PANAMA AND CUBA: NSC-DIRECTED REVIEW REGARDING

C O N F I D E N T I A L SECTION 01 OF 02 PANAMA 002309

SIPDIS

DEPARTMENT FOR WHA/CCA AND WHA/CEN
SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 01/15/2015
TAGS: ETRD ETTC PGOV PREL PM CU POLITICS FOREIGN POLICY
SUBJECT: PANAMA AND CUBA: NSC-DIRECTED REVIEW REGARDING
SUSPENSION OF TITLE III OF THE LIBERTAD ACT

REF: A. STATE 207359

B. 04 PANAMA 02943

C. PANAMA 1416

D. PANAMA 1818

E. PANAMA 1205

F. 04 PANAMA 2943

Classified By: DCM Luis Arreaga for Reasons 1.4 (b) & (d).


1. (SBU) Embassy Panama offers the following information and
analysis in response to Reftel A tasking.

CUBA AND PANAMANIAN POLITICS


2. (C) On August 20, 2005, the GOP and Cuba reestablished
full diplomatic ties with the signing of diplomatic notes in
Havana, Cuba (Reftel C). Prior to the re-establishment of
full diplomatic ties, the GOP and Cuba had maintained only
consular relations since August 2004. Cuba broke off full
diplomatic relations in August 2004 when, on August 25,
Panamanian President Mireya Moscoso pardoned four anti-Castro
Cubans, including Luis Posada Carriles, convicted for
conspiracy, possession of explosives, and endangering public
security in connection to an alleged plot to assassinate
Cuban President Fidel Castro (Reftel B). Panamanian
President Martin Torrijos entered office on September 1, 2004
pledging to improve relations with Cuba, and took steps
towards that end with the re-establishment of full diplomatic
relations. Torrijos' step can be understood in the context
of his administration's overall outward-reaching regional
foreign policy designed to promote Panama as a regional
leader, and designed to compensate for unpopular domestic
policies. Senior officials in Panama's MFA have consistently
explained to Embassy Panama that the GOP's step toward
reestablishing ties with Cuba was an act of constructive
engagement.


3. (C) In a November 18 conversation with PolOffs, MFA Deputy
Foreign Policy Director Vladimir Franco said that little had
changed in the GOP's relationship with Cuba since August

2005. (Note: Franco specializes in North American affairs
and has questionable social ties to Cuban officials in
Panama. End note.) Franco explained that Fidel Castro
remained only "cordial" with GOP officials, and described the
relationship as "still having a certain coldness." On August
22, senior MFA Advisor Nils Castro explained to PolOff that
Fidel Castro did not appear ready to forgive the Torrijos
administration for the Moscoso pardoning of Posada Carriles
and three others (Reftel D). Franco said that Fidel Castro
believed Torrijos, who Franco described as attempting to
remain neutral on the issue, did not denounce strongly enough
Moscoso's pardoning of the convicted criminals. He added,
however, that Cuba's vice president maintained good relations
with GOP officials with some apparent apprehension of and
deference to the attitude of "El Jefe." Since the exchange
of diplomatic notes leading to re-establishment of full
diplomatic relations, the two countries had exchanged no
other high-level delegations, with the exception of the
recent arrival of Panama's ambassador to Cuba. Franco said
it was still unclear how warmly Panama's ambassador would be
received in Cuba. (Note: Cuba's Consul General in Panama
was promoted to ambassador. End Note.)


4. (C) According to Franco, trade with Cuba and Cuban
investment in Panama, mainly in the Colon Free Zone, had not
been negatively affected by the cooling of relations. Franco
said the GOP was unhappy with the presence of Cuban
intelligence in Panama. Panama continues to send a few dozen
underprivileged medical students to Cuba for studies, and,
according to Franco, Venezuela now funded travel to Cuba for
Panamanians who could not afford cataract eye surgery, which
was then provided by the Cuban government. Franco said that
this did not directly involve the GOP, but was a program
individual Panamanians could opt to participate in.


5. (C) On human rights, Franco said that the GOP did not
intend to make any formal statements of condemnation
regarding abuses in Cuba. He said the GOP did not believe it
was constructive to belabor Cuba, or other Central American
countries, over human rights issues. Franco added that the
GOP supports Cuba's transition to a democracy, but that the
GOP preferred to maintain open lines of communication with
Cuba. Panama has routinely supported initiatives in
multilateral fora to promote human rights or to condemn
abuses worldwide. In the recent past the GOP has not
publicly criticized Cuba for human rights abuses. Panama has
consistently joined its neighbors in the region by following
majority decisions on sensitive Cuba issues in multilateral
fora.

BILATERAL TRADE WITH CUBA AND INVESTMENT


6. (U) Panama's official trade figures suggest that the
country's trade with Cuba is minuscule. Panama's exports
to Cuba typically represent less than 0.5% of total
exports, while imports from Cuba amount to less than 0.1%
of Panama's total. In 2004, Panama exported $730,000 in
merchandise to Cuba, representing only 0.1% of total
exports of about $890 million. Likewise, Panama imported
only about $449,000 worth of Cuban products, representing
0.01% of Panama's total imports of nearly $3.6 billion.
The GOP's preliminary trade figures for January through
September 2005 show that Panama exported $371,000 in
products to Cuba. During the same period, imports from
Cuba jumped about 20-fold over 2004 levels, rising to more
than $10 million, which represents about 1.3% of Panama's
total imports. This appears to be due primarily to a
significant increase in imports of raw construction
materials (i.e., gravel) from Cuba, driven by this year's
boom in construction in Panama. Imports of Cuban
pharmaceutical and tobacco products also saw significant
increases in 2005.


7. (U) Cuba's principal economic connection with Panama
remains its use of the Colon Free Zone (CFZ, technically
outside of the Customs territory of Panama) where it is a
large customer (Reftel E). From January through September
2004, Cuba bought $131 million worth of merchandise through
the CFZ where financing is relatively easy to obtain. This
amount is roughly 3.4% of CFZ re-exports. Cuban exports to
the CFZ are so minimal that country is not included on the
CFZ's list of exporting countries. (Note: more recent
bilateral trade figures for the CFZ are not yet available.
End note).


8. (SBU) As Post reported previously (Reftels E and F),
overdue Cuban accounts receivable were estimated to exceed
$200 million as of late 2004. Panamanian CFZ companies
holding these large debts sometimes seek to restrain local
criticism of GOC policies, as they want to avoid Cuban
default on these payments.


9. (C) Although the GOP does not maintain data on
Panamanian investments in Cuba, anecdotal reports suggest
that such investment is minimal. It is believed that fears
of a potential GOC takeover of profitable businesses tend
to chill the enthusiasm of prospective Panamanian investors
in Cuba.

EATON