PANAMA: U.S. REP. GENE TAYLOR'S MEETING WITH GOP

C O N F I D E N T I A L PANAMA 000284 SIPDIS SIPDIS FOR STATE WHA/CEN - TELLO E.O. 12958: DECL: 04/09/2018 TAGS: EAID ECON ENRG NAS PM SUBJECT: PANAMA: U.S. REP. GENE TAYLOR'S MEETING WITH GOP VP/FORMIN SAMUEL LEWIS ¶1. (SBU) SUMMARY. On March 24, 2008, U.S. Representative Gene Taylor (Mississippi) met GOP Vice President and Foreign Minister Samuel Lewis. During the wide ranging 90-minute meeting, they discussed the Panama Canal expansion project, Manta relocation, 2009 Panamanian elections, the Colombia-Ecuador dispute, crime, Panama's economy, Hugo Chavez, and the Latin American Left. -------------- Meeting Participants -------------- ¶2. (U) USG Representative Gene Taylor Ambassador William A. Eaton Manuel Rubio, notetaker GOP First Vice President and Foreign Minister Samuel Lewis Deputy Foreign Minister Ricardo Duran Tommy Guardia, notetaker -------------- Panama Canal Expansion -------------- ¶3. (U) Taylor asked about the financing for the Panama Canal expansion project, the status of the bidding on Canal expansion contracts and the effect of increasing oil prices on Canal traffic. Lewis responded that the Canal expansion project would be financed through a combination of cashflow from operations and approximately $2.3 billion in debt financing. Lewis said there was "tremendous" interest among commercial banks and multilateral agencies, such as the Inter-American Development Bank, the Japanese International Cooperation Agency, and the European Union. He noted that lenders are attracted by the Canal's guaranteed revenue stream and successful history. ¶4. (U) Lewis added that, as the price of oil increases, the value of the shortcut offered by the Canal also increases. He said the GOP commissioned a study to access the impact climate change will have on the Canal and its operations. He said the study will also quantify the Canal's benefits to the environment through lower emissions and fuel costs by using the Canal as opposed to longer routes. -------------- -------------- Moving Manta Operation to Panama - GOP Not Interested -------------- -------------- ¶5. (C) Taylor noted that the Ecuadorian government may not extend the U.S. lease on the Manta facility. Taylor asked if the GOP would consider the USG moving part of the Manta operations to former Howard airfield outside Panama City or to any other facility anywhere in Panama. ¶6. (C) Lewis said there are "slim" chances that the GOP would consider such a request anywhere in the country. He said few in Panama would want to re-visit the issue. Lewis said opening up a discussion of moving part of the Manta operations to Panama would generate unspecified problems. Noting shared national security concerns and strong bilateral relationship, Lewis said the two countries should focus their security efforts on issues they can work jointly. Lewis noted that Panama's stability is related to U.S. national security since 14% of U.S. maritime trade passes through the Canal and the Canal handles more U.S. trade than any single U.S. port. -------------- Panamanian Elections -------------- ¶7. (SBU) Discussing the 2009 Panamanian elections, Lewis noted that the ruling Democratic Revolutionary Party (PRD) had two presidential candidates (Panama City Mayor Juan Carlos Navarro and Housing Minister Balbina Herrera) and that there may no space for additional candidates. Lewis said the PRD primaries would be in September or October, but the date would be decided by the PRD leadership. Lewis said he had made no decision on running for President. Lewis said the important thing for the new government would be to continue the programs started by the Torrijos Administration. -------------- Colombia and Panama -------------- ¶8. (U) Taylor asked how Panama has avoided the problems suffered by Colombia, such as the FARC and high crime, especially given their proximity and close ties. ¶9. (C) Lewis said the problems of Colombia are rooted in the drug trade, exacerbated by the involvement of an irregular army (FARC). According to Lewis, if the problems were rooted in ideology, the government and the FARC could eventually come to an arrangement on political representation. Lewis said that, since Colombia is dealing with drug dealers, there is nothing to negotiate, so compromise is not possible. Lewis said Panama is spared some of these problems because it is not a cocaine producing country. He said the GOP has always maintained a strong anti-drug policy. ¶10. (C) Lewis stressed that the GOP and most Panamanians do not want the Darien Gap opened. He said that while the Darien Gap makes it harder to control the area, it serves as a natural barrier to drug dealers and the FARC, as well as an environmental preserve. Lewis said he has to dance around the issue, especially with the Colombians, who he said bring up the topic "on a daily basis." -------------- Crime in Panama - Mostly Drug Related -------------- ¶11. (SBU) Discussing crime in Panama, Lewis said drug consumption is a problem and is aggravated by Panama being the first stop in the drug transit chain. Lewis said that narcotraffickers pay in drugs. Accordingly, drug dealers in Panama offer drugs cheaply in order to monetize such drugs. Lewis noted that with limited resources, Panama seized more drugs in 2007 than Mexico and than all of Central America combined. He said the large amount of drug seizures reflects the huge amount transiting Panama. Lewis said he feels that the Merida Initiative is very important is addressing the drug trade. He said Panama needs more resources to fight narcotrafficking and he hoped Merida would help. -------------- Copper Mines and the Environment -------------- ¶12. (SBU) Taylor asked about mining operations in Panama. Lewis said Petaquilla, a Canadian firm, had been working a cooper mine for 20 years. The mine was abandoned when copper prices collapsed. Now that prices have rebounded, they were looking to re-start activities. Lewis said the project is facing opposition from environmental and civil society groups. Lewis said environmental groups have aligned themselves with political groups who have different agendas, making compromise very difficult. He noted that environmental groups opposing mining also opposed expansion of hydroelectric power. He said hydroelectric power is the key to meeting Panama's energy needs. He said "water is Panama's oil." -------------- -- Booming Economy Strains Labor and Energy Supply -------------- -- ¶13. (U) Taylor asked whether Panama's booming construction sector was in a bubble. Lewis said there was some speculation in the sector. However, Lewis said that a study done by a local consultant found that most condominium units were being purchased by end-users. Lewis said Americans, Venezuelans and Colombians are purchasing these units to live in full-time. He recounted a story of a group of Venezuelan who recently purchased 100 condo units not for investment, but to occupy. Lewis said many believed that most condo units would be vacant or used only part time; this has not been the case. Lewis said the "tremendous" amounts of liquidity in the banking sector is also fueling the construction boom as financing for construction and purchases has become easier. He said prices are still rising. ¶14. (U) Lewis said the electric company assumed a 4% usage growth rate. He said the actual electric usage growth rate has been 10% in the last 12 months because of new condo occupancy. Lewis said energy demand and supply in Panama are almost equal. Lewis noted that Panama narrowly escaped the most crucial time, the recent dry season, without blackouts. Lewis said new thermal and hydroelectric plants coming online in 2008 and 2009 should be sufficient to meet energy needs. ¶15. (SBU) Lewis said Panama is at full employment. He said the 6% still unemployed are essentially unemployable, and the challenge for the GOP was to train these people so they can find jobs. Lewis said it is impossible in Panama to find construction workers. Anyone needing a worker has to take someone from another project. Even the sugar workers are leaving the industry to work in tourism. He said this has created competition for workers and, as a result, higher wages. ¶16. (SBU) Lewis said, however, that inflation (due to higher energy costs and declining dollar) was now Panama's greatest challenge. He said there are calls for higher minimum wages and price freezes. He said these distortions to the economy would be very damaging. With the election season beginning, he said such ideas could gain traction. -------------- Hugo Chavez -------------- ¶17. (C) Lewis said Chavez has been quiet for the last few weeks because of the conflict with Colombia. Lewis said Chavez has actually been saying helpful things with respect to Colombia. He attributed this attitude change to Chavez's realization he had crossed the line with Colombia. Lewis said Colombia, Ecuador and Venezuela were very close to war. He said of the three, the only army capable of fighting was the Colombian Army. He said Chavez realized he would lose badly to Colombia. Lewis said it "is one thing to play with the chain, it is another thing to play with the gorilla (Colombia)." Lewis said that Chavez's response to the Colombia-Ecuador incident opened the eyes of many in the region, including the Cubans. Lewis said everyone realized that Chavez had pushed things too far. When asked by why Chavez got involved in the Colombia-Ecuador dispute, Lewis said "Chavez is the type of person who would attend a funeral and be upset he was not the one in the coffin getting the attention". Lewis said Chavez could not stand not being part of the fight. -------------- Latin American Left and Panama's Challenge -------------- ¶18. (C) Taylor asked by why Panama has not elected a leftist populist government. Lewis said Ecuador, Venezuela, Bolivia, and Nicaragua, all had elements of a failed state where people are willing to try anything. Lewis said this willingness is a danger to democracy. People are not blaming leaders, but are blaming the system, he said. In Panama, he said, there are still those willing to fight for democracy. ¶19. (U) Rep. Taylor did not clear this cable. EATON