U.S. FIGHTS UNRELENTING FLOW OF DRUGS FROM PANAMA

WASHINGTON (Reuters) - The United States faces an uphill fight to contain
the flow of drug traffic from Panama -- the Western hemisphere's main
crossroads for narcotics smuggling, money laundering and other transnational
crime, senior U.S. officials told a congressional panel on Friday.

The sprawling Panama Canal container ports, together with the country's
position between North and South America and its long border with Colombia,
make it arguably the region's most strategically located center for drug
trafficking and other organized criminal activities, the officials told a
House of Representatives Government Reform subcommittee.

``Panama is a key area for the transit of cocaine, heroin and precursor
chemicals,'' said William Ledwith, chief of the Drug Enforcement
Administration's international operations.

``Fishing vessels, cargo ships and 'go-fast boats' transit Panamanian waters
and either continue on to other Central American countries or drop off their
cargo in Panama,'' he told the House panel. ``After cocaine arrives in
Panama, traffickers repackage it either for transportation northward along
the Pan American Highway or for sea freight transport.''

Cocaine is also flown into Panama in small planes, or dropped off for pickup
along the Caribbean coast.

Testimony before Congress by DEA as well as State and Defense Department
officials followed the leak on Thursday of an internal U.S. Customs
intelligence report asserting that Panama failed to curb drug traffic into
the United States and 1999 seizures declined 80 percent from the 1998 level.

The report said Panamanian law enforcement was struggling to cope with
sophisticated drug traffickers, that the Colon Free Trade Zone was widely
used to smuggle narcotics in cargo containers and that Panama had been
unable to secure its border with Colombia after the 1999 pullout of U.S.
troops.

The report fueled criticism among conservatives in Congress that the U.S.
pullout from Panama left the region more vulnerable to the activities of
``narco-guerrillas'' -- organized armies financed by billions of dollars in
drug money.

``The war in neighboring Colombia against well-armed narco-terrorist forces,
financed through laundered drug profits through Panama's banks is escalating
and threatens to spread through the region,'' said Rep. Dana Rohrabacher, a
California Republican. ``Panama does not have an army, navy or air force.
The Panamanian government and its national police force have reputations for
corruption and inefficiency.''

U.S. officials acknowledged the difficulties, but said the Panamanian
government of President Mireya Moscoso, which came to power in September
1999, has already shown willingness to cooperate in combating the drug
threat.

``Panama faces complex and daunting problems, not only those emanating from
the Colombian crisis, but also others that are outgrowths of institutional
weaknesses,'' said Rand Beers, assistant secretary of state for
international narcotics and law enforcement. ``At this moment Panama is a
partner who shares our counternarcotics concerns and possesses the will to
proceed with needed reforms, bilateral agreements and operations.''