PANAMA: TAIWANESE SEEK CLOSER COORDINATION WITH

C O N F I D E N T I A L PANAMA 001089

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/22/2017
TAGS: PREL PGOV EAID ECON PM TW
SUBJECT: PANAMA: TAIWANESE SEEK CLOSER COORDINATION WITH
USG

REF: PANAMA 964

Classified By: POLCOUNS Brian R. Naranjo. Reason: 1.4 (b) and (d)


1. (U) This is an action request. See para 6.

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Summary
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2. (C) "Taiwan and the U.S. should coordinate more closely
on assistance to Panama," Taiwanese Ambassador to Panama
Ping-Fu Hou told POLCOUNS on June 11. "Working together we
can ensure that the chavista threat does not take root in
Panama." Underscoring this message, the Director of the
Taiwanese International Cooperation and Development Fund
(ICDF),Fung-Yen Liu, urged POLCOUNS and Acting AID Director
that the U.S. and Taiwan should develop joint projects in
Panama. "Divided our forces are not as effective, but
working together Taiwan and the U.S. can have a bigger
impact," Liu said. POLCOUNS and Acting AID Director, noting
that it was useful to learn more about Taiwan's assistance
programs, underscored that post could not undertake any
formal or informal joint activities without direct
authorization and approval from Washington. Both Hou and
former Panamanian FM Oyden Ortega, head of a pro-Beijing
advocacy group, separately told POLCOUNS that they did not
believe that Panama would switch relations from Taipei to
Beijing while approval of the U.S.-Panama Trade Promotion
Agreement (TPA) was pending before the U.S. Congress. Hou
and Liu seek to graft together Taiwanese and U.S. assistance
programs in the hopes of building an additional firewall to
forestall a Panamanian switch of its diplomatic recognition
to Beijing. End Summary.

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Taiwanese Ambassador Plays Chavez Card
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3. (C) Taiwanese Ambassador to Panama Hou asserted to
POLCOUNS on June 11 that the U.S. and Taiwan should work
together more closely "to prevent a Chavez from emerging in
Panama." In the wake of Costa Rica's switch of its
diplomatic recognition from Taipei to Beijing and resigned to
the likelihood that Nicaragua will do the same, Hou
acknowledged that Taiwan would be trying to shore up its
diplomatic relations in the region. Hou said that Taiwanese
VP Annette Lu would visit in July and would announce new
assistance projects, including the construction of a hospital
and a water supply system for a combined cost of USD 60
million. Hou himself recently donated funds to First Lady
Vivian Fernandez de Torrijos and Minister of Education Miguel
Angel Canizales to construct eighty-nine schools in rural
areas, providing direct support to the First Lady's
high-profile "Dignified Schools (Escuelas Dignas)" program to
replace dilapidated and sub-standard schools with more
adequate facilities. In another politically astute step, Hou
delivered to Minister of Housing Balbina Herrera -- perhaps
the most dynamic politician today in the governing
Revolutionary Democratic Party (PRD) and believed to be
considering a presidential run -- a donation to construct a
model community of three hundred pre-fabricated bamboo homes
for indigenous communities.


4. (C) Hou said that he did not believe that Panama would
switch its diplomatic recognition to Beijing while the
U.S.-Panama Trade Promotion Agreement (TPA) was pending U.S.
congressional approval lest Panama alienate pro-Taiwan U.S.
Congressmen. Separately, former FM Oyden Ortega, an active
advocate for Panama to recognize Beijing, told POLCOUNS on
June 13 that there would be no switch in diplomatic relations
while the TPA was under consideration by the U.S. Congress.
Furthermore, Ortega said Panama was unlikely to switch until
the end of Panamanian President Torrijos' tenure in 2009.
Ortega noted that Panama's business community was
increasingly lobbying the GOP to switch its diplomatic
recognition to China to advance further Panama's growing
commercial ties with the mainland.

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Extensive Taiwanese Assistance Programs
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4. (SBU) The following week, Panama-based ICDF Director Liu
contacted acting USAID director to request a meeting to
discuss possible future U.S.-Taiwanese joint activities.
Underscoring that ICDF was a "technical cooperation
organization," Liu shared with POLCOUNS and acting USAID
director on June 22 a comprehensive overview of ICDF's
activities in Panama as of the first quarter of 2007:

-- an organic agriculture project;
-- extensive training, agricultural including fruit trees,
vegetable gardens, greenhouses, and ornamental plants;
-- a sustainable "artisan" fishery management project;
-- a regional fish farming and training project;
-- extensive microcredit activities;
-- an exotic tropical fruit project; and
-- the establishment of an agroindustrial center to produce
fruit juices, preserves, and other processed fruit products.

Liu went to great lengths to explain the controls and
oversight that ICDF required for its projects and emphasized
that the GOP and local beneficiaries had to put up matching
funds for these projects. "If they buy in," Liu said, "they
are more likely to work to make the projects succeed." Liu
clarified, with some disdain, that recently reported
multi-million dollar Taiwanese donations to the First Lady's
office and to the Minister of Housing were "handled by the
Embassy, not ICDF" and did not have the same accountability
and oversight mechanism's like IDF's "technical assistance."


5. (SBU) Liu said that Taiwan and the U.S. should find ways
to work on projects jointly. Acting USAID director explained
that USAID's activities in Panama were shrinking due to

budget constraints and that the U.S. generally ran its own
projects to ensure accountability, though a particular
project might be in conjunction with others working on a
large effort. POLCOUNS noted that the U.S., of course, would
need to take into account the special nature of its
relationship with Taiwan before entering into any formal or
informal activities. Both POLCOUNS and acting USAID director
underscored that post could not contemplate any joint
activities without express guidance from Washington.

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Action Request
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6. (SBU) Action Request: Post requests guidance from
Department and USAID regarding further engagement with the
Taiwanese Embassy in Panama regarding this matter.

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Comment
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7. (C) The Taiwanese seek to work closely with Embassy in
the hopes of building another firewall to prevent Panama from
switching its diplomatic recognition to Beijing. Once U.S.
congressional action on the TPA is concluded, a significant
brake on such a switch will be removed. The "technical work"
of the ICDF in Panama is greatly overshadowed by the
high-profile, politically astute donations handed out by the
Taiwanese Ambassador. Additionally, memories of Taiwan's
multi-million dollar donations to sketchy associations during
the previous administration led by former President Mireya
Moscoso are still fresh in many Panamanian minds. Indeed,
Ambassador Hou himself has previously told POLCOUNS that he
was transferred to Panama to put Taiwanese-Panamanian
relations on a more firm footing by moving beyond the
Moscoso-era scandals by introducing more transparency and
accountability to Taiwan's donations to Panama. To a large
extent, Hou has succeeded as evidenced by the high-level
contacts between the two governments over the past nine
months.
Given the highly political nature of Taiwanese foreign
assistance in Panama -- both from a Taiwanese-Panamanian
bilateral prospective and from a Panamanian domestic
prospective -- post recommends steering clear of Taiwanese
proposals to coordinate formally or informally USG assistance
to Panama.

EATON