With China Perched On Both Ends of the Canal… Last Minute Drive to Keep U.S. Forces in Panama

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Congress was warned twenty years ago that American security interests would be placed in jeopardy if we gave away the Panama Canal. Those warnings have come back to haunt Congress and now there is a mad scramble to plug the hole before the December 31, 1999 deadline. That’s the day when the United States scuttles its bases and all U.S. military leaves the area, making Panama the proud owner of our Canal.

Meanwhile, the corrupt politicians in Panama have had a field day, grabbing Communist Chinese money for leases on the two crucial ports on each end of the Canal. American officials say the bidding process was fixed in favor of the Chinese. Now U.S. military bases are up for sale and there is strong possibility that these too will fall into Chinese hands. There is grave possibility that Chinese missiles, built from stolen U.S. documents, can now be placed in Panama, within range of U.S. cities.

But it gets even worse. China is negotiating with Cuba and several South American countries to create a strong Chinese presence in the entire region surrounding the Panama Canal. In the meantime, Panama is being overrun with Colombian drug terrorists, the Russian Mafia and a horde of Chinese immigrants.

But Bill Clinton says there is no danger for the United States. An incredible statement considering the U.S. will now have no military presence in the area; the U.S. navy will be cut in two if access to the Canal is shut off; there will be no way to stop South American drug traffic; and the Chinese may have nuclear missiles on our own former bases.

The situation is grim indeed. But not hopeless. Finally, Congress seems to be awakening from its Bill Clinton-induced slumber. Majority Leader Trent Lott has sounded the alarm and has demanded hearings to investigate Chinese activity in Panama. Representative Dana Rohrabacher has introduced a Resolution in the House of Representatives (and Senator Bob Smith has done the same in the Senate) to demand action be taken to keep U.S. military forces in Panama after the December 31st deadline.

In August, Rep. Rohrabacher traveled to Panama to see firsthand how bad the situation is and to decide on a plan of action to protect the Canal and American interests. Reprinted below is a copy of his shocking report to Congress.

Tom DeWeese

Codel Report:

Congressman Dana Rohrabacher

“Panama: Canal Transition and National Security Interests”

August 16-19, 1999

During the August break, as the United States military was completing its total withdrawal from the strategic Panama Canal Zone and a new Panamanian government was preparing to be inaugurated, Congressman Dana Rohrabacher traveled to Panama to investigate reports that China is rapidly expanding its influence in Latin America and the Caribbean region. In addition, Marxist narco-terrorist forces are expanding their power in neighboring Colombia and the region. Panama does not have any army, air force or adequate naval assets to credibly protect its sovereign territory. Numerous experts believe that U.S. counter-narcotics efforts have been harmed by the closure of U.S. military, Customs and DEA bases in Panama. The Congressman was accompanied by his Special Assistant Al Santoli and consultant Jeffrey Baxter, who is fluent in Spanish. The trip was sponsored by the Washington-based American Foreign Policy Council.

Before arriving in Panama, the delegation received briefings by U.S. Customs officials in Washington and by military experts, including Commanding General Charles Wilhelm, at the Pentagon’s Southern Command Headquarters in Miami. Two private counter-terrorism experts who had recently served with U.S. military forces in Panama accompanied the delegation for the mission.

In particular, the delegation looked into how the Chinese Hutchison Whampoa Company and its Chairman, Li Ka-Shing, managed to obtain 26 to 50 year leases on ports at both the Atlantic and Pacific Ocean ends of the Canal. Li Ka-Shing and his Hong Kong-based company are closely associated with Communist China and have a history of acting as conduits for the People’s Liberation Army. The delegation also looked the rampant piracy of U.S. intellectual property products; drug and weapons smuggling between Russian and Chinese Mafias and the Colombian narco-terrorist armies; voluminous cases of money laundering; and media reports of massive Chinese illegal alien smuggling involving the highest levels of Panama’s government.

In Panama, the delegation met prominent politicians, including the Kitchen Cabinet and 2nd Vice-President J.D. Bazan of the incoming government of President Mireya Moscoso. [The incoming 1st Vice-President Arturo Valarino was on a visit to the People’s Republic of China where he met with senior Chinese Communist political and trade officials.] The delegation also met with senior Panamanian law enforcement officials including Attorney General Jose Antonio Sossa and Drug Czar Rosendo Miranda; Panamanian business leaders; prominent journalists; the leaders of the Canal Workers Union; Panama City Mayor Mayin Correa; and U.S. Ambassador Simon Ferro and the U.S. Embassy team. The delegation was given a helicopter tour of the Canal and ports, including the Free Port of Colon, by Dr. Nicolas Ardito Barletta, director of ARI, the government’s Canal Zone development bureau. In addition, the delegation met with Mrs. Samantha Smith, the controversial National security and Intelligence chief for the outgoing government of President Ernesto Perez Balladares.


1. Growing Role of Communist China: The People’s Republic of China is making major political, economic and intelligence inroads in Latin America and the Caribbean. China has increased its activities in Cuba, including the creation of major electronic intelligence/jamming facilities directed at the United States, and increased Spanish language broadcasts of Radio Beijing. Panama, the strategic choke point between the Atlantic and Pacific Oceans and between North and South America, is becoming China’s “hub” or “beach head” in our hemisphere. U.S. security officials and knowledgeable Panamanians see the Chinese using trade as their cover for intelligence and political operations. Beijing’s goals are: 1) usurping U.S. political influence in the region; 2) dislodging the political recognition and economic influence of Taiwan; 3) a base for sabotage in the event of any future U.S.-China conflicts over Taiwan or the South China Sea. Canal security is very difficult and the presence of Chinese entities controlling ports at both ends of the Canal is a serious security risk. In addition, their control of the ports and stevedoring enhances the two-way flow of sensitive weapons-related technologies and the potential for sabotage.

2. Hutchison Whampoa Control of Canal Ports: Businessmen involved in the bidding, as well as current and former-U.S. officials claim that the Chinese Hutchison Whampoa Company obtained the contract for 25 to 50 year lease for the Canal ports by using unfair under-the-table tactics. At least two consortiums, involving American companies may have offered better bids for these strategic port facilities. The small of corruption is exceptionally strong. In addition, China has stationed a senior intelligence official, reportedly Mr. Yu Gi Ye, is reportedly Beijing’s Commercial Attache and de facto ambassador. He operates with a staff of 14 out of the Global Bank Building in Panama City.

It is especially troubling that the Clinton administration has publicly stated that they have no knowledge of a connection between Hutchison Whampoa and the Chinese government or military. See the attached documents that include or cite reports by U.S. intelligence agencies, the U.S. Bureau of Export Affairs [BXA], the U.S. Embassy in Beijing and the Rand Corporation identifying Li Ka-Shing and Hutchison Whampoa as financing or serving as a conduit for Communist China’s People Liberation Army [and navy] to acquire sensitive technologies and other equipment. In addition, Li serves as a board member on CITIC, which is a state-owned funding and technology acquiring source for Communist China’s military. Hutchison Whampoa’s control over millions of cargo containers at entrance points at both ends of the Canal for the next 50 years is a more pressing security concern than the legal debate over who may appoint Canal pilots.

3. Corruption, Smuggling and Money Laundering: Panama – especially Colon – has become the “K Mart” of worldwide smuggling; the counterfeit and piracy of U.S. products; repackaging of Chinese textiles to beat U.S. quotas; and illicit money laundering. Chinese triad gangs from the mainland and Taiwan have been working together, in tandem with Russian Mafia entities. There are also Middle Eastern organizations present, as well as the pervasive activities of the Colombian drug cartels and narco-terrorist organizations. The entire 2,000 mile coast of Panama, from Costa Rica to the Colombian border has been as drop-off points for weapons being shipped into Colombia. There are also some 1,500 islands along the coast. Corruption in the Colombian government is rampant. Example: Panama’s negotiator for a treaty with U.S. on stolen cars brought to Panama for transshipment, herself drove a stolen car.

4. Chinese Alien Smuggling: There is strong evidence of massive systematic smuggling of Chinese illegal aliens into Panama, which results in a steady flow of illegal Chinese from Panama to the United States, with the complicity of the highest levels of the Panama government. This is a major news story in Panama. All Panamanians the delegation spoke with, from senior government officials to ordinary citizens, expressed deep concern about the exceptionally large numbers of illegal mainland Chinese migrants that have been flooding into Panama during the past few years, for surpassing similar activity that occurred during the Noriega dictatorship. Panama’s former Intelligence chief Samantha Smith, now in hiding in fear of retaliation, told us in detail the role of President Balladares and his closest aides in the Chinese alien smuggling.

THE THREAT: If Mainland Chinese and their Hong Kong-based front companies dominate the local and macro Canal-based economy, Beijing will become the dominant political influence in the country.

In Panamanian newspapers, the designated new Canal Commissioner Ricardo Martinelli has been quoted as stating, “The departure of the U.S. role in the Canal Zone will have no economic impact on Panama because of the influx of income from [mainland] China.” The media also report that China has promised to step up economic assistance and investment in Panama after the U.S. departs. China’s $2 billion worth of annual commerce in the Canal Zone dwarfs the $500 million of commerce by Taiwan. And there are reports, in Hong Kong and Panama, that Taiwan’s Evergreen shipping company is planning to sell its port on the Atlantic Coast of the Canal, with Hutchison Whampoa a potential buyer.

5. The Clinton-Balladares-China Connection: The ties between the President Balladares and communist China, as well as the tics between President Clinton’s political entourage and Balladares and China is a matter of serious concern. In 1996, the Canal contract bidding occurred while China was making substantial contributions to the Clinton campaign. Li Ka-Shing is an investor in the Riady family’s Hong Kong China Bank. Clinton crony and former White House Chief of Staff Mack McClarty is the President’s Special Envoy to Latin America and has reportedly spent “a lot of time” in Panama. In 1997, James Carville ran the Balladares campaign to extend his presidency. Clinton lawyer Gregory Craig has represented at least one Balladares crony indicted on drug-smuggling charges in the U.S., and was publicly mentioned by Balladares as the lawyer to possibly represent his interests if the Chinese alien smuggling issue is brought to a U.S. court.

6. Maintenance of the Canal: Around 1/3 of the world’s economy passes through the Canal, including more than 15% of all U.S. trade. In addition the U.S. Navy makes some 200 passages through the Canal annually. The Canal is especially fragile to maintain and operate, requiring a cadre of skilled technicians and engineers to maintain. The Canal Workers Union reports that by the end of 1999, some 30 percent of skilled Canal Workers are being laid off. They are reportedly being replaced by inexperienced personnel, who qualifications are based on their membership to one political party or another. There are also reports that after the Canal is fully under Panamanian control that further lay-offs of skilled workers are expected. In addition, there are reports that pilots, engineers and other technicians are being hired in Communist China for the Canal, but will not arrive in Panama until after the year 2000.

7. Colombian Narco-Terrorist Forces: The U.S. military and other counter-drug forces will completely depart Panama by December 1999. Panama has no army, air force or navy, except for a small Coast Guard. The government relies upon largely untrained and poorly-armed police to patrol the border area with Colombia where the FARC narco-terrorist forces are increasingly active inside of Panamanian territory. Colombian FARC military/political units are increasingly active in the Darien region of Panama, including setting up schools, free clinics and other institutions. They are essentially waging a Maoist “people’s war.” The incoming President Mireya Moscoso and her advisors have spoken inconsistently on a U.S. role in bolstering Panama’s security, counter-narcotics operations from Panamanian territory and the legality of the “DeConcini Reservation” to the Carter-Torrijos Treaty that would permit the U.S. to intervene to defend the Canal’s security. The Clinton Administration speaks of a “two to three year cooling off period” before resuming bilateral talks on a Multinational Counternarcotics Center in Panama. Unfortunately, by that time the narco-terrorists could be in a much stronger position on both sides of the border.


1. Review the Canal Ports Contract Process: Congress should investigate, through hearings and possible GAO study, the bidding process for the Canal ports that resulted in the Balladares regime awarding the contracts for Balboa and Cristobal to the Chinese Hutchison Whampoa company. In an August 1999 press conference, in response to the letter of concern by Senate Majority Leader Trent Lott, a Clinton Administration spokesman admitted to the press that “our protests were noted” by Panama’s government regarding the reportedly corrupt ports contract process. However, the administration never followed up the protest, or demanded that the contract process be rectified to allow consortiums that included American companies to compete fairly. The Albrook air base deal, which is reportedly highly irregular, should also be investigated.

Law Number 5: Panama’s Law Number 5, related to the Canal ports contracts with Hutchison Whampoa, should be closely scrutinized by Congress. However, the contract for the control of the Canal ports and the flow of the massive amount of cargo that moves through the ports is a critical issue. This should not be overshadowed by legal debates over Law 5 or who may be entitled to appoint Canal pilots.

2. Hold Hearings on U.S.-related Chinese Alien Smuggling Rings in Panama: The former chief of Panama’s national intelligence agency, Samantha Smith told the delegation that she is willing to testify before the U.S. Congress on the systematic smuggling of illegal aliens from Communist China, with many transiting from Panama to the United States, that has involved the highest level of Panama’s government. The Miami Herald has reported that the U.S. Justice Department has been at odds with the U.S. State Department over interference in the DOJ investigation into this matter.

3. Assure Fairness in Contract Bidding Process for Howard Air Base: The contract to run Howard Air Base, which was the primary U.S. counter-narcotics facility in Panama until June 1999, is currently being offered in open bidding to private companies. At least four U.S. companies are involved in the international bidding to turn Howard into a commercial air/maintenance hub [ which could be shared with U.S. Customs or the DEA to continue counter-narcotics activities]. The U.S. Government must closely scrutinize the bidding process to make sure that it is fair and not tainted with the charges of corruption and under-the-table payoffs that are believed to have occurred during the Canal ports bidding process.

4. Resume Negotiations on the Multinational Counter-Narcotics Center: In all recent polls, between 70 and 80 percent of Panamanian citizens favor a continued U.S. presence in Panama, especially for security reasons. Negotiations for a continuation of a U.S. security presence in Panama, with respect to Panama’s sovereignty and the provisions of existing Treaties, should be resumed immediately. A U.S. security role should include the training and assistance to Panamanian border police forces and counter-narcotics forces, as well as the creation of a regional counter-narcotics center. Compensation to Panama for the establishment of joint counter-narcotics facilities could be based on relief of some of the billions of dollars in debt that Panama still owes the United States.

5. Enact Legislation to Permit SOUTHCOM to train and support Panama Police: Panama does not have armed forces. The SOUTHCOM Command would like to train and support the Panamanian National Police for counter-insurgency and counter-narcotics activities in the region bordering Colombia. These police are largely unprofessional and severely out-gunned. However, under current U.S. law, the Pentagon is permitted to only train the military forces of neighboring countries, but no the police. Given the growing narco-terrorist war in Colombia, and the expansion of FARC forces into Panama, the Congress should quickly enact legislation to permit the U.S. military to work with Panama’s National Police.

6. Review SOUTHCOM’s Funding: The Latin America/Caribbean region encompasses 32 countries, 400 million people and 12 million square miles. The Pentagon’s SOUTHCOM’s funding may be inadequate for their expanding mission. Compare the $2 billion the U.S. is spending for the Bosnia operation this year to some $677 million for all of SOUTHCOM. Expedited joint regional training exercises are essential, especially following the loss of the U.S. Jungle Training and Operations Center at Ft. Sherman, Panama. [Ft. Sherman is now being turned into “ecological-tourism” facility.]

7. Ensure a Professional Canal Work Force: There are troubling indications that a large number of skilled technicians and laborers who have a history of successfully operating the Canal, are being laid off. These Panamanian workers have been employees of the U.S. government. There are reports that they are being replaced by lower-paid, largely unskilled, workers whose qualifications are political patronage-related. The Congress should review provisions in the Carter-Torrijos Treaty that involve labor issues involving the Canal. Reports that Panamanian officials may be hiring or planning to hire personnel from mainland China to work on the Canal, should also be investigated.

Take Action! Sign our Panama Petition

Tom DeWeese
[email protected]

Tom DeWeese is President of the American Policy Center and National Grassroots Coordinator for CFACT (Committee for a Constructive Tomorrow) working to help local activists organize into Freedom Pods (www.CFACT.org). He is also the author of three books, including Now Tell Me I Was Wrong, ERASE, and Sustainable: the WAR on Free Enterprise, Private Property, and Individuals.