PANAMA: LIMITED WINDOW FOR FTA RATIFICATION

S E C R E T PANAMA 000252

NOFORN
SIPDIS

E.O. 12958: DNG: CO 03/23/2019
TAGS: PGOV PREL PM
SUBJECT: PANAMA: LIMITED WINDOW FOR FTA RATIFICATION

REF: A. A: PANAMA 00704/08

B. B: PANAMA 00058/08

Classified By: Charge David R. Gilmour for reasons 1.4 (b) and (d)

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No Time Like the Present
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1. (S//NF) The U.S. and Panama need to resolve several
complicated issues
in order to meet congressional concerns associated with the
Free Trade
Agreement (FTA) between the two countries. With three months
left until
the end of the Torrijos administration, it may be tempting
to put
negotiations with the GOP on hold and wait for the seemingly
inevitable
victory of the "pro-American" Ricardo Martinelli before
attempting to move
forward. Such a move would be a major mistake. The Torrijos
government at
the end of its five year term is still likely to be the best
bet to get
the necessary legislation passed in the National Assembly,
and to wring
needed concessions from powerful domestic lobbies. President
Torrijos and
VP/FM Samuel Lewis see the FTA as part of their legacy and
will do
everything they can to get the needed changes passed by the
National
Assembly, which is controlled by their Democratic
Revolutionary Party
(PRD). While Torrijos is a lame duck, he is not really
powerless, given
his well known intention to seek election again in five or
ten years, and
his position as PRD Secretary General. While there may not be
enough time
left to resolve all issues, there is still an experienced,
coherent, and
committed partner in Panama with whom we can work towards a
resolution of
the outstanding issues.

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Careful What You Ask For
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2. (S//NF) As for the prospects of a Martinelli government
(Note:
Martinelli continues to have a comfortable lead in the polls
over Balbina
Herrera of the PRD. End Note),it is time to take a closer
look at what a
Martinelli government may mean for U.S.-Panamanian relations.
While
Martinelli is exuberantly pro-American, this creates a
problem for us, as
he gives us no "top cover." The Torrijos government has
developed robust
security cooperation with the USG (see reftel A) without
drawing much
attention, or opposition, to it. The PRD's robust nationalist
credentials
and Torrijo's control over the party's left wing elements,
have shielded
the USG from criticism. Martinelli, on the other hand, will
be very
exposed in his dealings with the U.S., and may not even have
support from
all his coalition partners on some issues. He will also have
to face an
opposition PRD that knows exactly what kinds of cooperation
are taking
place, and will be able to draw attention to them if the PRD
can draw
political advantage from it. Given the fact that Martinelli
will probably
not control the National Assembly, all of this may make it
very difficult for Martinelli to actually deliver on his pro-American
instincts, and may
end up curtailing some security cooperation, rather then
expand it. It is
also likely to effect his ability to make concessions on
economic issues
for the same reasons.

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Hydra-Headed Coalition
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3. (S//NF) Martinelli will also have to govern with a very
complicated
coalition behind him. While Torrijos has had the support of a
disciplined
PRD and a deep talent pool to draw from, Martinelli will need
to balance the wishes of four parties (his Democratic Change
(CD) party,
the Panamenistas, Patriotic Union (UP),and MOLIRENA) and an
evangelical
movement, none of which is very deep in talent. This group
will spend a
lot of time at the beginning of the government fighting over
positions and
responsibilities. Many more people in the Martinelli
coalition think they
deserve high level positions than can possibly get them,
which will create
dissatisfaction and resentment within the coalition from day
one. CD
itself is very small and will give Martinelli very few people
he can truly
trust, as several of its high profile members have dubious
pasts. This may
make a future Martinelli government ineffectual, at least
until the power
relations are decided. It will also take some time to fill
the vast number
of political positions within the GOP. Given that the GOP has
limited
bandwidth on the best of days, this may make it very
difficult for a
Martinelli government to tackle any complex issues for
several months.

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Whom Does He Represent?
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4. (S//NF) Besides the emerging issue of corruption, it is
not yet clear
what economic interest groups Martinelli represents. He has
publicly
announced his support for the so-called "Ley de Retorsion",
which is a law
authorizing the GOP to retaliate against governments that
discriminate
against Panama (by placing Panama on blacklists, for
example). If
Martinelli is tied more closely to groups that oppose some of
the reforms
we are seeking, such as the elimination of bearer shares
which some
lawyers here bitterly oppose, we may find it harder to make a
deal with
Martinelli than with the Torrijos government.

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Labor Problems on the Horizon?
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5. (S//NF) As we move forward with the FTA, it also bears
noting that
Martinelli has no bridges to the non-traditional left. There
are
increasing fears that there could be serious social
disturbances early in
a Martinelli presidency. Groups like the radical construction
workers
union SUNTRACs and the radical social movement FRENADESO (see
reftel B)
will looking for an excuse to start a fight, and reforms of
the labor code
could set them off. In addition, the PRD's left-wing faction,
the
"Tendencia", will no longer be tied to the government, and
may well be
spoiling for a fight.

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Comment
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6. (S//NF) The window is closing on the Torrijos
administration, and we
need to use these last three months to get the needed changes
in Panamanian labor law approved by the National Assembly for
FTA, and to get
as far along as we can on a constructive solution on the OECD
"tax haven"
issue. After July first we will be entering uncharted
territory as we
build a partnership from scratch, probably with a
pro-American president
with a lot of problems to deal with. The more we get taken
care of now,
the better.
GILMOUR