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### Viewing cable 09PANAMA306, PANAMA: SCENESETTER FOR CODEL LEVIN

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09PANAMA306 | 2009-04-14 23:11 | 2011-04-11 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Panama

`

    VZCZCXYZ0000
    OO RUEHWEB

    DE RUEHZP #0306/01 1042303
    ZNR UUUUU ZZH
    O 142303Z APR 09
    FM AMEMBASSY PANAMA
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 3263
    INFO RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC IMMEDIATE
    RHEHAAA/WHITE HOUSE WASHDC IMMEDIATE
    RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
    RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
    RUMIAAA/HQ USSOUTHCOM MIAMI FL IMMEDIATE
    RHEHAAA/NSC WASHDC IMMEDIATE

` `

    UNCLAS PANAMA 000306

    SENSITIVE
    SIPDIS

    WHSR PLEASE PASS TO USTR
    PASS TO H

    E.O. 12958: N/A
    TAGS: OREP EWWT OVIP PREL PGOV ECON ETRD EINV PM
    SUBJECT: PANAMA: SCENESETTER FOR CODEL LEVIN

    -------
    SUMMARY
    -------

    ¶1. (SBU) The fate of the U.S./Panama Free Trade Agreement
    (FTA) will determine the trajectory of our bilateral
    relationship through the foreseeable future. Congressional
    passage and a successful implementation of the FTA would
    serve to maintain extraordinary, yet vulnerable, U.S.
    influence in Panama and drive further reforms. A failed FTA
    will be a blow to reformers and will strengthen both
    traditional and nationalist (anti-United States) voices in
    Panama and those in a new generation who simply call for
    fewer American-centric policies. Failure could also increase
    uncertainty about the $6.2 billion stock of U.S. investment
    in Panama. President Torrijos who will leave office on June
    30 has the will and the influence in the National Assembly to
    push through labor and contentious bearer share reforms.
    However, the FTA process in Panama almost certainly will
    falter if additional conditions from the U.S. are demanded at
    this time or if the legislative changes do not occur under
    the Torrijos Administration. The next administration, which
    will likely be led by supermarket tycoon Ricardo Martinelli,
    will not be as politically invested in the FTA and may not
    have the legislative muscle to push through the labor and
    bearer share legislation, especially in the short term.
    Indeed, for those invested in strengthening labor standards
    and practices and promoting transparency in Panama, the next
    80 days provide a unique window of opportunity. End Summary.

    ---------------------------------
    Panama After Operation Just Cause
    ---------------------------------

    ¶2. (SBU) Since the 1989 restoration of democracy, Panama has
    established and consolidated a democratic, stable and
    responsive government; accelerated economic growth through
    open markets; and strived to ensure that the benefits of that
    growth reach all citizens. While a hemispheric leader in
    progress on these fronts, Panama today stands at a
    crossroads. Its political establishment is fast approaching
    its fourth presidential election since 1990, yet cynicism
    abounds. Panama has leveraged its superb stewardship of the
    Canal and central location to create an economic and
    logistical architecture that is yielding now comparatively
    stellar economic growth and a substantial reduction in
    poverty. However, opportunities created by the growth remain
    elusive to many Panamanians due to continued income
    inequality fostered by lack of access to quality education
    and inadequate public infrastructure (especially
    transportation and health).

    ---------------
    May 3 Elections
    ---------------

    ¶3. (SBU) Panama will hold general elections on May 3, 2009,
    to choose a president and to fill every elected seat in
    Panama's National Assembly. We fully expect this date to
    herald the fourth free and fair election since Operation Just
    Cause in December 1989 restored democracy in Panama.
    According to polls, a population focused on insecurity from
    the rising rate of crime and lingering economic insecurity
    from the now abating rate of inflation has grown cynical
    about its government's ability to deliver security and
    sustained social and economic progress. The race is now
    basically a two-person race, with opposition Democratic
    Change (CD) party candidate Ricardo Martinelli enjoying a
    steady 12-15% lead in the polls over the candidate of
    President Torrijos' Revolutionary Democratic Party (PRD),
    former Housing Minister Balbina Herrera. Martinelli has thus
    far successfully positioned himself as the candidate for
    change, in part as a result of an impressive campaign
    financed in part from his substantial fortune (Martinelli
    owns a major supermarket chain in Panama). Herrera has been
    campaigning on a platform of continuity with Torrijos'
    successful administration, but has suffered from several
    political missteps by the Torrijos administration, and by her
    past association with Manuel Noriega, and her reputation as a
    left wind firebrand in the past. The explosion of the Murcia
    (a Colombian pyramid scheme kingpin who operated in Panama)
    case has roiled the political landscape in the wake of his
    credibly detailed public description of funneling $6 million
    to the PRD (including Herrera) and Herrera's assertion that
    Martinelli through his business laundered money for Murcia.

    ----------------------
    Torrijos wants the FTA
    ----------------------

    ¶4. (SBU) President Torrijos, who leaves office July 1,
    asserts he fulfilled all major campaign promises, but one -
    the FTA. The FTA is a legacy issue; President Torrijos
    desires a 'book-end' to his father's Canal treaties. Thus
    President Torrijos and his administration are willing to
    spend political capital to legislatively address labor and
    bearer share issues brought up by the U.S. legislative and
    executive branches. However, this late in his administration,
    that capital, while still powerful, is limited. Due to the
    timing of the election, the choreography of the potential
    movement of the FTA through Congress and synchronization with
    potential Panamanian reforms is difficult. The U.S.
    legislative and executive branches must signal to he
    Panamanians that the U.S. Congress will vote on the FTA in
    order to rally the PRD majority in the National Assembly to
    pass legislation on labor issues and bearer shares during the
    Panamanian lame duck session (after the May 3 elections, but
    before the July 1 transfer of power). The legislation is
    politically difficult. On labor, President Torrijos'
    center-left majority can muster the votes, but cannot appear
    to be kowtowing to the United States. On bearer shares, the
    Torrijos Administration faces powerful and persistent
    opposition by lawyers who issue those shares, two of whom are
    former Panamanian ambassadors to the United States, and many
    of whom are stalwart contributors to the PRD. If additional
    conditions are requested by the United States (such as the
    completion of a TIEA), the Torrijos Administration will lack
    the influence to push all necessary legislation through the
    National Assembly.

    ¶5. (SBU) After July 1, a new Administration assumes power. A
    hypothetical Martinelli administration, based on a small and
    weak party (Democratic Change), will spend considerable
    effort merely maintaining an unwieldy four party coalition to
    govern. Even if Martinelli's Alliance for Change coalition
    wins a National Assembly majority, his coalition would likely
    splinter if forced to vote on labor reforms. Should Herrera
    win, it is likely that she will strive to maintain the same
    good relations with the U.S. as Torrijos has, though her
    advisors tend to be more left-wing and anti-American than
    Torrijos'. For any incoming administration, the immediate
    challenges of governing will be daunting. On May 3, every
    elected seat in national and local government will contested
    in a once-every-five-year poll. Once the dust settles on the
    elections, members of the new government will find little
    continuity, as the Panama's civil service remains small and
    almost non-existent in most major non-security related
    ministries.

    --------------------------
    Panamanian Reforms - Labor
    --------------------------

    ¶6. (SBU) The Panamanian Government indicated to USTR,
    Secretary Clinton, Majority Leader Hoyer, and other Members
    of Congress that legislation will be passed during a lame
    duck National Assembly in order to adjust the Panamanian
    labor code to comply with standards of the International
    Labor Organization (ILO). Torrijos enjoys a broad labor
    support, as embodied in Panama's unanimous election to the
    ILO Presidency at the 2008 ILO World Conference. Currently,
    USTR and the Panamanian Government are negotiating the
    details.

    ------------------------------
    Panamanian Reforms - Tax Haven
    ------------------------------

    ¶7. (SBU) Many sources have labeled Panama as a tax haven.
    However, Panama is not the stereotypical post office box
    destination for corporations seeking to avoid U.S. taxation.
    Rather, the vast majority of U.S. companies that locate
    subsidiaries in Panama do so to expand market share in Latin
    America. U.S. businesses are attracted to Panama due to the
    use of the U.S. dollar, modem banking system, Colon Free
    Zone, and transportation/logistical architecture that
    includes the Panama Canal, Panama Canal railroad, major
    ports, and a regional air hub. Companies use Panama as a
    marketing and distribution platform to expand brand awareness
    and sales in the region, often leading to increased
    employment in the United States.

    ¶8. (SBU) The reason Panama does not fit into this stereotype
    is that Panama has effective anti-money
    laundering/anti-terrorist finance banking regulation.
    Additionally, Although Panama has substantially bolstered its
    anti-money laundering/terrorist finance regime, especially in
    the well-regulated banking sector, transparency issues
    remain, concentrated in the corporate practices of Panama's
    loosely regulated legal profession. Under Panamanian law,
    lawyers are the only group empowered to establish
    corporations, including shell corporations that issue bearer
    shares. Bearer shares serve as an extremely powerful
    'cloaking device' for financial crimes. Held anonymously by
    "the bearer," these instruments allow the persons possessing
    them to store and transfer funds with little risk of
    detection. Often wealthy individuals or companies will open
    an "anonymous society" corporation in Panama. The President
    and Directors of the company are random people paid a nominal
    sum to sign a legal document that allows them to be the
    "leadership" of the anonymous society corporation. However,
    true ownership lies in the person who physically controls the
    bearer shares. The person who physically controls bearer
    shares likely will not be able to deposit them in a
    Panamanian bank without strict disclosure requirements, as
    the banks are tightly bound by know-your-customer rules.
    However, nothing stops bearer shares holders from traveling
    to a country with lax banking regulations and opening bank
    accounts through an attorney or other proxy (who can hide the
    identity of the holder of the bearer shares).

    ¶9. (SBU) After substantial engagement from the U.S.
    Government, the Government of Panama announced on April 7
    that it intends to regulate bearer shares. This breakthrough,
    when fully executed, will fulfill the USG's most prominent
    financial crimes regulatory recommendation, and remedy
    Panama's sole grave remaining anti-money
    laundering/counter-terrorism finance (AML/CFT) deficiency.
    Without the effective regulation of bearer shares through
    immobilization (registration), disclosures under any future
    Tax Information Exchange Agreement (TIEA) will remain
    incomplete - blocked by the secrecy of beneficial ownership
    of the corporation. Immobilization requires the registration
    of the beneficial owners of those shares -- as opposed to
    mere disclosure of directors and resident agents of anonymous
    society corporations issuing the shares. The GOP's statement
    does not specifically mention immobilization. However, it
    telegraphs this measure by mandating formation of a "working
    team" to "propose concrete actions" to "increase levels of
    responsibility and transparency with respect to the titling
    of anonymous societies." Responding to Congressional
    concerns, the USG has also engaged on a TIEA, we believe that
    in light of recent G20/OECD efforts in this area (as well as
    the related commitments of peer nations) that a TIEA is
    inevitable - but not achievable in the Torrijos
    Administration. The GOP committed to acceding to the OECD
    Model Convention on Double Taxation (Chapter 26 of which
    includes a TIEA regime) in a March 25 letter to the OECD
    Secretary General. However, without the intermediate step of
    regulation of bearer shares, a TIEA is of nominal value and
    would do little to address the closely related law
    enforcement and money laundering issues. Dealing with the
    TIEA via the G20 would be vastly more effective as this route
    would diffuse the issue of nationalist and sovereignty
    rhetoric.

    -------------------------------------------
    Limits of the President's Political Capital
    -------------------------------------------

    ¶10. (SBU) The Torrijos Administration has the political
    capital to implement the labor and bearer shares reforms.
    However, the ability to pass a TIEA or other additional
    conditions likely is not achievable, because President
    Torrijos would need to overcome the opposition of additional
    interest groups and newly inflamed sovereignty emotions
    stemming from that fact that Panama would be the single
    country required to negotiate a TIEA as a precondition to an
    FTA - after FTA negotiations had been completed.. The
    resulting perception in Panama is likely to be that the FTA
    failed due to "onerous" demands from the gringos (after the
    FTA was already signed by the respective governments). The
    nondemocratic and nationalistic segments of Panamanian
    society will be strengthened by using a caricature of an
    imperialistic America that is turning its back on the
    Panamanian people. While Panamanian society as a whole will
    not follow these segments of society, American influence with
    a small, but important ally, that effectively manages a
    strategic waterway, will be diminished.

    ¶11. (U)  End Scenesetter. Below are short fact sheets on the
    Panama's Economy, U.S./Panama Trade, Counter-Narcotics,
    Merida and Panama, and Security/Counter-Terrorism.

    ----------------
    PANAMA'S ECONOMY
    ----------------

    ¶12. (SBU) Behind the construction cranes and traffic jams is
    an expanding economic/logistical architecture. Its foundation
    is the Canal through which passes roughly 5% of world
    commerce. The Panama Canal Authority (ACP) has embarked on a
    $5.25 billion dollar expansion, the centerpiece of which is a
    third set of locks capable of handling the largest class of
    container vessels. A growing network of ports, including
    Manzanillo International Terminal in Colon (partially owned
    by U.S. firm Carrix), facilitates trans-isthmian logistics
    along with revitalized Kansas City Southern Railway between
    Panama City and Colon. Panama Ports (Hutchison Port holdings,
    Inc. of Hong Kong) launched a $240 million expansion of its
    Pacific and Caribbean terminals, augmenting the GOP's
    construction of the $215 million Panama-Colon Highway. The
    Colon Free Zone generated over $19 billion in trade last
    year. It serves as a hemispheric "one-stop shop" for
    sourcing, financing, and delivering products (mostly from
    Asia) to Latin American markets.

    ¶13. (SBU) Panama's robust financial center, with 90 banks and
    $63 billion in assets fuels the purchase and movement of
    cargo and facilitates the absorption of robust foreign direct
    investment (FDI) inflows that totaled $2.4 billion for 2008.
    Through generally prudent management, it has been able to
    finance construction projects and consumer spending, key
    drivers of GDP growth - 11.5% last year and roughly 9% in
    ¶2008. Although the global financial crisis will impact
    Panama, growth is expected to be 1-3% - one of the only
    countries in the hemisphere expecting positive growth.

    ¶14. (SBU) In recent years, Panama has reached beyond its
    traditional maritime and financial networks to build
    connectivity of data and knowledge, and people. Panama lies
    at the junction of five high bandwidth submarine fiber optic
    cables, placing Panama City second only to New York City in
    bandwidth availability. This feature was key in the decisions
    of Dell and Hewlett-Packard to locate regional headquarters
    at the former Howard Air Base, which is undergoing a $705
    million transformation as a regional manufacturing and
    distribution hub.

    ¶15. (SBU) Panama's tourism industry has similarly mushroomed
    in the past five years, with tourist arrivals increasing from
    600,000 to 1.6 million between 2000 and 2008. Arrivals at
    Tocumen International Airport reflect a similar trend,
    climbing from over 2.1 million in 2000 to an estimated 4.5
    million in 2008. Tocumen recently completed an $85 million
    expansion of its international terminal, complimented by the
    concurrent growth in its flag carrier, Copa (which codeshares
    with Continental Airlines). A recent United Nations report
    highlighted true progress in poverty reduction from 2001 to
    2007 - overall poverty fell from 37% to 29% and extreme
    poverty fell from 19% to 12%. Yet, the distribution of
    Panama's wealth and income remains highly skewed, and Panama
    has one of the highest degrees of inequality in the Americas.
    This situation creates palpable resentment as BMWs and Land
    Rovers zip past hot, crowded, buses that subject riders to
    unreliable multi-hour commutes. Most inhabitants of Panama
    City have never visited an indigenous area or the Darien,
    where poverty predominates, and government services are
    minimal.

    --------------------------
    UNITED STATES/PANAMA TRADE
    --------------------------

    ¶16. (SBU) The U.S. goods trade surplus with Panama was $4.5
    billion in 2008. U.S. goods exports in 2008 were $4.9
    billion. U.S. exports to Panama have grown by 130% from 2005
    to 2008.  The stock of U.S. foreign direct investment (FDI)
    in Panama was $6.2 billion in 2007 (latest data available).
    U.S. FDI in Panama is concentrated largely in the nonbank
    holding companies and finance sectors.

    FREE TRADE AGREEMENT
    formerly known as Trade Promotion Agreement)

    ¶17. (SBU) On June 28, 2007, the United States and Panama
    signed a Free Trade Agreement (FTA).  Panama approved the FTA
    on July 11, 2007.  The FTA is a comprehensive free trade
    agreement. When/if implemented, the FTA will result in
    significant liberalization of trade in goods and services,
    including financial services. The FTA also includes important
    disciplines relating to: customs administration and trade
    facilitation, technical barriers to trade, government
    procurement, investment, telecommunications, electronic
    commerce, intellectual property rights, transparency and
    anti-corruption, financial services, and labor and
    environmental protection. Under the FTA, Panama will be
    obligated to liberalize the services sector beyond its
    commitments under the WTO General Agreement on Trade in
    Services by adopting a negative list approach where all
    sectors are covered except where it has made specific
    exceptions. Moreover, in connection with the FTA, Panama
    agreed to become a full participant in the WTO Information
    Technology Agreement, and entered into an agreement with the
    United States that resolved a number of regulatory barriers
    to trade in agricultural goods ranging from meat and poultry
    to processed products, including dairy and rice.
    Tariffs

    ¶18. (SBU) Panama's maximum tariff on industrial goods is 20
    percent. Panama's tariffs on agricultural goods range from 10
    percent to more than 250 percent. When/if the FTA enters into
    force, 88 percent of U.S. exports of consumer and industrial
    goods will enter Panama duty free, with remaining tariffs
    phased out over periods of 5 years or 10 years. The FTA
    includes "zero-for-zero" immediate duty free access for key
    U.S. sectors and products, including agricultural and
    construction equipment, information technology products, and
    medical and scientific equipment. Other key U.S. export
    sectors such as motor vehicles and parts, paper and wood
    products, and chemicals also will obtain significant access
    to Panama's market as duties are phased out. The FTA provides
    for immediate duty free treatment for more than half of U.S.
    agricultural exports to Panama, including high quality beef,
    certain pork and poultry products, cotton, wheat, soybeans
    and soybean meal, most fresh fruits and tree nuts, distilled
    spirits and wine, and a wide assortment of processed
    products. Duties on other agricultural goods will be phased
    out within 5 years to 12 years, and for the most sensitive
    products within 15 years to 20 years. The FTA also provides
    for expanded market access opportunities through tariff-rate
    quotas (TRQs) for agricultural product such as pork, chicken
    leg quarters, dairy products, corn, rice, refined corn oil,
    dried beans, frozen French fries, and tomato products. These
    TRQs will permit immediate duly free access for specified
    quantities that will increase as over-quota duties are phased
    out over the course of the implementation period.

    ¶19. (SBU) Apparel products made in Panama will be duty free
    under the FTA if they use U.S. or Panamanian fabric and yarn,
    thereby supporting U.S. fabric and yarn exports and jobs.
    Strong customs cooperation commitments between the United
    States and Panama under the FTA will allow for verification
    of claims of origin or preferential treatment, and denial of
    preferential treatment or entry if claims cannot be verified.
    Panama Counter-Narcotics Overview

    ¶20. (SBU) Panama is one of the USG's most important partners
    in the fight against the drug trade, and its close
    counter-narcotics cooperation with the U.S. in 2008 led to
    the seizure of 5l metric tons of cocaine, following seizures
    of 60 tons in 2007 and 40 tons in 2006. These were the
    highest seizure figures in the region by far. Police also
    seized over $3 million in cash linked to drug trafficking,
    confiscated $1.5 million from 42 bank accounts, and arrested
    126 people for international drug-related offenses. The
    seizure rates reveal that Panama continues to be a major
    trans-shipment country for illegal drugs to the United States
    and Europe, as a result of its geographic position in the
    drug trafficking "transit zone." Drugs are shipped by go-fast
    outboard-motor boats through Panama's territorial waters on
    the Pacific and Caribbean coasts - an area that is two times
    the size of Panama's land mass - and overland through the
    dense forests of Panama's Darien province. The drugs are
    trafficked by Colombian and Mexican drug trafficking
    organizations (DTOs), and by elements of the FARC and the
    remnants of paramilitary organizations. These organizations
    have protagonized a significant increase in violent crime in
    Panama this year, a fact that has led to increasing social
    alarm in Panama. As a result of this, the Government of
    Panama called a meeting of the presidents of Panama,
    Colombia, Mexico and Guatemala in late 2008 to promote
    greater cooperation in the struggle against international
    organized crime and drug trafficking. As a result, the four
    governments are working on concrete plans to confront the
    DTOs through law enforcement cooperation and information
    sharing.

    ¶21. (SBU) Panama has limited resources to confront the drug
    traffickers. Having disbanded its military in 1989, following
    the U.S. invasion, Panama has a National Police (PNP) force
    of approximately 15,000. Security reforms were implemented in
    2008 to try to increase Panama's ability to confront the drug
    traffickers, including the creation of a coast guard- like
    National Aero-Naval Service (SENAN), and breaking off a
    National Frontier Service from the police to cover the
    boarders. These forces are in their infancy, however, and
    Panama still has very limited air and sea assets with which
    to adequately control its territorial waters. The U.S. Coast
    Guard has the right to enter Panama's territorial waters in
    pursuit of drug traffickers, and has had success seizing
    go-fasts. However, USCG does not have sufficient available
    assets to shut down the coastal route either.

    ¶22. (SBU) Post plans to use Merida Initiative funds to build
    up Panama's capacity to deal with this serious
    drug-trafficking threat, and its growing gang problem. NAS
    funds will be used to retrain the PNP in community policing
    techniques, while USAID administered Economic Support Funds
    (ESF) are used to develop an effective community-based gang
    violence prevention program. The prevention program will
    focus on the two major urban centers, Panama City and Colon,
    and on the rural communities of the Darien, which suffer from
    significant drug trafficking activities. Post's program will
    work to build ties between the community based organizations
    and the police, so that the two parts of the strategy support
    one another, and create a self-reinforcing circle of success.
    At the same time, Post will continue with our traditional
    assistance to Panama's counter-narcotics efforts, including
    highly effective vetted-units, Coast Guard-SENAN cooperation,
    and support for Panamanian efforts to tighten control of its
    borders, ports and airports.

    -----------------
    MERIDA and PANAMA
    -----------------

    ¶23. (SBU) Panama is a major transit location for the drug
    trade between Colombia and the U.S. and Europe. Huge amounts
    of cocaine transit through its territorial waters and over
    the Pan- American Highway everyday. Panama is taking decisive
    action against traffickers, and is one of the top countries
    in Latin America in terms of drug seizures. This is due
    primarily to its excellent collaborative CN relationship with
    the U.S., and the work of a small group of elite police
    officers.

    ¶24. (SBU) While Panama's security apparatus rakes up
    impressive drug seizures, the Panamanian public is alarmed by
    a perceived wave of crime and insecurity. This is largely a
    result of Panama's nascent gang problem. Indigenous youth
    gangs are developing in all of Panama's slums, especially in
    Panama City, Colon and David in the west. This gang activity
    is the result of enduring poverty and poor education leaving
    young people without the skills to succeed in Panama's
    rapidly growing economy. Meanwhile, Colombian and Mexican
    drug traffickers offer increasing opportunities for criminal
    groups to make money by stealing from drug dealers (tumbos),
    selling drugs on the local market and by acting as paid
    killers. While Panamanian authorities insist that the recent
    wave of killings is mostly among youth gangs and drug
    dealers, the public is nevertheless seriously concerned about
    the perceived erosion of security in Panama's streets.
    Embassy Panama believes that it is essential to help the GOP
    confront the gang problem now. The gangs are becoming more
    entrenched and sophisticated all the time according to local
    prosecutors, and could eventually offer the drug cartels a
    ready made local structure, should they decide to move their
    operations to Panama. Panama is potentially a very attractive
    location for the drug cartels to re-locate to once the Merida
    Initiative makes operating in Mexico more difficult, due to
    its world-class banking system, miles of unpopulated
    coastline in the middle of the transit zone, and highly
    developed shipping and cargo infrastructure sitting on one of
    the most important shipping lanes in the world. Getting the
    gang problem under control now is the best way to prevent the
    cartels from eventually bringing their brand of terror and
    violence to Panama, potentially threatening one of the most
    important commercial hubs in the world.

    ¶25. (SBU) Embassy Panama proposes a holistic, integrated
    inter-agency approach to the problem, using Merida funding to
    give life to a strategy, rather than building a strategy
    around funding streams. The foundation for our strategy is
    community policing. Post believes that the gang problem
    cannot be brought under control unless and until the police
    and the community come together to reclaim the streets of
    Panama's poor neighborhoods. Many of these neighborhoods have
    suffered for years from a scarce police presence. When
    present, police are a foreign presence, due to short tours of
    duty meant to avoid corruption. Post is working with the
    Panamanian National Police (PNP) to implement a Community
    Police strategy, in conjunction with the Miami Dade Police
    Department, to indoctrinate the highest level of the police
    leadership in the concept of community policing. At the same
    time we are implementing a "culture of lawfulness" program to
    build up the PNP's ability to police itself. Community
    organizations are also being reestablished to interact with
    the police, not just to identify criminal activities, but to
    report on police corruption and malfeasance. Post will use
    additional funds allotted through Merida to strengthen the
    PNP's ability to investigate and discipline internal
    corruption as a prerequisite for effective community
    policing. ILEA funds will also be used to strengthen the PNP'
    s leadership, and prepare them to lead an organization which
    is ready to work with the community to aggressively target
    criminal gangs, without violating the democratic foundations
    of the state, and the rule of law.

    ¶26. (SBU) Post will also work with the courts and prosecutors
    to increase their ability to investigate, prosecute and try
    gang activities. This will be increasingly difficult as
    Panama transfers to the accusatorial system over the next
    five years. While in the long run this transformation will be
    positive, and help to avoid the long and unnecessary
    incarcerations of suspects which frequently lead to the
    creation of youth gangs in prison for self- protection, it
    will be a traumatic change over if the justice system is not
    adequately prepared. The Central American Finger Print
    Exchange will be a valuable tool for prosecutors, as they
    face the need to provide independent evidence besides police
    testimony to gain convictions. Post will work to see if
    creative use of this system can meet requests we have
    received for help setting up a "tattoo" data bank to help
    prosecute gang suspects. Post will also use available USG
    assets, including training seminars by TDY feder

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