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PANAMA

Panama Profile

PANAMA / LATEST UPDATE MARCH 24, 2021 EN

Panama's location connecting Central and South America has made it a key transit point for illicit trade, as well as a refuge and negotiating area for criminal organizations. Its favorable economy and the booming contraband market of the Colón Free Zone (CFZ) have long attracted international money launderers.

The country's weak judicial system and high levels of corruption have allowed for transnational networks to make inroads, including Colombian guerrilla groups and Mexican cartels.

Panama's local gangs often collaborate with larger drug trafficking organizations, and as the amount of drugs passing through the country has risen over recent years, so has violent crime.

Geography

Panama is the southernmost country on the Central American isthmus, bordering Colombia to the east, Costa Rica to the west, the Pacific Ocean to the south and the Caribbean Sea to the north. Sometimes referred to as the "mouth of the funnel," it has long been an entry point for drugs heading from South America to Mexico or the United States. A dense strip of forest along the border with Colombia known as the Darien Gap facilitates the trafficking of arms, drugs and persons.

The Panama Canal has been a gateway between the Eastern and Western Hemisphere since 1914, and has long been used to smuggle all types of illegal goods. As a key waypoint in global shipping routes, Panama presents a useful option for traffickers utilizing shipping cargo to facilitate the drug trade.

In 2021, multi-ton seizures of cocaine were abundant at the Caribbean port of Colón which has become a launching point for cocaine on its way to Europe and African countries that also feed European cocaine markets. This has been facilitated by corruption within the port and officials of the Panama Canal Authority (Autoridad del Canal de Panama - ACP).

The country also has numerous loosely monitored islands that are useful for traffickers.

History

Panama's involvement in the drug trade began in the early 20th century with the trafficking of opium from Asia to Europe through the Panama Canal, which continues to be a global gateway for the transport of both legal and illegal goods.

During the 1960s and 1970s cannabis was cultivated in Panama, but the growing cocaine trade soon replaced the marijuana business.

As South American groups trafficking cocaine into the United States began to shift away from Caribbean routes popular in the 1980s, Panama’s shared border with cocaine-producing Colombia made it a natural transit point for drugs heading north.

During the 1980s, Panama became one of the most emblematic examples of a “narco-state” in Latin American history under the leadership of military dictator General Manuel Noriega, who established relationships with Colombia’s Medellín Cartel and Central American traffickers.

Noriega became de facto ruler of Panama in 1983 and maintained a close relationship with the United States, collaborating with the Central Intelligence Agency (CIA) for decades, despite his involvement in the illegal drug trade and money laundering.

After striking a deal with Colombian drug lord Pablo Escobar of the emerging Medellín Cartel in 1982, Noriega began charging Colombian traffickers $100,000 a load to fly cocaine into Panama. Throughout the 1980s, Colombians would also use Panama as a safe haven, a cocaine processing location, and as a banking and money laundering center, setting the trend for decades to come.

Noriega’s luxurious lifestyle of drug-fueled parties and lavish mansions was abruptly cut short in 1989, when the US military invaded Panama and arrested the leader. The United States charged the general with laundering millions of dollars, smuggling marijuana and collaborating with the Medellín Cartel. Growing political tensions, rather than concerns about Noriega’s involvement in illegal activities, likely motivated the US invasion and his capture during the operation. Three years later, a US court sentenced Noriega to 40 years in prison. He was later extradited to France to stand trial on money laundering charges, and after being convicted there was returned to Panama where he was also convicted for human rights abuses.

Following the US invasion, Panama abolished its military in 1990, transferring citizen safety responsibilities to newly formed civilian security forces led by the Public Security Ministry. The new force struggled in subsequent years with a lack of capacity and experience, which allowed various types of organized crime groups to consolidate their power.

For example, Panama’s first gangs emerged in the late 1980s, but the end of the Noriega era, the disbanding of the military and high poverty rates during the 1990s all opened space for these groups to grow. The trend continued in the 2000s; between 2005 and 2010, official data showed that the number of gangs operating in the country tripled -- a phenomenon experts blamed on a lack of coherent security policy.

During the 2010s, officials tried various approaches to the gang issue, none of which has proven to be particularly successful. President Juan Carlos Varela announced an amnesty for gang members who agreed to disarm themselves during his July 2014 swearing-in. That program was extended over the next several months to include job training for demobilizing gang members, but results were mixed. In 2016, authorities launched a gang crackdown on one major gang, and disrupted the operations of another gang involved in international cocaine trafficking. The moves seemed to herald a shift toward generally more repressive policies against gangs.

Similarly, international drug trafficking groups took advantage of their existing presence in Panama to expand operations in the wake of Noriega's ouster. A US government report published in 1991, two years after the invasion, suggested that drug trafficking in the country was actually increasing. In 1999, a decade after Noriega's arrest, the US State Department was still describing Panama as "a major transshipment point for illicit drugs smuggled from Colombia." By 2016, the country was seizing record amounts of drugs, spurred in part by a boom in Colombian cocaine production.

Noriega's graft-riddled style of governance left a legacy of corruption that has fueled one of the main criminal industries in Panama: money laundering.

Panama has historically been an international money laundering hub due to its extensive banking sector, its dollarized, fast-growing economy and the presence of the Colón Free Zone (CFZ), a free trade area established in 1948 that is currently one of the largest in the world. Tight bank secrecy laws combined with a lax and often corrupt judicial system are further factors contributing to money laundering activities.

Panama's central role in international money laundering was laid bare in 2016 by the publication of the so-called "Panama Papers," documents showing how Panamanian law firm Mossack Fonseca helped set up offshore accounts and shell companies for thousands of elite clients across the world, including a Guatemalan drug “queen” and a Salvadoran crime boss.

Also in 2016, the United States blacklisted several members of one of the country’s wealthiest and most powerful business families, the Wakeds, on money laundering allegations. In 2017, Nidal Waked Hatum, who had been labeled by the Drug Enforcement Administration (DEA) as “one of the world’s most significant drug money launderers and criminal facilitators,” pleaded guilty to involvement in a money laundering conspiracy.

Weak law enforcement and judicial institutions have helped perpetuate corruption in Panama, which has facilitated not only money laundering, but also drug trafficking and other criminal activities.

In the early 2010s, leaked US diplomatic cables showed concerns about the involvement of Panamanian politicians in the drug trade. These concerns persisted throughout the decade; in late 2017, for example, authorities disrupted an alleged international drug trafficking ring with links to a local mayor. Also in late 2017, a Colombian drug trafficker alleged to a local media outlet that Panamanian authorities resell seized drug shipments.

Elite graft remains a major problem, as illustrated by the case of former President Ricardo Martinelli. The former leader fled from Panama in 2016, seeking refuge in the United States from an investigation into his alleged involvement in multiple corruption schemes. Martinelli was arrested in 2017 near his home in Miami based on an extradition request accusing him of illegal spying, as well as accepting bribes from Brazilian construction company Odebrecht, which is at the center of a wide-reaching multinational graft scandal.

Martinelli, along with Former President Varela, was indicted on separate corruption and money laundering charges in 2019, though he has so far managed to evade outright conviction. Prosecutors did circle closer towards Martinelli in 2021 with the arrest of his two sons in Guatemala.

Both were extradited to the US and pled guilty to money laundering charges in the Eastern District of New York. Both sons established offshore bank accounts hiding the profits of shell companies all to facilitate bribery from Odebrecht, according to the Federal Bureau of Investigations (FBI). While these acts were allegedly done in service of a “Panama government official”, prosecutors stopped short of naming a specific individual.

Criminal Groups

Panama has had a gang presence since the 1980s, though not to the same extent as in other countries in the region. For a long time, these groups mainly carried out petty crimes, but they later began to grow in size and become more organized, engaging in drug trafficking, extortion, human trafficking, money laundering and kidnapping.

Two rival groups formed by the association of dozens of street gangs -- "Bagdad" and "Calor Calor" -- are currently believed to be the most powerful in the country.

Gang violence between the two groups has been linked to an uptick in Panama’s homicide rate in 2021, but authorities point to the 2019 massacre at La Joyita Prison as the catalyst for gang shoot-outs. At least 14 inmates were killed inside the prison complex though the bloodshed did not involve members of Calor Calor.

Rather, it was an attack on one of Bagdad’s subsidiary groups by other gangs within the larger umbrella that kicked off the steady string of gang killings in Panama. The government, in turn, initiated a massive crackdown on Bagdad. Aided by the US Drug Enforcement Agency (DEA), the Panamanian government aggressively targeted the facilities and leadership of the organization in a coordinated assault that has severely weakened the confederation.  

However, due to the loose structuring of Bagdad and its rivals, Calor-Calor, the complete dissolution of the confederation would be unlikely to seriously impact the role of drug trafficking gangs in Panama as smaller groups could simply expand to fill the void.

Various transnational criminal organizations -- particularly those based in Colombia and Mexico -- use Panama to traffic drugs, escape the heat in their home countries and to negotiate business deals.

The Urabeños, one of Colombia’s largest criminal organizations, has an established foothold in neighboring Panama. Also known as the Gulf Clan (Clan del Golfo), the organization maintains influence over the criminal economies  that traverse the border between the two countries.

Chief among these are drug trafficking and human smuggling that employs local communities as guides in the densely-forested Darien Gap. The capture of some 56 individuals in Panama’s Operation Fisher laid bare the extent to which the Urabeños have co-opted Panamanian organized crime, particularly for the cocaine trade.

The Colombians had established a partnership with a local trafficking group, Humildad y Pureza (Humility and Purity - HP), allowing them to ship cocaine north along the Central American isthmus. The Urabeños typically delivered drugs via go-fast boats to HP in Panama City and the Pacific province of Colón.

Among those arrested in Panama were also police officers and Panama Canal Authority functionaries, among other public officials.

Mexican crime groups as well have operated in the country. In 2013, Panama identified at least four Mexican criminal organizations operating within its borders: the Sinaloa Cartel, the Zetas, the Beltrán Leyva Organization (BLO) and the Juarez Cartel. However, evidence suggests that more Mexican groups may have representatives in the country, to ensure their supply of cocaine continues to flow north

Crime groups known as "tumbadores" specialize in stealing drugs from other criminal groups, at times with the cooperation of security forces.

Human trafficking networks also operate in Panama. Most trafficking of persons to, from and through Panama is linked to the sex industry, but forced labor is also a problem.

Lastly, the country has become a major center for international cybercrime has gained a significant foothold in Panama. Burgeoned by the Covid-19 pandemic and subsequent lockdowns, cyber criminals have cashed in on a variety of options. Most notably, stolen credit card details are an extremely lucrative business in Panama. The country maintained some of the most expensive rates for card details purchased on the dark web.

Security Forces

Since Panama's armed forces were abolished in the 1990s, citizen security has been the responsibility of the Public Security Forces, which include the National Police, National Air-Naval Service and National Border Service, all overseen by the Public Security Ministry. Security forces have received most of their equipment from the US, Canada and Italy since 2010.

As of 2021, the Border Service employed 4,000 officerss while the Air-Naval Service employed 3,000. The National Police force maintained 20,000 members.

Panama's security forces have long been criticized for being ineffective and corrupt, with a number of drug trafficking organizations infiltrating and at times recruiting authorities. Somewhat ironically, the country's relatively low murder rate may be linked to criminal groups using corruption rather than violence to achieve their goals.

Panama has various air and naval anti-drug bases along its coastlines, as well as radar systems. US aid to Panama focuses heavily on collaboration against drug trafficking and organized crime, and numerous US institutions provide security assistance to Panama. In more recent years, heightened collaboration with the DEA has yielded demonstrable success in combatting Bagdad, one of the country’s top criminal organizations. Security forces are still however, partially compromised by officials working in cahoots with drug trafficking organizations.  

Judicial System

Panama has a civil law system, and its highest judicial authority is the Supreme Court. The rest of the judicial branch includes superior, provincial and municipal courts.

The Public Ministry is responsible for criminal prosecution and for overseeing public officials. It consists of the Attorney General ("Procurador") and of District Attorneys ("Fiscales"), among other representatives. Criminal investigations are carried out by the Public Ministry's Judicial Technical Police.

Although Panama's constitution grants independence to the judiciary, it is nonetheless susceptible to political influence and corruption. In 2021, Transparency International found that Panama was especially lacking in the autonomy of its criminal justice system.

The process for appointing judges was found to be politicized and far too lengthy. Corruption within the judicial system remains problematic, even reaching into the country’s Supreme Court, as was revealed in the case against a judge appointed by Former President Martinelli.

Prisons

Panama's prison system is overseen by the Interior Ministry (Ministerio de Gobierno) through the National Penitentiary System Directorate (Dirección General del Sistema Penitenciario - DGSP). Prison authorities have struggled with staffing and resources shortages, which have contributed to corruption. The prison system has also been criticized for poor infrastructure and abuses by officials.

As of June 2022, the Institute for Criminal Policy Research reported that Panama's penitentiary system had an overpopulation rate of 134 percent, following an incremental upwards trend in recent years. Such a percentage is relatively low for the region. Furthermore, the county has a fairly low pretrial detention rate, with 37 percent of inmates awaiting trial.

Despite these numbers, the reputation of Panamanian prisons was irrevocably damaged by the 2019 massacre in La Joyita. Multiple firearms were seized after the attack, including assault rifles, highlighting a severe smuggling dilemma within the prison. The penitentiary does not have metal detectors or scanners, allowing weapons to flow inside with the assistance of corrupt officials.

Moreover, security within the prison was shown to be completely lacking. This is a problem that remains true across Panama as a whole, considering the country only has a total of 800 prison guards tasked with monitoring nearly 20,000 prisoners.

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