White House Rocked by Protests Against Unfair Colombia Trade Deal
Trade-ifact Part Deux

Wikileaks blows lid on Panamanian corruption

As Washington debates the NAFTA-style deal with Panama, Wikileaks has released a treasure trove of damning documents about the current Panamanian administration.

One of the major talking points that the trade deal's proponents utilize is that we must pass the trade deal to reward a key friend in the region. (See here and here.)

But with friends like Panamanian President Martinelli, who needs enemies?

In January 2009, the Embassy expressed concern that Panama's authorities supposedly in charge of providing the U.S. with intelligence "failed to provide" information about drug-related money laundering "to the Attorney General as required by law. Ambassador stressed that the credibility and efficacy of the UAF were crucial in fight against money laundering."

It gets worse. The man behind the money - David Murcia Guzman - has links to former Colombian president Alvaro Uribe, and current Panamanian president Ricardo Martinelli. According to this cable from March 2009, Martinelli's network of Super 99 stores may have been a "service provider" to Guzman, and may have laundered illicit proceeds.

The Embassy wrote, "This scandal is a huge black eye for Panama, and could do serious damage to its international reputation as a safe place to do business. And the worst is far from over."

But the Embassy made clear what its priority would be: "Given the explosive nature of the scandal, and the need to find scapegoats, Post is keeping a distance from both campaigns, so as not to provide the opportunity to tie the USG to events that may end up reshaping the electoral landscape and leave some political groups severely affected, and very angry."

Nice and principled stand, that.

A cable from July 2009 went even further, "There are signs that some newly appointed officials have questionable backgrounds that indicate that corruption may be a serious problem in the new government" - ahem, the government now in power.

These worries were compounded in October 2009, when the Embassy complained about Martinelli elevating an advisor who may have helped him cover up the Murcia Guzman scandal to Supreme Court. The Embassy wrote:

Jose Almengor is the Secretary for Security in the Ministry of the Presidency, and former lead drug prosecutor. He quit his job earlier this year, while investigating the actions in Panama of David Murcia, who has been convicted in Colombia of fraud and money laundering. ... "La Estrella" featured on a recent front page accusations that Almengor discovered information linking Martinelli to Murcia during his investigations, and suppressed it. According to these accusations, Almengor will be placed on the Supreme Court as a quid pro quo (septel)... This will perpetuate, or even worsen, the bad image of the judicial system, which is, according to global competitiveness rankings, the major drag on Panama's aspiration to become a first-world country. 

The Embassy reports in January 2010 that Almengor was indeed appointed, writing:

President Martinelli now controls the executive, legislative and judicial branches of government, and civil society and the media are up in arms.  Septel will detail the latest developments in Martinelli's quest to rein in the Attorney General's office, the last remaining independent government institution.

(Later news reports indicate that Almengor resigned earlier in 2011.)

What's that about an attorney general scandal? Wikileaks provides more. In October 2009, the Embassy reports on allegations that Martinelli pressured the country's independent attorney general Ana Matilde Gomez to prosecute his political rivals. She balked, and he reportedly made moves to remove her. “Gomez's dismissal by the Supreme Court would indicate inappropriate intervention by Martinelli in the independence of the judicial branch, and a serious setback for the development of democratic institutions in Panama," the Embassy wrote.

Then, in January 2010, the Embassy noted Martinelli's ongoing alleged harassment of Gomez, saying...

Why does it matter?  Panama has always squeaked by on mediocre institutions.  But mediocrity cannot withstand the rapid rise of violent crime related to narcotrafficking.  The security situation is at a tipping point.  Civil society professionals sense the urgency of the security problem and there is a greater demand than ever before for democratic institutions that work.

Finally, in February 2010, Gomez was indeed suspended by the Supreme Court. In a cable entitled "Martinelli's Wish is Supreme Court's Command," the Embassy wrote:

The costs to Panama of such actions are not likely to be confined to institutional or constitutional problems.  With the deterioration of Panama's judicial independence and a lack of ability to enforce contracts, Panama's business and investment climate will suffer.  We have seen in other countries in the region how deteriorating faith in democratic institutions has given rise to populist leaders who work to further erode those institutions as checks and balances.  We will coordinate closely with WHA on appropriate ways to signal USG support for strong democratic institutions.  As a modest first step, we propose declining an invitation for an embassy officer to speak at an upcoming conference aimed at increasing American investment in Panama - and explaining to the GOP why we are not currently able to champion Panama as a great place to invest.

Nice modest step. A real robust step would have been to refuse to finalize a NAFTA-style deal with Martinelli.

The Economist brings us up to speed on these developments:

On August 11th, Panama’s Supreme Court sentenced the attorney-general, Ana Matilde Gómez, to six months in prison for authorising wiretapping without Supreme Court approval during the investigation of a prosecutor accused of receiving a bribe. The judgment also disqualified her from holding public office for four years. The sentence was later reduced to a fine, equivalent to US$4,000, which Ms Gómez is refusing to pay, calling the ruling an injustice and a political failure, citing excessive executive control over the public ministry, which the attorney-general heads.

Ms Gómez has support from much of the press, as well as Panama’s main business organisation and, according to opinion polls, the public. The Supreme Court was split 5-4 on the ruling. Ms Gómez plans to appeal to the Inter-American Court of Human Rights (IACHR), the court of last resort in such cases.

For even more of the blow by blow, see reporting by Panama-based Eric Jackson.


The Embassy also noted more generalized concerns about Panama.

In March 2009, the Embassy notes, "should the GOP agree to immobilize bearer shares and/or regulate anonymous corporations, it would address their single area of FATF 40 9 non-compliance in the 2006 IMF/FATF Financial Sector Review and represent a significant step forward in achieving greater transparency."

That was then, this is now, when Panama has refused to immobilize bearer shares. The Obama administration took that deal and is moving forward with the trade deal, even though it will allow money launderers and drug barons continued tools to hide their identities.

An April 2009 cable notes the practice of Panamanian officials selling off flags of convenience to earn commissions. Panama is one of the world's top issuers of flags of convenience. This practice gives Panama enormous power, since the flag issuer nominally regulates what happens aboard those ships, and can either cooperate with the U.S. or not. Nothing in the FTA will clean this up.

In November 2009, the Embassy wrote of concern for increased drug trafficking the region:

Panama's territorial waters are one of the main trafficking routes in Central America, with recent estimates indicating that 2009 saw three times as much cocaine moving through Panama than in 2008, or more than 25% of all cocaine reaching Mexico transiting through Panama's waters. Drug trafficking organizations (DTOs) move drugs on short hops, requiring a sophisticated network of lookouts, refueling stations, and logistical support as loads are moved on to land and back to water.  The network is resulting in rampant corruption and a spiraling violent crime rate.  The GOP realizes it is losing control.

The next month, the Embassy noted the “the alarming trend of rapidly increasing narco-trafficking and the related violence” and complained about Israeli security firms getting in the way of cooperation with U.S. authorities. Even earlier, in August 2008, the Embassy reports that President Torrijos "noted that as Colombia continued its successes in combating the FARC, inevitably the FARC would become more active in Panama.  'If left unaddresssed, they (the FARC) will bring drugs, arms and crime to Panama,' the president explained." And in May 2007, the U.S. government heard concerns that more Panamanians could be displaced from agriculture if the FTA were to go into effect.

Seems like loss of legal jobs under the FTA would create incentives to move into illegal work, as even Colombia's government has noted.

To sum up, it would sure be useful to hear from our elected officials in public what they say in private. If we did, there might be less of a rush to sign a Panama trade deal, which will allow a corrupt Panamanian government or some of the shady 400,000 corporations registered in Panama to challenge U.S. laws for their own gain.

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Paco Alvarez

Before leaving his post the former U.S. Ambassador in Panama, Barbara J.Stephenson, met with senior government officials expressing concern that U.S. employers are being attacked by the Judicial System of Panama. These meetings are related to the increase of highly questionable court cases against employers, as determined by a variety of causes, namely, the pursuit of criminal cases, in addition to monetary civil cases. Although the ambassador made it clear that while the territory of Panama in American business must respect the laws of this country, according to a particular case of extreme caution.

Former Ambassador highlighted the case of a businessman who had a car accident four years ago, way to the airport and faces a $ 500,000 civil suit for damages. The driver of another vehicle was injured in the accident and three months later, a coroner came exactly 30 days disability making it a matter of the Transit Authority. However, the case ended up in municipal courts, where the chief justice is in-law and put an injunction on the employer. It is known that all forensic reports where the person has fully recovered were removed from the official record and only were those of his private doctor, Francisco Sanchez Cardenas.

Despite a fiscally that is not a criminal matter, and at least three appeals by the same public prosecutor is still waiting for a response to cancel the charge if the judge ordered the businessman to one year in prison. The annulard provides resources for the public prosecutor are excessive power and even the accused has not been notified of the hearing.

The new ambassador, Phyllis Powers, clearly stated the increase of such complaints and said that was adversely affecting the ability of American business investment and relations during the confirmation hearing of the Free Trade Agreement to Congress. U.S. businessmen are warning of the judicial system in Panama openly and many do not want to get away.

It is clear that this concern is rooted directly in the U.S. Congress, which has the task of ratifying the FTA between the U.S. and Panama.

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