Panama

I. Summary

The Government of Panama (GOP) has continued to demonstrate its willingness to cooperate with the U.S. Government (USG) and the international community in combating drug trafficking, money laundering, and other transnational crimes. In 2001, the GOP seized significant amounts of illicit drugs, particularly heroin and MDMA ("ecstasy"), even though drug traffickers varied their smuggling routes and methods to avoid detection. Panama continued to implement the anti-money laundering legislation and executive decrees passed in 2000 and to increase cooperation in regulating and interdicting precursor chemicals. Panama is a party to the 1988 UN Drug Convention.

Panama’s location as a country bordering Colombia and a land bridge to the rest of Central America, as well its advanced infrastructure and well-developed financial services sector, make the country a strategic transshipment point for illicit drugs smuggled from South America to the United States and other international markets. Panama is vulnerable to a wide range of transnational crimes, including drug trafficking, money laundering, illicit arms sales, stolen vehicle trafficking, and alien smuggling. Panama’s police and investigative resources are capable yet limited, and its judicial and penal systems are underdeveloped. Panama’s geography and infrastructure provide organized crime groups virtually limitless options to transport illicit narcotics. In 2001, Panama’s international banking center, the Colon Free Zone (CFZ), and its U.S. dollar-based economy continue to attract money launderers in spite of the Moscoso administration’s upgrading of its money laundering laws and regulations and efforts to enhance information sharing with other nations.

II. Status of Country

Panama’s proximity to the world’s largest cocaine producer, its vast maritime industry, containerized seaports, the Pan-American Highway, international hub airport, numerous uncontrolled airfields, vast coastline, and limited control of its borders has continued to make Panama a major drug-transit country. Domestic drug abuse continued to be a problem for Panama in 2001 with the emergence of ecstasy as an increasingly abused recreational drug. Panama is not a significant producer of drugs or precursor chemicals, although coca and marijuana are cultivated in small amounts. Panama’s large and sophisticated banking and trading center, and its dollar-based economy make it an attractive site for money laundering, especially through the Colombian Black Market Peso Exchange (BMPE) mechanism. The Moscoso administration took steps to enhance Panama’s measures to combat money laundering in 2001 (see Money Laundering Section). Panama is a member of the Egmont Group (an alliance of 30 nations with centralized financial intelligence units) and the Caribbean Financial Action Task Force (CFATF).

III. Country Actions Against Drugs in 2001

Policy Initiatives. The National Commission for the Study and Prevention of Drug-related Crimes (Commission Nacional Para El Estudio Y la Prevencion de Los Delitos Relacionados con Droga, or CONAPRED), Panama’s national drug policy office, established the Chemical Control Commission (CCQ), an interagency precursor chemical control agency, in 2000. In 2001, with the assistance of the U.S. Embassy’s Narcotics Affairs Section (NAS), the CCQ moved into its new quarters, integrating representatives from the three principal GOP entities regulating chemical control: the Ministry of Health, the Judicial Technical Police (PTJ) (Panama’s equivalent to the U.S. FBI), and Panamanian Customs. CONAPRED also brought together a wide range of government and private sector experts to draft Panama’s 2002 to 2007 national drug strategy. With assistance from the USG, the Ministry of Government and Justice’s National Criminal Statistics Analysis Agency (CONADEC) significantly upgraded its data input and analysis ability and established three new offices, including an office in oft-neglected Darien Province.

Accomplishments. Through CONAPRED and under the authority of the Attorney General, Panama continued to implement the National Drug Strategy 1996-2001, its national counternarcotics plan. This program coordinates GOP and NGO efforts and emphasizes prevention, treatment, rehabilitation, supply control, and interdiction. In 2001, CONAPRED worked closely with the NGO Cruz Blanca, the Ministry of Education, and the Embassy’s NAS to conclude a major epidemiological study of factors that put youth at risk for drug abuse. In August 2001, Panama’s Banking Association, with strong support from Panama’s Banking Superintendency and Financial Analysis Unit (FAU), hosted the Fifth Hemispheric Congress on the Prevention of Money Laundering. Panama’s Public Ministry hosted both the hemispheric Heads of National Law Enforcement Agencies (HONLEA) conference and the Central American International Drug Chiefs Conference in 2001.

Law Enforcement Efforts. DEA-monitored illicit drug cases and statistics through December 2001 show seizures of 4,118 kilograms of cocaine, 513.5 kilograms of marijuana, 514 kilograms of heroin, 22,169 tablets of ecstasy, and 217 arrests for international drug-related offenses, as well as 2.5 million in currency seizures. Trafficking groups have employed more sophisticated methods and a higher degree of operational security to elude detection in Panama. As a result, most of the large seizures in 2000 and 2001 resulted from intelligence-driven investigatory efforts, rather than random interdiction, and demonstrated both the increasing operational capabilities and the spirit of cooperation among Panama’s law enforcement agencies.

Heroin and ecstasy seizures for 2001 are at the highest recorded levels. The increase in heroin seizures is largely a result of the demand for Colombian heroin, coupled with a highly effective drug interdiction program at Panama’s international airports. Seizures of heroin, in multi-kilogram quantities, and heroin repackaging facilities underscore Panama’s key role in the transfer of heroin from Colombia into the United States. The exponential leap in ecstasy seizures indicates that Panama is emerging as an important transit center for ecstasy.

The Public Ministry’s Drug Prosecutor’s Office (DPO) remains a respected entity for combating narcotics-related crimes and a principal coordinator of Panama’s public forces’ counternarcotics investigative resources. The DPO’s cooperative efforts with U.S. law enforcement agencies are excellent and extensive. Panama’s National Police (PNP) Directorate of Information and Intelligence (DIIP) and its Anti-Drug Sub-Directorate (DAD) are extremely effective drug investigative units. The PNP/DAD was responsible for the majority of the illicit drug seizures made in 2001. The PNP assumed an increasingly important role in organizing and executing operations on the national and regional level.

The PTJ’s counternarcotics division’s bilateral cooperation with the United States has continued to be excellent and expanded to include establishment of an elite vetted unit. In 2001, Panama’s Tocumen International Airport drug interdiction unit, composed of representatives from the PNP, PTJ, and Panamanian Customs, accounted for record seizures of heroin, significant seizures of currency and cocaine, and arrests of international drug couriers.

The National Maritime Service (SMN) had some moderate success in interdicting illicit narcotics. The SMN worked with the National Air Service (SAN), the PNP, the PTJ, the DPO, and its U.S. counterparts. The presence of U.S. Coast Guard (USCG) training personnel assigned to live and work with the SMN has promoted an invaluable professional exchange that aided the SMN in a broad spectrum of law enforcement and shipboard-related skills.

The SAN continued to provide excellent support for counternarcotics operations despite limited air assets, continuing problems with maintenance and spare parts procurement, the strain of a heavy commitment to support the Darien Province border police, and internal management problems. The SAN’s efforts contributed to the eradication of 35,000 marijuana plants in 2001. The SAN continued to respond rapidly to U.S. law enforcement requests to overfly and photograph suspect areas and to identify suspect aircraft in flight or on the ground. The SAN provided crucial logistical support that enabled the USCG, assisted by the SMN and the PNP, to transfer detainees and drug evidence through Panama to U.S. jurisdiction. The SAN and the PNP also continued to cooperate in the surveillance of areas of potential coca and marijuana growth.

Precursor Chemicals. Panama is not a major producer or significant consumer of chemicals used in processing illegal drugs, but a large volume of chemicals transits the CFZ for other countries. In 2001, Panama further developed its regulatory/enforcement infrastructure to control the use and shipment of precursor chemicals with the assistance of the United States and the Inter-American Drug Abuse Control Commission (CICAD). The GOP also established an interagency precursor chemical control board that is responsible for the coordination of chemical control between four GOP entities and the private sector. In September 2001, under the direction of the Public Ministry’s CONAPRED, the GOP inaugurated the new offices provided by the USG for the multi-agency CCQ. The unit is staffed by members of the PTJ, Panamanian Customs, and the Ministry of Health.

Asset Forfeiture. Panama’s legal system authorizes asset forfeiture, including a system for identifying and forfeiting narcotics-related assets. Through seizure actions the PTJ, the PNP, and other GOP law enforcement agencies have acquired numerous vehicles. Panama has not specifically enacted legislation authorizing it to share seized narcotics assets with other governments, but the GOP has shared assets with other countries individually. Building on negotiations between the U.S. Department of Justice and the Office of Panama’s Attorney General, the USG developed a draft asset-sharing agreement that was provided to the GOP in 2000. This agreement would permit asset sharing in the multi-million dollar Gonzalo Rodriguez Gacha case, should that case result in forfeiture to Panama, as well as other major cases. The United States continues to await a response from the GOP to our follow-up inquiries about the draft agreement.

Money Laundering. Money laundering cooperation with the Moscoso government has notably improved. The GOP has actively implemented its anti-money laundering laws, as strengthened in 2000, criminalizing the laundering of proceeds from a series of serious crimes, including illegal arms trafficking, trafficking in persons, kidnapping for profit, extortion, criminal fraud, corruption of public servants, and theft and sales of stolen cars. The GOP’s Financial Analysis Unit (FAU) concluded an informal information-sharing arrangement with U.S. FINCEN, under which the two financial intelligence units (FIUs) have shared information through letters of exchange on a case-by-case basis. The FAU has signed or is in the process of negotiating memoranda of understanding (MOUs) with several other countries. For example, MOUs have been signed with Belgium, Colombia, and France. Negotiations of MOUs are pending with countries such as Mexico and Costa Rica.

Application of this strengthened legislation, coupled with the increase in resources to the FAU and the enhanced efforts toward international cooperation were instrumental in the Financial Action Task Force’s (FATF) June 2001 decision to remove Panama from the list of countries that were not cooperating in the international fight against money laundering.

Corruption. As a matter of government policy and practice, Panama does not encourage or facilitate the illicit production or distribution of drugs or the laundering of proceeds from illegal drug transactions. No senior official of the GOP engages in, encourages, or facilitates the illicit production or distribution of such drugs or substances, or the laundering of proceeds from illegal drug transactions. Corruption, facilitated by weak and uneven enforcement, is the major impediment to law enforcement efforts. These enforcement factors inherently foster individual corruption and make it challenging to develop long-term criminal investigations against top-echelon drug and money laundering violators. On July 23, 2001, the GOP hoped to remedy the situation when it passed a new law that modifies Panama’s judicial and penal codes by increasing penalties for corrupt practices and, in some cases, more than doubling previous penalties. President Moscoso signed a new Law backed by Transparency International at the end of January 2002 which provides free access to government records, similar to the USG’s Freedom of Information Act. The legislation also establishes the qualifications, as well as the chain of command, for an Anti-Corruption Czar.

Nevertheless, much remains to be done. The GOP has still not filled the Anti-Corruption Czar position, which falls under the Ministry of Economy and Finance and has been vacant for over a year. President Moscoso offered the position to several highly qualified candidates during the year, but all declined. Many believe that for the Anti-Corruption Czar to be truly effective, the position should be at the cabinet level and have the authority to investigate independently from the direction of a specific ministry. This would require re-structuring the current position.

Agreements and Treaties. Panama is a party to the 1988 UN Drug Convention, the 1961 UN Single Convention on Narcotic Drugs, the 1972 Protocol amending the 1961 UN Single Convention, and the 1971 UN Convention on Psychotropic Substances. A mutual legal assistance treaty (MLAT) and an extradition treaty are in force between the United States and Panama, although the Panamanian constitution does not permit the extradition of Panamanian nationals. In 1999, the USG concluded a customs mutual assistance agreement with the GOP.

In September 2001, Panama and the United States exchanged instruments of ratification for the bilateral stolen vehicles treaty signed in June 2000. Comprehensive implementing legislation must still be introduced into the Legislative Assembly. In 1991, the USG and the GOP signed a maritime operations agreement, which included provisions for shipriders and USCG support and assistance to the SMN. In October 2001, a supplementary arrangement to the 1991 agreement, a bilateral six-part maritime agreement between the USG and GOP was initialed. The agreement was signed and entered into force on February 5, 2002. This supplementary agreement will solidify the excellent level of bilateral maritime and air interdiction cooperation.

The GOP participates in CICAD, CFATF, the Black Market Peso Exchange Working Group, and the Basle Committee’s Offshore Group of Bank Supervisors. In 1997 Panama joined the Egmont Group, becoming the group’s first Latin American participant. As noted above, the GOP’s Financial Analysis Unit (FAU) concluded an information-sharing arrangement with U.S. FINCEN, and the FAU has signed or is in the process of negotiating memoranda of understanding with several other countries.

Panama has bilateral agreements on drug trafficking with the United Kingdom, Colombia, Mexico, Cuba, and Peru. In addition to the United States Panama has MLATs with the UK, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. Panama signed the UN Convention against Transnational Organized Crime, the Protocol to Prevent, Suppress and Punish Trafficking in Persons, and the Protocol against the Smuggling of Migrants in December 2000. Panama signed the Protocol against the Illicit Manufacturing of and Trafficking in Firearms on October 5, 2001. The GOP is a party to the Inter-American Convention Against Corruption and in 2001 signed the consensus agreement on establishing a mechanism to evaluate compliance with the Convention.

Cultivation/Production. Aerial reconnaissance by the SAN in 2000 and 2001 indicates the presence of suspected small coca fields in one of the areas where coca plants previously were eradicated. Efforts are underway to confirm the existence of reported coca cultivation and cocaine laboratories in Darien Province. There are limited amounts of marijuana cultivated to supply the local market and a small amount of marijuana grown in Perlas Islands is exported. Both the SAN and PNP investigate areas of potential cultivation and have eradicated marijuana when it is found. In 2001, a combined SMN, SAN, and PNP element eradicated 35,000 marijuana plants on Isla del Rey and Isla Pedro Gonzalez.

Drug Flow/Transit. Panama is a key center for the transit and distribution of South American cocaine and increasingly, precursor chemicals, heroin, and ecstasy. Fishing vessels, cargo ships, small aircraft, and go-fast boats transit Panamanian waters and airspace, continuing on to other Central American countries or dropping off their cargo in Panama. Shipments dropped off in Panama are repackaged and moved northward on the Pan-American Highway or shipped in sea freight containers. Small, low-flying planes were reported entering Panamanian airspace and dropping drug loads in remote and sparsely populated areas. Couriers transiting Panama by commercial air flights continued to move increasing amounts of cocaine and heroin to the United States and Europe.

Domestic Programs (Demand Reduction). In 2001, Panama continued to implement CONAPRED’s counternarcotics plan and to design its next five-year counternarcotics strategy. The Ministry of Education and CONAPRED, supported by U.S. funding, promoted demand reduction through training for teachers, information programs, counternarcotics abuse training for youth, and school curriculum programs. CONAPRED and the Embassy’s NAS also supported the Ministry of Education’s National Drug Information Center (CENAID) in 2001. These efforts were integrated with the Ministry of Health’s treatment and rehabilitation programs and those of the Catholic Church, local NGOs, and the University of Panama. Hogares Crea (a local NGO) expanded the long-term rural rehabilitation center established in 2000.

Working with the Embassy’s NAS, the Ministry of Education, and the NGO Cruz Blanca, CONAPRED administered a comprehensive epidemiological survey to 5,000 children in Panama City, Colon, David, and Bocas del Toro to identify factors that put youth at risk for drug abuse and links between those factors and violence, family break-up, and other social problems. The preliminary survey results demonstrate that risk factors can be identified and that children with significant risk factors are likely also to have serious drug abuse and other social problems. The GOP will continue to analyze the results in detail in 2002 to determine how the data can be used to improve drug abuse prevention education and drug abuse rehabilitation programs.

IV. U.S. Policy Initiatives and Programs

The U.S. provided crucial equipment, training, and information to enhance the performance of GOP counternarcotics and law enforcement institutions in 2001. These U.S.-supported programs are aimed at: improving Panama’s abilities to investigate and prosecute illegal drug trafficking and other transnational crimes; strengthening Panama’s judicial system; assisting Panama to implement its drug abuse prevention program; encouraging the enactment of more effective laws and regulations covering counternarcotics, money laundering, alien smuggling, stolen vehicle trafficking, and corruption; improving Panama’s border security; and ensuring strict enforcement of existing Panamanian laws.

The USG, through USAID, is assisting the GOP to develop an Administration of Justice (AOJ) program to strengthen law enforcement and judicial institutions and procedures. This program addresses reduction of pre-trial detention, and the use of alternative dispute resolution for commercial disputes. The AOJ program also works to promote civil society involvement in the reform process.

During 2001, the USCG worked closely with the SMN, enhancing its effectiveness as a maritime interdiction force. The SMN received its fourth and fifth (final) 82-foot patrol boats, which the United States provided under a 2000 Memorandum of Understanding (MOU). That MOU also provided for the transfer of vans for Panamanian Customs. In 2001, the USCG established and completed four three-week 82-foot patrol boat courses, two of which had international students from Colombia and Costa Rica. The United States traditionally has had an excellent relationship with Panamanian Customs, and the United States has provided Panamanian Customs with training, operational tools, and a canine program that has become a linchpin of the Tocumen International Airport drug interdiction law enforcement team. Transfer of the USCG 180-foot buoy tender "Sweetgum" to the SMN will take place February 15, 2002.

The Office of Defense Cooperation received $590,000 in Foreign Military Financing in 1999, which is being used to help the SMN establish an Atlantic base, procure much-needed repair parts for boats transferred by the USG, and provide training. The United States, through the Embassy’s NAS, continued to procure repair parts for the patrol boats transferred by the USG and to fund additional training.

Other USG projects in 2001 included: establishing a rental motorpool in the PTJ’s counternarcotics units in Panama City and Colon to increase their mobility and interdiction capacity; improving CONADEC’s analytical ability and expanding CONADEC’s provincial reporting program; providing training and equipment to deter money laundering, alien smuggling, and vehicle theft; and upgrading the analytical capacity of the FAU. The USG continued to support the Ministry of Education’s teacher training for demand reduction programs, development of Panama’s Joint Intelligence Coordination Center, and joint counternarcotics operations among Panamanian authorities and the DEA, Customs, INS, and the USCG. The four narcotics detection dogs donated to the Customs unit at Tocumen International Airport are housed in a new kennel; the canine program has already resulted in an increase in narcotics seizures.

U.S. law enforcement agencies working from the U.S. Embassy in Panama City, the Embassy’s NAS, and the UK’s Customs Service have developed a port security project proposal to involve the Maritime Chamber of Commerce, the GOP’s law enforcement agencies, and the GOP’s Maritime Authority with Panama’s private sector ports in a multi-stage program. The project proposal was enthusiastically received and a seven-person delegation from Panama attended a regional training program in Ecuador to evaluate successful methods developed elsewhere. Drawing on these experiences, the participants will work together with U.S. and UK officials during 2002 to develop a series of agreements to launch the project in Panama’s two leading ports.

Bilateral Cooperation. The Moscoso administration continued its close cooperation by sustaining joint counternarcotics efforts with the DEA and by strengthening national law enforcement institutions. In 2001, the USG and GOP concluded a comprehensive, six-part bilateral maritime agreement with significant additions to permit the transfer of seized drugs and prisoners to the United States through Panamanian territory. The agreement was signed and entered into force on February 5, 2002.

GOP actions over the past year have established significant precedents. The transfer of prisoners and contraband drug evidence through Panama, described below, has provided invaluable support and cost savings to the USG. . Further advancing bilateral cooperation, the GOP and USG concluded an arrangement to permit the temporary deployment of uniformed and civilian members of the U.S. armed forces to Panama for security training, assistance, and operations. This will permit the continuation in 2002 of joint operations (Operaciones Conjuntos), which were canceled in 2000/2001 until the temporary deployment arrangement was concluded.

The SMN provided four crewmembers in March 2001 for the Caribbean Support Tender (CST), a USCG cutter with a multinational crew that provides training and assistance in ship maintenance and repairs to Caribbean and Central American coast guards. Heightening the significance of this CST training, the SMN members will then be assigned to the USCG cutter "Sweetgum," when it is transferred to the SMN in 2002. An additional four new SMN crew members will report to the CST in January 2002. From August 6-12, 2001, the CST visited Panama and provided training and maintenance support to the SMN. The CST focused all of its efforts on the five USG-donated SMN 82-foot "Point" class patrol boats. Projects completed include the installation of a loud hailer system, a full assessment of the on-board electronics, and inspection and servicing of all damage control and fire-fighting equipment. Ship-board emergency drills also were conducted and participants were taught tune-up procedures for the ship’s service generators and improved maintenance techniques.

The GOP has remained one of the United States’ principal partners in counternarcotics missions. Under the authority of the Attorney General and Ministry of Government and Justice, there have been seven instances in which drugs and prisoners seized on the high seas were transferred through Panama’s territory for prosecution in the United States. The GOP has been extremely cooperative and forward leaning, with the transfer of both drugs and prisoners to the United States through their territory. The GOP has cooperated with U.S. requests to board and search Panamanian-flagged vessels suspected of drug smuggling in international waters. In 2001, the PTJ, Customs, the National Directorate of Immigration, and the PNP, with support from the INS, U.S. Customs, and the DEA, executed three major joint interdiction operations against alien smuggling and drug trafficking along the Costa Rican border.

The GOP continued to investigate important high-level drug traffickers and money launderers. Some examples of major cases as of December 2001 include:

* Cesar Ramirez-Lopez, 424 kilograms of cocaine, 10 arrests;
* Mario Rojas-Bedolla, 222 kilograms of cocaine, 17,200 MDMA pills, 8 arrests;
* Juan Garcia-Gritan, 10 kilograms heroin, 5 arrests;
* Tomas Ceballo-De Cruz, 800 kilograms cocaine, 3 arrests;
* Jaime Newbold-Suero, 760 kilograms cocaine, 12 arrests.
* Jorge Ricardo Manilla, 202 kilograms cocaine, seizure of one Sabre jet Aircraft, dismantling of a general aviation organization smuggling cocaine between Panama and Mexico

In April, the 2001 Annual IDEC conference elected PNP Director General Carlos Bares as the Regional IDEC President for Mexico and Central America. In 2001, the Central American countries jointly participated in simultaneous counternarcotics operations under the IDEC umbrella. Operations in 2001 consisted of commercial international airport interdiction, Pan-American Highway interdiction, maritime operations on the Atlantic and Pacific coasts, and a targeted approach to heroin trafficking.

The Road Ahead. The GOP continues to demonstrate its commitment to build strong law enforcement institutions, fight money laundering, and deter the flow of narcotics northward. The United States and Panama will continue to cooperate in these areas and to strengthen joint counternarcotics efforts. The maritime agreement and an arrangement to establish the framework for the travel of uniformed and civilian members of the U.S. Armed Forces to Panama for security training, assistance, and operations will enable the USG and the GOP to expand their law enforcement cooperation significantly. The development of a port security project will enable Panama to take the lead in controlling its huge container traffic in order to detect and deter illicit drug and precursor chemical smuggling through Panama’s ports.

Panama’s law enforcement efforts would be enhanced through additional coordination between its law enforcement agencies and with U.S. counterparts. The United States will continue to work with the GOP to help strengthen Panama’s law enforcement institutional capacity, particularly in training, interdiction, investigation, and prosecution. The United States will provide assistance to Panama to support criminal justice reform, as well as anticrime and anticorruption efforts. U.S. assistance will complement Panama’s counternarcotics and anticrime efforts, including assistance in the areas of detecting and deterring alien smuggling and stolen vehicle trafficking. The U.S. will continue to assist the GOP in its efforts to increase its own ability to investigate and prosecute successfully money laundering cases in Panama through training and commodity assistance to the FAU. The United States will continue to work with the Ministries of Health and Education and NGOs to expand Panama’s demand reduction program. Because of Panama’s budgetary limits, we believe the GOP should develop new sources of funds to combat drug trafficking and abuse, such as those available through effective money laundering prosecutions, asset forfeiture, and user/license fees where appropriate. We will work with the GOP to explore how such possible funding sources can be exploited fully.


March 2002

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