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Panama's “Blackmail” and “Threats” Against the US: Can Panama be Trusted?

By signing a weak Tax Information Exchange Agreement (TIEA) with the U.S. last month, Panama has tried to portray itself as finally coming out of the tax haven shadows so that Congress will approve the Panama FTA. Despite the signing of the TIEA, there still remains the question of whether Panama will faithfully implement the TIEA over the next year. Accumulating evidence suggests we can't trust the government of Panama to end its status as one of the largest tax havens in the world.

This Sunday, the New York Times reported on how the Panamanian President, immediately after being elected in July 2009, attempt to coerce the U.S. Drug Enforcement Administration (DEA) into using its wiretapping technology to wiretap his political opponents:

The United States, according to the cables, worried that [Panamanian President Ricardo] Martinelli, a supermarket magnate, “made no distinction between legitimate security targets and political enemies,” refused, igniting tensions that went on for months.

Mr. Martinelli, who the cables said possessed a “penchant for bullying and blackmail,” retaliated by proposing a law that would have ended the D.E.A.’s work with specially vetted police units. Then he tried to subvert the drug agency’s control over the program by assigning nonvetted officers to the counternarcotics unit.

And when the United States pushed back against those attempts — moving the Matador system into the offices of the politically independent attorney general — Mr. Martinelli threatened to expel the drug agency from the country altogether, saying other countries, like Israel, would be happy to comply with his intelligence requests.

The New York Times' reporting is based on several secret diplomatic cables recently released by Wikileaks. One cable dated August 2009 offered a frank assessment of President Martinelli's attitude toward following the law:

Martinelli's seeming fixation with wiretaps and his comments to [the U.S.] Ambassador during an August 12 meeting demonstrate that he may be willing to set aside the rule of law in order to achieve his political and developmental goals....He chided the Ambassador for being "too legal" in her approach to the issue of wiretaps.

On other matters of law such as drug trafficking itself, the diplomatic cables paint a dark view of the Panamanian government, noting that each month President Martinelli's cousin helps smuggle millions of dollars of drug money through Panama's main airport. Since President Martinelli apparently can't be bothered to follow the laws of his own country, how can his government be trusted to follow an international agreement and help the U.S. government ferret out tax dodgers?

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