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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
      COUNTERDRUG IMPLICATIONS OF THE UNITED STATES LEAVING PANAMA

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON CRIMINAL JUSTICE,
                    DRUG POLICY, AND HUMAN RESOURCES

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 9, 2000

                               __________

                           Serial No. 106-217

                               __________

       Printed for the use of the Committee on Government Reform

  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
71-970 DTP                  WASHINGTON : 2001
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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana

                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                    Lisa Smith Arafune, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

   Subcommittee on Criminal Justice, Drug Policy, and Human Resources

                    JOHN L. MICA, Florida, Chairman
BOB BARR, Georgia                    PATSY T. MINK, Hawaii
BENJAMIN A. GILMAN, New York         EDOLPHUS TOWNS, New York
CHRISTOPHER SHAYS, Connecticut       ELIJAH E. CUMMINGS, Maryland
ILEANA ROS-LEHTINEN, Florida         DENNIS J. KUCINICH, Ohio
MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
STEVEN C. LaTOURETTE, Ohio           JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
DOUG OSE, California                 JANICE D. SCHAKOWSKY, Illinois
DAVID VITTER, Louisiana

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
           Sharon Pinkerton, Staff Director and Chief Counsel
              Carson Nightwine, Professional Staff Member
                           Ryan McKee, Clerk
           Micheal Yeager, Minority Senior Oversight Counsel

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 9, 2000.....................................     1
Statement of:
    Beers, Rand, Assistant Secretary, Bureau of International 
      Narcotics, Department of State; Ana Maria Salazar, Drug 
      Enforcement Policy and Support, Department of Defense; and 
      William Ledwith, Chief, International Operations, Drug 
      Enforcement Administration, Department of Justice..........    90
    Cabal, Professor Tomas, University of Panama.................   179
Letters, statements, etc., submitted for the record by:
    Barr, Hon. Bob, a Representative in Congress from the State 
      of Georgia, Legislative Assembly Law No. 5, Republic of 
      Panama.....................................................   148
    Beers, Rand, Assistant Secretary, Bureau of International 
      Narcotics, Department of State, prepared statement of......    93
    Cabal, Professor Tomas, University of Panama, prepared 
      statement of...............................................   185
    Ledwith, William, Chief, International Operations, Drug 
      Enforcement Administration, Department of Justice, prepared 
      statement of...............................................   114
    Mica, Hon. John L., a Representative in Congress from the 
      State of Florida:
        Followup questions and responses.........................   153
        Letter dated June 8, 2000................................   121
        Prepared statement of....................................     6
    Mink, Hon. Patsy T. Mink, a Representative in Congress from 
      the State of Hawaii, prepared statement of.................     9
    Ose, Hon. Doug, a Representative in Congress from the State 
      of California, followup questions and responses............   150
    Rohrabacher, Hon. Dana, a Representative in Congress from the 
      State of California:
        January 16, 1997, memo...................................    83
        Legislative Assembly Law No. 5...........................    14
        Prepared statement of....................................    88
    Salazar, Ana Maria, Drug Enforcement Policy and Support, 
      Department of Defense, prepared statement of...............   104

      COUNTERDRUG IMPLICATIONS OF THE UNITED STATES LEAVING PANAMA

                              ----------                              

                          FRIDAY, JUNE 9, 2000

                  House of Representatives,
Subcommittee on Criminal Justice, Drug Policy, and 
                                   Human Resources,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2247, Rayburn House Office Building, Hon. John L. Mica 
(chairman of the subcommittee) presiding.
    Present: Representatives Mica, Barr, Souder, Hutchinson, 
Ose, Mink, and Schakowsky.
    Also present: Representative Rohrabacher.
    Staff present: Sharon Pinkerton, staff director; Charley 
Diaz, congressional fellow; Carson Nightwine, professional 
staff member; Ryan McKee, clerk; Lauren Perny and Brian Bobo, 
interns; Michael Yaeger, minority senior oversight counsel; 
Sarah Despres, minority counsel; Earley Green, minority 
assistant clerk; and Teresa Coufal, minority staff assistant.
    Mr. Mica. Good morning. I'd like to call this hearing of 
the Criminal Justice, Drug Policy, and Human Resources 
Subcommittee to order.
    This morning we'll be conducting a hearing entitled, 
``Counterdrug Implications of the United States Leaving 
Panama.'' We have two panels, and we're going to go ahead and 
proceed with the consent of the minority. We should be joined 
by other Members, but we do have a full hearing so we want to 
keep this proceeding moving.
    The order of business will be opening statements, and I'll 
start with my opening statement. I'll yield to other Members as 
they come. And with the consent of the minority, we will leave 
the record open for a period of 2 weeks for additional 
statements, information or background that may be submitted as 
part of this hearing record.
    It's been about 6 months since the United States military 
has left Panama in accordance with the 1977 Carter-Torrijos 
Treaty. Today, this subcommittee will examine some of the 
implications of that move on our drug interdiction and 
eradication efforts in that region.
    Located at the nexus of two oceans and two continents, the 
country of Panama holds a uniquely strategic importance in the 
free flow of trade in the Western Hemisphere. Unfortunately, 
that trade also has come to include the trafficking of 
contraband such as illegal drugs, illegal arms, black market 
goods, and also extensive money laundering.
    Over the years, a critical element of our international 
drug eradication and interdiction efforts has been our 
operations which have been based in former United States bases 
in Panama. That all came to a grinding halt last year with the 
turnover of the Panama Canal. By the end of 1999, the United 
States had abandoned the Panama Canal and the 360,000 acre 
Canal zone, as well as military property consisting of 70,000 
acres and 5,600 buildings worth an estimated $10 to $13 
billion. Since the late 1980's, these bases have served as the 
cornerstone of the U.S. military's counterdrug effort in that 
region.
    Today, the United States can no longer fly planes out of 
Howard Air Force Base. Likewise, we can no longer base our 
ships at Rodman Naval Base. We can no longer coordinate our 
regional counterdrug efforts out of Fort Sherman. Somehow I 
still don't understand why this administration wasn't able to 
foresee this predicament and develop contingency plans. I know 
we from the subcommittee have done everything possible to 
highlight what we knew would be problems in this area with the 
close-down of those bases. Instead, we find ourselves today 
playing a catch-up game, and we have a long way to go to make 
up for the losses of these bases and strategic forward 
operating anti-narcotics efforts.
    Over a year ago, on May 1st, 1999, the United States ceased 
all surveillance flights from Howard Air Force Base in Panama 
from which the United States had flown more than 2,000 anti-
narcotics flights per year. Over the past 12 months, the United 
States has signed 10-year agreements with Aruba, Curacao and 
Ecuador, and most recently with El Salvador, to provide 
alternative staging areas, known as forward operating locations 
[FOLs], for both our military and law enforcement surveillance 
aircraft.
    Two of the 10-year agreements have been ratified. The El 
Salvador agreement still lacks parliamentary approval. But, in 
fact, we once operated out of just one base, and now the United 
States may be forced to maintain and finance bases in four 
locations.
    Also, we're faced with mounting construction costs and 
operational costs for these forward operating locations at the 
new operating locations, and every time we have folks appear 
before the subcommittee the estimates of cost of operating 
those bases climb.
    Even more troubling, the date at which all four FOLs will 
be fully operational keeps slipping. The most recent guess is 
that we will not be fully operational until the year 2002. 
Meanwhile, drug-laden boats and planes keep heading toward our 
shores undetected. Each of these deadly craft carry death and 
destruction bound for the U.S. streets and neighborhoods.
    I hope to hear from today's administration witnesses about 
our latest cost estimates, the latest timeline for getting 
these FOLs fully operational. I also want to know the 
likelihood that these four FOLs will make up for the extensive 
coverage loss that we experienced with the shutdown of Howard, 
including a breakdown of coverage in the source zone and also 
the transit zone.
    I chaired a similar hearing on Panama 1 year ago where we 
discussed the implications of losing Howard Air Force Base. At 
that hearing I stated that, ``hopefully, we can avoid a near-
term gap with the damaging loss of critical coverage.'' 
Obviously, this administration missed the mark. Unfortunately, 
the gap is now something we're experiencing and it's very real.
    By SOUTHCOM's own admission in a letter to the subcommittee 
sent yesterday by Charles Wilhelm--and I invited him to testify 
today. I hope the Members will take a look at this. But his 
words are that we estimate our capability will continue to be 
approximately one-third of what it was in Panama. This is an 
incredible gap. I think it's one reason that we have drugs, 
particularly a resurgence of cocaine now, incredible quantities 
of heroin, pouring into our shores.
    Again, according to our own SOUTHCOM Commander, we are two-
thirds shy of what is needed. I understand that a majority of 
this shortfall is in the critical source zone countries of 
Colombia, producing 80 to 90 percent of the cocaine now, by the 
administration's own estimates, and some 70 percent of the 
heroin on our streets that's seized, according to DEA 
estimates--Peru and also Bolivia, and their efforts to 
eradicate the cocaine production are now also being harmed 
we've learned from recent reports. These are the very countries 
that need our support and need our help right now. We must 
minimize the extent and duration of this gap in coverage.
    Instead of closing the gap, though, this administration 
reduced the number of counterdrug flights by a staggering 68 
percent from 1992 to 1999. Again, I refer to the document 
requested. I didn't conduct the study. GAO did, upon our 
request, citing a 68 percent reduction in these anti-narcotics 
surveillance flights in the period from 1992 to 1999.
    I read in today's New York Times that we have increases in 
drug use, particularly cocaine, marijuana and other hard drugs 
of our young people. I think the CDC--and we may ask them to 
come in and testify now--but from 1991 to current, dramatic 
increases in use. And again we have a reduction in our 
counternarcotics effort, most effective tool for stemming these 
shipments.
    The number of ship days also, according to this report, 
dropped 62 percent.
    It is painfully clear that this counternarcotics effort is 
not a priority, top priority for this administration. And I 
don't know why. As we all know by now, a real shooting war, 
largely financed by the illegal drug trade, is raging just 
south of Panama in the Republic of Colombia. In fact, you can't 
have a meaningful discussion of the drug situation in Panama 
without considering what is happening in Colombia.
    I know the House has acted. I salute my colleagues in 
working with me and the Speaker and others in trying to get the 
$1.6 billion passed and from the House to the Senate. It's 
shameful that the Senate, including the Republican leadership 
there, have not acted on that measure. I want to make sure I 
put the blame on everybody today.
    In the past there have been reports of significant 
Colombian rebel activity in the Darien Province of southern 
Panama. Now with the United States withdrawal from Panama and 
the recent focus on Colombia, we have already witnessed an 
increase in narco-terrorist incursions into Panama. With a weak 
and corrupt police force, Panama is now ripe for takeover by 
narco-dealers.
    At last year's hearing, I voiced concern about the 
expanding FARC guerilla presence in Panama. I warned that, 
absent an effective United States policy--and this is my quote 
a year ago--``the United States will be back in Panama at some 
point in the future, and at great cost and sacrifice, to 
preserve the sanctity of the Canal and protect our national 
interests.'' 1 year later, my concern about this deteriorating 
situation is even greater.
    We'll probably hear more about this, but I think everyone 
is focusing today on a report, and I honestly have not read the 
entire report, only seen press accounts, this headline--and 
this happens to be the Washington Times, but it's in the Post 
and the New York Times--``With U.S. Gone Panama Is a Mecca for 
Drug Trafficking.'' And we'll hear more about that report.
    From my perspective as chairman of the subcommittee, I 
don't think this administration has taken this threat 
seriously. How could this administration turn its back totally 
on direct tenders that captured key Panamanian court contracts 
at Colon? And the administration officials, including General 
McCaffrey, have confirmed to me both publicly and privately 
that these were corrupt tenders that allowed these contracts to 
go to Chinese interests and zero out United States competitors.
    Today, we have a complete lack of engagement by this 
administration and Panama, and the region is in turmoil. 
Colombia is in chaos, Venezuela is thumbing its nose at the 
United States, and the administration is undermining our best 
ally in the anti-narcoterrorist effort, President Fujimori of 
Peru.
    This complacency is jeopardizing stability in the region, 
and it is also a threat to our national security. The threat to 
the region and the Canal is real, and we need to address it.
    In the aftermath of the United States efforts to apprehend 
the Panamanian dictator Manuel Noriega in 1989--and just as a 
lesson of history we went after him for being involved in drug 
dealing and corruption--we insured that the corrupt Panamanian 
Defense Force [PDF], was dissolved. In fact, we had their 
military dissolved by that action. And Panama changed its 
constitution to prohibit a standing military.
    Now the security of that country is in the hands of the 
institutionally weak Panamanian National Police force. And if 
we're to believe these reports, they've been very seriously 
corrupted and infested by narco-drug traffickers.
    Experts contend that this modest, ill-equipped force does 
not have the capacity to effectively monitor or guard the 
southern border with Colombia. In fact, despite President 
Clinton's certification of Panama last year, I have received 
troubling reports that drug seizures in Panama dropped by some 
80 percent in 1999 from 1998.
    In Panama, we face serious challenges in the months and 
years ahead, challenges that in fact will impact our ability to 
keep drugs, illegal narcotics off our street and from our 
children. With the pullout of the United States military from 
Panama, it appears to me we'll only see more increases in drug 
trafficking, narcoterrorism, illegal arms smuggling and money 
laundering in Panama and also throughout the region.
    Hopefully, today's hearing will shed light on these issues 
and help us address some of them squarely, collectively and in 
a bipartisan fashion and effectively. The citizens of the 
United States and this hemisphere deserve no less.
    In this region, if we recall from history, Teddy Roosevelt 
adopted the policy of ``walk softly and carry a big stick''. 
Unfortunately, historians may record the Clinton foreign policy 
for this region at this time as the ``que pasa'' era. And if 
you're not familiar with Spanish, que pasa is sort of a blase 
``what's happening'' for a literal interpretation. And we do 
need to find out what's happening here today.
    With those opening comments, I'm pleased to yield to the 
ranking member of our subcommittee, the distinguished lady from 
Hawaii, Mrs. Mink.
    [The prepared statement of Hon. John L. Mica follows:]
    [GRAPHIC] [TIFF OMITTED] T1970.001
    
    [GRAPHIC] [TIFF OMITTED] T1970.002
    
    Mrs. Mink. I thank the chairman for yielding to me at this 
time.
    I do hope that the intent of these hearings today is to 
really find out what's happening in terms of the impact of the 
United States having no military base in Panama as a result of 
an agreement made some years ago. While I think it's useful to 
examine the situation of the pullout and what the impacts have 
been with respect to the United States and the region, I do 
think that the discussions about drug trafficking do not really 
lend any particular intelligence to the discussion of this 
subject.
    I think it's quite obvious that with a pullout of our 
military bases that we would lose a very important command post 
in our counterintelligence activities. I've always taken the 
viewpoint that it's important for us to establish strong 
relationships and a sense of related responsibility toward the 
supply side of the various drugs from this region.
    But in looking at the whole picture it's very important to 
understand that we have two sides to this issue, and that is 
demand and supply. And while we want to bring considerable 
pressure on these countries to perform better, it's really our 
responsibility to make the relationships work and to establish 
those counterintelligence posts that are meaningful.
    We knew we had to pull out of Panama, and I think if there 
is a deficit of policy, it was not being able to establish on a 
much earlier timetable the replacement posts for the absence of 
the Howard Air Force Base. And so my emphasis has always been, 
what do we do here in the United States? What are we doing to 
curb demand?
    I think that the Congress has a very large responsibility 
in this area, and we have been focusing heavily on our side to 
strengthen the law enforcement aspects of all the incursions of 
drugs coming into United States and also understanding that 
part of the demand policy is also what we do with respect to 
those who need treatment. If we can't do something about 
treatment of those who are addicted to drugs, then we're not 
really looking at the demand side.
    So while I welcome this opportunity to discuss Panama today 
and to look at the implications of the loss of our military 
base there in Panama, I do think that a full view of this 
situation, rather than simply a condemnation of administration 
policy, has to take the balance, look and see what implications 
this means for our strengthened resolve to do more within the 
United States on the demand question.
    Thank you, Mr. Chairman. I ask unanimous consent that my 
statement be placed in the record.
    Mr. Mica. Without objection, so ordered. Thank you.
    [The prepared statement of Hon. Patsy T. Mink follows:]
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    [GRAPHIC] [TIFF OMITTED] T1970.004
    
    Mr. Mica. I'll recognize the vice chairman of our panel, 
Mr. Barr, the gentleman from Georgia, at this time.
    Mr. Barr. Thank you, Mr. Chairman; and thank you for 
convening these two very distinguished panels today to continue 
what you know must be a long-term, sustained focus on Panama 
and the surrounding problems in the Caribbean and South 
America.
    This is not a problem, like many here in Washington, that 
somebody will focus on for 1 day of hearing and then everybody 
will go back and do their other things and forget about it. 
That happens far too often, and that's why we find ourselves 
frequently in crisis situations here in the Congress or facing 
crisis situations elsewhere.
    You've taken a different tack, and I commend you for that. 
You realize that the problems with regard to drug trafficking 
and money laundering and narco-terrorist activity in Central 
America, in Panama, in Colombia, and elsewhere is something 
that must be attacked every single day of the year, year in and 
year out. And the problems that we're facing in Panama largely 
now are a result of the vacuum created by the departure and 
turnover to Panama of all military--all United States personnel 
and facilities and the lack of planning by this administration 
to have alternatives such as operational FOLs ready to go and 
to hit the ground running the day after the turnover are very, 
very severe and continuing.
    And while I do appreciate the steps that have been taken 
and I recognize that these are not easy contracts to negotiate 
and to go so in a manner that is respectful of taxpayer money. 
Previous hearings that we've had have indicated that things 
could have moved much more quickly if they had been started 
much earlier as well.
    But, be that as it may, there's nothing we can do at this 
point to make up for prior shortcomings. What we have to do is 
continue to focus on the problems created by the vacuum when 
the United States departed Panama lock, stock and barrel and to 
see if there are some steps that can be taken both in the 
civilian sector with regard to encouraging--and this might be 
something that we can look at legislatively as well as look 
United States companies to become more active in Panama.
    It also requires a look at the very distressful increase in 
the Communist Chinese influence and interest in Panama.
    As we all know, Panama has been, over the years, very, very 
courageous, more courageous than our country, as a matter of 
fact, in recognizing the free people of China and in providing 
diplomatic recognition to the Republic of China, not the 
Communist People's Republic of China. This has been a sore 
point for Beijing for many years, and they have been mounting 
over the last few years a much more sustained effort to switch 
allegiance, and I do hope and encourage the people of Panama to 
resist such entreaties.
    But the Communist Chinese presence, which took a quantum 
leap forward with what I believe was a very corrupted process 
of negotiations, has given them a foothold through Hutchison 
Whampoa on both ends of the Panama Canal which certainly we 
anticipate that they will expand. There would be no reason for 
them to be there if they didn't plan on expanding, and that has 
been the nature of Communist Chinese presence in other parts of 
the world. This is something we do need to focus on.
    The administration is not--the President, in perhaps a 
Freudian but probably very accurate slip of the tongue, a 
number of months ago indicated that he seemed pleased with the 
Communist Chinese presence there, and they would run the Canal 
properly. Many of us up here, including, I know, you, Mr. 
Chairman, and certainly myself and Mr. Rohrabacher and I 
suspect all members of this panel, take a much different view. 
We are concerned about the increased Communist Chinese focus in 
Panama, just as we are concerned about the danger posed to the 
Panamanian people by incursions by narco-terrorists, by the 
FARC and ELN, in the southern provinces of Panama where it 
borders on its neighbor to the south.
    These are matters that do impact us, and they impact us in 
many, many different ways, including the security of the Canal. 
If commercial shippers do not believe that the security of the 
Canal will be maintained long into the future and indefinitely 
into the future, if they foresee problems, then they are going 
to start looking at alternatives. Once they start doing that, 
much of the revenue currently derived by Panama from the Canal 
will start to dry up. So that's something that neither country 
certainly wants to see happen.
    I also hope, Mr. Chairman, that we can begin to focus on 
the problem of the cleanup of the target ranges in Panama and 
the testing ranges. As I understand it from talking with people 
both in Panama who have traveled down there and experts, this 
matter has not yet been resolved, and I think we could go a 
long way toward improving the climate for future negotiations 
and current negotiations between our two countries for a more 
cooperative physical presence down there if we can get this 
matter resolved as well.
    So there are many, many facets to the problems that you are 
continuing to focus on, Mr. Chairman. I've just enumerated a 
few of them. You have also.
    I read the same press reports this morning of the 
intelligence estimate, the law enforcement officer estimate. 
This is very, very troubling, although not terribly surprising. 
It, too, is the result of lack of foresight by the 
administration in really laying the groundwork to address these 
problems that we all knew would crop up.
    But, again, I hope that we can work and I anticipate we 
will continue to work with the administration to resolve these. 
Certainly we would have preferred to see it done sooner rather 
than later, but it is not too late. And you are playing, 
through your convening--through this hearing today and I know 
future hearings, Mr. Chairman, playing a key role in that, and 
I thank you.
    Mr. Mica. Thank the gentleman.
    I'll now recognize Mr. Ose from California.
    Mr. Ose. Thank you, Mr. Chairman. I think I'll pass on the 
opening statement.
    Mr. Mica. Thank you.
    The gentleman from Arkansas, Mr. Hutchinson.
    Mr. Hutchinson. I pass and look forward to the witnesses' 
testimony.
    Mr. Mica. The gentleman on our panel, Mr. Souder from 
Indiana.
    Mr. Souder. Pass.
    Mr. Mica. We're also joined by a member of the 
International Relations Committee who's taken an active 
interest in this hearing; and, without objection, I'm pleased 
to recognize Mr. Rohrabacher from California at this time.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman.
    As you know, I've had a very deep interest in Panama and in 
the national security interest of our country that I believe 
are being put at risk by some of our policies in Panama. And I 
want to thank you for conducting this hearing on the national 
security threats that are developing in the Panama Canal area 
which remains a key strategic choke point for the Americas.
    When I visited Panama last summer I was stunned by the 
complete absence of American security forces in what had been 
for nearly a century America's military outpost protecting our 
Nation's vulnerable southern flank. And I had been to Panama 
several times during the Reagan years when I worked at the 
White House, and those of us who visited Panama in the past 
realize how significant a military presence America had there 
and what role that presence played in the stability and played 
for a positive factor in Latin America and in that region.
    Today, Communist China and transnational criminals are 
filling the strategic vacuum created by the total withdrawal of 
the United States of America from Panama. Major ports on both 
ends of the Canal are now under the control of a Hong Kong-
based Chinese company, Hutchison Whampoa, which has close ties 
to the Communist Chinese Government and is partly owned by an 
entity which is itself wholly owned by the Communist Chinese 
regime, the China Resources Enterprises, which is also very 
well known as a front for the Chinese military intelligence.
    I am submitting for the record a copy of the Panamanian 
Government's official open bid document, and it shows that 
American companies initially outbid the Chinese companies for 
control of the port facilities in both ends of the Panama Canal 
but were denied the port contracts through what our State 
Department has called, a highly irregular process.
    [The information referred to follows:]
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    Mr. Rohrabacher. Please also include for the record the 
enclosed document that describes the relationship between 
Hutchison Whampoa and its owner Li Ka-Shing and China Resources 
Enterprises to the Communist Chinese regime itself.
    [The information referred to follows:]
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    Mr. Rohrabacher. It is not a coincidence that Taiwan, which 
is under the threat of military attack by Beijing, has stopped 
shipping military supplies through the Panama Canal because of 
their concern that all ships' cargo manifests will be seen by 
Hutchison Whampoa and reported to Beijing.
    Equally troubling, since the removal of United States 
counterdrug operations at Howard Air Force Base, there has been 
a significant increase in the vast quantities of South American 
cocaine and heroin that transit through and around Panama.
    And let me say to my colleague from Hawaii I certainly 
share her commitment to trying to reshape America's drug effort 
so it isn't totally aimed at enforcement and interdiction, but 
that does not take away from the importance of these other 
efforts. But putting treatment in the mix is a good idea. It's 
an important element.
    But when we take a look at what's going on now as a result 
of America pulling back from Panama and the weakening of our 
drug enforcement mechanisms, it's having a harrowing effect on 
American security and on the security and well-being and 
stability of that part of the world.
    The war in neighboring Colombia against well-armed narco-
terrorist forces financed by laundered drug profits through 
Panama's banks is escalating and threatens to spread throughout 
the region. Panama does not have an army, a navy or an air 
force.
    The Panamanian Government and its National Police force 
are, at best, unable to cope with the challenges they face; and 
the people of Panama understand that. They're unable to cope 
for a number of reasons. There is incompetency and corruption 
charges, but also it is a very small force, and it is a very 
small country. It makes absolutely no sense for the United 
States Government to pour billions of dollars into a 
counterdrug war into Colombia and to deploy an increasing 
number of American soldiers there while ceasing to seriously 
negotiate with Panama for a reinstatement of American security 
advisers and, yes, even security forces and counternarcotics 
experts there in order to participate in a regional effort.
    In all recent public opinion polls--and this is what makes 
it so incredulous that this is happening--80 percent of the 
Panamanian people support a continued United States security 
presence in their vulnerable homeland. They want us there. The 
empty American bases and total absence of American military 
presence in Panama--at America's most important strategic point 
in this hemisphere. This is a glaring example of this 
administration's callous disregard for our country's national 
security interests.
    In Panama, the people want us there, but yet this 
administration was unable to negotiate an agreement to permit 
us to have a military presence there. It's a travesty. In fact, 
I would say it's more. It's a sham when one says that we were 
honestly trying to negotiate so America could maintain some 
sort of a presence there in Panama.
    And those of us who, spent time in that part of the world, 
it's shocking to go and see now that there's just no American 
troops, no American military. What was an area where it was 
bustling with Americans, we had presence, we were able to deter 
evil forces--and I know that people don't like to use the word 
``evil.'' It maybe sounds a little bit too plebeian to use the 
word evil, but there are evil forces in this world and 
America's presence was able to deter those forces from 
dominating this very small country of Panama.
    So this hearing is very important for our national security 
today because we do have evil forces, countries and forces that 
hate the United States that are involved with drug trafficking, 
forces that would undermine our national security, and Panama 
needs America's help, and it needs America's presence. And I 
thank you for holding this hearing.
    [The prepared statement of Hon. Dana Rohrabacher follows:]
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    Mr. Mica. I thank the gentleman for joining our panel this 
morning and for his comments.
    We have already agreed to leave the record open, with 
consent of the minority, for 2 weeks. Without objection. Also, 
I think the material that the gentleman from California 
requested will be made part of the record.
    At this time, we have our first panel; and I'd like to 
recognize our first panel: the Honorable Rand Beers, who is the 
Assistant Secretary of the Bureau of International Narcotics 
for the Department of State; Ms. Ana Maria Salazar, she is the 
with the Department of Defense in charge of Drug Enforcement 
Policy and Support; and Mr. William Ledwith, and he is the 
Chief of International Operations from the Drug Enforcement 
Administration.
    I think they've all been before our panel before, and 
they're familiar with the requirements of this investigations 
and oversight panel.
    If you would please stand and be sworn.
    [Witnesses sworn.]
    Mr. Mica. The witnesses answered in the affirmative.
    I am pleased to welcome back today Mr. Rand Beers, who's 
the Assistant Secretary of State for the Bureau of 
International Narcotics. You're recognized sir.

   STATEMENTS OF RAND BEERS, ASSISTANT SECRETARY, BUREAU OF 
    INTERNATIONAL NARCOTICS, DEPARTMENT OF STATE; ANA MARIA 
  SALAZAR, DRUG ENFORCEMENT POLICY AND SUPPORT, DEPARTMENT OF 
DEFENSE; AND WILLIAM LEDWITH, CHIEF, INTERNATIONAL OPERATIONS, 
     DRUG ENFORCEMENT ADMINISTRATION, DEPARTMENT OF JUSTICE

    Mr. Beers. Thank you, Mr. Chairman and members of the 
Subcommittee on Criminal Justice----
    Mr. Mica. I'm not sure if we can hear that. You might have 
to pull that as close as you can.
    Mr. Beers. Is this better, sir?
    Mr. Mica. Yes, go ahead.
    Mr. Beers. Thank you for this opportunity to speak today 
about Panama and in particular the narcotics trafficking 
situation. Panama's shared border with Colombia leaves it 
vulnerable to narcotics trafficking and to incursions into the 
Darien Province by guerrillas and narco-traffickers. It is 
arguably one of the most strategically located countries in the 
Western Hemisphere for drug trafficking and other organized 
criminal activities. Panama's location between South and North 
America, its long coastlines, border with Colombia, the Canal 
and other factors make it a key staging areas for drug 
shipments and insurgent unrest originating in Colombia. It is 
crucial, therefore, that we remain committed to a partnership 
that promotes security for both the United States and Panama.
    Panama was certified as fully cooperating with the United 
States on counternarcotics in 1999. While this country is not a 
significant producer of drugs or precursor chemicals, due to 
its strategic location, advanced transportation infrastructure 
and financial development it serves as a crossroads for 
transnational crime, including drug trafficking and money 
laundering. Panama's long land border and shared sea-lanes with 
Colombia and its extensive Caribbean and Pacific coastlines 
make land and sea interdictions a major challenge. The Panama 
Canal, container seaports, the uncontrolled Colon Free Zone and 
the beginning of the Pan American Highway, an international hub 
airport and numerous uncontrolled airfields create unlimited 
transportation opportunities for drug traffickers.
    Accordingly, Panama has become a major transshipment point 
for illicit drugs smuggled from Colombia into Panama by ``go-
fast'' boats, by containers transported by maritime cargo 
vessels that transit the Canal or off-load in Panama's ports, 
by private and commercial overland vehicles and aboard private 
and commercial aircraft.
    Colombian cocaine is, in turn, often stockpiled in Panama 
and repackaged for further shipment to the United States and 
Europe. Panama is also extremely vulnerable to money laundering 
due to its international banking sector, the Colon Free Zone, 
and the United States-dollar-based economy.
    Panama's law enforcement agencies maintain good relations 
with their United States counterparts and have demonstrated 
their willingness to cooperate on an interagency basis.
    In 1999, the United States and Panama carried out four 
coordinated counterdrug operations. The Technical Judicial 
Police and the Panamanian National Police also executed three 
major joint interdiction operations along the Costa Rican 
border against alien smugglers and drug traffickers. In fact, 
we had one just in the past week.
    At the request of the Moscoso Administration, the United 
States and Panama began law enforcement bilateral discussions 
on November 23rd, 1999. This past Tuesday, June 6th, the 
Government of Panama hosted the second round of law enforcement 
bilaterals. The issues discussed included law enforcement, 
specifically drug interdiction cooperation, alien smuggling, 
money laundering and judicial reform. In addition to these 
issues, this particular round of bilateral discussions was 
concluded with the signing of a Stolen Vehicle and Aircraft 
Treaty.
    According to United States law enforcement and insurance 
agencies, Panama is an important destination for vehicles 
stolen from the United States. Some of these vehicles are 
transported to Panama for the local market, while others are 
routed there for transshipment to Europe and elsewhere. Stolen 
vehicles are often used by Colombia drug traffickers to 
transport drugs. This treaty for the repatriation of stolen 
vehicles and aircraft illustrates Panama's commitment to 
building successful law enforcement and judicial institutions 
and enhancing bilateral cooperation beyond counternarcotics.
    Panama continues to be a major drug transit country because 
of its proximity to the world's largest cocaine producer. The 
situation in Colombia, therefore, is critical for the 
surrounding region. Colombia is increasingly threatened by 
well-armed and ruthless narcotics traffickers that are 
supported by guerillas and paramilitaries. Not only is the 
Colombian Government unable to exert effective control over 
thousands of square miles of its own territory, but the border 
areas of neighboring countries are also put at risk by the 
instability and violence. The corrosive powers of narcotics and 
narcotics money are ever-present threats to the institutions 
and economies of the entire region.
    The situation in Colombia also poses a considerable number 
of direct threats to United States national security interests, 
including thousands of Americans killed by drugs and drug-
related violence each year, losses to our economy from drug-
related accidents, inefficiency in the workplace and the social 
and human costs of abuse and addiction.
    After strained relations with the tainted Samper 
administration, President Pastrana's tenure and the proposed 
funding for Plan Colombia offer the United States and Panama a 
golden opportunity to work with Colombia to confront such 
threats. Panama faces complex and daunting problems, not only 
those emanating from the Colombian crises but also others that 
are outgrowths of institutional weaknesses in Panama.
    Our challenge as a neighbor and a partner is to identify 
ways in which we can assist Panama in resolving its narcotics-
related and other problems. At this moment, Panama is a partner 
who shares our counternarcotics concerns and possesses the will 
to proceed with the needed reforms, bilateral agreements and 
operations. I look forward to working closely with the Congress 
as we continue to address these critical issues.
    Thank you very much.
    Mr. Mica. Thank you. We'll withhold questions until we've 
heard from all three members of the panel.
    [The prepared statement of Mr. Beers follows:]
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    Mr. Mica. I'll recognize next Ana Maria Salazar, who is 
with the Department of Defense, Drug Enforcement Policy and 
Support. You're recognized.
    Ms. Salazar. Thank you, Mr. Chairman. I'm pleased to have 
the opportunity to testify once again before the subcommittee 
and to provide an update on the status of our forward operating 
locations.
    At this time, I would like to summarize my statement and 
submit a written statement for the record.
    Mr. Mica. Without objection, your entire statement will be 
made a part of the record. Please proceed.
    Ms. Salazar. As you know, a year ago last month the runway 
at Howard Air Force Base in Panama closed and the interagency 
began conducting counterdrug flights on an expeditionary bases 
from existing commercial facilities in Aruba, Curacao and the 
Ecuadorian military airfield in Manta. Since the last time I 
testified a year ago on this issue, we have made important 
progress toward replacing and enhancing our capabilities.
    In November 1999, the Government of the United States and 
Ecuadorian Government signed a 10-year agreement for the use of 
the Manta airfield to support interagency counterdrug missions 
throughout the source zone, including Colombia, which supplies 
90 percent of the cocaine shipped to the United States. The FOL 
at Manta is now capable of 24-hour, 7-days-per-week, all-
weather flight operations. United States Navy P-3s are 
conducting Eastern Pacific counterdrug detection and monitoring 
missions from this facility as we speak. The Manta airfield is 
suitable for United States Customs Service P-3 operations, and 
the deployments are currently scheduled for this month. This 
fact alone will allow the United States to increase the 
surveillance capability in the source zone tremendously.
    In March of this year, our government and the Kingdom of 
the Netherlands signed a similar 10-year agreement for the 
critical coverage of the northern source zone and Caribbean 
portions of the transit zone.
    The United States Customs Service has been flying from 
Aruba since April 1999, and the Department of Defense has been 
operating with aircraft such as the F-16s, United States Navy 
P-3s and E-2s, United States Air Force AWACS, as well as other 
Intelligence, Surveillance and Reconnaissance platforms from 
Curacao since May of last year.
    Shortly after initiating flight operations from the FOLs, 
the interagency exceeded pre-Howard closure counterdrug 
detection and monitoring on-station time by 15 percent. 
Furthermore, transit zone detection increased by 50 percent; 
and maritime-related cocaine seizures climbed by over 500 
percent.
    Most recently, in March 2000, we signed a 10-year agreement 
with the Government of El Salvador for the use of Comalapa Air 
Base, which will support P-3 counterdrug flights in the Eastern 
Pacific and Western Caribbean portion of the transit zone. This 
agreement is pending ratification by the Salvadorian 
legislative assembly prior to initiating counterdrug 
operations.
    Geographically, the El Salvador location optimizes the 
integrated coverage of the three FOLs, minimizing overlaps 
while simultaneously extending the reach of airborne 
counterdrug missions to the northern region of the Eastern 
Pacific transit zone along the west coast of Mexico.
    Although progress has been made, important challenges still 
remain. The vast majority of D&M on-station hours were flown in 
support of counterdrug transit zone missions, primarily in the 
Caribbean. In fact, source zone on-station time has decreased 
by 75 percent.
    We need to increase our airborne D&M coverage over the 
source zone to complement the Puerto Rican ROTHR, which has 
completed its testing phase and is now fully operational, 
providing unprecedented coverage over southern Colombia. Once 
full operational capability is established at each of the FOLs, 
the interagency will have significantly greater source and 
transit zone coverage than existed when counterdrug operations 
were flown out of Howard Air Force Base.
    I would like to briefly talk about some of the issues that 
you have raised in regard to Panama.
    I know that members of the subcommittee are concerned about 
how and what effect illegal drug trade is having on Panama. 
From DOD's perspective and perhaps the interagency at large, we 
are closely monitoring the situation, and we stand ready to 
assist Panama, as with any other country in the region, in 
support of that country's security concerns. We do not foresee, 
however, any counterdrug requirement for an FOL-like presence 
in that country at this point.
    The El Salvador FOL meets or exceeds all Department 
requirements and optimizes the synergetic effect of the 
geographical situation of the three locations. A Panama site 
suboptimizes the FOL architecture because its coverage--the 
region that it would be covering would overlap that provided by 
the other operating locations.
    However, we are engaged with the Government of Panama in 
counterdrug concerns. There have been ongoing bilateral 
discussions, as mentioned by Assistant Secretary Rand Beers; 
and SOUTHCOM has participated in those efforts. However, until 
Panama signs a visiting forces agreement, an agreement that we 
have in many countries around the hemisphere, it will be very 
difficult for DOD to increase dramatically their support.
    I would like to briefly talk about the Colombia 
supplemental. Most of the required military construction 
funding for the FOLs is currently contained in the fiscal year 
2000 supplemental developed to support Plan Colombia. From an 
execution perspective, the Department requires a funding as 
soon as possible, especially in the case of the Manta FOL, 
which could go to contract as early as July.
    President Pastrana has asked for international support to 
address an internal problem that has international dimensions 
fueled in part by our country's demand for cocaine. It is a 
long-time sense that we should move forward on the Colombian 
supplemental, and I hope that we can do so soon.
    We cannot execute our congressional mandated mission to 
curb the shipment of illegal drugs without the FOLs. The 
Department of Defense along with our interagency partners has 
made important progress over the past year, and with the 
continued congressional support we hope to continue to do so in 
the future.
    I thank you for affording me the opportunity to speak to 
you in regards to the FOLs and Panama; and, with that, I look 
forward to answering your questions.
    [The prepared statement of Ms. Salazar follows:]
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    Mr. Mica. We will withhold questions until we've heard from 
our final witness. And that witness is William Ledwith, Chief 
of International Operations for our Drug Enforcement 
Administration under the Department of Justice. Welcome and 
you're recognized sir.
    Mr. Ledwith. Good morning, sir.
    Mr. Mica. You might have to pull that up close. For some 
reason, they're not picking up over there.
    Mr. Ledwith. Good morning, sir.
    Mr. Chairman and members of the subcommittee, I appreciate 
the opportunity to appear before the subcommittee today on the 
subject of Panama. My comments will be limited to an objective 
assessment of the law enforcement issues involving drug 
trafficking and money laundering in and through the country of 
Panama. I would like to again express my thanks to the 
subcommittee for your continued support of the Drug Enforcement 
Administration and for your overall support of drug law 
enforcement.
    Today's organized crime leaders are strong, sophisticated 
and extremely destructive. They have the capability of 
operating on a global scale. They are callous individuals who 
send their surrogates to direct the distribution of the drugs 
they ship to the United States. These organizational leaders 
have at their disposal airplanes, boats, vehicles, radar, 
communications equipment, money and weapons in quantities that 
rival the capabilities of some legitimate governments.
    Panama is the most strategically located country in the 
Western Hemisphere for drug trafficking and other transnational 
crime. Panama's location between South America and North 
America, with its long coastlines, its border with Colombia, 
and the Panama Canal make the country a key transit point for 
drug shipments originating in Colombia for further shipment 
north.
    Other factors which make Panama attractive to major drug 
traffickers are its weak law enforcement and public security 
institutions, its large and sophisticated international banking 
sector, the Colon Free Zone and cargo container port facilities 
on both ends of the Panama Canal.
    Panama continues to be threatened by Colombian drug 
trafficking organizations that utilize containerized cargo, 
aircraft, maritime vessels and the Pan American Highway in 
order to transport their illicit drugs through Panama.
    In addition, these same drug trafficking organizations 
utilize the Panamanian economy in order to launder their 
billions of dollars in drug proceeds through the Colon Free 
Zone.
    To combat this threat, the Government of Panama continues 
to cooperate with DEA to investigate and prosecute these 
transnational drug criminals.
    In 1999, Panamanian agencies seized a significantly reduced 
amount of cocaine and marijuana. This was principally due to 
changing trafficking methods and Panamanian authorities' lack 
of resources and training to respond to these changes.
    However, cocaine and heroin seizures in 2000 are on a pace 
to exceed the record seizures made by Panamanian authorities in 
1998. Panama continues to be a major financial and commercial 
center, ideally positioned for illicit financial transactions 
and drug smuggling. Panama's international banking center, a 
long-established tax haven, combined with the Colon Free Zone 
and a United States-dollar-based economy, render Panama 
vulnerable to money laundering.
    The Colon Free Zone is second only to Hong Kong as the 
largest free zone in the world and is the largest in the 
Western Hemisphere. The Colon Free Zone comprises over 161 
acres of warehouses and showrooms which accommodate over 1,600 
companies. Operating as a free trade zone, the CFZ is an area 
where goods can be imported and reexported without being 
subject to tariffs, quotas or taxes. Therefore, importers 
throughout Latin America can purchase a wide variety of these 
products at a competitive price.
    In addition, CFZ merchants will routinely accept third-
party checks, money orders, wire transfers and cash as payment 
for these goods.
    Illegal narcotic sales in the United States generate 
billions of dollars annually, most of it in cash. Efforts to 
legitimize or launder this cash by the Colombian drug cartels 
are subject to detection because of intense scrutiny placed on 
large financial transactions by United States banks and 
institutions. To avoid detection, the drug cartels have 
developed a number of money laundering systems that subvert 
financial transaction reporting requirements and manipulate 
facets of the economy unrelated to the traditional financial 
services industry.
    One such form of money laundering is known as the Black 
Market Peso Exchange. The Black Market Peso Exchange is a 
complex system currently used by drug trafficking organizations 
to launder billions of dollars of drug money each year. In 
addition, this financial scheme exploits the advantages of the 
CFZ, which serves as an integral link in the Colombian money 
laundering chain.
    The Black Market Peso Exchange is an underground financial 
system used to evade reporting and recordkeeping requirements 
mandated by the United States Bank Secrecy Act, as well as by 
Colombian foreign exchange and import laws and tariffs.
    Money brokers, utilizing pesos, purchase United States 
dollars from narcotics dealers in Colombia in exchange for 
Colombian pesos. These United States dollars are sold to 
Colombian importers in exchange for Colombian pesos. The United 
States dollars purchased by Colombian importers are used to pay 
for merchandise bought in the CFZ. The purchased goods are 
shipped to Caribbean or South American destinations, sometimes 
via even Europe or Asia, then smuggled or otherwise 
fraudulently entered into Colombia.
    The Colombian importer takes possession of his goods, 
having avoided paying extensive Colombian import and exchange 
tariffs, and they pay the peso broker for the items with 
Colombian pesos. The peso broker, who has made his money 
charging both the cartels and the importers for his services, 
uses those new pesos to begin the cycle once again.
    These investigations are extremely complex and require 
cooperative law enforcement efforts between the United States 
and Panama. Although cooperation between the United States and 
Panama on money laundering investigations has improved, the 
pursuit of such investigations remains constrained by 
Panamanian laws requiring prosecutors to satisfy an unusually 
high burden of proof and to meet extremely difficult 
evidentiary standards.
    Under Panamanian law, if a merchant demonstrates that 
transactions include real goods and that payment is at fair 
market value, he is not engaged in money laundering. Thus, 
willful ignorance of the law is not a crime.
    From the Panamanian perspective, criminal money laundering 
takes place only when a person moves cash without a 
commensurate exchange of goods and the cash involved results 
from specific drug transactions.
    These legal loopholes continue to be exploited by money 
laundering organizations operating in the Colon Free Zone.
    In conclusion, as the gateway to the Caribbean, Panama 
continues to provide a significant link between South American 
drug cartels and their ability to transport their poisons to 
the continental United States. The country of Panama is 
singular in the opportunities it provides for traffickers, as 
well as the challenges it creates for law enforcement 
authorities.
    Over the past several years, the United States Government 
has refocused a great deal of asset and enforcement initiatives 
along the southwest border in order to address the threat posed 
by Mexican drug trafficking organizations and their alliance 
with Colombian drug cartels. While these initiatives have 
resulted in outstanding successes, we remain concerned about 
the increased drug trafficking activity throughout the entire 
Panamanian and Caribbean regions. I can assure you that the DEA 
will, therefore, remain diligent in our efforts to respond to 
any apparent shift in drug trafficking trends.
    The use of Panama as a drug transit zone by Colombian drug 
trafficking organizations, as well as a means of securing their 
narcotics proceeds, creates unique challenges to Panamanian 
United States law enforcement authorities. We are dedicated to 
cooperative drug enforcement investigations with our Panamanian 
counterparts in order to address this threat.
    Mr. Chairman, thank you for the opportunity to appear 
before this subcommittee today. I sincerely appreciate the 
interest that you and the subcommittee have shown in DEA's 
counterdrug role in Panama. At this time, I will be happy to 
answer any questions you may have.
    Mr. Mica. Thank you.
    [The prepared statement of Mr. Ledwith follows:]
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    Mr. Mica. I will start with some questions.
    Again, from all the papers that have disclosed the 
existence of--I believe it is a Customs report that I had not 
seen--Mr. Beers, have you seen the Customs report?
    Mr. Beers. Sir, I have it in my possession, and I looked 
briefly at it, but I haven't had a chance to read it closely.
    Mr. Mica. How about you, Ms. Salazar?
    Ms. Salazar. I have not seen that report, and I believe it 
was not cleared through the Department of Defense.
    Mr. Mica. Mr. Ledwith.
    Mr. Ledwith. I have not had a chance to review it yet, sir.
    Mr. Mica. First of all, I am going to request from Customs 
a copy of the report and, if necessary--hopefully, they will 
voluntarily provide it to the subcommittee. If not, I will 
consult with Chairman Burton about subpoenaing the report.
    The report--and again I only have the press reports of what 
it says--there is a quote that intelligence sources indicate 
that Chinese and Russian organized crime factions are active in 
narcotics, arms and illegal alien smuggling, utilizing Panama 
as a base of operations.
    Are you aware of those activities, Mr. Ledwith?
    Mr. Ledwith. There is intelligence indicating that there is 
significant Chinese involvement in that part of the world, yes, 
sir.
    Mr. Mica. The other part of this says--and again I have to 
quote from this--says drug seizures by authorities in Panama 
declined by 80 percent last year from 1998 levels, and no major 
narcotics traffickers or money launderers were arrested.
    Is this factual, Mr. Beers?
    Mr. Beers. Yes, sir. If you aggregate the cocaine, the 
marijuana and the heroin seizures, that is an accurate 
statement, but it is based entirely on the drop in the area of 
marijuana. Both cocaine and heroin seizures went up. However, 
having said that, it is also true that if you take 1998 as your 
base year everything went down.
    Mr. Mica. I had invited General Wilhelm to come today, and 
he wasn't able to be with us, for scheduling reasons. He did 
submit this letter, which I think the minority also has.
    Without objection, Mrs. Mink, I would ask that it be made a 
part of the record. Is that acceptable that we submit that? I 
think they supplied you with a copy.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T1970.099
    
    [GRAPHIC] [TIFF OMITTED] T1970.100
    
    Mr. Mica. But in this letter, which will be part of the 
record, it says, we estimate our capability will continue to be 
approximately one-third of what it was in Panama.
    Ms. Salazar, is that correct?
    Ms. Salazar. From the perspective of what we are doing 
right now and the coverage we are providing the source zone, I 
believe it is correct.
    Mr. Mica. I have held a number of closed-door meetings, not 
to embarrass the administration, on trying to replace these 
forward operating locations. It is critical that we get them in 
place.
    We do have the now signed, I guess, 10-year agreements with 
the two. For the record, will you tell us when you estimate 
they now will be fully operational?
    Ms. Salazar. Are we talking about the source zone, transit 
zone, sir?
    Mr. Mica. All of our capabilities, source zone and transit 
zone, that we had when we had Panama fully operational.
    Ms. Salazar. I am going to try to answer this question. The 
biggest problem we have right now is trying to increase our 
coverage in the source zone. If you look at what we are doing 
in the transit zone and what I said in my oral statement we 
have, in fact, better coverage now than we had when we were 
flying out of Howard Air Force Base.
    Mr. Mica. One of the problems is this stuff is coming out 
at unprecedented quantities out of the source zone.
    Ms. Salazar. You are absolutely correct, sir, and with 
Customs initiating flights out of Manta this month--and I don't 
want to give you numbers because then I get quoted and these 
numbers change.
    Mr. Mica. Well, they do, and we have been conducting these 
hearings and we get sort of a revolving description of when we 
are going to have full operational capability in place. So you 
are not prepared--some of the documentation I think you have 
supplied to us said 2002 is the latest estimate.
    Ms. Salazar. When we are going to have most of the MILCON 
construction done, when we are going to be able to have the 
AWACS flying out of Manta, you are absolutely right, and it is 
going to take about a year and a half to be able to do most of 
the upgrades.
    Mr. Mica. You did talk about what is going on in Manta. One 
of the problems with Manta is the condition of that airstrip; 
is that correct?
    Ms. Salazar. That's correct.
    Mr. Mica. How much is it going to cost now to get it fully 
operational?
    Ms. Salazar. It is going to cost--the total--I am going to 
give you the total cost for the MILCON that we have requested 
for Manta airport, which is $61.2 million, and that includes 
the barracks. That includes----
    Mr. Mica. You described aircraft flying out of there, but I 
understand it is being remodeled and reconstructed to also 
support U-2 aircraft; is that correct?
    Ms. Salazar. U-2 aircrafts, I am not aware of that, sir. It 
would be for AWACS.
    Mr. Mica. I am sorry, AWACS?
    Ms. Salazar. Yes, that's correct.
    Mr. Mica. AWACS, and there are no AWACS flights out of 
there now?
    Ms. Salazar. Out of Manta, no, sir.
    Mr. Mica. All right. The AWACS capability then will not be 
up and running in that location until 2000?
    Ms. Salazar. That's correct.
    Mr. Mica. Two?
    Ms. Salazar. 2001. My advisors here tell me that the runway 
itself will be available in the summer of 2001.
    Mr. Mica. One of the problems we have is, of course, the 
U.S. military doesn't conduct any enforcement operations and is 
prohibited really from being an enforcement agent under the 
Constitution and our laws, but what they do is provide 
surveillance information to the source countries.
    This GAO report which was provided to me recently says that 
United States officials in Peru told us there has been little 
or no United States airborne intelligence or surveillance of 
air traffic routes between Peru and Bolivia since 1997. The 
United States Ambassador to Peru warned in an October 1998, 
letter to the State Department that the reduction in air 
support could have a serious impact on the price of coca.
    Mr. Ledwith, aren't we seeing an increase in cocaine coming 
out of this zone?
    Mr. Ledwith. If you take the zone as a whole, yes, sir, we 
are seeing increased cocaine production.
    Mr. Mica. For the first time, I was told by some officials 
that we are seeing an increase again in Peru. Is that correct?
    Mr. Ledwith. There are reports of an increase beyond the 
previously achieved low, yes, sir.
    Mr. Mica. If I ask, Ms. Salazar, these people in Peru who 
have been our allies, or Bolivia or Colombia, if they are 
getting the same level of information and intelligence for 
surveillance of drug trafficking production, etc., in those 
areas, what are they going to tell me?
    Ms. Salazar. Sir, they are probably going to tell you, at 
least from the air surveillance aspect, that they are going to 
be receiving increased information. As you know, the ROTHR 
Puerto Rico came on board, and the importance of the ROTHR, at 
least for the Department of Defense and the role we play, is 
that you will have the capability of being able to have--see 
what is going on in the way of air flights in Peru, Colombia, 
Northern Brazil.
    So in the short term they are probably going to tell you 
that they are going to have more information in the way of air 
flights.
    Mr. Mica. The ROTHR has been up for how long?
    Ms. Salazar. It just came--there were still playing with 
it, but it is formally and it has been in use for about, I 
would say, 3 weeks now. I was--in fact, I was looking at the 
site a day and a half ago.
    Mr. Mica. It's too early to get any data from its effect, 
or about its effectiveness?
    Ms. Salazar. Well, sir, in fact, talking to our experts, 
they are actually quite pleased with what they are seeing right 
now; and they have, in fact, started to increase--providing the 
information to source zone nations.
    Mr. Mica. Thank you.
    Mrs. Mink.
    Mrs. Mink. Thank you very much, Mr. Chairman.
    From all of your statements and testimony, I gather that 
the area coverage, in terms of the surveillance activities by 
the United States, is greater than it was during the operation 
of Howard Air Force Base. Is that correct?
    Ms. Salazar. For the transit zone, the Caribbean zone, yes, 
it is.
    Mrs. Mink. Could you explain exactly what that coverage is 
with respect to the issue that we are discussing this morning 
about Panama and the drug trafficking through Panama? To what 
extent does this transit coverage meet the problems that we are 
discussing this morning about Panama?
    Ms. Salazar. OK. Madame, if you allow me to use this map 
you will probably get a good sense as to each one--of the 
coverage that will be provided by each one of the FOLs.
    Panama would be that yellow spot that you see in the middle 
of those bigger circles. As you can see, when you look at the 
FOL, Aruba and Curacao, who is the green star, the amount of 
coverage we are receiving right now, because where 
geographically you find Aruba and Curacao is much larger than 
we were in Panama.
    If you look at where the Salvador FOL--which hopefully will 
be coming on board in the next couple of months and we will 
start providing flights, we are going to have a larger coverage 
through what is called the East Pac. And what does that mean 
for us? As my colleagues from DEA will state, we have seen 
increased flow of maritime tracks through East Pac; and, in 
fact, there has been a pretty large interdiction of drugs 
through the East Pac. And because we are going to be having 
that--geographically, Salvador is the higher Central American 
strait--we are going to be able to have more coverage of the 
East Pac.
    If you look down at the blue star, where the Manta FOL is, 
you can see we have a deeper coverage of the source zone 
countries. It is easier to get to Peru and southern Colombia, 
where, you know, 90 percent of the drugs that come to the 
United States are either produced or cultivated.
    If you look at the map, we have--our air platforms will 
have easier access to get to that area; and, therefore, they 
will be spending less time in the transit zone. They will be 
using their time to be on the source zone and being able to 
surveil from that area.
    I don't know if that explanation helps you, but once we 
have the three DOL fully functioning we will, in fact, have a 
better coverage, air surveillance coverage, than we had from 
Howard Air Force Base.
    Mrs. Mink. When do you expect that to be fully on board?
    Ms. Salazar. We expect the missing part of the puzzle right 
now is the fact that we can't fly AWACS out of Manta.
    Mrs. Mink. What is the reason for your inability to fly 
AWACS out of Manta?
    Ms. Salazar. The airfield doesn't--can't withstand an 
AWACS, which is----
    Mrs. Mink. Why can't you fix the airfield?
    Ms. Salazar. We are going to do that. In fact, the MILCON--
--
    Mrs. Mink. Do you have funds to do it?
    Ms. Salazar. We do not have funds. We requested the MILCON 
in the Colombia supplemental, and we are hoping that once the 
Colombia supplemental has been approved we would be able to 
even cut a contract.
    Mrs. Mink. What is the current status of that supplemental?
    Ms. Salazar. Right now, it is--I think it is ready to go to 
conference. I think they are trying to attach it to the MILCON 
bill. My sense is, in regards to the MILCON discussions in the 
supplemental, there is no--there is no questions about it. It 
is just a matter of supplemental.
    Mrs. Mink. How much are you requesting in that MILCON?
    Ms. Salazar. We are requesting, for all the FOLs, $126 
million.
    Mrs. Mink. That is now stuck in the Senate? As I understand 
it, we passed it in the House in the emergency supplemental?
    Ms. Salazar. I believe that's correct.
    Mrs. Mink. And currently, as I understand it, that 
emergency supplemental is not moving, so it has to await 
passage of the regular appropriations bill before you get 
funded?
    Ms. Salazar. My colleague from the State Department was 
reminding me, there are two parts to it. We have the military 
part of the supplemental and also the State Department part of 
it, and our part of the supplemental would be attached to the 
MILCON. I think they were going to initiate discussions in the 
next 2 or 3 weeks. I don't--it would be very difficult for me 
to predict when it----
    Mrs. Mink. So assuming that you get the funding in late 
fall, that would be the timeframe in which you could begin the 
reconstruction of the airfield, is that correct?
    Ms. Salazar. That's correct, and that's why, when I stated 
that the pavement would be ready to have AWACS flying out of 
Manta, what I was mentioning--what I was referring to was that 
if we started the--if we got the money sometime in July or 
August, most of the repairs of that airfield would be done by 
the summer of the year 2001. At that point, we would be able to 
fly out of Manta.
    Mrs. Mink. Now, with the departure of our military base out 
of Panama, what is the reality of having a visiting force 
agreement in place with Panama to substitute for the absence of 
an actual military base?
    Ms. Salazar. It is--I think we are talking about two 
different issues. If we have a visiting force agreement, it is 
an agreement that we use in most countries to basically protect 
our people when they are deployed. What does that mean? That 
there is just basic rules and regulations as to what we can do 
in a country when we are--when I say we, I am talking about 
DOD--what DOD personnel can do in any specific country when 
they do deployment, provide technical assistance and support.
    We have been in conversations with the Government of Panama 
for the last number of months. This agreement has not moved 
forward and DOD, as you can understand, would be very nervous 
in increasing our activities and increasing our presence, 
increasing our training deployments to Panama until we had a 
signed agreement.
    Mrs. Mink. Now, if you had a visiting forces agreement, 
could you do with that agreement some of the drug surveillance 
activities that we had done previously at the base?
    Ms. Salazar. No, that would be a different type of 
agreement. As you know, with the forward operating locations, 
when you look at that agreement it basically outlines the type 
of activities we would perform from any specific airport and 
the types of assets we would be using. Those are two different 
types of platforms.
    At this point, we haven't approached Panama or had any 
conversations with Panama to--in regards to having an FOL 
presence because, as you see from the map, Panama at this point 
does not help us graphically when you take into consideration 
that we will probably be initiating flights out of Salvador in 
the near future.
    Mrs. Mink. The news article that the chairman referred to 
this morning from the Washington Times makes reference to 
Chinese and Russian-organized crime groups. You, Mr. Ledwith, 
indicated that the presence of the Chinese groups has increased 
in Panama. Can you make a comment about the Russian-organized 
crime?
    Mr. Ledwith. Only in this realm, to say that there has been 
increasing evidence of a Russian-organized crime influence in 
that part of the world, also, ma'am.
    Mrs. Mink. When you speak of organized crime, this is drug-
smuggling activities basically, since that is the focus of our 
attention in this committee?
    Mr. Ledwith. Our area of interest would, of course, be 
specifically drug trafficking.
    Mr. Beers. But it is broader than that, ma'am.
    Mrs. Mink. Would you like to amplify on that, too?
    Mr. Beers. Russian-organized crime is a poly crime 
activity. It involves both drugs, which is one of the basic 
reasons for their interest in that particular area of this 
hemisphere, but they are also involved in laundering money out 
of Russia, in the movement of counterfeit goods and counterfeit 
money and alien smuggling and trafficking in women and 
children.
    All of those are activities that Russian-organized crime 
has sought to bring to this hemisphere and other locations 
around the world. They are just spreading out.
    Mrs. Mink. Have you reports or other documents that you can 
make available to this committee with regard to that?
    Mr. Beers. There are intelligence documents, ma'am, and we 
can ask the intelligence community to make those available.
    Mrs. Mink. Thank you. Thank you, Mr. Chairman.
    Mr. Mica. Thank you.
    I would like to yield to our vice chairman. Could you yield 
to me for just a second, Mr. Barr?
    Mr. Barr. Certainly.
    Mr. Mica. I just want to point out for the record, and 
there will be a written record and if we submit this chart as 
testimony, part of the testimony, that the circle shown to the 
subcommittee this morning with a star indicating El Salvador is 
not in operation at all and that we only have a fraction of the 
capability coming out of Manta at this time and, again, no 
AWACS capability, just for the record.
    Mr. Barr, thank you.
    Mr. Barr. Thank you. If we could have a staff person turn 
that so that both the witnesses and the Members could see it, I 
would appreciate it.
    Prior to our evacuation of Howard Air Force Base, Ms. 
Salazar, it is correct, is it not, that we were flying some 
2,000 counterdrug flights per year out of Howard?
    Ms. Salazar. That's correct--I think it was actually more 
than that. Yes, 2,000 including support missions.
    Mr. Barr. OK. And it is true also, is it not, that the cost 
of operating Howard Air Force Base was approximately $75 
million per year?
    Ms. Salazar. Approximately.
    Mr. Barr. With all of these circles up here, how many 
counterdrug flights are currently being operated?
    Ms. Salazar. If you give me--we have that in, I believe, 
one of my charts, but I will give that--if you give me a couple 
of minutes, we will try to get that information to you right 
now.
    Mr. Barr. OK. I think the chairman made a very, very good 
point. I mean, this is a very pretty drawing and the circles 
are very nice and the stars and so forth, but this is 
theoretical. I mean, these areas are not being covered 
currently in the same manner as the larger circle reflected 
coverage out of Howard Air Force Base.
    What these circles reflect, I believe, is the theoretical 
coverage. You can draw all the circles in the world that you 
want, but if you don't have planes up in the air they don't 
really mean anything.
    Ms. Salazar. Actually, sir, I am sorry. The map is somewhat 
confusing. That larger circle that you see----
    Mr. Barr. I don't find it confusing.
    Ms. Salazar. No, the larger circle that you see actually 
reflects the AWACS, the capability of the AWACS.
    Mr. Barr. But there are no AWACS.
    Ms. Salazar. But there will be AWACS flying out of Manta.
    Mr. Barr. So this is theoretical at this point.
    Ms. Salazar. At this point, we don't have AWACS flying out 
of Manta.
    Mr. Barr. Well, we don't have AWACS flying out of any of 
these areas.
    Ms. Salazar. No, sir. We do actually have AWACS flying out 
of Curacao.
    Mr. Barr. How many are there down in Curacao today?
    Ms. Salazar. Right now, today, I can't give you details.
    Mr. Barr. It is my information there are none down there 
today.
    Ms. Salazar. There may not be one there today, sir, but we 
have had the AWACS flying in the AOR; and, specifically, they 
have been flying out of Curacao.
    Mr. Barr. There are no AWACS that are permanently stationed 
in any of these locations; that's correct, isn't it?
    Ms. Salazar. Nor were there in Panama. The AWACS normally--
--
    Mr. Barr. There are none?
    Ms. Salazar. No, but, sir, even when we had Howard Air 
Force Base the AWACS were never permanently stationed out of 
Panama.
    Mr. Souder. They were prior to them being transferred to 
Kosovo, and so forth.
    Ms. Salazar. No, no.
    Mr. Barr. There are no AWACS down here on a regular basis.
    Ms. Salazar. I would disagree, sir. We do have AWACS 
coverage flying out of Curacao.
    Mr. Barr. From time to time.
    Ms. Salazar. We--as much as we had--when you have only one 
AWACS--I mean, I think the issue here is we only have one AWACS 
and at different points.
    Mr. Barr. We only have one AWACS in our defense inventory?
    Ms. Salazar. No, sir, we only have one AWACS that has been 
assigned to this.
    Mr. Barr. Therein lies the problem. A policy decision has 
been made by President Clinton, or Secretary Cohen, I don't 
know which, not to make the AWACS available. We have AWACS.
    Ms. Salazar. We do have.
    Mr. Barr. They are just not assigned here.
    Ms. Salazar. As you know, sir, throughout the years there 
has been a reduction in a number of these assets, and a 
decision was made by the Secretary that there were other 
missions around the world that required----
    Mr. Barr. We are well aware of these other so-called 
missions around the world and how they are eating up our 
resources. That's why we don't have them here.
    Would any of you disagree with the estimates that I have 
seen that the FARC in Colombia strength--what is the FARC 
strength as far as you all know?
    Mr. Beers. Sir, my understanding is that it is between 
10,000 and 15,000 armed individuals.
    Mr. Barr. OK. Would any of you all have any reason to doubt 
those figures?
    Mr. Ledwith. No, sir.
    Mr. Barr. OK. By any measure, a fairly substantial 
presence.
    Are you all familiar, I presume, to one extent or another, 
with Panama law No. 5, organic law No. 5? Mr. Beers, I 
certainly know you are very familiar with it.
    Mr. Beers. You are going to have to remind me what it says, 
sir.
    Mr. Barr. Well, OK. Panama law No. 5 has been written about 
extensively, both publicly as well as in United States 
Government documents, because it is the framework that 
specifically provides the powers for Hutchison Whampoa to 
control assignment of pilots for ships transiting the Canal, to 
hire pilots for ships transiting the Canal; to determine the 
order of ships going through the Canal.
    None of you all are familiar with Panama law, organic law 
No. 5?
    Mr. Beers. No, sir.
    Mr. Ledwith. No, sir, not particularly so.
    Mr. Barr. Mr. Chairman, I am speechless.
    Mr. Mica. We want to make sure that's included in the 
record, that you are speechless.
    Mr. Barr. I guess this is one reason why we see so little 
concern on the part of the administration over Communist 
China's presence in Panama. The administration apparently is 
not even familiar with the basic law of Panama that provides 
very significant powers to Hutchison Whampoa that provide for 
the hiring, the assignment of pilots for ships transiting the 
Canal, the order of line for ships going into and out of the 
Canal.
    Are you all familiar with the recent purchase by a 
Communist Chinese bank of Marine Midland Bank, which is one of 
the major banking institutions in Panama?
    Mr. Beers. Simply that it happened, sir.
    Mr. Barr. Was this significant enough to hit the radar 
screen of the U.S. Government, the administration?
    Mr. Beers. Sir, we are concerned about financial 
transactions in Panama as a general issue because as several of 
us have indicated, the issue of money laundering is a serious 
issue in Panama.
    Mr. Barr. How about is there any specific concern with 
regard to increased Communist Chinese presence and power in 
banking and other financial institutions located in Panama?
    Mr. Beers. Sir, as a general matter, that's, of course, 
something that we pay attention to, look at----
    Mr. Barr. Good.
    Mr. Beers [continuing]. And report upon.
    Mr. Barr. I appreciate that.
    Is this of concern to other agencies of the government, the 
increased Communist Chinese financial presence in Panama 
through such things as the purchase of Marine Midland Bank? Is 
this of concern to the Department of Defense?
    Ms. Salazar. Sir, as you know, I am the Deputy Assistant 
Secretary of Defense for Drug Enforcement so I--although----
    Mr. Barr. Does that include money laundering?
    Ms. Salazar. Not necessarily. As you know, my role is 
detection--our role is detection and monitoring and providing 
support through our DOD forces. However, when we do get 
requests for training, we provide training and intelligence. 
But, generally, we don't participate in money laundering 
support--into money laundering support.
    Mr. Barr. Mr. Ledwith, I know that you all's agency is very 
concerned about and does very, very good work on attacking 
money laundering. Are you concerned about the increased 
Communist Chinese presence in financial institutions and power 
in Panama?
    Mr. Ledwith. Yes, sir, we are working in cooperation with 
our colleagues in the Customs Service and the FBI we watch that 
very closely.
    Mr. Barr. You might want to share that concern with some 
other agencies of our government.
    Mr. Ledwith. Yes, sir.
    Mr. Barr. I might also state for the record, Mr. Chairman, 
and encourage representatives from our government, too, look 
carefully at Panama organic law No. 5 because it also provides 
contract rights transfer authority for Hutchison Whampoa. In 
other words, they can take the contract rights that they have 
through this very, very long-term contract that they signed 
with the Panamanian Government and transfer them to a third 
party, without restriction; and that would include transferring 
of their rights to other components of the Communist Chinese 
Government, other corporations controlled by different 
components of the Communist Chinese hierarchy, and so on and so 
forth.
    I have other areas, Mr. Chairman, but since there are other 
Members will we have another round of questioning?
    Mr. Mica. If time permits.
    I will recognize Mr. Ose now.
    Mr. Barr. Thank you.
    Mr. Ose. Thank you, Mr. Chairman.
    Mr. Ledwith, I am interested in a particular area and that 
is from your base of knowledge, how much money do we spend 
addressing the issues of drug enforcement in this area? I mean, 
from your Department's----
    Mr. Ledwith. From DEA's perspective, sir?
    Mr. Ose. Yes.
    Mr. Ledwith. Limited to Panama or the region?
    Mr. Ose. The region.
    Mr. Ledwith. Millions of dollars.
    Mr. Ose. Tens of millions or $5 million?
    Mr. Ledwith. We would probably say tens of millions.
    Mr. Ose. OK. Ms. Salazar, the same question, generally 
speaking.
    Ms. Salazar. In this area I can give you some specific 
numbers, and then we could come back with--I could give you 
some general numbers and then come back in general.
    Mr. Ose. Sure.
    Ms. Salazar. This year we spent, in the whole FOL process, 
which would include what we have spent in Manta and Aruba and 
Curacao, I would say approximately $34 million. Now, you also 
must add on, if we are talking about that--the region in 
general, we have a very large and important program in Colombia 
that goes to $60 million, $70 million, and we also have 
important programs in Peru. So we are talking----
    Mr. Ose. We are on the area of nine figures somewhere as it 
relates to your particular area?
    Ms. Salazar. Probably.
    Mr. Ose. Mr. Beers.
    Mr. Beers. Likewise. Hundreds of millions of dollars in the 
region.
    Mr. Ose. The reason I ask that question is, having spent 
all of this money, do we know who the individuals are behind 
the exportation of drugs to this country, the individuals? Not 
the cartel names, not the cities from which it comes but the 
individuals?
    Mr. Ledwith. Yes, sir, we know many of them.
    Mr. Ose. Say again?
    Mr. Ledwith. Yes, sir, I would say that we do know many of 
them, yes, sir.
    Mr. Ose. I would like to visit with you later about perhaps 
creating a list of such individuals.
    Mr. Ledwith. Yes, sir, I would be happy to do that.
    Mr. Ose. I always find that shining a light on specific 
people, kind of helping bring attention to their activities, is 
helpful.
    I also want to go back to the question of the operating 
bases. As I understand it, Ms. Salazar, as it relates to Howard 
Air Force Base, we were running about 2,000 flights a year out 
of there; and it was costing us around $75 million a year to 
operate that effort.
    Ms. Salazar. I stand to be corrected. I was given the 
numbers that Congressman Barr had asked for and, in fact, when 
we were flying--as you know, Howard had a number of different 
types of flights that took place. Some of them were counter 
drugs. Some of them were support for the hemisphere. When you 
look at the counterdrug flights, we were flying approximately 
550--520 detection and monitoring missions per year.
    This year, we have flown, up until now, 600 detection and 
monitoring flights. So, in fact, the number of flights has 
increased.
    Mr. Ose. Is the $75 million number correct in terms of the 
general operating expenses?
    Ms. Salazar. For Howard, yes, approximately.
    Mr. Ose. For Howard?
    Now we have got a number for these new forward operating 
locations in terms of capital expenditures. I think the number 
was $126 million is the one you cited, investment in these 
airports.
    Ms. Salazar. I am sorry, sir. What I am talking about, yes, 
it is a capital investment in the next 2 years of being able to 
improve the capabilities of the FOLs, which would include----
    Mr. Ose. Would that be all three of them?
    Ms. Salazar. That would include all three of them, 126----
    Mr. Ose. This would be, for instance, airports like 
National Airport or Dulles or Sacramento International? I mean, 
that's the comparable facility, if you will? You have private 
carriers coming in. It is not like Howard Air Base in that it 
is strictly a military facility?
    Ms. Salazar. Yes. Manta, although it is an Air Force 
facility, it also has international flights flying out of it. 
So it is also an international airport, yes.
    Mr. Ose. If I understand correctly, we have $126 million 
worth of capital investment going into these three forward 
operating bases. Do we have any feel for what the annual 
operating costs for these three forward operating locations 
would be?
    Ms. Salazar. OK. I am going to stand to be corrected one 
more time. It is $136 million when you include Salvador.
    Mr. Ose. OK. So do we have a number for the estimated 
annual operating expenses for the three forward operating 
locations?
    Ms. Salazar. We are struggling with those numbers right 
now, sir, in part because--there are a number of reasons. We 
initially had anticipated $19 million to $18 million is the 
numbers that General Wilhelm had provided us, but it looks like 
those numbers are going to increase, and they are increasing 
based on the fact that now we have not accounted for Salvador 
at the time we were providing those numbers, and there are 
costs that we couldn't anticipate when we were trying to 
predict as to what were the needs in these different airports.
    Mr. Ose. If you had to estimate presently, to the best of 
your knowledge, you are probably talking $100 million a year 
for operating expenses out of the three forward operating 
locations?
    Ms. Salazar. $100 million? No. I would say 23--between 23 
and--23 would be the lower end right now, what we are looking 
at. It could go higher than that, $23 million.
    Mr. Ose. How do you reconcile the $75 million number at 
Howard for 520 detection excursions with the $23 million at the 
three bases on an annual basis?
    Ms. Salazar. The $23 million--well, we--maybe you could 
repeat the question?
    Mr. Ose. I asked earlier about what were the annual 
operating costs for running the drug interdiction efforts at 
Howard.
    Ms. Salazar. Right.
    Mr. Ose. You told me $75 million.
    Ms. Salazar. That's correct.
    Mr. Ose. That was generating about 520 excursions, if you 
will, for detection purposes and the like. Now I am interested 
in what the annual operating costs are estimated to be for the 
three forward operating locations that will replace Howard, and 
you have told me the best estimate you have today is $23 
million a year.
    Now, the question I have is, if Howard was generating 520 
detection missions for $75 million a year, how is it that we 
are able, at least year to date, just generically, to generate 
600 detection missions from the three bases at $23 million a 
year? There just seems to be a logical disconnection on a 
relative basis, and I am trying to reconcile that.
    Ms. Salazar. There is a couple--there are a couple of 
reasons. On the one hand, when we were at Howard, we had a full 
base facility. When you look at how we are functioning out of 
Aruba, Curacao, Manta and Salvador, they are more on an 
expeditionary basis, and they are not permanently there. So 
these are--the cost in many ways would be--probably are going 
to be less because our footprint is less.
    Mr. Ose. Is the $75 million number that you previously gave 
me the total operating expense at Howard?
    Ms. Salazar. Total operating expense.
    Mr. Ose. So not only the drug interdiction effort but the 
military effort?
    Ms. Salazar. Correct. Correct.
    Mr. Ose. Let me go on to my next question then. I may want 
to come back to that, if I have time.
    Mr. Barr was very effective as it relates to the AWACS 
planes not being in the region, and I see on your very clear 
picture the circles for the P-3s. Now do we have P-3s in the 
area right now?
    Ms. Salazar. Yes, we do, sir. We have P-3s flying out of 
Manta and Aruba.
    Mr. Ose. All right. How much in capital improvements do we 
have to make to continue the operation of the P-3s in the area?
    Ms. Salazar. Not much, because we are doing it already.
    Mr. Ose. OK. So I guess, Mr. Chairman, that begs the 
question why would we spend $126 million to improve an airport 
for an AWACS that's not there if we have got P-3s that are 
operating there effectively now?
    With that, I would yield back.
    Mr. Mica. Thank you.
    Mr. Souder.
    Mr. Souder. I have a couple of different lines of 
questions.
    Mr. Ledwith----
    Mr. Mica. Mr. Souder, you are not picking up for some 
reason.
    Mr. Souder. I am discouraged.
    Mr. Ledwith, on the question of the Communist Chinese, have 
you seen any involvement in money laundering related to 
narcotics from many of their institutions?
    Mr. Ledwith. Sir, we have no definitive information that I 
could put forward at this time, no, sir.
    Mr. Souder. But clearly that means you are closely 
monitoring because there is possible doubt?
    Mr. Ledwith. Because of the scope and complexity of money 
laundering in general, and particularly in Panama, yes, sir, we 
are watching it closely.
    Mr. Souder. What we have seen in Panama predominantly is 
Colombian heroin coming north. Have you seen any sign that they 
also could get Asian heroin moving the other direction with 
their presence in Central America?
    Mr. Ledwith. Are you referring to Asian heroin coming to 
the United States from Panama?
    Mr. Souder. The increasing presence of China.
    Mr. Ledwith. We have not seen any indications of that yet.
    Mr. Souder. So to the degree you are watching it, you are 
mostly watching to see if they become involved in South 
American events?
    Mr. Ledwith. Yes, sir. There are other issues that we are 
also closely monitoring. China, for instance, is a source of 
much of the ephedrine in the world that is utilized in making 
methamphetamine, which is a particular product available----
    Mr. Beers. From a broader perspective, sir, alien-smuggling 
is an issue, the flow out of China, and Panama is an 
intermediate destination.
    Mr. Souder. But the DEA--zeroing in on narcotics, I 
understand that the ephedrine would be coming from Asia. You 
say they are involved in that. Any of you who want to answer?
    Mr. Ledwith. China is one of the major producers and 
exporters of ephedrine, and clearly we have our eye on that 
particular element also, yes, sir.
    Mr. Souder. So part of the reason for the investment, in 
fact, in Central America could become to try to be involved in 
that precursor business in South Central America, 
theoretically?
    Mr. Ledwith. I cannot speak to what their ideas are, but 
certainly it is something that we are interested in and closely 
monitoring.
    Mr. Souder. That is certainly not an illogical jump? In 
other words, it is enough that you at least would want to watch 
it, because if they are one of the largest providers of the 
precursors, this is the largest provider of narcotics, it would 
be totally unwise not to be watching an increasing presence in 
that zone if there is going to be some future linkup?
    Mr. Ledwith. You are absolutely correct, sir, and that's 
why we are watching it.
    Mr. Souder. OK. Thank you. I can't have Mr. Beers at a 
hearing and not talk about Blackhawks for a second.
    My favorite staffer on Colombia, John Mackey, was just 
showing me some wonderful pictures of actual Blackhawks in 
Colombia with the galvin 18 guns on one side, and I hope we can 
continue to work to get the guns on the other side as well 
since it looks like the first five helicopters that were 
damaged were damaged on the side without the more powerful 
guns.
    Which leads me to one of my frustrations that I am 
discouraged on. I know all of you from multiple of these 
things. I think the biggest problem we are fighting right now 
in the anti-narcotics effort is that there is a movement 
growing on both sides, right and left, that somehow this is an 
unwinnable war and that we are all fighting hard to try, and 
disagreeing at times as to how to do it, but we are in a real 
battle here, and this is part of my frustration on these dates 
questions.
    My generation is obsessed with Vietnam, that we are always 
behind and that we can argue whose fault it was or how we got 
into this in the Panama Canal, but as a business guy I look at 
it as somehow a critical path method wasn't done here to 
realize the date for having a final decision in Panama, was too 
late for us to be able to, you know, replace the resources fast 
enough. That I happen to believe, and I think many others are 
very concerned, that there has been a stockpiling going on 
while we are in transition; and that while we are trying to 
figure out how to get our AWACS there, I don't disagree 
theoretically.
    This may not, in the end, give us better coverage in the 
antidrug effort. There are still other issues in the zone such 
as, say, the Canal that happens to be very important in 
international trade. That alone may be enough of an argument to 
have an FOL in Panama or some sort of a function there that may 
not be related to narcotics at all. It is a big trade question, 
I mean, nominally related to narcotics.
    I heard in Ms. Salazar's testimony, that's what we should 
have been working on in mid-1998, if it takes us a year and a 
half, because there is plenty of blame to go around. I 
personally believe that Plan Colombia and these Blackhawks 
should have been requested from us 4 years ago. I was fighting 
for over six Blackhawks, and now we need 20's and 40's and 60's 
down there.
    But the truth is, Congress is moving at a snail's pace 
right now, too, and now that the administration has come forth, 
now we are dinking around with whether we need the right 
helicopters, when this money is going to come through, and then 
by the time we get it there we are going to need more.
    Furthermore, I read in Mr. Beers' written testimony about 
an incursion into the Darien by the paramilitary's six men, not 
much, but this week an incursion of 70 armed rebels last week. 
If we, in fact, do put a billion and a half into Colombia and 
that is mostly oriented toward a push south-southwest, why 
isn't it going to pour right across that line? And how many 
police do they have to move to the border there?
    Mr. Beers. A very limited number, sir.
    Mr. Souder. And what is our strategy? Ms. Salazar said, I 
believe the exact quote was, we are closely monitoring the 
situation and stand ready to assist Panama.
    What does that mean, given the fact that if we do pass this 
bill, take a year and a half probably to get all the stuff down 
there or a year, we get it there, we start hammering them, what 
does this mean? Are we going to wait until they are already in 
Panama and then have to have another billion and a half 
supplemental?
    Ms. Salazar. And perhaps I did not--I didn't fully detail 
with you all the number of ongoing engagements SOUTHCOM has 
with Panama at this point, but it is an engagement that is 
somewhat limited to the fact that we won't be able to increase 
our capability of deploying people down there and increase our 
training and technical assistance to the Panamanians until we 
have this agreement that we talked about earlier. But we do 
have--we do have an ongoing engagement.
    SOUTHCOM has been working very closely with the Panamanians 
in developing their national security strategy. They also have 
been helping and working with the Panamanians so that they 
develop a nationwide communication system for their forces. So 
we do have something of--I am not going to say a presence but 
of an engagement with Panama.
    And what I said is exactly right. I mean, we continue to 
monitor this situation very closely and try to cooperate and 
work with the Panamanians in so much as the Panamanians want 
it.
    Mr. Souder. I have been involved in this subcommittee from 
the time we took over Congress and have been down every year to 
South America and even got lost in Santiago one night, that one 
of the things that is frustrating here is that we wait, we get 
the information, once we get the information we go through the 
process, and we get just enough to now be just slightly behind. 
And something like this is the most tragic thing we are 
battling in the streets and in our families, and it is not 
going down, it is getting exacerbated--unless we can get ahead 
of the curve and try to anticipate what is going to happen 
next, rather than reacting to what has happened, the charges 
against us are going to continue to be true and undermine our 
support base to do anything about it.
    Mr. Beers. Thank you, sir. That is the intention of our 
effort, to work with you on Plan Colombia to get ahead of the 
curve with sufficient resources, to be able to have a real 
opportunity to be effective, and we welcome your support and 
appreciate it.
    Ms. Salazar. And the Department of Defense also shares your 
concern and somewhat your frustration. We did not anticipate 
that we were going to have to leave Panama, so we found ourself 
almost, from 1 day to another, in the situation where we had to 
start negotiating with a number of countries agreements so we 
could land, finding the resources so we could be able to deploy 
assets that had not been deployed to these areas and basically 
finding ourselves seeking MILCON construction so we could be 
able to kind of replace and enhance our capabilities that we 
had flying from Panama. So, in many ways, the Department of 
Defense shares your concerns and your frustrations.
    Mr. Souder. Anything you want to say, Mr. Ledwith?
    Mr. Ledwith. Yes, sir. The Drug Enforcement Administration 
looks forward to the passage of Plan Colombia, also. It is 
something that is very, very needed, very timely; and I would 
like to see it go forward.
    Mr. Souder. Are you concerned that, if we pass it, it is 
just going to overrun Panama and that we aren't prepared to 
fight the Panama situation?
    Mr. Ledwith. We are concerned from a regional perspective 
about what the displacement effect will be of all of those 
resources in Colombia. And, of course, Plan Colombia also has a 
regional focus; and that is something we are watching very 
closely.
    The situation in Ecuador, the situation in Venezuela, the 
situation in Panama, these are all areas that can be adversely 
impacted by a displacement of either drug traffickers or 
guerrillas.
    Mr. Beers. But at this point in time, sir, in all fairness 
to your point, the cultivation----
    Mr. Souder. Right.
    Mr. Beers [continuing]. Which is the principal focus of 
Plan Colombia wouldn't be expected to move in the direction of 
Panama. It is too small, and it is in the wrong geographic 
area.
    Mr. Souder. But that FARC is predominantly a protection 
group. What they could do is much like what happened in 
Vietnam. They go across to Cambodia, harbor themselves over 
there for awhile, we destroy one season of the crops, they come 
back across. Our guys can't control that much land with the 
amount of money we are giving them. That's only a fraction of 
the cost.
    Mr. Beers. Remember, it is not seasonal, sir. The cocaine 
is not seasonal.
    Mr. Souder. Depending on what we use to destroy it.
    Mr. Beers. No. It is a perennial, not an annual. It is not 
like the opium poppy. You grow a plant, and you continue to 
harvest it year after year after year for about 15 to 18 years. 
So they have a startup requirement that's 18 to 36 months to 
get started.
    Mr. Souder. That's assuming, of course, we have eradicated 
everything, that we got control of the whole zone, which $1.9 
billion is not going to do.
    Mr. Beers. Yes.
    Mr. Souder. But it is an important start. For example, we 
are dealing with a stagnant bill. We need to continually look 
at that for the Panama question, because I heard this week and 
last week are new things that we hadn't seen before. We suspect 
it might happen, but that clearly we have a change in the 
dynamics of Peru. We don't know what the opposition is going to 
do. Are they going to align with that? Are there going to be 
additional pressures there? As we look at our package, we have 
to understand we have to stay ahead of the curve, not just be 
reactive. Otherwise, we are just throwing money away, wasting 
money.
    Mr. Mica. Thank you, Mr. Souder.
    Let me see--Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much.
    First of all, let me just restate for the record that I do 
agree with Mrs. Mink about America's drug program cannot be 
just focused on interdiction. We have got to start trying to 
affect demand, which also includes treatment. And until we do 
get demand under control, we can't expect only law enforcement 
to do the job. So first, before I go into that, I want to 
identify with Mrs. Minks' statement.
    Let me also say that, in terms of the other end of this 
battle, I have been very deeply disappointed in the 
administration, and especially in what the administration has 
been doing in relationship to Panama, which I consider to be a 
frontline country in this whole situation.
    If we forget Panama, we do so at our own peril. Having 
looked at what has been going on in Panama, I would say that 
the administration has--at best--been incompetent. And trying 
to engage the Panamanians in a way that would result in 
policies and in a reality that is beneficial to the United 
States and protecting our interests. Not only drug interests, 
but interests in terms of potential enemies like Communist 
China.
    First and foremost, let me ask you, the baseline that you 
are using today, Ms. Salazar, you are suggesting that there are 
actually more flights now than when we had Howard Air Force 
Base.
    Ms. Salazar. That's correct.
    Mr. Rohrabacher. When we had Howard Air Force Base, as of 
what year are you talking about? Are you talking about as of 2 
years ago? What about 10 years ago? Were there more flights 10 
years ago before the Clinton administration?
    Ms. Salazar. I could get you those numbers.
    I guess what I would have to clarify, if you are talking 
about counterdrug flights or other types of support activities 
that the Department of Defense provided.
    Mr. Rohrabacher. If you could give me those numbers, would 
it surprise you to know that there were dramatically more 
flights 10 years ago?
    Ms. Salazar. Ten years ago? I don't think there would have 
been many--I believe--you know, I couldn't speculate, because I 
am trying to understand the numbers and the way of the 
counterdrug flights and the numbers that were increased.
    Mr. Rohrabacher. I have a chart in front of me here that 
suggests that at least the number of hours that were present in 
the flights has gone from over 8,000--from about 8,000 to under 
5,000 hours.
    Mr. Beers. Which is your base year, sir?
    Mr. Rohrabacher. This is--the baseline is 1992, before the 
Clinton administration.
    Ms. Salazar. OK.
    Mr. Rohrabacher. It appears here, it is under 5,000--or 
around 5,000, I guess, but it was over 8,000. So you see a 
reduction of at least maybe a third of the number of hours.
    Ms. Salazar. Are you talking about a 1992 baseline, sir?
    Mr. Rohrabacher. Yes.
    Ms. Salazar. I don't know if you are aware, but there was a 
congressional mandate to cut approximately $300 million of the 
CTA program, which I supervise, and a lot of that cut was 
reflected in flight time and steaming hours. So the numbers are 
absolutely correct.
    Mr. Rohrabacher. OK. But the mandate wasn't that you cut 
this; it was to cut something, right?
    Ms. Salazar. No, no. It was actually when you look at the--
--
    Mr. Rohrabacher. It was to cut the number of hours--the 
Congress mandated that we cut the number of hours for drug-
related flights?
    Oh, that was when the Republicans came in, I guess.
    Mr. Ose. Mr. Rohrabacher, I am curious. May I interject 
something?
    Mr. Rohrabacher. Yes.
    Mr. Ose. The mandate on the $300 million, was that passed 
by a Congress--what year was that passed----
    Mr. Rohrabacher. Well, is it the 1992 Congress that you are 
talking about mandated this?
    Ms. Salazar. It was for the 1993 FYI; yes, FYI.
    Mr. Rohrabacher. So that was----
    Mr. Ose. That would have been the Congress elected in 1992 
then?
    Mr. Rohrabacher. Right.
    Mr. Ose. Thank you.
    Mr. Rohrabacher. I seem to remember there was a shift in 
control of Congress somewhere around there.
    Ms. Salazar. But, sir, beyond who was----
    Mr. Beers. There was a Congress elected in 1990.
    Mr. Rohrabacher. So you are saying the Democrat-controlled 
Congress mandated that you shift--dramatically decrease the 
number of drug control flights in this area; is that right?
    Ms. Salazar. There was a concern expressed by a GAO report 
written in 1992 that the Department of Defense was spending way 
too much money in detection and monitoring, in light of the 
capability of our law enforcement to perform end games and the 
capability of other countries to perform end games.
    Mr. Rohrabacher. So there is an excuse for them to want to 
dramatically decrease it. So you are not using that year as a 
baseline. You are using some year after these dramatic cuts.
    Ms. Salazar. Yes, 1998. The figure I gave you, 520.
    Mr. Rohrabacher. 1998 obviously; what were we in the 
process of in 1998? We were in the process of moving out of 
Panama in 1998, were we not?
    Ms. Salazar. No, sir, we were not. We left Panama in 1999.
    Mr. Rohrabacher. Right. We just left in 1 day?
    Ms. Salazar. No, the decision to leave Panama, at least 
when we were advised that we would be--when the decision was 
formally made to leave Panama was in, I believe, October 1998, 
Randy? Yes.
    Mr. Rohrabacher. Let me just say there were negotiations. 
Howard Air Force Base was closed in June 1999, of course, which 
means I don't think they just decided the day before they shut 
the door. It seems to me there is probably an evolution of--
especially considering the terrific job that the administration 
did in negotiating to try to keep Howard Air Force Base, there 
is probably an understanding that Howard was going to actually 
shut its doors. So the baseline you are using is a baseline 
when Howard was in transition to be closed.
    Ms. Salazar. I would politely disagree, because the 
ratcheting down of flights began, I believe, in January or 
February 1999.
    Mr. Rohrabacher. You are trying to tell us--the essence of 
your testimony today is that we really didn't need Howard after 
all.
    Ms. Salazar. No, sir.
    Mr. Rohrabacher. Well, that is what you are saying. You 
have all these circles here and saying look at the coverage we 
are getting without Howard. You are trying to say, oh it was OK 
that the administration----
    Mrs. Mink. Will the gentleman yield? I don't feel that is 
an appropriate interpretation. They are left with a situation 
where they have to come up with an alternative, and this is the 
alternative plan which they feel is adequate in meeting the 
coverage that Howard Air Force Base previously provided, but 
not because they didn't need Howard.
    Mr. Rohrabacher. OK, that is very fair, and one could 
conclude that only if one believes that the administration was 
negotiating seriously to keep Howard. And what I am trying to 
say or suggest, and what my observation is, is that there was 
no serious negotiation, just like the administration hasn't 
done anything to keep this Chinese Communist-dominated company 
from controlling both ends of the Canal. The administration 
also was not negotiating seriously to try to keep an American 
military presence in Panama.
    There is an intent that is going on here that is not on the 
surface, is what I am saying, and I am trying to get to that. 
It seems to me by suggesting that, well, we really haven't had 
any problem because of this because now we have the coverage 
anyway, takes away from an understanding of just how drastic a 
change has taken place in Panama and what that has to do with 
our national security and our efforts to combat drug shipments.
    Ms. Salazar. If I could make two comments, at least from 
DOD's perspective and as a person who had to deal with the fact 
that we were leaving Panama, we pretty much were under the 
impression, and we were behaving as a Department, that we were 
going to be in Panama until September 1998. And the reason why 
I tell you this is that from at least our perspective, there 
was a sense or there was a hope that we would be able to stay.
    With that said, if I have sounded Pollyannaish and have 
given you the sense that there aren't challenges in our 
program, I apologize; there are huge challenges. And one of the 
biggest challenges we have right now is being able to increase 
our capability of doing surveillance over the source zone which 
is the area, as you know, we need to place most of our 
resources, because that is the area where most of the drugs 
that come to the United States come from.
    So I am not trying to be Pollyannaish, but kind of 
paraphrasing what Congresswoman Mink was saying, we woke up, we 
had the situation, and I believe within a year the Department 
of Defense has been able to react.
    Mr. Rohrabacher. You try to make the best out of a bad 
situation, and I guess what I am suggesting is this 
administration created the bad situation. This administration, 
through either incompetence or whatever their motive was, has 
overseen a total withdrawal of the United States from Panama. 
There are evil forces in this world, forces that are enemies of 
the United States, forces that don't like democracy, whether 
they are gangsters or drug lords or Communist Chinese who may 
hate us for whatever reason, that would like to control and 
dominate the strategic country of Panama. The Panamanian people 
know that. They wanted us to stay. Polls indicate that 80 
percent of them wanted us to reach an agreement; yet this 
administration wasn't able to do so.
    That is the reason why I am expressing, anyway, here to 
express doubts about what the administration has done and to 
applaud the chairman for focusing on this, because it affects 
our drug efforts, but it affects our national security in so 
many ways.
    Mr. Mica. We appreciate the gentleman joining the panel. I 
do want to give our ranking member an opportunity for another 
question. I think Mr. Barr had a question, if we could proceed.
    Mrs. Mink. Our visitor on the committee has riled my 
adrenaline, because I don't think that his conclusions are 
really fair to the administration. It is true that the 
negotiations failed, but as the explanations have been given to 
this committee, formally and informally, I believe that the 
negotiations were being conducted very aggressively and 
seriously. It was the interposition of political circumstances 
within Panama, as I understand, the elections and so forth, 
that caused the failure of the negotiations to finalize an 
agreement where we could stay in some form or another; perhaps 
not the full base, but at least for our drug surveillance 
requirements.
    I have said in my previous comments on this that I was very 
disappointed that the negotiations failed, and I would have 
hoped that they could have been successful. But to say that the 
administration itself caused this to happen, I think is a 
complete misanalysis of the circumstances that we find 
ourselves in.
    Having said that, I join the chairman of this committee in 
urging the administration now to do everything they can to 
provide the United States with the equal resources that we lost 
when we lost Panama. That is the sentiment that both the 
chairman and I share, that we have to develop an aggressive 
policy that will give the United States the same kind of 
capacity to obtain intelligence on the drug movement and to do 
the interdiction that is required in order to curtail traffic 
in our own country.
    We can't interpose our wishes upon an independent country. 
We don't own them. We can't dictate policies to an independent 
country. Some on this committee would probably wish that we 
could, but we can't. The reality is we can't. Therefore, we 
have to come up with a substitute policy.
    If the majority feels as strongly as they have indicated 
today, they should get to work on the other side of the Hill 
and make that money available to the administration so that 
they can do the repairs and put the AWACS operations into full 
effect so we can have the surveillance of source as well as 
transit.
    This is an area of enormous concern to the minority, and we 
join the majority in expressing them. We may have different 
emphasis on where we would like to see our efforts. Many of us 
on our side are so frustrated that we can't get enough funding 
and attention on the treatment end, so we continue to go to the 
floor and try to urge that point of view. I believe it probably 
will be done again shortly.
    I think this it is an area which we should minimize, this 
country-bashing. I don't see any point in bashing Panama at 
this point and its political leadership, and this leads me to 
my final question.
    We talk about all this name calling about the local 
Panamanian law enforcement efforts. To what extent are we able 
to work with the law enforcement agencies that exist there? 
What are we doing to help them meet the challenge and are we 
meeting with any success at all? Anybody on the panel?
    Mr. Ledwith. I would be happy to respond to that, Madam 
Congresswoman. We have a very good working relationship with 
the Panamanian authorities. We have eight agents stationed in 
Panama. Due to congressional increases, we hope to increase 
that in the upcoming year to maybe 10 agents. We have a good, 
strong, working relationship with them.
    Yes, there are problems, there are a lack of resources, and 
they are almost overwhelmed with the scope of the problem. But, 
yes, we are able to work with them, and we will continue to do 
so.
    Mrs. Mink. Is there any indication that they resent or 
reject our efforts to support and supplement their own internal 
law enforcement activities with respect to the drug issue?
    Mr. Ledwith. As to drug interdiction, no. As to money 
laundering, it is a somewhat different subject.
    Mrs. Mink. So in that area they do resist our 
interventions?
    Mr. Beers. It isn't so much that they resist them. They 
have taken our assistance and our training. The issue is that 
they haven't completely created the legal framework that makes 
it effective.
    As Mr. Ledwith said earlier, the only predicate at this 
point in time for their money laundering legislation is drug 
trafficking. It would be a much more effective regime if the 
implementation or the law were broader based so we could do 
that. But we have been training their financial intelligence 
unit, we have been working with them. They have not made the 
prosecutions off of this unit yet that we would like to see 
them make, and that is something we have talked with them as 
recently as this week about. So it is an ongoing issue of 
concern.
    Mrs. Mink. What about the free trade zone? What efforts are 
we making there to meet the problems that all of you have cited 
with reference to the free trade zone?
    Mr. Ledwith. Well, if I may, I would like to echo my 
colleagues' remarks. I wouldn't characterize it resisting our 
efforts. I would categorize it as a legal entanglement. The 
Colon Free Zone is of such paramount economic interest to 
Colombia and is a source of such revenue, changes in the laws 
of Panama that would enable more effective investigations and 
prosecutions of money laundering are economically difficult. 
There are a variety of interests at play.
    Mrs. Mink. Well, that is no different now than it was 
before we lost the air base. I mean, that is not a new 
development, is it?
    Mr. Ledwith. I think you would be accurate in representing 
that it is not a new development. The Colon Free Zone has been 
there for some time.
    Mrs. Mink. No, I am talking about the money laundering.
    Mr. Beers. Right. No, it has been an ongoing concern. I 
have been involved in this situation for 10 years.
    Mr. Ledwith. It has been a concern for many years.
    Mrs. Mink. So it is sort of the situation and frustrations 
that we express when we discuss the internal difficulties we 
have with Mexico.
    Mr. Ledwith. Anytime----
    Mrs. Mink. There is a very close correlation in what we 
would like to see happen and the difficulties because of their 
internal legal system, their laws and so forth.
    Mr. Beers. As well as economic interests, yes, ma'am.
    Mrs. Mink. Thank you, Mr. Chairman.
    Mr. Mica. Mr. Ledwith, you said you hadn't seen this report 
that says that there are more serious problems arising from 
corruption of law enforcement and other agencies within Panama.
    Mr. Ledwith. I now have a copy of it, sir. I haven't had a 
chance to read it yet.
    Mr. Beers. Sir, I skimmed it, and I have tried to 
understand how one could draw from that to say that this is 
something that has happened, as Mrs. Mink has said, something 
that has happened in the very recent past. It seems to me to 
describe a situation that has been there for as long as I have 
looked at Panama as an area of concern.
    Mr. Mica. I will look at the report. I have not seen a copy 
of it. We will get back with you after we have reviewed that 
and see how dramatically the situation has changed.
    Mr. Barr.
    Mr. Barr. Thank you, Mr. Chairman.
    Going back to our map over here, Ms. Salazar, given that 
there had been some 2,000 counterdrug flights per year, what 
mix of flights would you have to have out of these three 
potential locations in order to reach that level of 2,000 
counterdrug flights per year?
    Ms. Salazar. I misstated that number. There were 2,000 
flights leaving Panama at the time, but of those 2,000 flights, 
at least in the year, base year that I am talking about, 1998, 
there was 520. As of right now, we have 600 flights that have 
been flying out of the FOLs. Most of those flights----
    Mr. Barr. You are confusing me. The figure of 2,000 
counterdrug flights is yours.
    Ms. Salazar. Sir, I am sorry. I misstated. It wasn't 2,000 
counterdrug flights.
    Mr. Barr. I don't mean today. This has been your consistent 
position. You stated in sworn testimony on May 4, 1999, before 
this committee, you used that figure as well. Forgive me, but I 
suspect what we are hearing is a typical Clintonism. In an 
effort to make us believe through smoke and mirrors that there 
is really even more drug flights going on now than there were 
before, you are trying to now change the definition of what a 
counterdrug flight is.
    I don't buy that. I mean, you used, have used for over a 
year now, the figure of 2,000 counterdrug flights per year. 
That is a quote from your sworn testimony. And now you are 
telling me, oh, there really weren't 2,000 counterdrug flights, 
there were only 500, and therefore all of a sudden, hey, it is 
magic, there is more now than there were before.
    Ms. Salazar. Sir, if my testimony says 2,000 counterdrug 
flights, I apologize. That number is wrong. And I don't 
question you, it may be in my testimony. I should not have said 
that.
    Mr. Barr. Can somebody take these documents to the witness, 
please?
    This was your sworn testimony in May 1999. We rely on you-
all's testimony. When you all come up here and take an oath and 
swear to give us correct information, we would like to be able 
to rely on it, and our staff relies on it. And when they 
prepare information for us, whether it is going on a foreign 
CODEL, such as the ones that Mr. Souder mentioned he is going 
on, whether it is for our work up here to perform our job on 
behalf of the American people and to legislate and to 
appropriate and to conduct oversight, we have I think a right 
to rely on sworn testimony from administration witnesses.
    Now, when an administration witness comes up here, as you 
did in May 1999, and gives us, both in written testimony and in 
sworn oral testimony, that there were over 2,000 counterdrug 
flights per year originating from Howard Air Force Base, I am 
inclined to believe you. Now you are telling me, you are trying 
to play games and say oh, that doesn't really mean 2,000, and I 
apologize, maybe I misspoke. I don't think you misspoke. I 
think that there were in fact over 2,000 counterdrug flights 
originating from Howard.
    Ms. Salazar. When I spoke 2,000 counterdrug flights, we 
were talking about flights that included resupplying, bringing 
in equipment, bringing in individuals and probably involved in 
some of those numbers were flights that did not necessarily 
have the counterdrug nexus. If you wish, I can bring you 
concrete numbers as to the types of flights that we were doing 
out of Howard Air Force Base prior to its closure and what we 
are doing right now.
    When I spoke of the 520 flights, I am talking specifically 
of 520 detection and monitoring flights. That is, those flights 
that specifically took off from either Aruba-Curacao or one of 
the FOLs and did surveillance over any specific region. Of 
those detection and monitoring flights, specific detection and 
monitoring flights, we did 520 in the base year 1998, and this 
year we did 600 of those flights, detection and monitoring.
    Mr. Barr. So your position now is, just by coincidence, 
when we are up here trying to get to the bottom of some things 
here and to find out why we don't have the same capability that 
we had under Howard, you are now trying to convince us that 
even without further work on any of these bases, these FOLs, 
even without any AWACS, that you expect us to believe that the 
air coverage for this region is now even better than it was 
when we had Howard and were operating out of Howard?
    Ms. Salazar. Sir, the big difference between the types of 
flights that are taking place----
    Mr. Barr. Are you trying to with a straight face convince 
us that the situation is now even better than it was when we 
had Howard?
    Ms. Salazar. No, sir; I am trying to give you the facts.
    Mr. Barr. You are telling me that according to your now new 
definition of what a counterdrug flight is, that there are more 
counterdrug flights now than there were when we had Howard?
    Ms. Salazar. The difference between the activities or the 
flights taking place when we had Howard and now is the AWACS. 
All the other assets are flying in the region. They are either 
flying Aruba/Curacao----
    Mr. Barr. What AWACS? There aren't any AWACS down there.
    Ms. Salazar. Sir, we have right now, this year alone, we 
were provided an AWACS, and it flew--16 percent of the number 
of flights I provide you were AWACS.
    Mr. Barr. Over 300?
    Ms. Salazar. Over 300? Are we talking about the number of 
AWACS?
    Mr. Barr. No, the number of flights.
    Ms. Salazar. No, sir, I am----
    Mr. Barr. I thought you said there were something over 500 
flights?
    Ms. Salazar. 600 flights. Of those 600 hundred flights, 16 
percent of those flights were AWACS related.
    Mr. Barr. That is what I am saying.
    Ms. Salazar. Sixteen percent. One, six.
    Mr. Barr. I thought you said 60.
    Ms. Salazar. No, I apologize. Sixteen.
    Mr. Barr. I now realize we can't take anything for granted. 
You didn't say AWACS flights, you said AWACS related.
    Mr. Salazar. They are AWACS. AWACS flights. I can give you 
the breakdown of the number of flights that the P-3s did, the 
number of flights the Citations did, the number of Double Eagle 
packets.
    Mr. Barr. But those 600-something flights are counterdrug 
flights?
    Mr. Salazar. That is correct, sir.
    Mr. Barr. And you are trying to have us believe----
    Mr. Salazar. Sir, they are detection and monitoring 
flights. Those are not flights where we were moving people 
around, where we were moving equipment. These are 600 bona fide 
surveillance flights.
    Mr. Barr. I don't know what you mean by bona fide anymore. 
Maybe we have to go back to basics. What does a counterdrug 
flight mean?
    Mr. Salazar. A counterdrug flight, the flights that I pay 
for, that they use my funding for, has to have a counterdrug 
nexus.
    Mr. Barr. What is a counterdrug nexus?
    Mr. Salazar. It could be that they were moving people 
around, that they were trying to transport people from one 
place to another. It could be transporting equipment. It could 
be ISR, which is different than detection and monitoring 
flights. So when you take all these different types of 
counterdrug flights, what I am telling you right now is the 
detection and monitoring, the flights that we perform to be 
able to do the surveillance, was 600.
    Mr. Barr. So detection and monitoring flights would be a 
subcategory of a counterdrug flight?
    Mr. Salazar. That is correct, sir.
    Mr. Barr. And when you use the figures for here, which are 
you using?
    Mr. Salazar. The figures I am using for here are detection 
and monitoring.
    Mr. Barr. So I go back. Your testimony today is you are 
trying to convince us that despite what seem to be glaring 
problems here in getting sufficient planes in the air and down 
there, that the situation is actually better today because you 
have more detection and monitoring flights in the air than we 
did previously with Howard?
    Mr. Salazar. I am not--if you believe--if that is what is 
understood from my testimony, then I am going to give a caveat. 
We acknowledge most of those flights took place, those 
detection and monitoring flights, took place in the transit 
zone. What I am trying to say is that is the biggest challenge 
we have right now. We need to be able to take those 600 flights 
and start increasing the number of flights in the source zone.
    So I am not--I am acknowledging----
    Mr. Barr. What zone do we have here?
    Mr. Salazar. Both.
    Mr. Barr. Other than the twilight zone, I think.
    Ms. Salazar. No, sir.
    Mr. Barr. Where is the transit zone?
    Mr. Salazar. If you look at the blue star and the circle 
around the blue star, we would classify that as the transit 
zone. Excuse me, excuse me, the source zone. The star, the 
green star--I would say above the green star, that would be the 
transit zone, all the Caribbean region and the east-Pac region. 
What I am trying to say, each one of those circles doesn't 
necessarily encompass one region, the transit zone or the 
source zone regions.
    Mr. Barr. When we heard from you earlier, when we talked 
about the number of counterdrug flights per year originating 
from Howard, did that include both source zone and transit zone 
also?
    Mr. Salazar. Yes. The 2,000 flights, yes.
    Mr. Souder. What about the 540?
    Mr. Salazar. The 520, that would include both transit zone 
and source zone. Sir, I am acknowledging here we have a 
problem. Most of those flights have been in the transit zone. 
The priority of this administration has been to get those 
flights into the source zone where they need to be.
    Mr. Barr. These figures may not mean an awful lot.
    Mr. Salazar. They mean there has been great effort----
    Mr. Barr. You really have to go beyond simply whether it is 
2,000 or 500 or 600 and look at precisely what kind of flight 
it was.
    Mr. Salazar. I agree.
    Mr. Barr. And precisely what area it covered.
    Mr. Salazar. I agree.
    Mr. Barr. Somebody take that off then, because it is 
absolutely meaningless and I don't want it to confuse the 
issue.
    Looking at the particular airfields at the FOLs, it is 
correct, is it not, that these are civilian airfields?
    Mr. Salazar. No. The Manta is an Air Force Base that does 
also have a runway that has international flights. The Salvador 
is also an Air Force Base, but also it is right next to an 
international airport.
    Mr. Barr. What about Aruba/Curacao?
    Mr. Salazar. Aruba/Curacao are international airports.
    Mr. Barr. So you all have a problem. Obviously, one problem 
is security and having nonmilitary personnel spotters who could 
very easily spot what aircraft is coming and going, and when.
    Mr. Salazar. And that, unfortunately, has been the case 
even when we were in Panama. The issue of the spotter was an 
issue we had to constantly battle with. I guess the advantage, 
if there is an advantage in this, is that having three airports 
or four airports where we are flying out of, it just makes it 
somewhat more difficult for the traffickers to predict at what 
point we are going to be flying an AWACS or P-3 in any given 
area or region. But when we were in Panama, the spotters----
    Mr. Barr. You wouldn't say it is an insurmountable burden 
for them, though, certainly? You wouldn't say it is an 
insurmountable problem for the drug traffickers, given they 
have billions of dollars?
    Mr. Salazar. They have a lot of resources. Even when we 
were at Howard, we had to deal with this problem.
    Mr. Barr. Could I, Mr. Chairman, I would like to introduce 
into the record a document entitled Legislative Assembly Law 
No. 5 of January 16, 1997, from the Republic of Panama.
    Mr. Mica. Without objection, so ordered.
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    Mr. Barr. Is the GAO report to which our colleague Mr. 
Rohrabacher referred to, is that a part of the record also from 
December 1999, the GAO record?
    Mr. Mica. It has been made a part of the record in the 
past. We did a hearing specifically on that report. We will 
refer to that for that.
    Mr. Barr. Thank you very much, Mr. Chairman.
    Mr. Mica. Thank you. Mr. Ose.
    Mr. Ose. Thank you, Mr. Chairman. I want to go back, if I 
may----
    Mr. Mica. We are going to have a vote shortly, and I would 
like to try to get our witness up, so maybe we could divide the 
time up remaining.
    Mr. Ose. I will submit my questions in writing, Mr. 
Chairman.
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    Mr. Mica. Mr. Souder.
    Mr. Souder. I have one brief comment I want to make.
    Mr. Salazar. I understand that the Coast Guard is very 
worried about the increase in gas prices, at we have some in 
the supplemental, but they are saying they could be down as low 
as 10 percent of their coverage in the transit zone. So we also 
have to be looking at mixed resources.
    I would like to request for the record an ``apples to 
apples,'' so that we can look back on this hearing and try to 
see this, possibly using the definition, because I have a 
different concern, slightly, than Mr. Barr had. Now I feel kind 
of duped by the 2,000, because I thought the 2,000 were flights 
that were tracking, which may mean we had a more significant 
drop earlier.
    What I would like to see, given the specifics of the 
definition, a 1990, a 1995, a 1998----
    Mr. Mica. Mr. Souder, it is very difficult. We have been 
round and round and they have changed the definitions. There 
were in fact 15,000 flights taking off annually from Howard Air 
Force Base. Some of those were military, some might have had a 
drug nexus, some might have been delivering personnel. We have 
been behind closed doors and tried to sort this out. We have 
gotten different definitions and evaluations. I would be glad 
to again look at your request. We can go back and sit down. But 
the terms have changed, the definitions have changed, and you 
are not going to get a straight answer.
    Mr. Souder. I would like to know what the witness's 
statement of 2,000 constituted, and then I would like to have 
that compared by the Department of Defense to before and 
afterwards, apples to apples, because right now you have shaken 
the confidence of our ability to measure, because when we were 
told, it was counter-drugs; and now we are hearing it was 
shuttling around in 1998. Part of our concerns in 1998 were we 
were already cranking down from 1995, and 1995 was arguably 
maybe starting to go back up, but from 1990. So we are really 
comparing things here that the base years are important and we 
need a little bit of a pattern of a definition.
    Mr. Mica. We will request that information.
    Mr. Souder. We would really like surveillance and detection 
flights, 1990, 1992, 1995 and 1998. That is really the critical 
thing. If we are going to go out 600, I would like to see some 
years before Clinton, and source zone emphasis.
    Mr. Mica. Briefly, Mr. Rohrabacher.
    Mr. Rohrabacher. I know we have a vote, so let me just 
state for the record that Mr. McNamara, who was a negotiator 
for this administration with the Panamanian Government, 
testified before the committee on which I sit, International 
Relations Committee, that there was a need and that the 
administration determined a need for a 2-year cooling off 
period; in other words, for a closure of all America's military 
presence in Panama for a 2-year period before we would then 
start negotiations, serious negotiations, for an American 
military presence. Which seemed to indicate that what has been 
happening down there, the fact that you open your eyes and 
there is now no Americans down there in order to have a 
positive influence on Panama, was part of an actual policy, 
although it hasn't been stated.
    What we have been discussing, of course, in this last 
little interchange about the 2,000 flights is simply what the 
definition of ``is'' is, and it keeps coming back over and over 
again with this administration, and we keep having to face 
questions like that.
    Mr. Mica. Thank you. Well, we do have a vote. We will be 
submitting additional questions for the record to these 
witnesses. I appreciate their cooperation and testimony today. 
We will dismiss them at this time.
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    Mr. Mica. What I am going to do is, since there is a vote, 
I think we will recess until a quarter of one. At a quarter of 
one, we will have Professor Thomas Cabal provide his testimony 
and hear from our second panel. With that, we will excuse this 
panel.
    The subcommittee stands in recess until a quarter of one.
    [Recess.]
    Mr. Mica. I would like to call the subcommittee back to 
order. We should be joined by other Members. But I do want to 
call forth our second panel so we can proceed.
    Our second panel consists of Professor Tomas Cabal. He is 
with the University of Panama. Welcome to our subcommittee. 
This is an investigations and oversight subcommittee of 
Congress. We are pleased to have you provide us with your oral 
testimony, and also upon request through the Chair, we will be 
glad to submit lengthy documents or information, reports in the 
record, or make reference to them by request.
    Also, this being an investigations and oversight 
subcommittee, we do swear in our witnesses. If you would stand, 
please, to be sworn.
    [Witness sworn.]
    Mr. Mica. The witness has answered in the affirmative. I am 
pleased to welcome you at this time and also to recognize you 
for your testimony and also thank you for being with us, for 
the record. I understand it was somewhat difficult and 
straining circumstances on your coming, leaving Panama, to 
provide us testimony, and we do appreciate your willingness to 
come forward and supply us with your background and point of 
view at this juncture. Thank you.

    STATEMENT OF PROFESSOR TOMAS CABAL, UNIVERSITY OF PANAMA

    Mr. Cabal. Thank you, Congressman Mica. I want to do two 
things. I will submit my written testimony, as I will only 
cover part of my statement----
    Mr. Mica. Without objection, your entire statement will be 
made part of the record. Please proceed.
    Mr. Cabal. Right. And then, I will cover the areas having 
to do with the Chinese presence in Panama.
    I would also like to preface my statement by thanking 
Congressman Rohrabacher, Congressman Barr, Congressman Metcalf, 
for their role in securing or making sure that I was present 
today at this hearing. As you mentioned in your statement, it 
was very difficult. We still have very stringent libel laws in 
Panama, we call them gag laws, introduced by the Noriega 
regime, precisely to persecute, prosecute and intimidate 
citizens and journalists just trying to do our job. So again, 
thank you to your efforts that I am here today.
    I also would like to address some of the issues brought up 
by the panel, because I think there is a lot of information 
that has not been properly presented, and some of that 
information I think is clearly misleading.
    I have a background in engineering and my family has been 
involved in construction in the Panama Canal Zone for over 20 
years. We built many of these bases, the housing involved, and 
we also helped build a key facility that has been closed down, 
which is Galata electronic listening post that operates on the 
Atlantic side.
    If you will, Mr. Chairman, I will go directly into my 
testimony and bring up some points that were brought up in the 
question and answer period by some of the Congressmen.
    The presence of Red China. In the last 5 years, powerful 
Chinese companies have invested millions of dollars in Panama. 
Recently the Hong Kong Shanghai Banking Corp. purchased the 
local branch of the Chase Manhattan Bank. Cable and Wireless, 
an English corporation with close ties to Hong Kong, owns 
Panama's phone company. Hong Kong and China export 25 percent 
of all the goods purchased by the Colon Free Zone. Hutchison 
Whampoa, a Hong Kong-based company that operates ports 
worldwide, won the right to operate the ports of Balboa and 
Cristobal on the Pacific and Atlantic entrances to the Panama 
Canal.
    Experts disagree on the level of influence that the Chinese 
will have in Panama, but congressional investigators and the 
National Security Center note that the contract they signed 
allows them abundant leeway in their operation of the port 
facilities. Hutchison controls 50 percent of all stevedoring 
services in Hong Kong, a situation that lets them set container 
transport prices and may allow them to undercut their 
competitors in Panama. Li Ka Shing, Hutchinson's chairman, is a 
key advisor to the Chinese leadership in Beijing.
    Some experts believe that Hutchison will be able to affect 
canal operations and that they could impede the normal flow of 
vessels, a contention disputed by the Panama Canal authorities, 
who insists that only they can determine the level of 
expediency in canal traffic.
    With America's retreat from Panama, the Red Chinese are 
quickly filling the power vacuum. Companies identified by the 
Cox report as participating in industrial espionage or the 
purchase of restricted technology are active in Panama.
    COSCO, the Chinese shipping company that services the 
People's Liberation Army, sends 300 ships every year through 
the Panama Canal. They are investing heavily in Panama and have 
just started a new service from China to Europe via the canal. 
Other Chinese companies will take advantage of the 
modernization of the Panama railroad, while others will be 
bidding the operation at Howard Air Force Base, investments 
that could put them in a commanding position in Panama. The 
presence of Red Chinese companies may tilt the diplomatic 
balance in favor of Beijing.
    Currently, Panama maintains diplomatic relations with 
Taiwan, but as the Bahamian Government just proved, a $40 
million investment by Hutchison Whampoa in port facilities led 
to a switch in its diplomatic allegiance from Taipei to 
Beijing.
    Continued investment by Chinese corporations could greatly 
diminish the ability of the United States to influence events 
in Panama. The Chinese community is already very influential, 
and with the support of Chinese companies and investments this 
influence could increase. The Government of Panama wants 
foreign investment, but as a recent poll shows, 81 percent of 
the population would welcome the return of the United States 
and would support a limited American military presence to aid 
the country in its war on drugs and to secure the Colombian 
border.
    The key to any negotiations that would bring back American 
military forces to Panama is a fair economic arrangement 
between both countries. The United States still has an 
opportunity to influence events in Panama through investment 
and foreign aid. Panama needs $100 million to fully implement a 
national security plan that would protect the Colombian border 
and limit the activities of international drug traffickers.
    As part of the aid package to Colombia, the Congress only 
included $8 million in aid to Panama. The Panamanian Government 
needs to purchase helicopters, patrol boats, aircraft, radar 
and communication equipment, and it needs to improve the 
training and equipment provided to the border police. A naval 
base to patrol the Atlantic companies must be constructed, 
while radar coverage must be extended to cover the Pacific area 
and the Colombian border.
    On the Pacific side, the United States Coast Guard could be 
instrumental in reopening Rodman Naval Station, a modern naval 
facility located near the entrance to the Panama Canal. The 
Coast Guard could also be instrumental in helping the National 
Maritime Service improve its interdiction ability in Panamanian 
territorial waters. American corporations could become key 
players in the bid to transfer Howard Air Force Base into an 
international air cargo facility that would take advantage of 
its proximity to the canal and the Colon Free Zone to ship 
goods all over the world. Tax incentives and export-import 
funding could help American companies invest in Panama if 
Washington and the Congress decided that Panama is still an 
important strategic partner for the United States.
    American companies ship more than 140 million tons of cargo 
through the Panama Canal every year. The canal is still very 
important to American commerce and to American prosperity. Many 
experts agree that a new strategic partnership between Panama 
and the United States is the key to the operation of a safe and 
efficient international waterway that is a marvel of modern 
engineering and Yankee ingenuity. Many people in the United 
States and Panama would like the two countries to reestablish a 
strategic partnership, then, to enhance canal security and to 
protect both nations from the threat of international drug 
traffickers.
    Organizations like the Center for Security Studies, the 
Conservative Caucus, and the National Security Center have been 
instrumental in getting the issues before public opinion in 
Panama and in the United States.
    Let us hope that the elected representatives of the people 
in the U.S. Congress examine the facts and work toward 
reestablishing a strategic alliance that will enhance the 
security of both countries.
    On the issue of drug interdiction flights, you mentioned, 
and we heard today, all types of figures being bandied about. 
The figures start at 20,000. Those were the flights coming out 
of Howard Air Force Base.
    Howard Air Force Base has the longest runway and the best 
infrastructure of any facility of its kind south of the Rio 
Grande. The United States does not have and will not have in 
the near future a facility such as Howard Air Force Base.
    Another element that I notice was not fully analyzed this 
morning has to do with what intelligence experts call real-time 
information. The antidrug center that operated at Howard Air 
Force Base had a budget of $238 million a year. This amount of 
money was expended because you had the air crews living and 
working out of Panama on a rotation basis, the aircraft were 
serviced and maintained, they were fueled. The facility also 
had top-of-the-line computers and communications facilities 
that tied in to the Galata Island communications facility, so 
that when the AWACS and the P-3 Orions were operating, this 
information could be fed and coordinated with other regional 
radar coverage. The United States provided the Governments of 
Colombia, Peru and Venezuela with radar coverage that allows 
them to monitor and to intercept suspicious drug flights.
    One of the outcomes of the operation of the antidrug center 
at Howard Air Force Base and real-time information getting 
promptly to law enforcement and to military groups in the 
region, was that the drug interdiction, the aerial drug 
interdiction effort, was very successful. From 1995 to 1998, 38 
aircraft were shot down in the region. Drug planes were shot 
down, most of them by the Peruvian Air Force that has been very 
aggressive. The Peruvian philosophy is if you do not hail an 
order to land the aircraft, you are shot down.
    The Colombians have a little different variety. They pursue 
the aircraft and try to force it to land, rather than shoot it. 
But recently they too have resorted to the effort at shooting 
down, and recently a suspected drug plane was shot down on 
Colombian territory. So that in itself accounted for a 
substantial increase in the price of coca in the region 
producing the cocaine.
    The other aspect that I think was not fully addressed, and 
you can look at it, if one of the staffers would be kind enough 
to put the circle there again to look at it, it is the fact 
that Panama is a strategic center because of its very close 
proximity to the countries producing cocaine. Here you have 
extended coverage. Yes, you might extend the coverage, but you 
are not that close.
    It means we haven't heard any figures pertaining to the 
cost of fuel, which in my estimate, will skyrocket because of 
the increased distances that the aircraft will have to fly. The 
distances also mean that the aircraft will not be able to be in 
the air for longer periods of time. And Howard Air Force Base 
is a key element to that because of its proximity to the 
regions that are producing these drugs that are inundating the 
streets and cities of the United States.
    Another element that I think fits and has not been fully 
disclosed to this subcommittee is the fact that along with drug 
interdiction, you have facilities in Panama like at Fort 
Sherman where training could be enhanced, not only for 
Panamanian border police, but for regional armies, that can 
train in the counterinsurgency and the jungle training so 
needed in areas such as this.
    In the Darien province which was mentioned this morning, we 
share a very heavy jungle terrain, tropical rainforest border, 
225 kilometers with Colombia, which is now becoming a haven for 
the FARC guerrillas. Over the last 2 weeks, more than 1,000 
Colombian citizens have fled the fighting between the 
paramilitary, the Colombian Army and the FARC guerrillas and 
are now in Panamanian territory. This last week there were two 
or three incidents of groups of armed Colombians coming into 
Panamanian territory in areas where the Panamanian police 
simply can't do the job.
    Panama's national air service has one helicopter 
operational and three small fixed-wing aircraft to patrol the 
Colombian border. The maritime service does not really have the 
equipment or the capacity or the infrastructure to patrol both 
the Atlantic Coast and the Pacific area which, because we have 
no radar coverage out of Howard anymore, that area is 
completely open. There is no radar coverage in this area.
    Now, whether this administration is going to provide radar 
coverage in the so-called eastern region, again, remains to be 
seen. But the way this thing works is you have regional radar 
coverage, and then in each individual producing country, you 
have smaller mobile radars that are operated by the local 
military with the support and training of American personnel.
    As you know, Mr. Chairman, there are now close to 300 
military advisers in Colombia trying to get the antinarcotics 
battalion fully operational, trying to get Plan Colombia off 
the ground. In Plan Colombia, this Congress intends to spend, 
what, something like $1.6 billion to try to help the Pastrana 
administration win its war against drug traffickers and 
Colombian subversives. All they have to do, Mr. Chairman, is 
cross the border, and it is time out. They simply cross the 
border and they will escape the Blackhawks or the Hueys you 
give them or the new battalions they train. They will simply 
cross over into Panamanian territory and hide out like they 
have done for the last 10 years.
    Arms smuggling. There is an ongoing route that begins in 
the Middle East with Libyan arms trafficker, East European arms 
traffickers. The weapons are shipped basically to Honduras and 
Nicaragua, and then from then on by land and sea they are 
shipped into Panama and on to the Colombian subversives. This 
is one of the fallouts from the paramilitary and the left wing 
guerrillas in the Caribbean area of Uraba province, which the 
Colombian province of Uraba borders the Panamanian territory, 
is that both the right wing and the left wing need the access 
to the Caribbean Sea to get their weapons in and to ship their 
drugs out.
    Colombian guerrillas and paramilitary profit about $600 
million a year in the sale and export of drugs. They have moved 
from simply protecting and taxing the campasinos, the farmers 
that grow the drugs, into overall commercialization, 
refinement. And, of course, as you know the FARC guerrillas now 
control free territory the size of Switzerland, in which 
laboratories are now operational, in which cultivation is now 
taking place. That is why the figures that were presented here 
by the DEA representative have skyrocketed.
    In the last year, Colombian drug production has risen by 
about 25 percent. That means a rise from around 450 tons of 
cocaine produced in 1998 to between 520 and maybe as much as 
650 tons of cocaine.
    Heroin is also rising in the areas occupied by the 
guerrillas. The estimates by experts is anywhere between 7 and 
10 tons of high-grade heroin are now flowing into the United 
States, almost single-handedly from the Republic of Colombia, 
between 7 and 10 tons. This transit goes through Panama. The 
figures we have is about 300 tons of cocaine and maybe 2 to 4 
tons of heroin are shipped through Panama every year into the 
United States.
    So I guess the administration can argue on the values of 
how much they are going to have to spend on these forward 
operation locations and whatnot, but the fact is that real on-
the-ground intelligence, real human resources being utilized 
close to where the action is occurring, is certainly much more 
effective.
    There are issues, of course of politics and Panamanian 
sovereignty, which the chairman there addressed. But, overall, 
the American military presence was a welcome presence. Eighty-
one percent of the Panamanian people want Uncle Sam to come 
back. They are not saying, ``Gringo go home,'' they are saying, 
``Gringo, come on down.'' Why? Because the American military 
presence, the infrastructure and the jobs that they generated 
signify some $300 to $400 million in the local economy.
    The Panamanian economy is today in a severe economic 
recession because high-paying workers have lost some 20,000 
jobs. There are about 100,000 Panamanians that depended in one 
way or another from the American military presence. That is 
gone. This money fueled the economy, and we in Panama were not 
prepared. The government was not prepared to make that 
transition.
    [The prepared statement of Mr. Cabal follows:]
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    Mr. Mica. As you can hear, the buzzer has gone off for a 
vote. We want to have some time for questions, we have about 10 
minutes for questions. I wanted to ask a couple, and we 
appreciate again your testimony and your coming before us 
today.
    First of all, how would you estimate since the closure of 
Howard Air Force Base last May, a year ago, what would you 
estimate the amount of increased transit of cocaine and heroin 
to be through Panama?
    Mr. Cabal. I would estimate that the figures in 1998 were 
100 to 200 tons, 100 tons of cocaine and about 2 tons of 
heroin.
    Mr. Mica. Additional.
    Mr. Cabal. In addition; yes, sir. As you know, the heroin 
trade is 95 percent by human mules, people that swallow, so the 
authorities have uncovered in the last year several what we 
call defecation houses. These are small houses or apartments in 
which the drug runner brings his cargo, defecates it, they 
clean it up and they give it to somebody else, who swallows it 
and on to the United States.
    Mr. Mica. Coming out of Colombia?
    Mr. Cabal. What they do is disguise the origin of the 
traveler. It is one thing, if you come out of Colombia, you go 
into Miami or fly into L.A., New York, or Houston, you are 
certainly going to be looked over very carefully. But if you 
come out of Panama, they are not as rigorous.
    Mr. Mica. You also described a disruption along the border 
and you said 1,000, was that Panamanians?
    Mr. Cabal. No, these are Colombian citizens----
    Mr. Mica. That fled into Panama.
    Mr. Cabal. Yes, they are there currently hiding. What 
happens is the paramilitaries, the left and the right are 
fighting over control of the Caribbean, the access to the 
Caribbean, so they can ship their drugs and receive their 
weapons.
    Mr. Mica. I also appreciate your testimony. I think you 
said about $8 million is earmarked for Panama and some of the 
other surrounding countries.
    Mr. Cabal. Yes. The original request was for $30 million, 
and the Congress allocated $8, and that is simply not going to 
get the job done.
    Mr. Mica. I think you raise a good point about this 
spreading as we put pressure on Colombia and Panama. I think 
you cited very graphically, you just step across the border and 
you are scot-free from the Blackhawks and others. Again, we 
appreciate your testimony and your insight. Again, you're 
risking some of your personal well-being coming here today.
    I want to yield at this time to Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much. Mr. Chairman, again, 
thank you very much for holding this hearing. I think that the 
drug issue overlaps into other areas of national security. And 
I am on the International Relations Committee and have spent 
considerable time on the other implications, but this is 
important in a number of areas and a number of levels.
    You mentioned that 81 percent of the people down in Panama 
would like to see----
    Mr. Cabal. That is the most recent CID-Gallop poll 
published in the local paper, 81 percent.
    Mr. Rohrabacher. Which indicates that the Americans were 
having a positive influence, not just for military security.
    Mr. Cabal. Economic. We are in a severe recession as we 
speak, because $354 million is no longer circulating in the 
economy.
    Mr. Rohrabacher. While we were there, we were playing a 
dominant role in Panama. People don't necessarily want us to 
dominate Panama, but our presence was a positive role. That 
influence that we had, and have now, just left. That void is 
being filled by----
    Mr. Cabal. The Red Chinese, for example, have taken over 
the Russian listening stations in Lourdes in Cuba. The Chinese 
are now operating electronic eavesdropping stations that allows 
them to monitor Federal, military and commercial.
    Mr. Rohrabacher. They are involved in your banking system.
    Mr. Coble. Yes, they just bought out Marine Midland, which 
was mentioned by Congressman Barr, and they now just bought out 
Chase Manhattan, which is the second oldest bank in the 
Republic of Panama, right after Banco Nationale.
    Mr. Rohrabacher. And, as well, a company that controls both 
ends of the Panama Canal.
    Mr. Cabal. And the phone company. Cable and Wireless has 
substantial amounts of Chinese money behind it.
    Mr. Rohrabacher. So the United States has walked away from 
one of the most strategic areas in this hemisphere, where both 
of the continents come together, both the oceans come together, 
walked away from people who liked us and wanted us to be there, 
and we are letting the presence be filled by Communist Chinese 
and by drug lords and gangsters.
    Mr. Cabal. Russian gangsters who are now active in the 
Colon Free Zone. The Chinese triads. Panama has an extensive 
Chinese community that is the prey of the triads. They are 
involved in prostitution, illegal gambling, and illegal alien 
smuggling.
    Mr. Rohrabacher. One last question. Is illegal alien 
smuggling still going on?
    Mr. Cabal. It has actually increased, Congressman.
    Mr. Rohrabacher. This is very disturbing. What is happening 
in Fort Sherman now? You mentioned what was going on before. 
What is happening now at Fort Sherman?
    Mr. Cabal. Nothing. The facility is up for sale, for lease. 
There is talk of ecological development. But the runway is not 
being used, the building is not being used, and certainly the 
Panamanian border police is ill-equipped, ill-trained, and they 
need all the help they can get. They are a unique world-class 
facility that could be used by the Panamanians, that could be 
used by the Americans. The same with Rodman Naval Station. For 
example, the Coast Guard could be working there to help the 
interdiction in the Pacific area.
    They could also help the Panamanians build a Naval base on 
the Atlantic side to stop the flow of drugs through the 
Caribbean.
    Mr. Rohrabacher. With the United States withdrawing from 
the role that it has played in Panama for so many years and 
stepping up of other forces as we have talked about, what kind 
of pressure is that putting on elected officials in Panama? Can 
you really blame them when the United States is not offering 
that anchor of stability and integrity that we did in the past?
    Mr. Cabal. Certainly it is a substantial issue. The 
gentleman from the DEA clearly explained peso brokering. The 
Colon Free Zone does about $11 billion of business a year, $5 
and $5, import/export, $5, $6. That in an economy that barely 
reaches $8 billion. So it is very, very important.
    What it does, the Colon Free Zone is an area where money 
laundering is occurring, about $3 billion every year, about 
half through the peso brokering mechanism explained before.
    The other money laundering occurs in the banking area; and 
one thing the Panamanian Government, and the governments before 
this administration, have to take a hard look at their 
political commitment to put an end to money laundering. Bank 
secrecy laws, the Colon Free Zone, I mean, you have to have a 
commitment.
    Panama does have one of the few financial investigative 
units, but they need money, they need training, they need 
specialists, they need communications. But there has to be a 
clear political commitment from the Panamanian Government to 
put an end to money laundering, and I don't see that happening. 
As long as that doesn't happen, it is going to go on.
    Mr. Rohrabacher. Mr. Chairman, let me note it is very 
difficult for a small country like Panama that's very 
vulnerable to powerful outside interests, it is very hard for 
those government officials to make that commitment when the 
United States basically has surrendered and run away and left 
the playing field to tyrants, to gangsters, to people who are 
antithetical to everything that we believe in.
    Mr. Cabal. Congressman, there is a grave question regarding 
political contributions, where this cash is coming from and who 
it is getting elected.
    Mr. Rohrabacher. Thank you very much. Thank you, Mr. 
Chairman.
    Mr. Mica. I want to thank you, Professor, for being with us 
today and, again, for offering your insight. You certainly have 
a very great knowledge of what is going on in Panama; and your 
experience in economics, I think, sheds a great deal of light 
for this subcommittee on the money involved, the trafficking 
involved and the influences that may be, in fact, corrupting 
Panama, and also the difficulty we have incurred since we have 
lost our forward operating locations at that point.
    Mr. Cabal. Yes.
    Mr. Mica. I know that other members had questions. 
Unfortunately, I am going to have to adjourn the hearing at 
this time, but we will be submitting additional questions to 
you for the record.
    Mr. Cabal. I have a very good working relationship with the 
Congressman and his assistant. We are in constant contact. We 
have e-mail.
    Mr. Mica. We may have additional questions from members of 
our panel. So we would like to make them part of the hearing.
    Again, we thank you for your contributions today and for 
your appearing as a witness.
    There being no further business before the Subcommittee on 
Criminal Justice, Drug Policy, and Human Resources at this 
time, this meeting is adjourned.
    [Whereupon, at 1:15 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]
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