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### Viewing cable 10PANAMA87, No Recognition for PRC Anytime Soon - Panama Sticks with

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
10PANAMA87 | 2010-02-23 19:07 | 2011-05-08 10:00 | CONFIDENTIAL | Embassy Panama

`

    VZCZCXYZ0000
    RR RUEHWEB

    DE RUEHZP #0087/01 0541907
    ZNY CCCCC ZZH
    R 231907Z FEB 10
    FM AMEMBASSY PANAMA
    TO RUEHC/SECSTATE WASHDC 0465
    INFO RHEFDIA/DIA WASHINGTON DC
    RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
    RUEAIIA/CIA WASHINGTON DC
    RUEHBE/AMEMBASSY BELMOPAN
    RUEHBJ/AMEMBASSY BEIJING 0001
    RUEHBO/AMEMBASSY BOGOTA
    RUEHCV/AMEMBASSY CARACAS
    RUEHIN/AIT TAIPEI TW 0001
    RUEHMU/AMEMBASSY MANAGUA
    RUEHPE/AMEMBASSY LIMA
    RUEHQT/AMEMBASSY QUITO
    RUEHSJ/AMEMBASSY SAN JOSE
    RUEHSN/AMEMBASSY SAN SALVADOR
    RUEHTG/AMEMBASSY TEGUCIGALPA 0081
    RUEHZP/AMEMBASSY PANAMA
    RUEKJCS/SECDEF WASHINGTON DC
    RUMIESS/SOUTHCOM IESS MIAMI FL

` `

    C O N F I D E N T I A L PANAMA 000087

    SIPDIS

    E.O. 12958: DECL: 2020/02/16
    TAGS: PREL PGOV PM CH TW ECON
    SUBJECT: No Recognition for PRC Anytime Soon - Panama Sticks with
    Taiwan

    REF: 09 PANAMA 461; 09 SAN JOSE 985; 10 PANAMA 29

    CL...

    C O N F I D E N T I A L PANAMA 000087

    SIPDIS

    E.O. 12958: DECL: 2020/02/16
    TAGS: PREL PGOV PM CH TW ECON
    SUBJECT: No Recognition for PRC Anytime Soon - Panama Sticks with
    Taiwan

    REF: 09 PANAMA 461; 09 SAN JOSE 985; 10 PANAMA 29

    CLASSIFIED BY: Stephenson, Ambassador; REASON: 1.4(B), (D)

    Summary

    ¶1. (U) The GOP has renewed its commitment to Panama's longstanding
    relationship with Taiwan, despite public statements by President
    Ricardo Martinelli in 2009 that Panama would opt for formal
    diplomatic ties with the People's Republic of China (PRC).
    Martinelli attempted to follow through with his plan for
    recognizing the PRC but was told to back off by the Chinese.
    Taiwan has used financial incentives to retain the backing of the
    Martinelli administration, generating controversy over the recent
    "donation" of a $22 million business jet for the government's
    official use. End Summary.

    Hurry up and Wait

    ¶2. (C) On January 6, Foreign Minister Juan Carlos Varela agreed to
    a "five-year cooperation" plan which includes the donation of $25
    million for construction of a hospital on the outskirts of Panama
    City in Chilibre - Las Cumbres, and the donation of a $22 million
    executive business jet.  Varela had to backtrack in announcing the
    cooperation plan; during their 2009 presidential campaign, both he
    and President Martinelli publicly indicated that Panama would
    recognize the growing economic relationship with China, as well as
    China's particular interests in Panama, by establishing formal
    diplomatic relations.   During his first meeting as President with
    the Ambassador in May 2009, Martinelli said that he was "going to
    recognize Beijing" as he thought that Panama's business community
    would benefit as a result (Ref A).

    ¶3. (C) Martinelli may have had in mind the type of cooperation that
    Costa Rica has been enjoying with the PRC since establishing formal
    ties in 2007 (Ref B).  However, FM Varela stated to the Ambassador
    on February 18 that he was told by the Chinese Foreign Minister
    during his visit to Asia the previous month that, due to diplomatic
    overtures underway between Beijing and Taipei, now was not the time
    for Panama to recognize the PRC.  On February 1, Costa Rican
    President Oscar Arias informed a Colombian diplomat that Martinelli
    told him Panama wanted to follow Costa Rica's lead but that the
    Chinese had asked him to "remain calm" and that the PRC was not
    interested in furthering diplomatic ties in the region for the time
    being.   Chinese diplomats have related to Poloff in Costa Rica
    that the PRC was concerned that diplomatic recognition from other
    Latin American countries might damage their recently improved
    relations with Taiwan (Ref B).

    ¶4. (U) While Panama and Taiwan have full diplomatic relations, the
    PRC maintains only a trade mission in Panama.  The PRC  has
    important economic interests in Panama; Hong Kong-based companies
    operate two of the four ports on both the Atlantic and Pacific
    terminus of the Panama Canal and the PRC is the second most
    frequent user of the waterway.  The PRC is also the largest
    supplier of goods to the Colon Free Zone (CFZ), the world's second
    largest free trade zone.  Taiwan and Panama, meanwhile, signed a
    free trade agreement in 2003. The ethnic Chinese community in
    Panama remains publicly agnostic on the issue of official
    recognition for the PRC. "Chino-Panamanos" number between 130,000
    and 200,000 (roughly 4-6% of the population) and are ubiquitous in
    the convenience store or "mini-super" industry.

    Where Does the Money Go?

    ¶5. (U) Varela's confirmation of the renewal of ties with Taiwan
    came on the heels of Taiwan's gift to the GOP of a $22 million
    Embraer Legacy 600 executive business jet in December 2009.
    Martinelli had previously received criticism for his plans to
    purchase a new official jet, which ran counter to his campaign
    rhetoric indicating that, with an officially declared personal
    fortune of approximately $300 million, he would not need to charge
    the public treasury for executive travel. The government of Taiwan
    has historically used financial incentives to sweeten its
    relationship with Panama: political science professor Miguel
    Antonio Bernal estimated aid to be $125 million per year during the
    previous administration of President Martin Torrijos.
    Scholarships for study in Taiwan and grants to various ministries
    are among the ways Taiwan has donated to Panama.  Last year during
    an address to the Panamanian National Assembly, President Ma
    expressed interest in "project-based" aid, specifically mentioning
    planned improvements to Panama's mass transit system.

    ¶6. (U) The longstanding financial aid has been derided on both
    sides of the Pacific as "checkbook diplomacy" and there is a
    traditional lack of transparency in how the money received from
    Taiwan is spent.  Varela stated to Polcouns and the Ambassador that
    the money is simply deposited in the treasury. In mid-February of
    this year reports surfaced that former president Mireya Moscoso was
    facing investigation for the misuse of up to $70 million in funds
    from Taiwan.  Moscoso has denied any involvement in distribution of
    money received by Mar Del Sur, a foundation set up for the sole
    purpose of distributing Taiwanese funds.

    Comment

    ¶7. (C) The GOP decision to publicly back Taiwan is the result of
    financial incentives and a current lack of interest by the PRC.
    Martinelli seems to have been yearning for a dramatic diplomatic
    maneuver in pursuing recognition of the PRC but did not appear to
    have factored in the possibility that China would use (or, rather,
    not use) Panama for its own ends in improving its relationship with
    Taiwan.
    STEPHENSON

`