JAPAN: LYING LOW IN PANAMA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90T00100R000201130001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 27, 2016
• Document Release Date: July 29, 2013
• Sequence Number: 1
• Publication Date: April 19, 1988
• Content Type: MEMO

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DATE 2:r1-7
DOC NO f./Cr- 31-a5p
OIR 3
P PD I
Central Intelligence Agency
Washington. D. C.20505
DIRECTORATE OF INTELLIGENCE
19 April 1988
Japan: Lying Low in Panama
Summary
Much of Japan's $9 billion in direct investment in Panama, second
only to its stake in the United States, is well protected from political
pressure by the regime, but some individual Japanese businessmen are
vulnerable to Defense Chief Noriega' s efforts to squeeze money out of
them. Mindful of US interests, the Japanese Government has refused so
far to recognize Solis F'alma's presidency, but Tokyo is maintaining
low-level official contact with the regime. If Panamanian opposition to
Noriega escalates or Washington prods harder, Tokyo would contemplate
limited steps to increase the pressure on Noriega. A prolonged period of
political instability could dampen Japanese investor interest in Panama
over the longer run, however, retarding any recovery under a successor
regime.
This memorandum was prepared by Japan Branch, Northeast Asia Division, Office of East
Asian Analysis. Information available as of 19 April 1988 was used in its preparation.
Comments and queries are welcome and may be directed to the Chief, Japan Branch,
Northeast Asia Division, DEA,
EA M 88-20050
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What's At Stake?
Japan's $9 billion direct investment in Panama is well protected from extortion
attempts by Defense Chief Noriega, both because of the nature of Japanese economic
involvement and the fact that the Japanese have moved to minimize their financial
exposure as the crisis has developed:
? With much of Japan's investment in Panamanian-flagged, Japanese-owned ships
plying the globe, Japanese shipping interests have few assets in-country.
? Much of the remaining Japanese stake in the financial sector, sited in Panama for
tax considerations, has dried up in recent months.
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Indeed, all ten Japanese banks in Panama 25X1
have announced they intend to close, according to the US Embassy.
Despite the pullback, Noriega retains some high-cost options (see inset), and
some Japanese businessmen in particular are vulnerable. For example, a prominent
Japanese entrepreneur, Hiroyoshi Aoki, has significant hotel and other local business
holdings. In March, he was prepared to provide Noriega with cash, according to the US
Embassy in Panama. Another Japanese concern, Fuji Kosan, operates an oil refinery and
may be susceptible to similar pressure.
Noriega's staying power in the face of strong economic and political pressure
almost certainly has convinced the Japanese that they cannot expect a quick return to
business-as-usual. We believe most firms are simply seeking to tide themselves over
the crisis, maintaining skeleton staffs while removing nonessential personnel and their
dependents to safe havens.
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Noriega's Options: The Ramifications
Possible Panamanian Actions Costs to Japan and Panama
Seize assets Japanese firms would lose
several hotels and an
oil refinery; would
considerably dampen
long-term Japanese
investment interest.
Default on bank loans Japanese banks have $500
million in outstanding
loans to Panama; would
probably lead other Western
banks to cut off
financing.
Strip ships of Panamanian Would probably create
flags one-time cost of
changing to alternative
flags, such as Liberia.
Nearly 30 percent of
Panamanian-flagged ships
are Japanese-owned.
Panama would lose up
to $40 million in
flagging revenues.
Impound ships in Panamanian
ports
Very few Japanese ships
are in Panama at
any one time. Would
probably lead to severely
curtailed trade.
Tokyo: Keeping a Low Profile
For their part, Japanese officials are likely to avoid taking sides even if they
conclude Japan's interests would be better served by Noriega's ouster. In conversations
with US officials, Japanese diplomats clearly have suggested as much. The Foreign
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Ministry, responding to Washington's concerns, has ignored the Solis government's
re uest for formal Japanese recognition but has continued working-level contacts.
If US pressure on Tokyo or Panamanian opposition to Noriega escalates, however,
we believe the Japanese would move cautiously to support Washington more directly.
In our view, Tokyo's initial steps would probably be symbolic, such as suspending its
modest $4 million cultural aid program?usually the first gesture the Japanese make
when civil strife hits their aid recipients. Less likely approaches for Tokyo would be to
encourage Japanese shippers to switch flags or to persuade companies to place
corporate taxes due the Panamanians into escrow accounts. Tokyo might consider such
measures, however, if European countries were planning similar actions.
From Tokyo's perspective, any of these steps could be easily rescinded should
Noriega step down, clearing the way for establishment of ties to a successor regime.
Indeed, we would not rule out a significantly expanded Japanese aid program as a
means to cement the relationship in the post-Noriega period. Here, too, however, Tokyo
would be unlikely to take major initiatives quickly. Its behavior in the Philippine case
suggests new activity by the Japanese private sector also could lag if Noriega's
successor has trouble consolidating control. Japanese businessmen have yet to recover
sufficient confidence in the Aquino government to initiate significant new investment.
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JAPAN: LYING LOW IN PANAMA
DISTRIBUTION:
SENIOR POLICYMAKERS
1 - GASTON SIGUR, ASSISTANT SECRETARY FOR EAST ASIAN AND PACIFIC
AFFAIRS, RM 6205,
1 - ELLIOT ABRAMS, ASSISTANT SECRETARY FOR INTER-AMERICAN AFFAIRS, RM
6263,
1 - DONALD GREGG, ASSISTANT TO THE VICE PRESIDENT FOR NATIONAL
SECURITY, RM 298,
1 - DAVID C. MULFORD, ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS,
RM 3432,
DEPARTMENT OF STATE
1 - WILLIAM CLARK, DEPUTY ASSISTANT SECRETARY FOR EAST ASIAN AND
PACIFIC AFFAIRS, RM 6205, '
1 - WILLIAM G. WALKER, DEPUTY ASSISTANT SECRETARY FOR INTER-AMERICAN
AFFAIRS, RM 4915,
1 - ROBERT SUETTINGER, DIRECTOR, OFFICE OF ANALYSIS FOR EAST ASIA AND
PACIFIC, RM 8840,
1 - WILLIAM PIEZ, DEPUTY ASSISTANT, BUREAU OF EAST ASIAN AND PACIFIC
AFFAIRS, RM 6205,
1 - JIM PRZYSTUP, POLICY PLANNING STAFF, RM 7330,
1 - WILLIAM BREER, DIRECTOR, OFFICE OF JAPANESE AFFAIRS, RM 4210,
1 - THEODORE TANOUE, INR/EAP/JAPAN, RM 8840,
1 - RALPH R. JOHNSON, DEPUTY ASSISTANT SECRETARY FOR TRADE AND
COMMERCIAL AFFAIRS, RM 3831,
1 - TIM FOSTER, DEPUTY DIRECTOR, OFFICE OF JAPANESE AFFAIRS, RM 4210,
1 - JAMES DERHAM, DEPUTY DIRECTOR, OFFICE OF JAPANESE AFFAIRS, RM 4210,
1 - RICHARD WYROUGH, DIRECTOR OF PANAMANIAN AFFAIRS, RM 4915,
1 - PETER D. WHITNEY, DIRECTOR, ARA/ECP, RM 3234,
1 - LUIGI EINAUDI, DIRECTOR, OFFICE OF POLICY PLANNING AND
COORDINATION/ARA, RM 6913A,
1 - ROBERT FOUCHE, DIRECTOR, ANALYSIS FOR INTER-AMERICAN REPUBLICS,
INR, RM 7358,
1 - JAMES BUCHANAN, CHIEF, SOUTH AMERICAN DIVISION, INR/IAA/SA, RM 7534,
1 - NICK RIEGG, EB/PAS, RM 3419,
1 - RICHARD TROPP, SPECIAL ASSISTANT TO A.I.D., ADMINISTRATOR, RM 5879,
NATIONAL SECURITY COUNCIL
1 - JAMES A. KELLY, SPECIAL ASST TO THE PRESIDENT & SR. DIR. FOR ASIAN
AFFAIRS, RM 493,
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1 - STEVE DANZANSKY, SPECIAL ASST TO THE PRESIDENT & SR. DIR. FOR INT'L
ECONOMIC AFF, RM 363,
1 - DOUGLAS PAAL, DIRECTOR FOR ASIAN AFFAIRS, RM 493,
1 - AMBASSADOR JOSE SORZANO, SPEC. ASST TO THE PRES. & SR. DIR. LATIN
AMERICAN AFFAIRS, RM 391,
1 - LUDLOW FLOWERS, III., DIRECTOR, LATIN AMERICAN AFFAIRS, RM 391,
DEPARTMENT OF DEFENSE
1 - DR. KARL JACKSON, DEPUTY ASSISTANT SECRETARY FOR EAST ASIA AND
PACIFIC AFFAIRS, RM 4E817,
1 - ROBERT PASTORINO, DEPUTY ASSISTANT SECRETARY FOR INTER-AMERICAN
AFFAIRS? RM 4C800,
1 - RADM EDWARD BAKER, JR., DIRECTOR, EAST ASIA AND PACIFIC REGION, INT'L
SECURITY AFFAIRS, RM 4C839,
1 - LTC WILLIAM M. WISE, ASSISTANT FOR REGIONAL POLICY AND
CONGRESSIONAL AFFAIRS, ISA, RM 4C839,
1 - JAY SLOAN, DEFENSE INTELLIGENCE OFFICER, EA/P, RM 2C238,
1 - COL. JOHN CASH, DIO/DIA, RM 2A520, 4
1 - COL. STEVEN DELP, DB-2D, RM C2951,
1 - CDR. (RET) JAMES AUER, OASD/ISA/EAPR, RM 4C836,
1 - LTC JEFFREY CHALMERS, OJCS/J-5/NORTHEAST ASIA/JAPAN, RM 2D977,
COMMERCE DEPARTMENT
1 - MAUREEN SMITH, DEPUTY ASSISTANT SECRETARY FOR JAPAN, RM 2320,
1 - KIM FITZGERALD, OFFICE OF INTELLIGENCE LIAISON, RM 6854,
1 - MEL SEARLES, DEPUTY ASSISTANT SECRETARY FOR EAST ASIA AND PACIFIC,
RM 3820,
1 - USDOC, JAPAN DESK RM 4026,
1 - ALLEN LENZ, DIRECTOR, OFFICE OF TRADE AND INVESTMENT ANALYSIS, RM
2217,
DEPARTMENT OF TREASURY
1 - PATSY HAAS, OFFICE OF INTERNATIONAL BANKING & PORTFOLIO
INVESTMENT, RM 5320,
1 - ROBERT FAUVER, DIRECTOR, OFFICE OF INDUSTRIAL NATIONS AND GLOBAL
ANALYSIS, RM 5050,
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INTERNAL
1 - NIO, EAST ASIA, RM 7E62,
1 - NIO, ECONOMICS, RM 7E47,
1 - Nb, LATIN AMERICA, RM 7E48,
1 - CHIEF, PPS/DO, RM 3001,
1.- CHIEF, EAFRM 5E18,
1 - CHIEF, OGI/TID, RM 3G30,
1 - CHIEF, 0G1/11C/P1 RM 2G18,
1 - CHIEF, OGI/ECD RM 3G46,
1 IEEW STAFF, 001 RM 3004,
1 - CHIEF, OEA/NEA/KOREA, RM 4G43,
1 - CHIEF, OEA/NEA/STI, RM 4043,
1 - CHIEF, OEA/NEA/DIVISION, RM 4043,
1 - CHIEF, ?EA/CHINA DIVISION, RM 4020,
1 - CHIEF, 0EA/SEA DIVISION, RM 4F24,
1 - CHIEF, ?EA/PRODUCTION, RM 4G48,
1 - DIRECTOR, ALA, RM 3F45,
1 - CHIEF, ALA/MIDDLE AMERICAN DIVISION, RM 4F29,
1 - CHIEF, ALA/MCD/CENTRAL AMERICA BRANCH, RM 4F39,
1 - CHIEF, FBIS/NEAD, RM B5,
1 - DDI, RM 7E44,
1 - SENIOR REVIEW PANEL, RM 5000,
1 - OCA REGISTRY, OFFICE OF CONGRESSIONAL AFFAIRS RM 7B24,
1 - PDB STAFF, RM 7F30,
1 - CHIEF, LDA/EAD/AB, RM 1H18,
1 - CHIEF, LDA/PPD/PPAB, RM 5G03,
1 - CHIEF, LDA/LAAED/CENTRAL AMERICA, BRANCH, RM 1H39,
6 - CONTROL BRANCH, OFFICE OF CURRENT PRODUCTION AND ANALYTIC
SUPPORT, RM 7007,
1 - INTELL. SUPPORT STAFF, OFFICE OF CURRENT PRODUCTION AND ANALYTIC
SUPPORT, RM 7G50,
1 - INTELL. LIAISON STAFF, OFFICE OF CURRENT PRODUCTION AND ANALYTIC
SUPPORT, RM 7050,
1 - CHIEF, PRODUCT EVALUATION STAFF, RM 2F42,
1 - NIC, ANALYTIC GROUP, RM 7E47,
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