C O N F I D E N T I A L SECTION 01 OF 03 PANAMA 001818

SIPDIS

DEPARTMENT FOR WHA/CEN
SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 08/23/2015
TAGS: PGOV PREL PM POL FOREIGN POL
SUBJECT: PANAMA FOREIGN MINISTRY ADVISOR NILS CASTRO ON
CUBA, VENEZUELA AND UN SECURITY COUNCIL ENLARGEMENT

REF: A. 04 PANAMA 2152


B. 04 PANAMA 2176

C. PANAMA 1377

D. PANAMA 1496

Classified By: Charge Luis Arreaga for reasons 1.4 (b) & (d).

Summary
--------------


1. (C) On August 22, PolOff met with senior MFA advisor Nils
Castro, former Ambassador to Mexico, to discuss GOP's August
20 re-establishment of full diplomatic relations with Cuba
and GOP objectives in its petroleum negotiations with
Venezuela. Castro, who recently spent two days in Caracas
with GOV officials, said Panama had no hidden agenda in
normalizing relations with Cuba, and that Fidel Castro still
appeared to harbor considerable resentment toward Panama for
the August 2004 Moscoso administration release of Luis Posada
Carriles (see reftels A and B). He said GOP wants to be
prepared for any transition should Fidel Castro become
physically unable to govern, which the GOP thinks is likely
in the short-term. Nils Castro said GOP and GOV are still
not "clicking" on the central issue, petroleum, in Panama's
attempt to re-negotiate the Caracas Energy Accord, but that
he expected a signed agreement by the first week of
September. Castro also suggested that GOP support for the
G-4 proposal on UN reform is tied to GOP interest in
improving maritime relations with Japan. End Summary.

On Cuba
--------------


2. (U) On August 20, a picture appeared of Panamanian
President Martin Torrijos, sandwiched between a beaming
Venezuelan President Hugo Chavez and an austere Cuban
President Fidel Castro as he presided over the signing (by
GOP Vice-Foreign Minister Ricardo Duran and Cuban Foreign
Minister Felipe Perez Roque) of diplomatic notes exchanged in
an "act of reconciliation" to re-establish full diplomatic
relations between Cuba and Panama. The signing took place on
the fringes of a graduation of more than 40 poor and
indigenous Panamanian medical students in a group of several
hundred graduating from the medical university. Panama's
delegation also included Health Minister Dr. Camilo Alleyne,
Minister of Government and Justice (MOGJ) Hector Aleman and
Director General of

the Institutional Protection Service
(SPI) Lionel Solis. Representatives from CARICOM states were
also present at the graduation and signing ceremonies.


3. (C) According to Nils Castro, who was part of the advance
team to Havana, the Cuban dip note contained accusatory
language toward GOP regarding the release of Posada Carriles.
Panamanian newspaper La Prensa reported that both parties
affirmed sovereignty and non-interference in internal state
affairs. Nils Castro downplayed the failure of GOP First
Vice-President and Foreign Minister Samuel Lewis Navarro to
attend the signing, saying he was still in travel status
after completing his trip to Japan. Nils Castro also took
pains to downplay the published photo that shows Chavez,
Torrijos, and Fidel Castro looking on as Duran and Perez sign
the document. Commenting that Chavez "had nothing to do with
the agreement," Nils Castro reported that the GOP delegation
had not expected Chavez to appear in the photo, but that
Fidel Castro pulled Chavez into the center of the action
while other CARICOM representatives looked on from the
sidelines. Castro said Fidel Castro flaunted his close
relationship with Chavez to the GOP delegation throughout the
event. SPI Director Lionel Solis related one telling
anecdote of the day's events, describing how the GOP
delegation had not been invited to the celebratory lunch set
to take place before the signing of the dip. notes. When GOC
protocol discovered they had arranged for both the lunch and
the signing to take place in the same building, they invited
the GOP delegation but sat them at the far end of the banquet
table from Fidel Castro and Chavez. Fidel "was not going to
celebrate our relationship" with the act of reconciliation,
said Nils Castro.


4. (C) Nils Castro stated several times that GOP simply
wanted to normalize relations with Cuba, and implied as many
times that it had no implications for the GOP relationship
with the U.S. He also complained about what he called U.S.
neglect of Latin America in recent years. Castro also said
that Panama could act as a mediator between the U.S. and
Cuba. He explained that the GOP wanted to move forward with
normal relations with Cuba (and Venezuela) for two reasons.
First, stability in external relations would assist the
Torrijos administration in maintaining domestic support and
stability as the controversial social security reform talks
remain unresolved and chip away at Torrijos's popularity (see
reftel C). Second, the GOP wants to be well-prepared and
well-placed for what it sees as the inevitable transition
from power of Fidel Castro. Nils Castro observed that Fidel
Castro "has problems pronouncing words," and that Fidel
Castro "looks older than he is."


5. (C) Nils Castro said ambassadorial announcements would be
forthcoming soon. Most likely the current consul general of
each country's diplomatic mission would be promoted to
ambassador. (Comment: Nils Castro's comment about the
promotion to ambassador of the respective consuls general
supports what MFA senior advisor and Panama's first
Ambassador to Russia Flavio Mendez told PolOff in mid-July.
Mendez said the GOP would most likely promote career diplomat
and former Ambassador to Trinidad and Tobago Minister
Counselor Rolando Barrow from CG to Ambassador to Cuba. Nils
Castro and Manuel Solis Palma, Ambassador to Venezuela under
Noriega and former Education Minister are also possible GOP
choices. Cuba's CG in Panama is Carlos Eloy Garcia Trapaga.
At a September 1 representational event in Panama City, Cuban
Commercial Consul Ramon E. Perez Soria told PolOff that GOC
planned to name CG Garcia Ambassador to Panama. He also said
GOP would not name their CG in Cuba Ambassador, but bring in
someone new. On September 2, GOP released a press statement
saying they had asked GOC for agrement of their
Ambassador-designate and would release the name of the
Ambassador-designate once Cuba gave agrement to the GOP
candidate. End Comment.) Nils Castro said Panama would like
a "young, energetic" ambassador to represent Panama in Cuba
due both to the current nature of the relationship and what
GOP sees as an inevitable transition in the relative
short-term.


6. (C) Panamanian press coverage of the weekend in Havana was
positive. La Prensa quoted opposition party Solidaridad
leader and former Foreign Minister Jose Raul Mulino
expressing support for Torrijos's step and calling
re-establishment of relations "positive." Nils Castro said
that the Panamanian public generally supports normalized
relations with Cuba and does not favor strained relations
with countries like Cuba and Venezuela.


7. (C) (Note: Embassy Defense Attache Office reported
similar language from Minister of Government and Justice
Hector Aleman in discussing the weekend's events, suggesting
that GOP coordinated the message Embassy would receive from
discussions with GOP officials. End Note.)

On Venezuela
--------------


8. (C) Nils Castro called GOP's relationship with Venezuela
"more important" than its relationship with Cuba. Currently
the GOP and GOV are re-negotiating the 2000 Caracas Energy
Accord which promised help with financing petroleum purchases
but which lacks implementing language. Castro led the GOP
negotiating team on the August 4-5 trip. Castro made no
bones about GOP's bottom line with Venezuela: petroleum
prices. In the negotiations, according to Castro, progress
was made on several "social and other" issues tangential to
the central point of discussion, petroleum.


9. (C) Castro said GOP had secured a GOV promise that it
would not fund Bolivarian Circles in Panama, and that GOP
Minister of Government and Justice Aleman had found no
evidence to support direct GOV funding for Bolivarian Circles
in Panama. (Note: this had been reported to Embassy earlier
by Aleman after a July trip to Venezuela. See reftel D. End
Note.) The Torrijos administration's efforts to reform
social security have been successfully frustrated by an
active and vocal labor movement. On the rate of exchange for
petroleum, Castro said there was "a lot of talking, but no
clicking." He said he still expected GOP and GOV to sign an
agreement by the first week of September, but this was not
consistent with his position that little progress had been
made on petrol. He said an agreement came down to politics
and nothing else.


10. (C) GOP's primary concern is skyrocketing domestic fuel
prices, especially for buses and trains, according to Castro.
The issue of rising public transportation costs is a growing
sore spot for the Torrijos administration. On August 25,
transportation groups in the western provinces of Chiriqui
and Bocas del Toro threatened to strike on September 5,
complaining that the GOP's 10-cent-per-gallon subsidy is not
sufficient to bear the costs of rising gas prices. In
response, the Cabinet immediately approved an extraordinary
session of the National Assembly to issue a 60-day extension
of the diesel fuel subsidy and a 30-day extension of the
gasoline subsidy. Castro said the GOP hopes to convince GOV
to accept an unusual barter arrangement of Panamanian goods
like chicken, pork, sugar and rice as partial payment for
reduced petroleum rates. He also said this was "only a
dream" at this stage in negotiations. Ultimately, Castro
explained, Panama wants credit or an extension in years on
payment for Venezuelan petroleum.


11. (C) Castro said that Chavez only spoke briefly with
Torrijos at the Havana event and appeared to know very little
about the petroleum negotiations.

On G-4
--------------


12. (C) When presented with the recent GOP decision to side
with the G-4 on UN reform, a decision that coincided with
First Vice-President and FM Lewis's visit to Japan to discuss
tourism, trade and Canal investment, Castro said only that
maritime interests with not only Japan but other countries
were a significant component in foreign policy
considerations.

Comment
--------------


13. (C) Domestic stability concerns generated by unrest over
fiscal reform, social security reform and oil prices are
pushing GOP to mend fences with Cuba and Venezuela.
Torrijos, whose Democratic Revolutionary Party controls the
National Assembly with an absolute majority, hopes to
supplant a perceived lack of domestic leadership on issues
ranging from a corrupt Supreme Court to labor strikes that
unraveled passage of a social security reform bill with
strengthened multilateral engagement. (Note: Panamanian FM
Lewis and MOGJ Minister Aleman talked with Charge Luis
Arreaga, and SPI Director Lionel Solis talked to Pol
Specialist prior to the trip to Havana to explain their
position and reassure Embassy that they had no ulterior
motive in seeking re-establishment of relations with Cuba.
They made it clear they understand USG sensitivity to the
"act of reconciliation" with Cuba. In addition, on September
1, FM Lewis approached Pol Specialist and PolOff after the
opening of the regular session of Panama's National Assembly.
He wanted to be sure the Embassy took note that in President
Torrijos's address to the Assembly, Torrijos specifically
mentioned the close, positive relationship Panama had with
the U.S. and did not mention Cuba or Venezuela. The U.S. was
the only country mentioned by President Torrijos in his
address. End Note.)
ARREAGA