Panama's reputation for respecting press freedom was severely compromised by the government's attempt to expel journalist Gustavo Gorriti from the country in response to his investigative reporting.

Gorriti, who was forced to flee his native Peru in 1992 after being kidnapped by government security forces, joined the staff of the Panama City daily La Prensa in 1996. Soon after arriving in Panama, he began reporting on the collapse of the Panamanian Agro-Industrial and Commercial Bank (Banaico). In a series of articles, Gorriti documented how Colombian drug traffickers with close ties to the Panamanian government used the bank to launder money. He also found that a major trafficker with close ties to the Cali drug cartel had made a US$51,000 contribution to President Ernesto Pérez Balladares' campaign fund. After initially denying the allegation, the president later acknowledged that it was true.

Angered by Gorriti's reports, the government announced on August 5 that it would not renew his work visa in Panama and ordered him to leave the country by August 28. Under Panama's Ley Mordaza (Gag Law) written in 1978 under the military dictatorship of Omar Torrijos, foreigners are banned from holding senior positions in local media. While Labor Minister Mitchell Doens described the decision to expel Gorriti as an attempt to create employment for Panamanian journalists, CPJ, and other international press freedom and human rights organizations, denounced the measure as a transparent attack on press freedom. The attempt to expel Gorriti inspired widespread press coverage in The New York Times, The Wall Street Journal, The Washington Post, and The Miami Herald, which reported that the decision was taken after Nicolás Gonzales Revilla, a cousin of the president, complained that the journalist's reporting was interfering with his attempt to gain virtual monopoly control over Panamanian television.

Despite threats to use force if Gorriti refused to leave the country voluntarily, the Panamanian government finally backed down on October 14 and agreed to extend Gorriti's work visa for another year.

While the decision was an important victory for press freedom in Panama, the government has not upheld its commitment to reform the country's gag law. Under provision of that law, the Interior Ministry has discretionary authority to impose sanctions on the print media in the form of fines and to close down print media outlets for such infractions as "publishing facts related to the private life ... that can cause moral damage to the person affected." The executive branch exercises discretionary powers to prosecute criminal libel offenses for which it can impose penalties of up to two years in prison.

Moreover, under Panamanian law a defendant can file the same charges with different judges. Tomás Cabal, a free-lance columnist and correspondent for a number of U.S. media outlets, has been sued 34 times by lawyer Hernán Delgado over a 1991 story in which he reproduced statements originally published in U.S. News & World Report that linked Delgado to drug traffickers. While Cabal has prevailed in 31 cases, one judge sentenced him to a 12-month suspended sentence, another fined him U.S. $1,000, and a third sentenced him to 15 months in jail. That conviction is under appeal, but Cabal estimates he has shelled out US$10,000 in legal fees.

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