PANAMA: DOMESTIC POLITICS HAUNT FTA

S E C R E T PANAMA 000329

SIPDIS
NOFORN

E.O. 12958: DNG: CO 04/19/2018
TAGS: PGOV PREL ECON ETRD PM
SUBJECT: PANAMA: DOMESTIC POLITICS HAUNT FTA

REF: PANAMA 300

Classified By: POLCOUNS Brian R. Naranjo. Reasons: 1.4 (b) and (d).

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SUMMARY
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1. (S//NF) As Panama enters the final stretch of its general
election campaign season, politics has come to haunt the
U.S.-Panama Free Trade Agreement (FTA). "Forget about the
FTA," governing Revolutionary Democratic Party (PRD)
presidential candidate Balbina Herrera declared on April 19
to law students at the University of Panama. Meanwhile,
Alliance for Change presidential candidate Ricardo Martinelli
stumbled in releasing a statement of support for the Torrijos
Administration's efforts to put the FTA on a path to
ratification in the U.S. While the final version of the
Martinelli statement avowed support for Torrijos' efforts to
secure FTA ratification, an unauthorized draft published by
Panama City daily La Estrella put down a marker warning the
Torrijos Administration not to commit Martinelli to any
course of action, including specifically regarding the
exchange of banking information. Increasingly, Panamanian
opinion leaders are questioning what Panama's efforts --
negotiations, high-level visits and engagement, and money
spent on lobbying -- have gotten Panama. There is still time
to take advantage of a narrow window of opportunity in Panama
to resolve outstanding FTA-related issues. The Torrijos
Administration remains committed to addressing labor concerns
and immobilizing bearer shares. The Torrijos Administration
understands that it is under G-20/OECD pressure to conclude
tax information exchange agreements (TIEAs),but does not
have the political capital to tackle a TIEA with the U.S.
during the less than seventy days that it will remain in
office. While the scenario for moving forward on these
issues could become more difficult after the May 3 general
elections, that scenario will only worsen after Martinelli is
sworn in as president, as expected, on July 1.

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Balbina: "Forget About It"
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2. (SBU) Speaking to law students at the University of
Panama while President Torrijos was at the Summit of the
Americas in Port of Spain, Herrera responded to a question
about the FTA, blurting out, "Forget about it." She added,
"I am an agronomist, and I'll tell you that people are going
to learn to love the 'countryside (campo)'," referring to
workers in Panama's agricultural sector.

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Martinelli Stumbles with Pro-FTA Statement
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3. (S//NF) "We recognize the efforts of Panama's Foreign
Minister, Samuel Lewis Navarro and our Ambassador in
Washington, Federico Humbert . . . ," Martinelli declared on
April 9 in a press statement entitled "Martinelli
Congratulates the Foreign Minister." In the version of this
statement carried by Panama City daily La Estrella, but not
in any other media, this opening sentence continues, stating,
". . . and we will always support (the Torrijos
Administration) as long as they do not commit us to take
future actions such as the exchange of banking information
without consulting and reaching consensus with the private
sector and the Alliance for Change." Martinelli's lead
campaign advisor Demetrio "Jimmy" Papadimitriu clarified for
POLCOUNS on April 20 that La Estrella published an unapproved
draft of the statement. Papadimitriu said that this opening
sentence in the approved final version ended as follows: " .
. . and we will continue to support an open and transparent
process to obtain the ratification of the FTA." Papadimitriu
said that the campaign's press secretary had sent the
erroneous draft, which made specific reference to the
exchange of banking information, to La Estrella without his
approval. Papadimitriu changed the final wording of the
opening lines to underscore the candidate's support for the
FTA and his call for "an open and transparent process."

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FTA Exhaustion Setting In
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4. (C//NF) Meanwhile, Panama's chatter-atti and commentators
have been giving popular voice to a growing FTA exhaustion.
Essentially, the basic expression of this exhaustion boils
down to: a plaintive review of the litany of the efforts to
secure a FTA -- three years and ten rounds of negotiations,
USD 6.2 mllion spent on lobbying efforts, and numerous
high-level delegations back and forth between Washington and
Panama -- that concludes with the rhetorical question, "Where
has all this effort gotten Panama?"

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Political Analyst Worried About Governability
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5. (S//NF) "Martinelli's victory is going to be like a
seismic event in Panama's political order," political analyst
Jose Blandon told POLCOUNS on April 21. This PRD-friendly
analyst asserted that Martinelli's victory would touch off a
wave of in-fighting not only within the PRD, but also within
the Panamenista Party, Panama's largest opposition party.
Blandon cautioned though that a Martinelli Administration
would not be fully stood up and capable of grappling with
tough FTA-related issues for at least one year. (Note:
Martinelli's lead campaign advisor Jimmy Papadimitriu
predicted that a prospective Martinelli Administration would
need seven to eight months to find its sea legs. (REFTEL))
Blandon assessed that the PRD' electoral losses would be a
traumatic event -- it would not only lose the presidency,
but, he believed, lose a significant number of seats in the
National Assembly -- that would touch off a struggle for
control of the party among Torrijos, Herrera, Vice
Presidential candidate Juan Carlos Navarro, former President
Ernesto "El Toro" Perez Balladares, and National Assembly
Deputy Hector Aleman. In perhaps the first public move in
the struggle to control the PRD, First VP and FM Samuel Lewis
said in a radio interview that, once he stepped down from
office, he would dedicate himself to his businesses and to
grassroots political work, ostensibly to make a run for
president in 2014. Meanwhile, traumatized by its inability
to secure top billing in a grand opposition alliance, the
Panamenistas, though part of a winning Martinelli-led
coalition, could also be torn apart by jockeying for position
among former President Guillermo Endara (who already broke to
form his own Moral Vanguard of the Nation party),former
President Mireya Moscoso, Martinelli VP running mate Juan
Carlos Varela, and former primary presidential candidate
Alberto Vallarino. "By scrambling the political structure of
Panama," Blandon concluded, "Martinelli's victory raises real
concerns about his ability to govern once he is inaugurated."

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Comment
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5. (S//NF) Panama's campaign season is coming down to the
wire. Trailing badly in the polls and desperate to gain
traction and forward momentum, Herrera is trying to tap into
nationalism and rural voters who could suffer from the impact
of lower tariffs on U.S. agricultural products by asserting
that Panama should "forget about" the FTA and instead
indulging in the notion of a romantic renaissance in the
"campo." Martinelli, focused on maintaining his alliance's
unity and significant momentum in the polls, is thinking
solely about victory at the polls, not governance issues such
as securing ratification of the FTA. Clearly though, there
are powerful interest groups in the Martinelli camp that
nearly succeeded in putting the candidate on record to block
any Torrijos Administration deals on tax havens and the
exchange of tax information. Our own encounters with the
lawyers who lead powerful business organizations have
confirmed our fear that they see a Martinelli victory as an
avenue to shut down movement to immobilize bearer shares and
introduce transparency into the financial sector. We note
with dismay that these same forces did succeed in including
in Martinelli's published platform a plank saying Panama
would retaliate against countries who put Panama on a black
list by denying corporations from countries that blacklist
Panama the ability to compete in public sector bids (such as
bids for work on the Panama Canal expansion project).
Candidate Martinelli himself, on the eve of the G-20 Summit,
stated for the cameras that Panama was not a tax haven.
While we are grateful that he stopped short of Herrera's flat
call to forget the FTA, we underscore that progress on the
package of issues -- labor, bearer shares, enhanced exchange
of banking information -- will be much harder after the new
government takes office on July 1 than it is now, and it is
not easy now. FTA exhaustion has well and truly set in here
in Panama.
STEPHENSON