Panama Warns Venezuela on Debt as Rift Widens

Panama's president told Venezuela on Friday that its decision to break off diplomatic ties should not be an excuse to renege on its massive debt to the Central American nation.

President Ricardo Martinelli's warning came a day after Venezuela ordered the expulsion of Panama's ambassador and three other diplomats in a worsening dispute stemming from protests against the Caracas government.

"Panama is owed amounts of more than $1 billion," the Panamanian leader told reporters.

"I don't want to think that this is an excuse not to pay and that the Venezuelan state is a deadbeat."

At least 20 people have been killed in more than a month of anti-government protests in Venezuela that President Nicolas Maduro blames on a US-backed "fascist" plot.

Maduro lashed out Wednesday at Panama, calling it a "lackey" of the United States for seeking a meeting of the Washington-based Organization of American States on the turmoil, and announcing he was cutting ties with the country.

In an escalating war of words Friday, Martinelli suggested that Maduro's real motive was to get out of paying huge bills owed to the Colon duty-free trade zone and to COPA, the Panamanian airline.

"Venezuela would appear to be bankrupt, although it shouldn't be because it is a very rich country," said Martinelli.

It "has no excuse" to not pay off its debts, he added.

The Venezuelan president retorted by claiming that Martinelli was demanding a 20 percent kickback from Venezuelan merchants whose goods went through the duty-free trade zone.

In a televised address, Maduro accused Martinelli of "using political power to enrich himself."

Martinelli took to Twitter to denounce the "vile attacks and false accusations," and said that Maduro was making the charges as a distraction.

The manager of the Colon Free Zone, Leopoldo Benedetti, said Venezuelan importers have about $2 billion in unpaid bills.

Panamanian Economy Minister Frank De Lima acknowledged that there was "not a clear figure" on the debt, because there are cases in which the Panamanians "overcharge" in order to help Venezuelan businessmen circumvent strict currency controls and get US dollars out of their country.

Venezuelan businesspeople racked up the debt because it is hard for them to obtain US dollars due to the currency controls imposed by the late Hugo Chavez in 2003.

Panama's free-trade zone is the largest in Latin America. In 2012 more than $30 billion worth of business was conducted in the zone.

COPA, which Martinelli said is owed $480 million, issued a statement saying its flights between Panama and Venezuela were operating normally.

Guatemalan President Otto Perez offered his country's services to broker dialogue between Panama and Venezuela.

Meanwhile Panamanian officials said that its ambassador in Caracas, Pedro Pereira, and three other top diplomats kicked out of Venezuela arrived home safely.

Panamanian Deputy Foreign Minister Mayra Arosemena also said that Venezuela was withdrawing the 11 diplomats it has in Panama, even though the Central American country has imposed no sanctions on them.