the government's desperation to avoid a transport
strike.

Relations With Venezuela, Cuba
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10. (C) (Comment: Suddenly, improving relations with
Venezuela and seeking a deal on fuel finance costs have
become a GOP priority, as Torrijos needs to show he is doing
all he can do to moderate fuel costs. Torrijos is programmed
to visit Chavez in Caracas in several weeks and also to meet
Chavez and Fidel Castro in Havana August 20‐21. Although
nobody can control the price of oil, one can speculate
whether Torrijos would have had to make either of those trips
had his internal political position been more secure. The
high price of oil may yet complicate whether and to what
extent Torrijos can get his way on CSS reform, which comes
due in early October. See Reftel C, "Senior Panamanian
Officials To Visit Caracas July 6 Seeking Oil Deal," PANAMA
1423 and Reftel D, "Panama‐Venezuela Relations Stuck On
Internal Security Concerns, High Oil Prices," PANAMA 1496.)

Delays And More Delays
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11. (C) The Canal referendum, once penciled in for early
2005 now probably will not take place until mid‐2006 at the
earliest. The bilateral FTA, which Panama could have
concluded in the fall of 2004, now looks increasingly awkward
for 2005, given the government's sensitivity to political
criticism in the wake of the anti‐CSS reform strikes.
Specifically, the GOP fears uniting its critics from
sensitive agricultural sectors with radical trade unionists
and other protesting CSS reforms, Trade Minister Alejandro
Ferrer recently told POL and ECON Counselors (See Reftel G,
"Panama Trade Minister Wants To Meet USTR On FTA; Timing A
Dilemma," PANAMA 1645.) Since appointing a commission to
study judicial reform in April 2005, at the height of public
outcry at perceived abuses at the Supreme Court, Torrijos has
said almost nothing about it, though he will be forced to
react when the commission makes its report on September 10.
(See Paras 14‐17.) One month later, October 5, is the date
that the National Dialogue on CSS reform ends.

A Secretive Autocrat?
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12. (C) At the same time, Torrijos has a tendency to act in
ways that seem secretive, autocratic or high‐handed, as in
the midnight passage of both the fiscal reform bill (January
31) and the (June 1) CSS reform law known locally as "el
madrugonazo" (something done when people are asleep). (Note:
See Reftel A, "Fiscal Reform Passes With A Grimace," PANAMA
0277 and Reftel B, "Panama President Bows To Labor Pressure
But Not Low Enough To Suit His Opponents," PANAMA 1377)
Those actions have unfortunate echoes to the times of
Martin's dictator dad, Omar Torrijos, when Panama was a
military dictatorship. In truth, U.S.‐educated Martin
Torrijos probably has nothing in common with his father's
political outlook, though in some quarters his Democratic
Revolutionary Party (PRD) still bears a fading stigma for
being the party of the dictators.

In The Dead Of the Night
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13. (C) With the PRD's clear majority in the Assembly, why
push the (CSS) bill through at midnight? Presidential advisor
Jorge Ritter said to POL Counselor recently. "It gives the
impression of doing something dirty and underhanded," Ritter
said. Torrijos thought passage of the bill would end the
strikes, but he miscalculated, Ritter said. Instead,
Torrijos himself was forced to back down on granting
permission for a national dialogue of social security reform,
an idea he had twice pledged not to allow. See Reftel D and
Reftel E, "Panama's CSS Reform Package Passes With Minor
Changes," Panama 1184.)

No Action On Anti‐Corruption
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14. (C) In almost 12 months since taking office, the
Torrijos administration has yet to try, let alone jail,
anyone on a myriad of egregious, high‐profile corruption
cases left over from the 1999‐2004 Moscoso administration,
even though it was elected on a platform of "zero
corruption." That and other evidence lends credence to
charges that Torrijos has made a political "non‐aggression
pact" with the Panamenista Party of Mireya Moscoso, known as
the "Pacto Ma‐Mi" (Martin‐Mireya) in local argot. The
shameful spectacle of continuing official impunity past,
present, and future, paints an ugly picture of Panama's
rulers ‐‐ a parasitic political class that gives its members
"Get Out Of Jail Free" cards, while alternating in power,
with mutual and reciprocal permission to carve up state
assets. Impunity corrodes the legitimacy of the Torrijos
government and Panamanian democracy, critics say, and creates
an opening for radicals and populists who will find ready
audiences for their accusations.

Prados Del Este And Bolivar Pariente
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15. (C) (Comment: The sole exception to the continuation of
official impunity is the jailing of Bolivar Pariente, the
former head of Banco Nacional de Panama, who was implicated
in loan and other irregularities in the September 2004 Prados
del Este scandal. The scandal ‐‐ which involved the
allegedly illegal construction and financing of a housing
development on a flood plain ‐‐ erupted shortly after
Torrijos took power when a flood destroyed the neighborhood
and left several dead. The reason Bolivar Pariente is in
jail at all, cynics say, is that he made the Torrijos
government look bad, by fleeing the country when he was
called in for questioning, then trying to negotiate the terms
of his surrender from abroad. Embassy had taken a sanguine
view of Torrijos's efforts to change Panama's culture of
official and non‐official corruption but his continuing
inaction has led us to reassess. See Reftel I, "Panama:
Torrijos Government Gets Fast Start On Anti‐Corruption," 04
PANAMA 2613. End Comment.)

Kicking The Can On The Supreme Court
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16. (C) In recent discussions, Presidential Secretary for
Goals and Planning Ibrahim Asvat (protect) told POL Counselor
that the GOP has no strategy on what to do about the Supreme
Court. The six‐month compact with civil society groups to
"solve" the Supreme Court issue ("State Pact for Justice"
that expires on September 5, 2005) is simply an instance of
"kicking the can." The Harvard‐educated Asvat said he argued
at a cabinet meeting (that included Jorge Ritter, Dani
Kuzniecky, Jorge Snchez, Ubaldino Real, Hector Alemn, and
Martin Torrijos) that asking the legislature to investigate
Justice Arjona's accusations against Justices Oyos, Salas,
and Spadafora probably would produce enough evidence and
public outcry to make it possible to impeach them. (See
Reftel F, "Panamanian Supreme Court Fracas Blurs Government
Focus On Social Security Reform," Panama 0629.) The cabinet
reached no conclusion, he said.

CEMIS Intrudes...
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17. (C) The Supreme Court "crisis" thus represents a big
opportunity for the GOP to firmly establish its
anti‐corruption credentials, Asvat continued. Asvat's
impression was that the cabinet wanted to go easy on the
Court because it was afraid of getting dragged down by the
unresolved 2002 CEMIS scandal (possibly Panama's most
notorious corruption scandal of recent memory) and did not
want to motivate the Court to counter‐investigate the
legislature on CEMIS, which is now before the Court. The PRD
probably took around $900,000 in bribes on CEMIS, he said.
(Note: That amount is within the ballpark of what has been
widely assumed. End Note.) Asvat decried permitting NGOs
and civil society to set the public agenda. The president
should set the agenda, he said. (See Reftel G, Panama
Attorney General Tests Torrijos Administration, Reopens CEMIS
and Supreme Court Bribery Cases," PANAMA 0778.)

"Legacy" Issues
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18. (C) Dani Kuzniecky, possibly the most idealistic member
in a government of optimists, also is critical of the
president. Although it is aware of its priorities, painfully
so, he told POL Counselor in recent conversations, the
government has no real plan to achieve them. (See Reftel H,
"Panamanian Comptroller General Dani Kuzniecky Disenchanted
With Torrijos, Mulls Calling It Quits," PANAMA 1613.)
Kuzniecky said he keeps telling Torrijos that he must
concentrate on five main "legacy" issues which are his and
his alone and which only his direct intervention and
participation can accomplish ‐‐ Tourism, Canal Modernization,
Airport Expansion, Port Investment, and Jobs/Employment
Creation. The president himself must take the lead on those
issues and should ensure that they are done or are on their
way to being done when he leaves office, Kuzniecky said,
adding "I always remind him of that." Kuzniecky said he also
always reminds Torrijos that he has a unique opportunity,
perhaps not to be repeated, to accomplish great things in
Panama and to really put the country on a new footing and
path. The trouble is, Kuzniecky implied, it's just not
happening...

Next Installments
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19. (SBU) Part 2 of this message will present the
government's views, review U.S. interests, and analyze more
critical observations. Part 3 will provide a first‐year
score card on Panama's economic performance under the
Torrijos administration.
ARREAGA