PANAMA TO NEGROPONTE: WE WELCOME TRADE DEAL, BUT

C O N F I D E N T I A L PANAMA 000788

SIPDIS

SIPDIS

DEPT FOR WHA/CEN - TELLO
ALSO FOR WHA/EPSC - SALAZAR AND MARTILOTTA
ALSO FOR EB/TPP/BTA - LAMPRON
STATE PASS USTR FOR SCHWAB, VERONEAU, EISSENSTAT, AND MALITO
USDOC/MAC FOR GAISFORD

E.O. 12958: DECL: 05/15/2017
TAGS: ETRD ECON PREL PGOV ENRG UNSC OAS PM
SUBJECT: PANAMA TO NEGROPONTE: WE WELCOME TRADE DEAL, BUT
NEED EDUCATION AND INSTITUTIONAL REFORMS


Classified By: Ambassador William A. Eaton - Reasons 1.4(b and d)


1. (C) Summary. In separate May 11 encounters with Deputy
Secretary of State John D. Negroponte, a cross-section of
Panamanian business, civil society, and media leaders
welcomed the U.S.-Panama Trade Promotion Agreement (TPA).
They cautioned, however, that Panama also had to reform its
educational and judicial systems, among other institutional
changes, to better use the TPA in addressing Panama's
persistent poverty and wide income disparities. End summary.

Roundtable Members Fret Over Poverty & Poor Education
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2. (U) On May 11, the Deputy Secretary discussed trade and
development issues with a cross-section of about a dozen
business and civil society leaders. Flanked by WHA Assistant
Secretary Thomas A. Shannon and Ambassador William A. Eaton,
the Deputy Secretary highlighted the evidence of significant
growth and change he observed during his earlier stops in
Colombia, Ecuador, and Peru. His question about how a TPA
with the U.S. might affect Panama sparked a 90-minute
discussion that revealed broad acceptance of free trade, but
also deep concern that endemic corruption, weak institutions,
and inadequate education might keep the benefits of Panama's
trade and economic growth from reaching the nearly 40 percent
of Panamanians still mired in poverty and those struggling to
narrow the country's wide income disparities.


3. (C) Former Vice Minister of Foreign Affairs Roxanna
Castrellon said that, despite Panama's economic boom, many
Panamanians remained stuck in poverty. She attributed this
phenomenon mainly to a continued lack of equal access to
opportunities. Castrellon pointed to increased security
risks, especially in the Darien region bordering Colombia, as
a result of the limited opportunities offered to many
Panamanians. Rosario Aguilar, a longtime aid worker in the
Darien concurred, noting that most of the youth in Panama's
largest, sparsely populated province saw few, if any,
opportunities. She said that some in the Darien had to
journey 16 hours by canoe downriver to the nearest market,
where they might earn $1 per 100 bananas, which wholesalers
later turn around for $5 per 100. As a result, she said,
Darien residents were increasingly vulnerable to the lure of
"easy money" offered by drug traffickers, despite the risks.


4. (C) Economist Alexis Soto suggested that Panama's
continued dynamic of "growth without development" resulted
from the poor linkage of booming economic sectors with
impoverished communities. He stressed that Panama had to
better integrate its agricultural sector with the rest of an
economy that had been historically driven by the Panama
Canal. A one-time TPA skeptic, Soto agreed with the Deputy
Secretary on the job-creation prospects offered by the TPA.
He felt that the TPA offered an adequate adjustment period
for Panama's agricultural sector, but that much more was
needed to "fully integrate" this sector with the overall
economy.


5. (C) Business leaders such as AmCham President Carlos
Urriola, CONEP ("Chamber of Chambers") President Jose Javier
Rivera, and retail & finance executive Felix Maduro each
stressed Panama's lack of skilled labor as a critical barrier
to ensuring that the TPA delivered results. They said that
Panamanian employers stood ready to hire thousands of
additional employees, but could not find nearly enough
qualified workers. As a result, they worried about the need
to bring in foreign workers, e.g., for the maritime sector
(Panama Canal expansion),which could cause serious social
problems.


6. (C) Others, such as law professor Miguel Antonio Bernal
and Transparency International's Executive Director Angelica
Maytin, pointed to corruption and weak rule of law as the
primary impediments to Panama's development. Bernal welcomed
the TPA, but warned that the country would not advance amid
the GOP's erosion of civil liberties, rampant corruption in
the judiciary, and the "virtual return" of ex-dictator Manuel
Noriega in the form of former Noriega allies who now held
some key GOP posts. Likewise, Gertrudes Sires, who leads an
indigenous women's association in a Ngobe Bugle comarca (akin
to an Indian reservation) said that corruption at local
levels prevented wealth from reaching the base of Panamanian
society. She called for greater capacity building for
indigenous women to better serve as watchdogs over
expenditures for local development programs in their
communities.


7. (C) Agricultural exporter Francisco Atunez bemoaned the
existence of poverty and starvation in a country that enjoys
enormous natural wealth. Environmental activist Raisa
Banfield concurred, illustrating the point with a Panamanian
fairy tale about a small cockroach that found a dollar bill,
but did not have a clue about what to do with it.
Panamanians, she said, did not yet know the rich biodiversity
the country had and, as a result, had not developed anything
resembling an integral plan for sustainable development.

Top Opinion Leaders Focus on "Institutionality"
-------------- --


8. (C) The Deputy Secretary's two-hour dinner with a smaller
slice of business, civil society, and media opinion leaders
revealed a similar consensus that corruption and weak
institutions could hinder Panama's gains from a TPA with the
U.S. Alfredo Castillero Hoyos, a former Foreign Ministry
official and UNDP consultant, typified the group's welcoming
of the TPA, but with the caveat that deep institutional
reforms would be needed before the deal could have its
desired impact for ordinary Panamanians. He pointed to the
GOP's rejection of bad news, such as a recent UNDP report on
starvation in the Darien, as indicative of the government's
unwillingness to meet its institutional challenges
forthrightly. Former OAS Ambassador and current U.S.-Panama
Association President Enrique de Obarrio noted that this
concern prompted Panama's leading association of business
executives to focus its May 16-18 annual conference on the
country's lack of "institutionality." Magaly Castillo,
leader of a top judicial reform advocacy group ("Alianza
Ciudadana Pro Justicia") stressed that stronger rule of law
was a must to advance Panama's development.


9. (C) Others, such as ex-Panama Chamber of Commerce
President Diego Eleta, worried that a drift in USG focus on
Latin America and/or failure to ratify free trade deals with
Colombia, Peru, and Panama would further embolden those who
advocate populist and/or authoritarian approaches to
addressing the region's development needs. Eleta welcomed
the Deputy Secretary's visit to the region as an encouraging
sign of stronger U.S. engagement.


10. (C) Several participants pointed to the persistence of
poverty in the Darien region as a key worry and as emblematic
of Panama's development challenges. Lawyer and former WTO
Ambassador Carlos Ernesto Gonzales stressed that "it is up to
us" to solve Panama's poverty problems. He said that the
GOP, by creating indigenous comarcas over the past few
decades, effectively condemned indigenous groups to perpetual
extreme poverty, as they could not usefully capitalize on
commonly held comarca lands. While noting the importance of
education, "Panama America" newspaper executive Guido
Rodriguez and others suggested that the Darien was unlikely

to see any change until Panamanians figured out how to
integrate it with the rest of the country. (Gonzales noted
wryly that the Spanish, despite establishing their first
foothold in the hemisphere in Panama, were never able to
control the Darien.) Meanwhile, a GOP and UNDP effort to
promote a "national dialog" toward creating a national
development plan was, according to de Obarrio, "going nowhere
fast."


11. (U) This message was cleared by the Deputy Secretary's
delegation.
EATON