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.

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Meeting Participants
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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

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Panama Canal Expansion
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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.

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Moving Manta Operation to Panama - GOP Not Interested
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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.

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Panamanian Elections
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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.

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Colombia and Panama
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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."

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Crime in Panama - Mostly Drug Related
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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.

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Copper Mines and the Environment
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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."

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Booming Economy Strains Labor and Energy Supply
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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.

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Hugo Chavez
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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.

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Latin American Left and Panama's Challenge
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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