GOP SET TO LAUNCH TIEA NEGOTIATIONS WITH OECD

UNCLAS PANAMA 000535 SENSITIVE SIPDIS WHSR PLEASE PASS TO USTR E.O. 12958: N/A TAGS: ECON EFIN EFTA ETRD PM PREL SUBJECT: GOP SET TO LAUNCH TIEA NEGOTIATIONS WITH OECD NATIONS REF: PANAMA 454 ¶1. (SBU) Minister of the Economy and Finance (MEF) Alberto Vallarino will assume leadership of the Tax Information Exchange Agreement (TIEA)/OECD-G20 transparency issues by spearheading the GOP's efforts to negotiate TIEAs with OECD nations. "Not having a TIEA could severely damage our service-based economy," Vallarino emphasized to EconCouns on July 7. He added, "Singapore is our model and we want to play with the grown-ups." However, Vallarino distanced his government's consideration of TIEAs from the stalled U.S.-Panama Free Trade Agreement (FTA),by noting that "this action is in Panama's best interest by itself and not part of renegotiating an already completed TPC (trade promotion agreement aka FTA)." ¶2. (SBU) Vallarino mentioned that he would propose either constituting a new commission or reorganizing the existing Commission to Defend International Services (reftel) at the July 9 cabinet meeting. At the following cabinet meeting on July 16, he intends to offer a policy for negotiating TIEAs with OECD nations, including the United States. ¶3. (SBU) Comment. It appears that pro-TIEA forces now have the upper hand in what has become a contentious power struggle. Vallarino, a pragmatic but prickly Cornell grad and bitter rival of Vice President and Foreign Minister Juan Carlos Varela (he lost the Panamenista nomination to Varela, and Varela later joined the Martinelli's Democratic Change ticket) clearly understands that Panama's foreign investment driven economy is endangered by the potential of OECD sanctions. However, as a swipe at Varela and a declaration that Panama will not simply follow perceived dictates of the United States, the first TIEA negotiated may not be with the United States. Vallarino is aware that the OECD benchmark of 12 TIEAs with OECD countries, does not specify countries. Nonetheless, he is also aware that it would make sense to conclude a TIEA with Panama's largest trade and investment partner. End comment. STEPHENSON