Panama, A Smuggler's Haven

(International Relations and Security Network, 13/09/2006)


Editor's Note: This is the second in a series of in-depth pieces on drug smuggling in the Americas. Each piece will focus on a specific city and the surrounding region, beginning with Buenaventura, Colombia and moving north through Central America and Mexico, to conclude with Washington, DC.


Panama City is where globalization meets the black market. The Panama Canal is a choke point of global trade in the Western Hemisphere. Some 12,000 vessels pass through the canal every year. Panama City and the surrounding environs are also a bottle neck for black market trade between Colombia and the rest of the world. Hundreds of tons of cocaine pass from Colombia through Panamanian sovereign territory on their way to the US, Europe and beyond.


Dozens of options for front businesses, money laundering operations and transit routes on land, water and in the air give traffickers the latitude they require to stay a step ahead of law enforcement.


Panama City is home to one of the largest concentration of banks in the Americas, making the country a global center for money laundering. Panama offers Colombian drug traffickers a culture they can blend into and with plenty of legitimate reason from which to choose. Colombian-owned businesses make up the majority of Panama’s most successful companies, most, if not all, located in Panama City. Many Colombians own vacation land or plantations in Panama, and make up part of the billions of dollars Colombians invest in Panamanian education, industry, trade and finance.


If the origin of cocaine in the Americas starts in Colombia, the key transit link of cocaine north, and money and guns south, is Panama. While law enforcement does make regular interdictions, it is hard pressed to combat the sheer number of options Panama City and the rest of the country offer to criminals.


A transit country


Panamanian authorities interdicted 30.52 tons of cocaine in 2005, according to Jose Abel Almengor, the number two Panamanian government public prosecutor for drug-related cases. “Panama’s interdictions in 2005 were the highest in Central America,” Almengor told ISN Security Watch.


By comparison, Nicaraguan authorities interdicted some 7.3 tons of cocaine in 2005.


While 2005 was a banner year for Panama, it appears 2006 is well on its way to matching those numbers. On 16 January, Panamanian and US authorities seized 4.7 tons of cocaine from two boats traveling along Panama’s Caribbean coast.


Three months later, Panamanian authorities fired upon a small aircraft while it raced to take off at a banana plantation near the town of Jagua, in Western Panama, close to the Costa Rican border. Bullets fired from the Panamanian helicopter downed the aircraft, killing the pilot, who was suspected to be Mexican. The single-engine aircraft had been loaded with 400 kilograms of cocaine.


Four months later, on 18 August, Panamanian authorities arrested three Mexicans and one Colombian-born Panamanian while driving a truck loaded with 511 kilograms of cocaine. Authorities concluded the cocaine was to be transported over land to Mexico.


Finally, on 7 September, a Panamanian helicopter crew identified a Colombian go-fast boat in Panama’s Bocas del Toro island archipelago, very close to the Costa Rican border. Local police seized just over a ton of cocaine, presumed to be on its way to Mexico, Almengor said.


Geography as facilitator


Turbo, Colombia is a banana export center located on Colombia’s Caribbean coast. Like Buenaventura on the Pacific coast, Turbo and the surrounding river system acts as a point of departure for Colombian go-fast boats that head straight for isolated destinations along Panama’s Caribbean coastline.


“The Atlantic coast, from Colon to Costa Rica, is the most active,” Almengor said, referring to the amount of drug trafficking that passes through the area. What makes these sea routes more attractive to smugglers is remoteness. The Darien Gap, a stretch of land that connects Panama with Colombia is not developed. Roughly half of Panama’s coastline, until reaching Colon on the Caribbean side, or Panama City on the Pacific side, is barren, save government-sanctioned land for Indian tribes that live there. The rest of the route, especially on the Caribbean coast, is sparsely populated.


After the US Drug Enforcement Administration (DEA) and other regional law enforcement authorities concluded Operation Twin Oceans in May, it uncovered that Pablo Rayo-Montano maintained islands on both of Panama’s coasts.


On the Caribbean coast, Rayo-Montano owned at least one island in the Islas Marias archipelago, near the Panamanian town of Veraguas, located less than 30 kilometers from Colon by boat and some 20 kilometers from the Bocas del Toro archipelago.


On the Pacific side, Rayo-Montano owned Isla Esmerelda, according to local news reports. Esmerelda Island is located near the Panamanian coastal town of San Carlos, less than 20 kilometers from Panama City by boat.


Go-fast boats, designed with long V-shaped hulls and driven by a combination of high-powered motors, can travel at speeds that reach some 150 kilometers per hour (km/h) in calm waters, 90 km/h in choppy water, and maintain 47 km/p in 1.5 to 2 meter seas.


These boats also have enormous carrying capacity and can easily haul multi-ton loads of cocaine.


Given the geographical nature of the Panama’s Caribbean coast, and the relative amount of remoteness along the length of Panama, it is not surprising that most of the cocaine trafficked from Colombia to Central America and Mexico passes along this route.


Front companies and money laundering


At the height of Rayo-Montano’s Panamanian empire, his central company, Nautipesca, was the top marine supplies business in the country. The company operated three stores, two in Panama City and probably one in Colon. Max Jaramillo Tovar, a Panamanian, was the president of Nautipesca. The company’s administrator, Yovanny Jaramillo Tovar, most likely had two principle roles: pay the “employees” and launder money.


Members of the Panamanian-based law enforcement team close to the Rayo-Montano investigations told ISN Security Watch that merchandise sold by Nautipesca to normal customers was almost always discounted by 15 or 20 percent because the difference between the true retail price of the item and the price any given customer would pay for it was filled with dirty money.


Money earned from selling cocaine would enter Nautipesca’s financial statement as part of a legitimate sale, thereby washing the money of its illicit origins. This stage, called “placement” by money laundering experts, is often the most difficult to accomplish.


Once the illicit money circulated into Nautipesca’s licit funds accounts, it could then be transferred to a number of banks, or be “layered,” and used to purchase items in Panama’s free trade zone, the final stage of money laundering referred to as “integrating.” These items would then be shipped to Colombia, where Rayo-Montano’s clients would receive them and sell various products such as refrigerators, washing machines and furniture in Colombia in exchange for Colombian pesos.


Panama has a long history of money laundering activity as well as anti-money laundering legislation. Since 1986, the country has had money laundering laws in place, but until 2000, they focused specifically on the drug trade, making it only a crime if targeted funds could be linked specifically with drug trafficking. In 2000, the laws were amended to add wording that included organized crime, significantly opening the way for more cases to be prosecuted.


The country now operates one of the most robust anti-money laundering legislative packages in the Americas. It also operates in concert with the Financial Crimes Enforcement Network under the US Department of Treasury.


Due to the tightening of Panama’s money laundering legislation over time and the country’s commitment to combat money laundering, smugglers have begun using more primitive methods of transferring money from the US and Mexico back south.


They tape it to their bodies or stuff bundles of cash into containers.


Money moves south via the same methods and conveyances that drugs move north. Just last September, law enforcement in Panama interdicted a container full of cash.


Individuals arriving in Panama via commercial airlines are sometimes stopped for questioning because of abnormal behavior. They are sometimes found with stacks of bills taped to their torso and legs.

Diversification is security


Law enforcement authorities well versed with Panama’s black market activity note that the country is a perfect place to do business. A number of criminal organizations come from around the world to take advantage of the free trade zone, the large volume of shipping traffic and Panama’s excellent banking system.


Colombian narco-traffickers are perhaps the most adapted and prepared for work in Panama. They thrive on the ability to constantly change routes, members of their network and technology, such as cell phones and other communication devices.


“[Their] base of security is constant change,” German Espejo, an independent security analyst and former member of Colombian research organization Security and Democracy, told ISN Security Watch.


While Panama, perhaps more than any other country in Central America, offers a wide range of options for smugglers, geography is only a fringe benefit. Yet, as Espejo points out, Colombian boats that pass through Panama must stop along the route to refuel or transport the shipment from one boat to another. This practice invariably requires that individuals in other Central American countries become involved in the race to move drugs from Colombia north and money and guns south.


Nicaragua is the next stop for drug shipments moving north along the coast, and it has a plethora of guns left over from a lengthy civil war. Guns make for perfect currency. And like Panama, much of Nicaragua’s Caribbean coast is a semi-autonomous area with little to no government presence. Small towns like Bluefields, Nicaragua have become perfect stop-off points for Colombian traffickers, who bring with them not only the bounty of what local fishermen have begun to call the “white lobster,” but also the devastation of addiction that comes with it.