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) -------------- No Time Like the Present -------------- ¶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. -------------- Careful What You Ask For -------------- ¶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. -------------- Hydra-Headed Coalition -------------- ¶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. -------------- Whom Does He Represent? -------------- ¶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. -------------- Labor Problems on the Horizon? -------------- ¶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. -------------- Comment -------------- ¶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