Investigative Report THE PANAMA CANAL IN TRANSITION: THREATS TO U.S. SECURITY and CHINA's GROWING ROLE IN LATIN AMERICA XXXXXXXXXXXX SECTION BLACKED XXXXXXXXXXXXXXXX Introduction: The Panama Canal, one of the world's key strategic waterways, is scheduled to be turned over to the Panamanian government on December 31, 1999. The Canal remains vital to American trade and defense capabilities. The Canal remains the vital sea link in the Western Hemisphere between the Atlantic and Pacific Oceans, and an economic and logistical bridgehead between North America and South America. Currently, some 15 to 20 percent of total U.S. exports/imports pass through the Canal, including some 40% of all grain exports. It is also a vulnerable "front-line" state against the spread of narcotics and terrorism that plague its South American neighbors. Ironically, the day that the delegation arrived in Panama, a week after the closure of the U.S. counter-narcotics center at Howard Air Base, heavily-armed Colombian narco-terrorist forces operating on Panamanian soil, dressed in full combat gear, were interviewed on national television. Panama has been the only country in Central or South America to host an active US military presence [SOUTHCOM] and permanent military training and operations bases. All of the American military bases, including counter-narcotics operations centers, are scheduled to close by June 30, 1999. The People's Republic of China, through the Hong Kong-based Hutchison Whampoa Ltd. company, which has close ties to the PRC government and People's Liberation Army (PLA), was granted a 25-year lease, with an additional 25 year option, for control of the Canals Atlantic and Pacific Ocean ports of Balboa and Cristobal and adjacent facilities. The delegation witnessed Hutchison Whampoa conducting major construction and port facility expansion at both the Atlantic and Pacific Canal ports. Hutchison Whampoa will control the stevedoring [loading and unloading of ship cargo] at the ports. The company also has a substantial interest in the railroad line that coordinates transportation of cargo between the ports. In addition, the Chinese company is a major bidder on construction of a new suspension bridge that will link "land canal" highways that will truck oversized cargo containers between the Atlantic and Pacific coasts. The war in neighboring Columbia against well-armed narco-terrorist forces, with a history of ties to Cuba, is escalating and threatens to spread throughout the region. Panama does not have an army, navy or air Force, The Panamanian government has an ongoing reputation for corruption and mismanagement. Chinese organized crime organizations are active in drugs, guns and illegal alien smuggling in Panama, and the Russian mafia is known to be supplying weapons to Columbian narco-terrorist forces. On June 1 - 4, 1999, XXXXX, special assistant to XXXXXXXXXXXXX XXXXXXXXXXXXXXXX, Asia and Pacific specialist on the XXXXXXXXX XXXXXXXXXXXXXX traveled on a fact finding mission to Panama. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX In Panama, the delegation coordinated meetings with XXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX In Panama, the delegation met with current and former Panamanian political leaders, Canal workers, journalists, U.S. embassy officials, US military representative and informal American and Panamanian private citizens. In addition, the delegation drove the length of the Canal, observing the ports of Balboa and Cristobal, the Free Trade Zone in Colon and operations of the important canal locks at Miraflores and Gatun. In addition, the delegation visited U.S. military facilities at Fort Clayton [Pacific Coast] and Fort Sherman Jungle Operations Training Center [Atlantic Coast], Mission Goal: The goal of the mission was to make a cogent assessment of the developing situation in Panama, including the role of communist China at the Canal and the growing threat of narco-terrorist forces in the region. There appears to be a lack of information or concern on the part of the U.S. Congress and the American public. The muted debate over the Canal in the United States has been polarized. Some public interest organizations, warn of Chinese military bases eventually being created in Panama and even a future missile threat. On the other hand, the Clinton administration and a number of professional bureaucrats consider those fears unfounded and have no qualms about China's growing role at the Canal. By most accounts, an unfair and corrupt contractual bidding process, which was protested by the U.S. ambassador to Panama, enabled the Chinese Hutchison Whampoa Company to outmaneuver American and Japanese companies for the long-term lease on the Canal ports. A new democratically elected government, led by President-elect Mireya Moscoso, is scheduled to be inaugurated in September. The delegation attempted to develop recommendations for new private and governmental American actions to maintain a critical national security and counter-narcotics presence for the United States in Panama, as well as to limit the influence of communist China at the Canal and in the region. The Geo-Strategic and Narco-terrorism Threat: The purpose of the mission was to observe first-hand the final stages of the withdrawal of U.S. military forces in preparation to hand over the Canal to the government of Panama on December 3I, 1999. The delegation shared the concern of Senate and House International Relations Chairmen Helms and Gilman, that the United States is losing vital counter-narcotics bases in Panama, Although the Clinton administration is attempting to set up other temporary counter-narcotics bases in the region, the locations are not as effective as Panama and the cost will run into hundreds of millions of dollars. In addition, the loss of U. S. forward operational bases in Panama will have serious implications for Hemispheric security, including rapid deployment in times in crisis. The delegation was also concerned about the growing presence of communist China directly at the Canal and in the region. U.S. and Panamanian security officials stated that Panama has become the central base of operations for communist China in Latin America. Panama is a Pacific Ocean port, and the canal is vital to commerce between the Asia-Pacific region and the Americas. [Europe also uses the Canal for a substantial mount of its trade with Asia] It is also a vital component to emerging Chinese communist strategy to dominate the Pacific and to undermine and isolate the United States. The Number Two user of the canal, after the United Slates is Japan, with China and Taiwan competing for the third position. The unofficial representative of the People's Republic of China [PRC] is believed to be a senior intelligence officer who operates out of an office on the top floor of a bank building in Panama City, with a staff of fourteen assistants. The $2 billion worth of annual business conducted by PRC in the Canal has rapidly eclipsed the $400 million of business by Taiwan. Taipai fears that it will lose diplomatic recognition, similar to its loss in the Bahamas, where the PRC invested a large amount of money - over and under the table - to gain control of the ports and political influence. Worldwide, China appears to be progressively positioning itself commercially and militarily along the key naval choke points between the Indian Ocean [its bases in Burma]; the South China Sea [Hong Kong]; the Straits of Malacca [the Spratley Islands and a growing role in Cambodia]; the central Pacific [a major land satellite tracking station on Tarawa]; the coast of Hawaii [a major ocean mining tract]; the Caribbean [Cuba and the Bahamas]; and now the Panama Canal. China's flagship commercial shipping fleet, China Ocean Shipping Company [COSCO, is directly connected to the People's Liberation Army and Chinese communist government. COSCO ships have served as careers for massive smuggling operations around the world - including the United States -- of weapons, drugs and illegal aliens. In addition, COSCO has been used by the Chinese government to ship missiles - and components of weapons of mass destruction to rogue nations such as Pakistan and Iran. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX recently witnessed China's aggressive Pacific strategy in their growing fortifications in the strategic SpratLEy Islands and their threats to the Philippines. A "vacuum-filling" pattern seems to be emerging: Wherever in the Pacific the U.S. withdraws or is negligent militarily, politically or economically, the Chinese communists move in. In addition to a growing commercial prowess in Caribbean ports such as the Bahamas, China recently completed military/intelligence agreements with Cuba to build communications intelligence facilities adjacent to Russia's massive technical spy center at Loutdes, Cuba..The Lourdes facility monitors the U-S- Atlantic fleet and elements of U.S. Pacific fleet operations, as well as domestic commercial and military communications throughout the Americas. The growing anti-U.S./NATO "strategic partnership" of China and Russia poses an increasing threat. There is a well-documented history of both Russian and Chinese organized crime organizations working as tools of their governments. In Panama, where government corruption is rampant, there is a dangerous convergence of well-financed Chinese and Russian mobs with Cuban government operatives and Latin American drug lords, leftists and narco-terrorist militants. This dark partnership is a threat to democracy in Panama and in neighboring countries, and is a direct long-term threat to Mexico and the United States. Chinese Alien Smuggling: The massive smuggling of illegal aliens from the People's Republic of China into Panama's ports is a major security problem for both Panama and the United States. Government officials and private Panamanians expressed their concern about the massive illegal immigration flow from mainland China, and the corruption among Panamanian officials who permit it. The alien smuggling - largely of peasants who have little money of their own -- is conducted by Chinese triad gangs on commercial ships. The price for Panamanian residence documents is $10,000 to $20,000 per alien. The new Chinese are visible not only in Panama City and Colon, but throughout the country, with many small Chinese businesses springing up, with workers who do not speak Spanish, in communities throughout the country. Panamanian officials say that many Chinese aliens final destination is the United States. Corruption is viewed as the Number One national problem by Panamanian voters. It is reported that officials in the Balladarcs administration have made millions of dollars through the alien smuggling rackets. An emerging problem is that some officials in President -elect Moscoso's Arnulfo Party have been either involved or privy to the alien smuggling system. It is essential that U.S. officials discuss this matter with President Moscoso to deter the ongoing alien racket in her administration. The scale of alien arrivals in Panama strongly suggests that Chinese communist officials arc involved in the process, as well as the shipping companies. XXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXX SECTION BLACKED OUT FOR NATIONAL XXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXX SECURITY REASONS XXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Hutchison Whampoa and Li Ka Shing's ties to the communist Chinese government: The Chinese Hong Kong company that was awarded the 25 year lease of the Canal's ports, Hutchison Whampoa, through its HIT subsidiary or Panama Ports Company, has substantial links to the Chinese communist government and the People's Liberation Army in its worldwide operations. The Panama Ports Company is 10 percent owned by China Resources Enterprise [CRE], which is the commercial arm of China's Ministry of Trade and Economic Co-operation [MOFTEC]. In its investigation into China's attempts to influence the 1996 U.S. presidential campaign, the U.S. Senate Government Affairs Committee identified CRE as a conduit for "espionage - economic, political and military - for China." Committee Chairman, Senator Fred Thompson said that CRE has "geopolitical purposes. Kind of like a smiling tiger; it might look friendly, but its very dangerous." The Senate Committee also revealed that Hutchison Whampoa's subsidiary, HIT has business ventures with the China Ocean Shipping Company, COSCO, which is owned by the People's Liberation Army. COSCO has been criticized for shipping Chinese missiles, missile components jet fighters and other weapons technologies to nations such as Libya, Iraq, Iran and Pakistan. In 1996, the U.S. Customs Service seized a shipment of 2,000 automatic weapons aboard a COSCO ship at the pot of Oakland, California. The man identified as the arms dealer, Wang Jun, is the head of China's Polytechnologies Company, the international outlet for Chinese weapons sales. Jun also sits on the Board of CITIC, the China International Trust and Investment Corporation, the chief investment arm of the Chinese central government. It is also the bank of the People's Liberation Army, providing financing for Chinese Army weapons sales and for the purchase of Western technology. Jun's fellow CITIC Board member is Mr. Li Ka Shing, chairman of Hutchison Whampoa Ltd. Li Ka Shing who has profound ties to the Beijing regime. Li has invested more than a billion dollars in China and owns most of the dock space in Hong Kong. In an exclusive deal with the People's Republic of China's communist government, Li has the right of first refusal over all PRC ports south of the Yangtze river, which involves a close working relationship with the Chinese military and businesses controlled by the People's Liberation Army. Li has served as a middle man for PLA business dealings with the West. For example, Li financed several satellite deals between the U.S. Hughes Corporation and China Hong Kong Satellite (CHINASAT), a company owned by the People's Liberation Army. In 1997, Li Ka Shing and the Chinese Navy nearly obtained four huge roll-on/roll-off container ships, which can be used for transporting military cargo, in a deal that would have been financed by U.S. taxpayers. A June 1997 Rand report, "Chinese Military Commerce and U.S., National Security," stated, "Hutchison Whampoa of Hong Kong, controlled by Hong Kong billionaire Li Ka Shing, is also negotiating for PLA wireless system contracts, which would build upon his equity interest in Poly-owned Yangpu Land Development Company, which is building infrastructure on China's Hainan Island." In 1998, Li Ka Shing attempted to issue $2 billion in bonds, through his Hutchison company, in the United States. According to the Dow Jones Newswire, Hutchison revealed that 50 percent of the bonds would be used through a subsidiary known as Chung Kiu Communications Ltd., which had signed agreements to provide cellular services and equipment to joint ventures between the People's Liberation Army and the Chinese Ministry of Posts and Telecommunications. Panama's Controversial Law Number 5: The port business in Panama has both commercial and strategic importance. With its strength, Hutchison Whampoa is becoming the dominant force in Panama. Hutchison, through its operations in Hong Kong, will control the movement of merchandise From Japan, Korea and other Asian exporters headed for the U.S. and Europe. In addition, under the quietly implemented and controversial Panamanian Law Number 5 that was secretly implemented by the Balladarcs regime, the Chinese Hutchison Whampoa company has the right of first refusal on other Canal facilities, including former strategic facilities, including former U .S. bases, such as the Rodman Naval Station port. Some of the measures harmful to U.S. security and economic interests under Law Number 5, include: Article 2.1 grants Hutchison Whampoa "first option" to take over the ports at Rodman Naval Station. U.S. warships could be shut out. Article 2.8 authorizes Hutchison Whampoa to "transfer contract rights" to any third party "registered" in Panama, This could be Cuba, Iraq, Iran or Libya or another country who is hostile to the United States. Article 2.12a, grants Hutchison Whampoa priority to all piers, including private piers, at Balboa and Cristobal, plus an operating area at Albrook Air Force Station. Article 2. 12i, guarantees Hutchison Whampoa the "right" to designate their own Canal pilots, change the rules for boarding vessels and add additional pilots - if clients claim dissatisfaction.
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