Assistant Secretary of State for International Narcotics
and Law Enforcement Affairs
Remarks before the Criminal Justice, Drug Policy and Human
House Committee on Government Reform
Washington, DC, June 9, 2000
Counternarcotics Cooperation With Panama
Mr. Chairman and Members of the Subcommittee on Criminal Justice, Drug Policy and Human Resources: I want to thank you for this opportunity to speak to you today about Panama, and in particular the narcotics trafficking situation. Panama's shared border with Colombia leaves it vulnerable to narcotics trafficking, and, of greatest concern, incursions into the Darien Province by Colombian guerillas and narcotraffickers. It is arguably one of the most strategically located countries in the Western Hemisphere for drug trafficking and other organized criminal activities. Panama's location between South and North America, its long coastlines, its border with Colombia, and the Panama Canal make the country a key staging point for drug shipments and insurgent unrest originating in Colombia. It is crucial therefore that we remain committed to a partnership that promotes security for both the U.S. and Panama.
II. From MCC to FOL
Regarding the Panama Canal turnover and the U.S. military pull-out, while these changes caused operational difficulties for the U.S. in conducting regional detection and monitoring (D&M) operations, other forms of ongoing U.S. counternarcotics support provided by U.S. Southern Command and Joint Interagency Task Force South have been unaffected. Support was simply relocated to Florida. To address the problems relating to D&M operations, the Department of State, at DoD's request, initiated negotiations with a number of countries in the region to establish Forward Operating Locations (FOLs).
In June 1996, as part of ongoing negotiations regarding a possible post-1999 U.S. military presence, then-President Perez Balladares of Panama proposed a Multilateral Counternarcotics Center (MCC) to be based at Howard Air Force Base. The USG welcomed the idea of the MCC, but indicated to the Perez-Balladares government that, beyond using Howard as a platform for counternarcotics interdiction for a period of at least 12 years, the USG would require its use for training, regional logistics, search and rescue activities, and other related missions. We could not justify the cost of maintaining the base itself and the personnel, equipment, and resources necessary to do the counternarcotics task without the ability to carry out these other activities. Though the Government of Panama gave some initial indications that it could agree with our requirements, after a referendum on presidential re-election failed in August 1998, a politically weak Perez Balladares asked that we end the talks. Accordingly, we issued a joint statement ending negotiations on September 24, 1998. In the end, our need for a cost-effective presence -- meaning one that permitted a full range of missions at Howard -- could not be reconciled with Panama's political requirements. Following the failure of the MCC negotiations, DoD went forward with plans to complete withdrawal from U.S. military facilities in Panama before December 1999. The last major facility transferred to Panama was Howard AFB in November 1999.
In the wake of the failure of MCC discussions and in view of the scheduled cessation of counterdrug activities from Howard AFB, DoD determined that U.S. counterdrug aerial tracking and monitoring capabilities in the narcotics source and transit zones would suffer significant degradation unless FOLs could be quickly negotiated elsewhere in the region. (Note: FOLs are not military bases nor a substitute for an MCC. They represent the deployment of limited numbers of U.S. personnel, equipment, and aircraft to locally controlled airfields, for the sole purpose of supporting aerial counterdrug missions).
Under a DoD plan, operational/logistical support to aerial counterdrug missions by several USG agencies (DoD, DEA, USCG, and Customs) would be maintained by having authorized access to and use of existing (and improved) airport facilities in selected countries. DoD identified the primary FOL sites to be Manta, Ecuador, the Netherlands Antilles (Curacao) and Aruba, and an unspecified Central American site (which later became El Salvador). DoD planned and used Roosevelt Roads, Puerto Rico, and U.S.-based locations as interim FOL sites until agreements on the primary sites were concluded and those facilities were operational.
Before Howard AFB completely ceased flight operations in May 1999, we concluded interim access and use agreements with Ecuador and with the Netherlands allowing us to begin expeditionary operations from Manta, Ecuador and Curacao/Aruba shortly thereafter. Since that time, the U.S. has made significant progress toward finalizing long-term agreements which are already enhancing our capabilities. In November 1999, we successfully negotiated and signed a 10-year agreement with Ecuador for use of the Manta airfield. And in March 2000, we negotiated and signed long-term agreements with the Netherlands for use and access of air facilities on Curacao and Aruba, and with El Salvador for use and access to Comalapa Air Base.
III. Current Drug Threat
Panama was fully certified as cooperating with the United States on counternarcotics in 1999. While Panama is not a significant producer of drugs or precursor chemicals, due to its strategic location, advanced transportation infrastructure, and financial development, it serves as a crossroads for transnational crime, including drug trafficking and money laundering. Panama's long land border and shared sea-lanes with Colombia, and its extensive Caribbean and Pacific coastlines make land and sea interdictions a major challenge. The Panama Canal, container seaports, the uncontrolled Colon Free Zone, the beginning of the Pan American Highway, an international hub airport, and numerous uncontrolled airfields create unlimited transportation options for drug traffickers. Accordingly, Panama has become a major transshipment point for illicit drugs smuggled from Colombia into Panama via "go-fast" boats, by containers transported by maritime cargo vessels that transit the canal or off-load in Panama's ports, by private and commercial overland vehicles, and aboard private and commercial aircraft. Colombian cocaine is in turn often stockpiled in Panama and repackaged for further shipment to the U.S. and Europe. Panama is also extremely vulnerable to money laundering due to its international banking sector, the Colon Free Zone, and the U.S. dollar-based economy.
Colombia Spillover Effects
Panama continues to be a major drug transit country because of its proximity to the world's largest cocaine producer. The situation in Colombia is critical for the surrounding region. Colombia is increasingly threatened by well-armed and ruthless narcotics traffickers that are supported by guerrillas and paramilitaries. Not only is the Colombian Government unable to exert effective control over thousands of square miles of its own territory, but the border areas of neighboring countries are put at risk by the instability and violence as well. The corrosive powers of narcotics and narcotics money are ever-present threats to the institutions and economies of the entire region.
Spillovers into Panama are becoming a routine occurrence. Last week for example, the Panamanian Security Council confirmed the incursion of about 70 armed rebels into Panama's Darien province. The villages entered were not occupied nor were any acts of violence committed against the public. However, as a result, police were transferred from other areas to Darien to increase resident security. Pablo Quintero Luna, Executive Secretary of the Security Council described the Colombia/ Panama border situation as "delicate."
Earlier this week, another incursion into Panama's Darien Province was reported, this time by alleged Colombian paramilitaries. Six heavily armed men robbed two stores in the Punta Alegre sector for cash, food, and equipment. Police were alerted but failed to respond due to the lack of necessary weapons. Forest engineer Luis Quinto, who works for the National Environmental Authority, confirmed the incursion and said that the security in the area is precarious due to the paucity of police units to counter these groups.
The situation in Colombia poses a considerable number of direct threats to U.S. national security interests, including the thousands of Americans killed by drugs and drug-related violence each year, losses to our economy from drug-related accidents, inefficiency in the workplace, and the social and human costs of abuse and addiction. After strained relations with the tainted Samper administration, President Pastrana's tenure, and the proposed funding included in Plan Colombia offer the United States and Panama a golden opportunity to work with Colombia to confront such threats.
Panama is a party to the 1988 UN Drug Convention, the 1961 UN Single Convention and its 1972 Protocol, and the 1971 UN Convention on Psychotropic Substances. A mutual legal assistance treaty and an extradition treaty are in force between the U.S. and Panama, despite Panama's law prohibiting the extradition of its own nationals. Panama has its own 5-year national drug strategy focusing on prevention, treatment, and law enforcement.
Panama's law enforcement agencies maintain excellent relations with their U.S. counterparts and have demonstrated willingness and interagency cooperation. In 1999, the U.S. and Panama carried out four coordinated counterdrug operations. The Technical Judicial Police and the Panamanian National Police executed three major joint interdiction operations along the Costa Rican border against alien smugglers and drug traffickers.
The Moscoso administration took office in September 1999 and immediately made changes in the leadership of the law enforcement establishment. In addition to ministerial changes, the Director General of the National Panamanian Police, the Director of the National Air Service, and the Director of the Joint Information Coordination Center were replaced. Throughout these changes, and despite difficulties resulting in overall internal law enforcement relations, the Moscoso administration has displayed apparent commitment to counternarcotics efforts. In 1999, Panamanian law enforcement agencies seized 2.5 metric tons of cocaine, over a metric ton of marijuana, approximately 60 kilograms of heroin, 600 liters of acetic anhydride, and over $2.5 million.
Between 130 and 150 suspects were arrested for drug-related offenses. Although 1999 cocaine seizures declined from record 1997-98 seizures, analysts believe the drug flow remains extremely high. Decreased seizures are attributed to changes in drug trafficking patterns from overland to maritime routes and the seizures of several multi-ton cocaine loads during the previous 2 years. (During the first weekend in June alone, Panamanian authorities seized nearly 700 kilograms of cocaine, in part through cooperative assistance provided by U.S. law enforcement agencies.)
In contrast to the number of 1999 cocaine seizures, heroin seizures continue to increase, further establishing Panama as a principal link in the chain that funnels Colombian heroin to the U.S. Approximately 44 kilograms of heroin were seized in Panama in 1999. South American heroin is typically smuggled through Tocumen International Airport by means of false-bottomed suitcases and couriers who often switch identification upon arrival.
Law Enforcement Bilaterals
At the request of the Moscoso administration, the U.S. and Panama began law enforcement bilateral discussions on November 23, 1999. Earlier this week, the Government of Panama hosted the second round of law enforcement bilaterals. The issues discussed included law enforcement, specifically drug interdiction cooperation, alien smuggling, money laundering, and judicial reform. In addition to these issues, this particular round of bilateral discussions was concluded with the signing of a Stolen Vehicle and Aircraft Treaty. This further illustrates Panama's commitment to building successful law enforcement and justice institutions and enhancing bilateral cooperation beyond counternarcotics.
Major efforts were put forth by the U.S. delegation to further negotiations for a comprehensive six-part bilateral maritime agreement similar to agreements already established with Costa Rica and Honduras. A comprehensive maritime agreement is vital to Panama and the U.S. in stemming the flow of drugs. Negotiations should be concluded this year and will include authorization to board Panamanian-flagged vessels in international waters that are suspected of being involved in drug trafficking.
Although the six-part maritime agreement has not been formally approved, Panamanian law enforcement agencies continue to cooperate with their U.S. counterparts to coordinate current drug investigations. Moreover, on September 24, 1999, Panama and the U.S. signed a "letter of understanding" that allows the Coast Guard Services of both nations to work together to seize drugs off the Panamanian coast and on the high seas.
Of notable success are the interdiction efforts by Panama's National Maritime Service (SMN). The SMN made numerous seizures of drugs, precursor chemicals and go-fast boats and despite pending negotiations of the proposed six-part bilateral agreement, the SMN cooperates extensively with the U.S. Coast Guard. The SMN in turn receives training, technical assistance, and professional exchanges from the U.S.
We are also beginning to work with the private sector in Panama under our Americas Counter Smuggling Initiative. Under this program, Customs teams are set to the key source and transit countries to work with the manufacturers and transportation companies to seek to prevent the use of legitimate shipments for the transport of narcotics. It is our hope that the companies will set up Business Anti-Smuggling Coalitions and seek to upgrade their security and other prevention techniques. A team just returned from Panama.
While cooperation on money laundering improved significantly with the new administration, the investigation of money laundering offenses remains constrained by laws requiring prosecutors to tie money laundering directly to drug trafficking. This is difficult in a country where non-drug money laundering, specifically tax evasion, is pervasive. Formal anti-money laundering mechanisms are in place, but the ability to identify, investigate, and prosecute money laundering offenses consequently suffers from an inadequate legal framework. U.S. Government officials are encouraging the Panamanians to seek legal reform that would extend the existing money laundering law beyond the laundering of drug proceeds to include the proceeds of other serious crimes. We are also urging them to pass legislation that would permit the Financial Analysis Unit (FAU) to share information with the foreign financial intelligence units. The FAU, created in 1995 with U.S. support, started receiving suspicious transaction reports in 1996 and began analyzing them for drug money laundering connections in 1997. Panamanian law, however, does not allow the FAU to share information with foreign financial intelligence counterparts. As a result, Panama is currently being investigated by the Financial Action Task Force (along with 31 other jurisdictions) as a potentially non-cooperative jurisdiction.
Panama, and specifically the uncontrolled Colon Free Zone, is an especially attractive site for the Colombian Black Market Peso Exchange (BMPE). This is a complex process in which traffickers sell U.S. dollars to a U.S. foreign currency broker at a discount. The broker then repays with pesos in Colombia. Panama recently became a member of the multinational Black Market Peso Exchange Initiative, which met recently for the first time. We continue to encourage such cooperative efforts and active participation by the Government of Panama.
Regarding asset forfeiture, Panama currently possesses the legal means needed to seize drug-related assets. The National Commission for the Study and Prevention of Drug Related Crimes (CONAPRED) is responsible for the distribution of forfeited property to various government agencies for drug prevention, rehabilitation, and law enforcement. Nevertheless, Panama does not have legislation that permits the sharing of such assets with foreign counterparts; rather, this issue is addressed on a case-by-case basis. The U.S. is in the process of drafting a proposed reciprocal asset-sharing agreement that will formalize such a process.
IV. Other Serious Crimes
Although Panama is not a significant source country for immigration into the U.S., it is a major transit point in the movement of illegal migrants en route to the United States. The movement of these migrants is facilitated through a large network of individuals engaged in human smuggling. The smugglers operate not only at a regional level but internationally as well. Migrants from countries such as Colombia, Ecuador, Peru, Cuba, India, and the Peoples Republic of China (PRC), are brought into and through Panama by various smuggling networks, which operate throughout the country. Human smugglers in Panama have prospered by conducting high profit/low risk operations.
Strict enforcement and prosecution of individuals engaged in smuggling operations is required to eliminate this illegal activity. To do this, the Government of Panama needs to make alien smuggling a higher priority and strengthen its existing alien smuggling legislation.
While enforcement and prosecution of smugglers is not an absolute solution to the problem, it is a major step in the right direction. Corruption of government officials, who provide passports and visas, hinders enforcement efforts. Also, poorly paid immigration inspectors and border guards, who perceive alien smuggling as a victimless crime, are easily bribed to assist smuggled aliens who are "only passing through." Elimination of this type of corruption is also required to stem the flow of alien smuggling operations.
Additionally, developing cooperative efforts to identify smugglers, the methods of operation, and smuggling routes can be accomplished through regional networking. The network between Latin American countries has already been established through the creation of the PUEBLA Process. Regional communication throughout Latin America to coordinate enforcement strategies and to raise social awareness of the dangers of alien smuggling need to continue to make the process a success.
According to U.S. law enforcement and insurance agencies, Panama has become an important destination for vehicles stolen from the U.S. Some of these vehicles are transported to Panama for the local market, while others are routed there for transshipment. For more than 2 years the U.S. and Panama negotiated the text of a treaty for the repatriation of stolen vehicles and aircraft. The discovery in 1999 that the Panama chief negotiator was driving a Mercedes that had been stolen in Miami embarrassed Panama into serious action. The official was removed and agreement on a treaty text was speedily reached. It was recently signed at the second U.S.-Panama Law Enforcement Bilaterals held in Panama City.
A Technical Judicial Police (PTJ) report links stolen vehicles to drug trafficking. It highlights Central America as a transit zone by Colombian drug traffickers using stolen vehicles to transport drugs. Drug traffickers using land routes use primarily trailer trucks and Sports Utility Vehicles (SUVs). PTJ investigations determined that three Panama-based organizations use SUVs to transport drugs. The PTJ reports that drug dealers also steal vehicles to transport drugs. In September 1997, the PTJ Stolen Vehicle Section confiscated four stolen vehicles purchased by drug traffickers to transport drugs. By 1999, they had confiscated 49 vehicles stolen only to transport drugs.
In addition to signing the Stolen Vehicle and Aircraft Treaty, Panama would benefit from the establishment of regulations to define procedures for dealing with stolen vehicles and their purchasers. Falsification of documents specifically relating to stolen vehicles should be criminalized.
The incursion of Colombian guerrillas, paramilitary groups, and drug traffickers have increased Panamanian awareness of the security dangers facing their country. The public awareness of such security issues and the apparently cooperative Moscoso administration improve the prospect for bilateral cooperation between Panama and the U.S. This was made evident by the recent law enforcement bilateral meetings hosted by Panama.
The return of the Canal to Panamanian control changed the relationship between Panama and the U.S., arguably for the better. A major benefit was that it opened the way for a greater sense of partnership by putting an end to contention over the Canal.
Panama faces complex and daunting problems, not only those emanating from the Colombian crisis, but also others that are outgrowths of institutional weaknesses. Our challenge, as a neighbor and partner, is to identify ways in which we can assist Panama in resolving its narcotics-related and other problems. At this moment, Panama is a partner who shares our counternarcotics concerns and possesses the will to proceed with needed reforms, bilateral agreements, and operations.
I look forward to working closely with Congress as we continue to address these critical issues.