Background Notes: Panama
PA/PC
Source: Office of Public Communication, Bureau of Public
Affairs
Date: Mar 15, 19923/15/92
Category: Country Data
Region: Central America
Country: Panama
Subject: Military Affairs, Cultural Exchange, Travel,
History, International Organizations
[TEXT]
Official Name: Republic of Panama
PROFILE
Geography
Area: 77,381 sq. km. (29,762 sq. mi.); about the size of South
Carolina.
Cities: Capital--Panama City and San Miguelito (pop. 821,000
preliminary estimate). Other cities--Colon (141,000), David
(103,000). Terrain: Mountainous (highest elevation Cerro Volcan,
3,475 m.--11,468 ft.); coastline 2,857 km. (1,786 mi.). Climate:
Tropical, with average daily rainfall 28 mm. (1 in.) in winter.
People
Nationality: Noun and adjective--Panamanian(s). Population (1991):
2.4 million. Annual growth rate (1991): 2.5%. Ethnic groups:
Mestizo 70%, West Indian 14%, white 10%, Indian 6%. Religions:
Roman Catholic 93%, Protestant (Evangelical) 6%.
Languages: Spanish (official); 14% speak English as their native
tongue; various Indian languages.
Education: Years compulsory--6. Attendance--95% primary school-
age children; 96% secondary. Literacy--87% overall: urban 94%,
rural 62%.
Health (1989): Infant mortality rate--22/1,000. Life expectancy--
72 yrs. Work force (1990, 820,000): Government and community
services--27%. Agriculture--25%. Commerce, restaurants, and
hotels--15%. Manufacturing and mining--10%. Transportation and
communication--6%. Construction--4%. Finance, insurance, and
real estate--4%. Canal area--2%. Electricity, gas, and water--1%.
Other --5%.
Government
Type: Constitutional democracy. Independence: November 3, 1903.
Constitution: October 11, 1972; amended 1978 and 1983 (new
amendments pending).
Branches: Executive--president (chief of state), two vice
presidents. Legislative--Legislative Assembly (unicameral, 67
members). Judicial--Supreme Court.
Subdivisions: Nine provinces and one (Indian) territory.
Political parties: Government coalition includes the
Arnulfista Party, led by President Guillermo Endara, and the
National Liberal Republican Movement (MOLIRENA) of Second Vice
President Billy Ford. The Christian Democratic Party (PDC), led by
First Vice President Ricardo Arias Calderon, was removed from the
coalition in April 1991 and is the main opposition party, holding a
plurality of seats in the Legislative Assembly. The oppositionist
Democratic Revolutionary Party (PRD) was founded by Gen. Omar
Torrijos and constituted the civilian arm of the regime of Gen.
Manuel Noriega. The Civic Crusade spearheaded the struggle against
Noriega and favors more far-reaching institutional reforms than the
governing coalition, although it is not a political party. Smaller
parties along the political spectrum include: Agrarian Labor Party
(PALA), Liberal Party (PL), and the Doctrinaire Panamanista Party.
Suffrage: Universal at 18.
Flag: Four rectangles--lower left, blue; upper right, red;
upper left, white with blue star in center; lower right, white with
red star in center.
Economy
GDP (1991): $5.2 billion.
Annual growth rate (1991): 9.3%.
Per capita GDP (1991): $2,150.
Avg. inflation rate (1991): 1%.
Unemployment (1991): 16% (down from 35% in December 1989).
Natural resources: Timber, seafood, copper, ore.
Sectors: Service (79% of GDP, 1991): Finance, insurance,
canal-related services. Agriculture (11% of GDP, 1991): Products--
bananas and other fruit, corn, sugar, rice, coffee, shrimp, timber,
vegetables, cattle. Land--agricultural 24%, exploitable forest 20%,
other 56%.
Industry (10% of GDP): Types--food and drink processing,
metalworking, petroleum products, chemicals, paper and paper
products, printing, mining, refined sugar, clothing, furniture,
construction.
Trade (excluding Colon Free Zone): Exports (1991 est.)--$385
million: bananas 25%, shrimp 13% (other seafood 4%), sugar 8%,
clothing 5%, coffee 4%, other 41%. Major markets--US, Europe.
Imports (1991 est.)--$1.5 billion: consumer and intermediate goods
65%, capital goods 18%, food 9%, crude oil 7%. Major suppliers--US,
Japan, Europe, Mexico.
Exchange Rate: The exchange rate is fixed at unity with the
US$.
US economic assistance: FY 1990-91, $451 million; FY 1992,
$10 million.
Fiscal year: Same as calendar year.
PEOPLE
The culture, customs, and language of the Panamanians are
predominantly Caribbean Spanish. Ethnically, the majority of the
population is mestizo (mixed Spanish and Indian) or mixed Spanish,
Indian, Chinese, and West Indian. Separate minority races, including
West Indian and indigenous Indian (Cuna, Guaymi, and Embera or
Choco), complete a colorful ethnic tapestry. Spanish is the official
and dominant language; English is a common second language spoken
by the West Indians and by many Panamanian professionals and
businessmen. More than half the population lives in the Panama
City-Colon metropolitan corridor. The rural areas are not heavily
populated, and most of the rural population lives west of the canal.
Panama is rich in folklore and popular traditions. Brightly
colored national dress is worn during local festivals and the pre-
Lenten carnival season, especially for traditional folk dances like
the tanborito. Lively salsa--a mixture of Latin American popular
music, rhythm and blues, jazz, and rock--is a Panamanian specialty.
Indian influences dominate handicrafts such as the famous Cuna
textile molas which generally depict native wildlife and themes.
Artist Roberto Lewis' Presidential Palace murals and his
restoration work and ceiling in the National Theater are well known
and admired.
Education
The University of Panama and its extensions throughout the country
have a total enrollment of about 40,000 students, the majority of
whom attend evening classes. Some 9,500 students, primarily in
engineering and allied fields, attend the Technical University.
About 4,500 students are enrolled in the University of Santa Maria
la Antigua, a private Roman Catholic institution. A large number of
the well-to-do study abroad.
Primary education is compulsory, and there are 350,000
students currently enrolled in grades one through six. Enrollment in
secondary grades is 200,000. Literacy in Panama is measured at
87%.
Media
Panama has six daily newspapers and tabloids: La Prensa, Panama
America, El Siglo, Critica Libre, El Diario Independiente, and La
Estrella de Panama.
Three commercial Spanish-language television stations
broadcast daily, and US television programs are available by
satellite or subscription in Panama City. The Voice of America
international news is carried daily on most of the major radio
stations.
The US Southern Command, headquartered in Panama, operates
an AM/FM radio transmitter and a television station for the benefit
of the US military and their dependents. These broadcasts also have
significant audiences among Panamanians in Panama City and Colon.
HISTORY
Panama's history has been shaped by the evolution of the world
economy and the ambitions of great powers. Rodrigo de Bastidas,
sailing westward from Venezuela in 1501 in search of gold, was the
first European to explore the isthmus of Panama. A year later,
Christopher Columbus visited the isthmus and established a short-
lived settlement in the Darien. Vasco Nunez de Balboa's tortuous
trek from the Atlantic to the Pacific in 1513 demonstrated that the
isthmus was indeed the path between the seas, and Panama quickly
became the crossroads and marketplace of Spain's empire in the
New World. Gold and silver were brought by ship from South
America, hauled across the isthmus, and loaded aboard ships for
Spain. The route became known as the Camino Real, or Royal Road.
Panama was part of the Spanish empire for 300 years (1538-
1821), and the principal themes of Panamanian history are rooted in
that experience. From the outset, Panamanian identity was based on
a sense of "geographic destiny," and Panamanian fortunes fluctuated
with the geopolitical importance of the isthmus. The colonial
experience also marked Panamanian nationalism with its strongly
anti-imperialist flavor. In addition, one of the principal legacies of
Spanish colonialism was a racially complex and highly stratified
society, the source of internal conflicts that ran counter to the
unifying force of Panamanian nationalism.
A transisthmian canal had been a dream since the beginning
of Spanish colonization. From 1880 to 1900, a French company
under Ferdinand de Lesseps attempted unsuccessfully to construct a
sea-level canal on the site of the present Panama Canal. In
November 1903, after Colombia rejected a treaty permitting the
United States to build a canal, Panama proclaimed its independence
from Colombia and concluded the Hay/Bunau-Varilla Treaty with the
United States. The treaty authorized the United States to build a
canal through a zone 10 miles wide and to administer, fortify, and
defend it "in perpetuity." In 1914, the United States completed the
existing 83-kilometer (52-mile) lock canal. The early 1960s saw
the beginning of sustained pressure in Panama for the renegotiation
of this treaty. (See discussion of United States-Panama relations
and the 1977 Panama Canal Treaties below.)
From 1903 until 1968, Panama was a constitutional
democracy dominated by a commercially oriented oligarchy. During
the 1950s, the Panamanian military began to challenge the
oligarchy's political hegemony. In October 1968, Dr. Arnulfo Arias
Madrid, twice elected President and twice ousted by the Panamanian
military, was again ousted as President by the National Guard after
only 10 days in office. A military junta governed, and the
Commander of the National Guard, Brig. Gen. Omar Torrijos, emerged
as the principal power in Panamanian political life. Torrijos was a
charismatic leader whose populist domestic programs and
nationalist foreign policy appealed to the rural and urban
constituencies largely ignored by the oligarchy.
Torrijos' death in a 1981 plane crash altered the tone but not
the direction of Panama's political evolution. Despite 1983
constitutional amendments which appeared to proscribe a political
role for the military, the Panama Defense Forces (PDF), continued to
dominate Panamanian political life behind a facade of civilian
government. The presidential election of 1984 resulted in the
election of the pro-military coalition candidate, amid widespread
voting irregularities and charges of fraud. Pro-government parties
also won a majority of Legislative Assembly seats in races tainted
by charges of corruption. By this time, Gen. Manuel Noriega was
firmly in control of both the PDF and the civilian government.
The rivalry between civilian elites and the Panamanian
military, which had been a recurring theme in Panamanian political
life since the 1950s, now developed into the gravest crisis in
Panama's history. Traditional elites joined middle-class elements
in organized opposition to the PDF's economic and political power.
Prompted by government restrictions on media and civil liberties
and the 1985 murder of prominent opposition leader Dr. Hugo
Spadafora, more than 100 business, civic, and religious groups
formed a loose coalition that organized widespread anti-
government demonstrations in the summer of 1987.
Panama's developing domestic crisis was paralleled by rising
tensions between the Panamanian Government and the United
States, which were caused in part by the regime's crackdown on
civil liberties and its harassment of US citizens. The United States
froze economic and military assistance to Panama in the summer of
1987 in response to the political crisis and an attack on the US
Embassy. The Government of Panama countered by ousting the US
Agency for International Development in December 1987. On
December 23, the US Congress cut off all assistance to Panama. The
indictment of General Noriega in US courts in February 1988 on
drug-trafficking charges sharpened the political crisis in Panama
and tensions between Panama and the United States. In early March,
President Eric Arturo Delvalle's attempt to remove Noriega as PDF
commander led to a government takeover by the PDF and domination
of the Legislative Assembly by Noriega forces.
In April 1988, President Reagan invoked the International
Economic Powers Act, freezing Panamanian Government assets in
US banks and prohibiting a variety of payments by American
agencies, firms, and individuals to the Noriega regime. Efforts to
negotiate a resolution of the crisis failed in May 1988, when
Noriega refused to abide by the terms of an agreement negotiated
with his representatives for him to relinquish his authority.
Despite the increasingly repressive character of the regime,
the anti-Noriega opposition prepared for presidential and
legislative elections in May 1989. The May 1989 election was
widely understood by Panamanians to be a referendum on Noriega
versus democracy. Panamanian voters turned out in overwhelming
numbers and voted by a margin of more than three-to-one for the
anti-Noriega candidates. The size of the opposition victory and the
presence of international observers thwarted regime efforts to
control the outcome of the vote. The regime annulled the election
and embarked on a new round of repression.
By the fall of 1989, the Noriega regime was clinging to power
through fear and force. An unsuccessful PDF coup attempt in
October produced bloody reprisals. Deserted by all but a small
number of cronies, distrustful of a shaken and demoralized PDF,
Noriega began increasingly to rely on irregular, paramilitary units
called Dignity Battalions. The climax of the crisis came in
December 1989, with a regime declaration of war against the
United States and attacks on US military personnel. On December
20, President Bush ordered the US military into Panama to protect
US lives and property, to fulfill US treaty responsibilities to
operate and defend the canal, to assist the Panamanian people in
restoring democracy, and to bring Noriega to justice.
The US troops involved in Operation Just Cause achieved their
primary objectives quickly, and the withdrawal of troops sent into
Panama on December 20 began on December 27. Noriega initially
sought refuge in the Papal Nunciature, but he eventually surrendered
voluntarily to US authorities.
Panamanians moved quickly to begin rebuilding a civilian,
constitutional government. On December 27, Panama's Electoral
Tribunal--whose members were appointed by Noriega--invalidated
the Noriega regime's annulment of the May 1989 election and
confirmed the victory of opposition candidates Guillermo Endara
(President), Ricardo Arias Calderon (First Vice President), and
Guillermo Ford (Second Vice President). As its priority objectives,
the Endara Government identified economic recovery and the
transformation of the Panamanian military into an apolitical police
force under civilian control. The Electoral Tribunal also certified
winners in 58 of the 67 Legislative Assembly races held in May
1989, and the Legislative Assembly convened for its first session
on March 1, 1990. In January 1991, free and fair elections were
held for the nine legislative seats whose winners could not be
certified by the Electoral Tribunal.
GOVERNMENT AND POLITICAL CONDITIONS
Panama's constitution separates the government into executive,
legislative, and judicial branches. The president is elected to a 5-
year, non-renewable term in a direct popular election. The
legislative branch consists of a 67-member Legislative Assembly.
The judicial branch is organized under a nine-member Supreme
Court and includes all tribunals and municipal courts. An
autonomous Electoral Tribunal supervises voter registration and
political party and election law activities. Everyone over the age of
18 is required to vote, although those who fail to do so are not
penalized.
The Legislative Assembly is considering a number of proposed
constitutional amendments. While most of the proposed
amendments are of a relatively minor nature, there are a number
which would establish a permanent legal basis for the
demilitarization reforms carried out by the Endara Government in
1990 and 1991. They would prohibit the existence of an army,
divide the public security forces into separate branches, and
prohibit them from intervening in Panama's political life. Following
approval by the Legislative Assembly, these constitutional changes
will be submitted to popular ratification in a plebiscite.
Panama has a rather fragmented multi-party system; 16
parties took part in the 1984 elections, and more than 12
participated in the 1989 elections. Each political party must have
at least 30,000 members in order to acquire full legal status. The
current government was elected under the aegis of the Civil
Democratic Opposition Alliance (ADOC), which was a coalition of
the Authentic Liberal Party (PLA), the Christian Democratic Party
(PDC), and the National Liberal Republican Movement (MOLIRENA).
President Endara ran as the candidate of the Authentic Liberal Party
because his own political party--the Authentic Panamanista Party-
-had been taken away by the regime's Electoral Tribunal and
awarded to a Noriega supporter. In 1990, Endara reorganized his
followers as the Arnulfista Party which is now part of the
governing coalition.
In April 1991, after a series of disagreements over policy and
patronage issues, President Endara removed Arias Calderon from his
cabinet position as Minister of Government and Justice, prompting
the other members of the PDC to resign from government. Arias
Calderon retains his elected position as First Vice President. The
PDC, which holds a plurality in the legislature, has stated that it
will act as a responsible opposition party, working in cooperation
with the Endara Government on issues to benefit the country.
The Democratic Revolutionary Party (PRD) leads the COLINA
coalition of labor, revolutionary, and communist parties, and is
made up primarily of former Noriega supporters; COLINA holds the
"swing vote" in the national legislature with 12 seats. The
Tendencia faction of the PRD is a strong-arm battalion with ties to
Cuba and Libya. Tendencia's influence is declining because of
internal frictions and public opposition.
Principal Government Officials
President--Guillermo ENDARA
First Vice President--Ricardo ARIAS Calderon
Second Vice President and Minister of Planning and Finance--
Guillermo "Billy" FORD
Minister of Foreign Affairs--Julio LINARES
Ambassador to the US--Jaime "Jimmy" FORD
Ambassador to the UN--Dr. Carlos AROSEMENA
Ambassador to the Organization of American States--Lawrence
CHEWNING Fabrega
Panama maintains an embassy in the United States at 2862 McGill
Terrace NW, Washington, DC 20008 (tel. 202-483-1407).
ECONOMY
Perhaps the greatest challenge for Panama is economic recovery and
expansion. Panama's economy was in shambles at the outset of
1990, after years of mismanagement, 2 years of US economic
sanctions, and the lingering effects of increased debt servicing
requirements. Total external debt stood at more than $4 billion and
total external arrears reached $2.4 billion, including $540 million
in arrears to international financial institutions. Panama also had
high unemployment and a deteriorating national infrastructure.
With the return of democratically elected civilian
government, the United States lifted all sanctions and is providing
more than $450 million in grant aid and more than $500 million in
credits and guarantees in FY 1990-91 to assist in Panama's
economic recovery. The key element for Panama's economic
recovery, however, is the return of long-term investor confidence
brought about by political stability and economic liberalization.
The traditional basis of Panama's economy has been services
in international shipping, commerce, and finance. Reflecting the
canal's role as a global transit point, the canal corridor is
significantly more developed than the rest of the country, and
modern service and commercial centers have grown up around the
terminus cities of Colon and Panama City.
Rapid economic growth in the 1960s and early 1970s was due
largely to an expansive fiscal policy fueled by extensive foreign
borrowing. Annual real growth of almost 5% continued until 1983.
This expansion ended, however, with the onset of higher energy
prices (Panama imports virtually all of its oil), and the higher
world interest rates which these energy price increases caused.
Under pressure from its external creditors, Panama attempted to
encourage exports, reduce the public sector's deficit and
involvement in the economy, and reschedule official and commercial
debt. These efforts were half-hearted and finally stalled in the
mid-1980s on politically painful issues such as social security and
labor code reforms. Moderate growth resumed from 1985 until the
1987 mid-year political crisis, when the economy contracted
sharply. From this point through 1989, real GDP declined by more
than 17%.
The 1987-89 recession had its origins in Panama's deepening
political crisis which led to reduced foreign lending and massive
capital flight, resulting in a liquidity squeeze. Immediately prior to
the 1987 political crisis, Panama again began to have problems
with its international debt and rescheduled certain payments.
Failure to service external arrears resulted in a cutoff of new
credit and further economic contraction. From mid-1987 to
December 1989, total banking center assets declined drastically,
and many banks left Panama. Bank runs closed financial
institutions on March 4 and 18, 1988, and the Banking Commission
responded by placing restrictions on depositors' access to accounts
(all restrictions were lifted in early 1990).
Capital flight exacerbated other problems, such as
unemployment. Lack of capital led to declining investment and a
simultaneously decreasing demand for workers. The construction
industry and the financial sector, which had been Panama's third-
largest employer after the Panamanian and US Governments, were
hit especially hard.
The economic recovery of 1990-91 was broad-based. Capital
returned to the banking system. Exports and construction rose. The
government deficit and unemployment declined. GDP was estimated
to have grown by at least 3.4% in real terms in 1990 and by 9.3% in
1991, and inflation remained very low. Government policies aimed
at encouraging foreign private investment for export industries and
at improving market efficiencies through the reduction or
elimination of tariffs, price controls, and quotas were proposed.
Although the initial recovery has been encouraging, sustained
growth depends on Panama's ability to resolve some of its long-
standing problems, which include high barriers to trade, external
debt, persistently high unemployment, and dependence on US
Government and canal revenues.
Structural economic reforms are the key to lasting
Panamanian growth and development. In early 1992, the Endara
Government concluded negotiations with the international financial
institutions to clear Panama's arrears with these institutions and
to restore access to new financing. These negotiations included
Panamanian agreement to implement various structural reforms,
such as trade liberalization, tax and social security reforms,
privatization, poverty reduction, and increased public investment.
These reforms will also help to reduce unemployment. By
December 1989, unemployment had reached over 35%. US economic
assistance during 1990-91 helped to create jobs by funding short-
term employment projects in the public sector and by encouraging
private sector investment. By 1992, the unemployment rate had
fallen to about 16%, close to the "normal" rate of the 1980s. The
further expansion of employment opportunities will require new
private investment, which will in turn require public sector
investment in infrastructure and human resources and policies
which promote trade liberalization, market efficiencies, and
private sector confidence.
To an extent, Panama depends on US Government expenditures
and attendant economic activity. The draw-down of US military and
civilian forces during the 1990s, the final decade of the canal
treaty, will produce increasing economic pressures in Panama
unless the country is able to create additional economic activity in
the reverted properties.
Although the canal produces millions of dollars annually for
Panama, it would be inappropriate to use canal revenues to sustain
government spending in other non-canal related areas at the end of
the treaty period. Canal transits and revenues have increased since
1985, but expanded use of alternatives to the canal, such as cargo
transport across North America and the trans-isthmian pipeline,
requires that Panama keep the canal economically competitive if
revenue is to be sustained or increased. This can only occur with
continued maintenance and investment financed by canal revenues.
The Panama Canal Commission, which operates the canal through
1999, has approved a $200-million project to widen the canal's
Gaillard Cut over the next 20 years.
Many other factors point toward economic expansion over the
next few years. Panama has long been a major international
financial center, fully exploiting its central location and good
communication and transportation facilities. A Spanish-speaking
environment combined with widespread English proficiency, a well-
educated labor force, relative labor stability, and a sophisticated
banking system make Panama attractive to outside investment.
Additionally, one of Panama's greatest comparative advantages is
that it is a dollar-based economy. The exchange rate is fixed at
unity with the dollar; the balboa is issued only in coins, and the US
dollar circulates freely as legal tender. Panama maintains no
foreign exchange controls.
The Colon Free Zone (CFZ) is the world's second-largest free
trade zone after Hong Kong. In 1990, CFZ activity comprised over
5% of Panama's GDP. The free zone is set to help return Panama to
the center of the Latin American economy.
The most important action which the Government of Panama
has taken to improve the economy, however, is to encourage
political stability by re-establishing and strengthening democratic
Panamanian institutions. Political stability is crucial in order to
attract new private investment and will, along with comprehensive,
structural economic reform, go farthest toward creating long-term
economic growth for Panama.
DEFENSE
The Panamanian Government has converted the former Panama
Defense Forces into a civilian police organization called the Public
Forces, which is subordinate to civilian officials and is responsive
to human rights concerns. Personnel strength has been cut from
16,000 to about 13,000. Virtually all former PDF senior officers
were removed from the Public Forces, and personnel discovered to
have been involved in corruption or other criminal activity are being
removed. The old, centralized command structure has been broken
up into four independent units: the Panamanian National Police, the
National Maritime Service (coast guard), the National Air Service
(official transportation), and the Institutional Protective Service
(VIP security). The Public Forces are fully accountable to civilian
authority under the Minister of Government and Justice.
Investigative and other units that have been separated from the
Public Forces, such as the Technical Judicial Police, are also
directly subordinate to civilian authorities. The Public Forces
budget--in contrast to that of the former PDF--is on public record
and under control of the executive, decreasing from $97 million,
plus at least $45 million in off-budget spending, under Noriega in
1989 to $76 million in 1990.
The United States, with congressional approval, is providing
appropriate assistance to establish a truly professional law
enforcement institution, dedicated to delivering adequate
protection to the citizens of Panama while fully respecting human
rights, democracy, and the law. The United States is providing
police skills training and technical assistance in civilian law
enforcement development through a $13.2-million program managed
by the US Department of Justice's International Criminal
Investigative Training Assistance Program (ICITAP). In addition, $8
million is being spent to assist the Panamanian Government to
improve the administration of justice.
INTERNATIONAL RELATIONS
The Government of Panama is nonaligned. Panama is a member of
the UN General Assembly and most major UN agencies, and it has
served three terms as an elected member of the UN Security
Council. It maintains membership in several international financial
institutions, including the World Bank, the Inter-American
Development Bank, and the International Monetary Fund. Panama is a
member of the Organization of American States and was a founding
member of the now-defunct Contadora group, which during the mid-
1980s sought peaceful settlement of Central American disputes. It
is one of the founding members of the Union of Banana Exporting
Countries and also belongs to the Inter-American Tropical Tuna
Commission.
Although not yet a member of the Central America Common
Market, Panama is affiliated with several other Central American
regional organizations and, under the Endara Government, has
participated actively in Central American regional meetings.
Panama has not participated in the Latin American Economic
System, known informally both as the Group of Eight and the Rio
Group, since it was suspended in early 1988 due to its internal
political situation under Noriega. Panama is not a member of the
General Agreement on Tariffs and Trade (GATT) but has established
a commission to negotiate accession to the GATT.
US-PANAMANIAN RELATIONS
The United States has traditionally maintained friendly relations
with the people of Panama and, with the exception of the later
Noriega years, has cooperated with the Panamanian Government in
promoting economic, political, and social development through US
and international agencies. Cultural ties between the two countries
are strong, and many Panamanians come to the United States for
higher education and advanced training.
The presence of US armed forces in Panama has generated
some friction, however, and Panama's relationship with the United
States has been a recurring political issue throughout Panamanian
history. Severe strains were placed on the relationship by the
Noriega regime during the late 1980s, but the renewal of democracy
and stability in Panama has shown that the bilateral relationship
remains fundamentally strong.
In addition, the Panama Canal Treaties have provided the
foundation for a new partnership. The United States and Panama
remain committed to the smooth implementation of these treaties,
including the departure of US armed forces, the reversion of US
military bases, and the turnover of the canal to Panamanian control
at noon on December 31, 1999.
Panama is also committed to the fight against illegal
narcotics. The country's proximity to major cocaine producing
nations and its role as a commercial and financial crossroads make
it a country of special importance in this regard. Although
Panamanian anti-narcotics institutions lack trained personnel and
blueprints for action, concerted efforts against the drug problem
are being made by the Endara Administration in cooperation with
the United States. Several bilateral anti-narcotics agreements
have been signed, the United States is providing needed resources
and training, and Public Forces joint operations with the Drug
Enforcement Agency and other US agencies have resulted in
unprecedented seizures of cocaine and other narcotics. The
conversion of the PDF into the professional Public Forces has
further demonstrated the government's resolve to strengthen
democracy and to continue the fight against drug-trafficking and
money-laundering in Panama.
Principal US Officials
US Embassy
Ambassador--Deane R. Hinton
Deputy Chief of Mission--David Beall
Counselor for Political Affairs--Steven Wesche
Counselor for Economic Affairs--Maureen Quinn
Counselor for Public Affairs--Peter DeShazo
Counselor for Administrative Affairs--William Francisco
Consul General--Robert Raymer
Panama Canal Commission
Administrator--Gilberto Guardia
Deputy Administrator--Raymond Laverty
US Southern Command
Commander in Chief--Gen. George Joulwan
The US Embassy in Panama is located at Avenida Balboa y
Calle 38, Panama City (tel. 27-1777). Personal and official mail for
the Embassy and members of the mission may be sent to: US
Embassy Panama, Box E, APO Miami, 34002.
THE PANAMA CANAL TREATIES
The 1977 Panama Canal Treaties entered into force on October 1,
1979. They replaced the 1903 Hay/Bunau-Varilla Treaty between
the United States and Panama and all other United States-Panama
agreements concerning the Panama Canal which were in force on
that date. The treaties comprise:
-- A basic treaty governing the operation and defense of the
canal from October 1, 1979, to December 31, 1999 (Panama Canal
Treaty); and
-- A treaty guaranteeing the permanent neutrality of the
canal (Treaty on the Permanent Neutrality and Operation of the
Panama Canal).
The details of the arrangements for US operation and defense
of the canal under the Panama Canal Treaty are spelled out in
separate implementing agreements.
Purpose of the Treaties
In negotiating the Panama Canal Treaties, the United States acted
to protect a fundamental national interest in long-term access to a
secure and efficient canal. Panama's cooperation is fundamental to
this objective. By meeting Panamanian aspirations for eventual
control of the canal, the United States sought a new relationship
with Panama based on friendship and mutual respect. The treaties
make Panama a partner in the continued safe and efficient operation
of the canal. In serving the best interests of both nations, the
treaties serve the interests of all users of the canal.
History of the Negotiations
Our bilateral relationship with Panama has centered on the Panama
Canal since the beginning of the century. Under the 1903 treaty, the
United States acquired unilateral control of the canal and the
Panama Canal Zone--a 553-square-mile area in which the United
States exercised the rights, power, and authority of a sovereign
state. Panamanians deeply resented the 1903 treaty and the
unequal relationship with the United States which it embodied. In
January 1964, Panamanian dissatisfaction with this relationship
boiled over into riots which resulted in the deaths of four US
Marines and more than 20 Panamanians. A 3-month suspension of
diplomatic relations followed.
The growing bilateral tension in the 1960s gave weight to the
views of those who believed that a new canal treaty was needed to
replace the 1903 treaty and to establish a new relationship with
Panama. In June 1967, United States and Panamanian negotiators
completed draft treaties dealing with the existing canal, a possible
sea-level canal through Panama, and defense matters. Neither
country ratified the treaties, however, and they were publicly
rejected by the Torrijos Government in 1970.
Treaty negotiations resumed in June 1971. On September 7,
1977, President Carter and General Torrijos signed the Panama
Canal Treaties at the headquarters of the Organization of American
States in Washington, DC. The Panamanian people approved the new
treaties in a plebiscite held on October 23, 1977. The US Senate
ratified the neutrality treaty on March 16, 1978, and the Panama
Canal Treaty on April 18, 1978. The treaties entered into force on
October 1, 1979. The protocol to the neutrality treaty is open to
accession by all nations, and more than 35 have so far subscribed.
Basic Provisions of the Treaties
The United States has primary responsibility for the operation and
defense of the canal until December 31, 1999. US rights to station
military forces and maintain military bases also terminate with the
canal treaty. After that date, the United States and Panama will
maintain a regime of neutrality for the canal, including
nondiscriminatory access and tolls for merchant and naval vessels
of all nations.
US warships will be entitled to expeditious passage of the
canal at all times, however, and the United States will continue to
have the right to ensure that the canal remains open and secure.
The United States operates the canal through the Panama
Canal Commission (PCC), which is a US Government agency
supervised by a board of directors consisting of five American and
four Panamanian members appointed by the President; the
Panamanian members are initially nominated by their government.
Until 1990, the canal administrator was an American and the deputy
administrator was Panamanian; these nationalities reversed for the
final decade of the treaty on September 20, 1990, when Gilberto
Guardia was installed as the first Panamanian administrator.
Pursuant to treaty obligations, the PCC is training Panamanians in
all areas of canal operations prior to the transfer of the canal in
1999. Panamanian citizens currently comprise over 87% of the PCC
workforce.
During the life of the treaty, Panama receives the following
payments from Canal revenues:
-- A fixed annual payment of $10 million;
-- An annual payment of $10 million, adjustable for inflation,
for public services provided to canal operating areas by the
Panamanian Government (the Canal Zone and its government ceased
to exist when the treaties entered into force, and Panama assumed
jurisdiction over canal zone territories and functions);
-- An annual percentage of toll revenues assessed at $0.35
(since October 1, 1990) per Panama Canal net ton transiting the
canal, worth $60.2 million in 1990;
-- A payment of up to $10 million in the event that revenues
exceed PCC expenditures in a given year.
Under US implementing legislation (the Panama Canal Act),
the PCC must be self-sustaining; its costs may not exceed its
revenues, nor may US taxpayer funds be used for canal operations or
payments to Panama.
In a note separate from the treaties, the United States agreed
to expedite economic and military assistance programs for Panama.
From the time the treaties entered into force until the political
crisis with the Noriega regime, the United States provided $200
million in development assistance, economic support funds, and
food and military aid. Assistance was suspended in 1987 in
response to political developments in Panama but was reinstated in
1990 with a 2-year package of more than $450 million in direct
economic assistance and more than $500 million in credits and
guarantees.
Panama and the United States are committed by Article XII of
the canal treaty to study jointly the feasibility of a sea-level canal
in Panama and to negotiate terms for its construction if it is agreed
that such a canal is desirable. In addition, the United States retains
the right throughout the term of the treaty to build a third lane of
locks to increase the capacity of the existing canal. In 1985, a
tripartite international organization, the Canal Alternatives Study
Commission, was established by the United States, Panama, and
Japan to examine the feasibility of modifications and alternatives
to the existing system. Completion of this study in 1993 will meet
our treaty obligation under Article XII.
Published by the United States Department of State -- Bureau of
Public Affairs -- Office of Public Communication -- Washington,
DC, March 1992 -- Editor: Anita Stockman.
Department of State Publication 8022 Background Notes Series --
This material is in the public domain and may be reprinted without
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