Counterfeiting, contraband, cocaine: How Panama’s commercial hub lost its luster Panama

IIn the free trade zone of Colon, near the Caribbean entrance to the Panama Canal, old Perspex and glass buildings are adorned with electronics, perfume and textile brands. Behind the weaving of vast warehouses and dozens of harbor cranes, while on the street, shop owners unload goods from shipping containers.

The world’s second free trade area, established in 1948, was intended as a wholesale redistribution center for Latin America and the Caribbean, but has become a global center for counterfeiting, contraband and cocaine.

In November, Europol arrested 49 members of a supercartel centered in Dubai that accounted for about a third of Europe’s cocaine supply. One of those arrested was Anthony Martínez Meza, the son of one of the directors of the Cologne Free Trade Zone, and suspected of organizing shipments from Cologne.

“Cologne is one of the world’s major logistics centers, but criminal organizations use this infrastructure to transport drugs around the world,” said Michael Chen, president of the Cologne Chamber of Commerce. “It seems like every day it’s getting worse … Organized crime and gangs are finding more creative ways to get through what’s left of my city.”

Across from Chen’s office, construction is nearing completion on a cruise port and duty-free mall that he hopes will bring more tourist dollars to the city. Around the corner, however, the city’s morgue is regularly emptied of corpses, many bearing signs of torture, as rival gangs seek control of the drug trade.

“The goal of the gangs is to control the points where containers can be contaminated with drugs in the free zone and ports,” said Aljo Campos, regional director of Crime Stoppers in Latin America.

Sailors assigned to the USS Billings load stores as the ship arrives in Colon, Panama. For a short stop for fuel and supplies in March 2022. Photo: NB/IA/Alamy

The cocaine arrives either directly in containers from Buenaventura, on Colombia’s Pacific coast, or via land routes to the free trade zone, before being hidden in other containers destined for Europe and beyond. At the ports, unions are shared by gangs and turn a blind eye as workers store packages and replace seals. Only 2% of shipments pass through container scanners designed to detect contraband. Meanwhile, underwater divers weld “parasites”—long metal containers filled with cocaine—to the hulls of cargo ships. According to Panamanian officials, most of the shipments intercepted by police in 2022 and 2023 were destined for Europe.

With the help of the United States, the Panamanian authorities have won some small victories against the traffickers. In 2021, they seized 126 tons of drugs, mostly cocaine, an increase of 82 tons from the previous year. The stings have busted several Colon cocaine kingpins and discovered $10 million in bills behind the wooden walls of a Colon house. In December, Panamanian police announced that they had arrested 27 members of the Clan de Gulfo, one of Colombia’s largest drug-trafficking organizations, accusing them of recruiting agents and moles in the security forces, the judiciary and the civil service.

But the resulting power vacuum has only led to more violence.

“There is a huge territorial dispute right now,” Campos said. “Police action killed some of the gangs and new leaders emerged who wanted to fit in, and that’s when the killings started.”

Collapsing security has accelerated the decline of what was once one of the Caribbean’s great cities.

We had bars, restaurants and movie houses on every corner. Colon never slept.” In the 1950s, he was among the crowds who lined the streets to witness the meeting between Queen Elizabeth II and President Dwight Eisenhower.

“But everything that blows, eventually blows,” he says.

An undated photo released by Spain's Civil Guard shows an operation in cooperation with Europol that dismantled a European cocaine supercartel that was run from Dubai.  One of the arrested was the son of the director of the Kowloon Free Trade Zone.
An undated photo released by Spain’s Civil Guard shows an operation in cooperation with Europol that dismantled a European cocaine supercartel that was run from Dubai. One of the arrested was the son of the director of the Kowloon Free Trade Zone. Photo: Guardia Civil Handout/EPA

In 1964, riots against US control of the Canal Zone devastated the city. The Americans left in 1979, but returned a decade later, when President George HW Bush ordered an invasion of Panama to oust Manuel Noriega.

Garbage is piled up in the corners of the streets and in the shell of the city’s Art Deco buildings. From the courtyard of the once grand but now abandoned Washington Hotel, where Albert Einstein, Babe Ruth and David Lloyd George once laid their heads, the rusting hull of a cargo ship resting on the sand blocks the view of the Caribbean Sea. In the 2008 James Bond film Quantum of Solace, Colón had the dubious honor of stopping in the Haitian capital, Port-au-Prince.

Successive Panamanian governments have promised to lift Colon out of decline, but have failed to make significant progress in reducing crime, providing basic services and improving the quality of life for its citizens. Chen has proposed the creation of the Kowloon Security Committee, an alliance between the private sector, civil society and the government to fight crime. “If the government has a monopoly on security, corruption permeates it,” he says.

But Chen is competing with bigger forces. Major new investments from China, the United States and Taiwan in port facilities, energy projects and mines are pouring into Kowloon. This brings opportunities for jobs and development as well as crime and corruption in a city that continues to be blessed and cursed by its strategic geography.

“Despite the fact that the old town is in decline, Colon is a valuable piece of real estate,” says Donadio, who has seen many booms and busts before. This city will never be the same again, but it is still the link between two continents and two oceans. And right now, I feel like there’s something in the air. Colon is going to explode again.”

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