U.S. Department of State 
Background Notes: Panama, January 1995 
Bureau of Public Affairs 
 
 
January 1995  

Official Name: Republic of Panama 
 
 
PROFILE 
 
Geography 
 
Area: 77,381 sq. km. (29,762 sq. mi.); slightly smaller than South 
Carolina.  Panama occupies the southeastern end of the isthmus forming 
the land bridge between North and South America.   
Cities:  Capital--Panama City and San Miguelito, a large, poor section 
of Panama City (827,828).  Other cities--Colon (140,908), David 
(102,678).   
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 (1994 est.):  2.54 million.   
Annual growth rate:  2%.   
Ethnic groups:  Mestizo (mixed Indian and European ancestry) 70%, West 
Indian 14%, Caucasian 10%, Indian 6%.   
Religions:  Roman Catholic 85%, Protestant (Evangelical) 15%.   
Languages:  Spanish (official); 14% speak English as their native 
tongue; various Indian languages.   
Education:  Years compulsory--6.  Attendance--95% for primary school-age 
children, 96% for secondary.  Literacy--87% overall:  urban 94%, rural 
62%   
Health:  Infant mortality rate--17/1,000.  Life expectancy--74 yrs.  
Work force (921,000):  Government and community services--32%.  
Agriculture--27%.  Commerce, restaurants, and hotels--16%.  
Manufacturing and mining--9%.  Transportation and communication--6%.  
Construction--3%.  Finance, insurance, and real estate--4%.   
 
Government 
 
Type:  Constitutional democracy.  
Independence:  November 3, 1903.  Constitution:  October 11, 1972; 
amended 1983. 
Branches:  Executive--president (chief of state), two vice presidents.  
Legislative--Legislative Assembly (unicameral, 72 members).  Judicial--
Supreme Court. 
Subdivisions:  Nine provinces and one (Indian) territory. 
Political parties:  President Perez Balladares belongs to the Democratic 
Revolutionary Party (PRD), which is allied with the Labor Party (PALA) 
and the Liberal Republic Party (PLR or LIBRE).  This alliance, known as 
the Pueblo Unido ("United People") Party, holds a slim majority in the 
new Legislative Assembly.  Other major political parties include the 
Arnulfista Party (PA), to which former President Endara belongs; the 
Christian Democratic Party (PDC); the Papa Egoro Party; and the National 
Liberal Republic Movement (MOLIRENA). 
Suffrage:  Universal and compulsory at 18. 
 
Economy 
 
Real GDP (1993):  $6.6 billion.   
Annual growth rate (1993):  6%.   
Per capita GDP (1993):  $2,500. 
Natural resources:  Timber, seafood, copper, ore.   
Services (72% of GDP):  Finance, insurance, canal-related services.   
Agriculture (11% of GDP, 1993):  Product--bananas and other fruit, corn, 
sugar, rice, coffee, shrimp, timber, vegetables, cattle.  Land--
agricultural 24%, exploitable forest 20%, other 56%.   
Industry (19% of GDP):  Types--food and drink processing, metalworking, 
petroleum products, chemicals, paper and paper products, printing, 
mining, refined sugar, clothing, furniture, construction.   
Trade (1993):  Exports--$508 million: bananas 43%, shrimp 11%; sugar 4%; 
coffee 2%, clothing 5%.  Imports--$2.2 billion:  capital goods 21%, 
crude oil 11%, foodstuffs 9%, other consumer and intermediate goods 57%. 
Exchange rate:  Fixed at unity with the U.S. dollar.   
 
 
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.  Spanish is the official and dominant language; English 
is a common second language spoken by the West Indians and by many in 
business and the professions.  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 Kuna 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. 
 
The University of Panama and its extensions throughout the country have 
a total enrollment of more than 51,000 students, the majority of whom 
attend evening classes.  More than 11,000 students, primarily in 
engineering and allied fields, attend the Technological University.  
About 6,000 students are enrolled in the University of Santa Maria La 
Antigua, a private Catholic institution. 
 
The first six years of primary education are compulsory, and there are 
357,402 students currently enrolled in grades one through six.  The 
total enrollment in the six secondary grades is 206,509.  Nearly 90% of 
Panamanians are literate.  
 
 
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. 
 
Building the Canal 
 
A trans-isthmian 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 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.) 
 
Military Coups and Coalitions 
 
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 
government was established, 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 1981 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 force (PDF), as they were then known, 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.  In the summer of 1987, prompted by 
government restrictions on media and civil liberties, more than 100 
business, civic, and religious groups formed a loose coalition that 
organized widespread anti-government demonstrations. 
 
Panama's developing domestic crisis was paralleled by rising tensions 
between the Panamanian Government and the United States.  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 U.S. 
embassy.  The Government of Panama countered by ousting the U.S. Agency 
for International Development in December 1987; before the end of the 
year, the U.S. Congress cut off all assistance to Panama.  General 
Noriega's February 1988 indictment in U.S. courts on drug-trafficking 
charges sharpened tensions, as did a government takeover by the PDF and 
domination of the Legislative Assembly by Noriega forces the following 
month.  In April 1988, President Reagan invoked the International 
Emergency Economic Powers Act, freezing Panamanian Government assets in 
U.S. banks and prohibiting a variety of payments by American agencies, 
firms, and individuals to the Noriega regime. 
 
When national elections were held in May 1989, Panamanians voted for the 
anti-Noriega candidates by a margin of over three-to-one.  Although the 
size of the opposition victory and the presence of international 
observers thwarted regime efforts to control the outcome of the vote, 
the Noriega regime promptly annulled the election and embarked on a new 
round of repression. 
 
By the fall of 1989, the regime was barely clinging to power.  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.  In December 1989, the 
regime declared war against the United States and initiated attacks on 
members of the U.S. forces. 
 
On December 20, President Bush ordered the U.S. military into Panama to 
protect U.S. lives and property, to fulfill U.S. treaty responsibilities 
to operate and defend the Canal, to assist the Panamanian people in 
restoring democracy, and to bring Noriega to justice.  The U.S. troops 
involved in Operation Just Cause achieved their primary objectives 
quickly, and the withdrawal of troops began on December 27.  Noriega 
eventually surrendered to U.S. authorities voluntarily.  He is now 
serving a 40-year sentence in Florida for drug trafficking. 
 
Rebuilding Democracy 
 
Panamanians moved quickly to rebuild their civilian constitutional 
government.  On December 27, 1989, Panama's Electoral Tribunal 
invalidated the Noriega regime's annulment of the May 1989 election and 
confirmed the victory of opposition candidates under the leadership of 
President Guillermo Endara. 
 
President Endara took office as the head of a four-party minority 
government, pledging to foster Panama's economic recovery, transform the 
Panamanian military into an apolitical force under civilian control, and 
strengthen democratic institutions.  During its almost five years in 
office, the Endara Government struggled to improve the lot of Panama's 
poorer citizens, of whom an estimated 50% live in poverty.  Success was 
limited; although real economic growth was impressive, benefits often 
did not trickle down to the needy, and the unemployment rate, though 
reduced, remained high.  Lacking resources, the government was unable to 
carry out needed improvements in infrastructure such as medical 
services, education, and the transportation system, and these continued 
to deteriorate.  The new police force proved to be a major improvement 
in outlook and behavior over its thuggish predecessor, but efficiency 
was a problem, and polls showed rising concern over escalating crime 
rates.   
 
While charges of narco-trafficking hurt Panama's international image, 
accusations of official corruption--nepotism, bribery, and favoritism--
plagued the Endara Government.  However, the Endara years produced 
important advances in democratic institutions:  A free, noisy press 
flourished; government prosecutors brought accused criminals and human 
rights violators from the Noriega and Torrijos periods to trial; and the 
Legislative Assembly made significant strides in changing its role from 
a rubberstamp for dictatorial decrees to an independent, responsible 
second branch of government. 
 
 
GOVERNMENT AND POLITICAL CONDITIONS 
 
Panama is a representative democracy with three branches of government:  
executive and legislative branches elected by direct, secret vote for 
five-year terms, and an independent appointed judiciary.  The executive 
branch includes a president and two vice presidents.  The legislative 
branch consists of a 72-member unicameral 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, the election process, and the 
activities of political parties.  Everyone over the age of 18 is 
required to vote, although those who fail to do so are not penalized. 
 
Ernesto "Toro" Perez Balladares was sworn in as President on September 
1, 1994, after an internationally monitored election campaign--Panama's 
largest, with seven candidates for the presidency, over 2,500 for the 
legislature, 2,000 for mayoral posts, and more than 10,000 at the local 
level--that was notable for its non-violent, orderly, and efficient 
pace.   
 
Balladares ran as the candidate for a three-party coalition dominated by 
the Democratic Revolutionary Party (PRD), the unpopular political arm of 
the military dictatorship during the Torrijos and Noriega years.  
Bruised by its forcible ejection from power by U.S. forces in Operation 
Just Cause, the PRD had been regarded--and indeed considered itself--
highly unlikely to conclude the elections anywhere near the top of the 
list.  A long-time member of the PRD, Balladares worked skillfully 
during the campaign to rehabilitate the PRD in the eyes of the voters, 
emphasizing the party's populist Torrijista roots rather than its 
association with Noriega.  He won the election with only 33% of the vote 
when the major non-PRD forces, unable to agree on a joint candidate, 
splintered into three competing factions.  Although two-thirds of the 
Panamanians voted against Perez Balladares, the dispersion of their 
votes left the PRD candidate with the simple majority he needed to win. 
 
President Balladares has broad powers under Panama's current 
constitution, but must work with a legislative assembly in which his PRD 
party and its political allies have only a bare majority.  Although the 
assembly lacks strong budgetary authority, it does play a crucial role 
in designing political, economic, and social initiatives; President 
Balladares will need to woo shifting constellations of the 10 parties 
represented in the assembly to build consensus for legislative projects.  
Stressing "national reconciliation," Balladares has appointed a multi-
party cabinet that includes prominent experts in their fields as well as 
several members who publicly opposed General Noriega. 
 
National Security 
 
The Panamanian Government has converted the former Panama defense forces 
(PDF) into a civilian police organization called the public force, which 
is subordinate to civilian officials and responsive to human rights.  
Personnel strength has been cut from 16,000 to about 13,000.  Virtually 
all former PDF senior officers were removed from the public force.  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, and the institutional 
protective service (VIP security).  The public force is fully 
accountable to civilian authority under the minister of government and 
justice.  
 
A constitutional amendment would abolish the military permanently, 
subject to approval in a national plebiscite.  Investigative and other 
units that have been separated from the public force, such as the 
technical judicial police, are also directly subordinate to civilian 
authorities.  The public force budget--in contrast to the former  
PDF--is on public record and under control of the executive.  The 
Panamanian Government has spent almost $500 million since 1990 on public 
order and security expenses.  Public security will cost $87 million this 
year and is expected to rise to $92 million for next year. 
 
The United States, with congressional approval, is delivering 
appropriate assistance to establish a truly professional law enforcement 
institution, dedicated to providing adequate protection to the citizens 
of Panama while fully respecting human rights, democracy, and the law.  
By the end of 1994, the United States will have provided police skills 
training and technical assistance in civilian law enforcement 
development through a $25.2-million program managed by the International 
Criminal Investigative and Training Assistance Program (ICITAP).  In 
addition, $4.4 million will have been spent to help the Panamanian 
Government improve its administration of justice.  Equipment that is 
appropriate for police work is also being provided. 
 
Principal Government Officials  
 
President--Ernesto Perez Balladares 
First Vice President--Tomas G. Altamirano Duque 
Second Vice President--Felipe Virzi 
Ministry of Foreign Affairs--Gabriel Lewis Galindo 
Ambassador to the U.S.--Ricardo Alberto Arias 
Ambassador to the UN--Jorge Illueca 
Ambassador to the OAS--Lawrence Chewning 
 
Panama maintains an embassy in the United States at 2862 McGill Terrace 
NW, Washington, DC, 20008 (tel. 202-483-1407). 
 
 
ECONOMY 
 
Two great challenges face the Balladares Administration as it begins its 
five-year term:  efficiently utilizing 70,000 acres of U.S. military 
land and buildings which will revert to Panama by 1999 and laying a 
solid groundwork for assuming full control of the Panama Canal in the 
21st century.  As the U.S. military departs, Panama will have to replace 
jobs and income earned from U.S. bases.  Long-term investor confidence 
brought about by political stability and economic liberalization are the 
keys to Panama's economic future. 
 
Panama's economy is primarily based on a well-developed services sector 
that accounts for 72% of GDP.  Services include the Panama Canal, 
banking, insurance, government, the trans-isthmian oil pipeline, and the 
Colon Free Zone--the world's second-largest free trade zone after Hong 
Kong.  Mining, tourism, and maritime services are projected sources for 
future growth. 
 
Rapid economic growth characterized the early 1990s.  Current forecasts 
call for continued but slower economic growth in 1994 and 1995.  Real 
GDP growth of about 5% is projected for 1994 and 1995, down from 6% 
growth in 1993, and 8.6% growth in 1992.  Nominal GDP rose to an 
estimated $6.6 billion in 1993 a result of construction and Colon Free 
Zone activity.  Capital has returned to the Panama banking system.  
Total banking center deposits rose to $21 billion in December 1993, with 
total assets valued at $26 billion.   
 
Although the economic recovery of the early 1990s returned the country 
to its 1987, pre-crisis levels, sustained growth depends on Panama's 
ability to resolve long-standing problems of inequitable distribution of 
wealth, high barriers to trade, external debt, and dependence on U.S. 
Government and Canal revenues.  Under and unemployment, although sliced 
by more than half in recent years, continues as an economic millstone.  
Panama's working-age population is expected to grow 2.5% per year during 
the 1990s; the economy must grow by at least 5% annually, according to 
one estimate, to keep the unemployment rate stable as new entrants swell 
the labor force. 
 
Role of Business 
 
The government and the U.S. business community actively promote Panama's 
long-standing reputation as an international trading, banking, and 
services center and as a site for foreign direct investment.  Panama's 
economy is characterized by low inflation and zero foreign exchange 
risk, despite the lack of major foreign investment in the last decade.  
Panama, however, must change its international image (e.g., on money 
laundering) and improve its infrastructure if it is to attract 
investment.  
 
Decisive policy reforms to change the economy and sustain long-term 
growth--reducing the public sector payroll, liberalizing the trade 
regime, privatizing state-owned enterprises, and fostering job creation 
through labor code reforms--is the major task of the Balladares 
Government.  Private construction and capital goods spending will be the 
main sources of growth in the short term.   
 
Many of the needed reforms are expected to be taken in the context of 
Panama's accession to the General Agreement on Tariffs and Trade (GATT), 
which began in earnest in April 1994.  Panama's new minister for 
planning and economic policy has stated that trade liberalization, 
including GATT accession, will be a priority of the Balladares 
Administration.  He has also affirmed his interest in structural 
economic reform that will ensure continued economic growth into the 21st 
century. 
 
 
FOREIGN RELATIONS 
 
Panama is a member of the UN General Assembly and most major UN 
agencies, and it has served three terms as a 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 Rio 
Group.  Although it was suspended from the Latin American Economic 
System (known informally both as the Group of Eight and the Rio Group) 
in 1988, due to its internal political system under Noriega, Panama was 
re-admitted in September 1994 as an acknowledgment of its present 
democratic credentials.  Panama is also one of the founding members of 
the Union of Banana Exporting Countries and belongs to the Inter-
American Tropical Tuna Commission. 
 
It is an active participant in Central American regional meetings and 
endorses Central American integration efforts.  Panama is a member of 
the Central American Parliament (PARLACEN) as well as the Central 
American Integration System (SICA).  The government is also taking steps 
to join the Central American Development Bank.  Panama has requested 
GATT accession and has already taken many of the key procedural steps 
necessary for membership. 
 
Panama strongly backed efforts by the United States to implement UN 
Security Council Resolution 940, designed to facilitate the departure of 
Haiti's de facto authorities from power.  Panama offered to contribute 
personnel to the Multinational Force, which restored the democratically 
elected government to Haiti in October 1994, and granted asylum to the 
former Haitian military leaders. 
 
 
U.S.-PANAMANIAN RELATIONS 
 
The U.S. and Panama are working toward implementing the 1977-78 Canal 
Treaties by preparing for the U.S. withdrawal and the Panamanian 
takeover of the canal and the U.S. base properties.  U.S. economic 
assistance to Panama in FY 1993 was $8.6 million. 
 
The United States cooperates with the Panamanian Government in promoting 
economic, political, and social development through U.S. 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.  President Perez Balladares has 
indicated that he intends to maintain a close relationship with the 
United States. 
 
In the past, the presence of a large contingent of U.S. armed forces in 
Panama has generated friction.  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.  The presence of the U.S. forces was not an issue 
during the 1994 presidential campaign. 
 
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 U.S. 
armed forces, the reversion of U.S. military bases, and the turnover of 
the canal to Panamanian control at noon on December 31, 1999.  Managing 
this complex turnover, which Panamanians call their "national 
patrimony," will be one of the prime challenges of the Perez Balladares 
administration. 
 
Panama continues 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, the Perez 
Balladares government and the United States are discussing concerted 
efforts to combat the drug plague. 
 
Principal U.S. Officials 
 
U.S. Embassy 
Charge d'affaires--Oliver P. Garza 
Counselor for Political Affairs--John Bennett 
Counselor for Economic Affairs--Elizabeth Bollman 
Counselor for Public Affairs--Joe Johnson 
Counselor for Administrative Affairs--Bernardo-Segura-Giron 
Consul General--L. Bradley Hittle 
 
Panama Canal Commission 
Administrator--Gilberto Guardia 
Deputy Administrator--Raymond Laverty 
 
U.S. Southern Command 
Commander in Chief--Barrey McCaffrey 
 
The U.S. 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:  U.S. Embassy Panama, Box E, 
APO Miami FL 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 U.S. 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 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 U.S. Marines and more than 20 Panamanians.  A three-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 new 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 U.S. 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 subscribed. 
 
Basic Provisions of the Treaties 
 
The United States has primary responsibility for the operation and 
defense of the Canal until December 31, 1999.  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. 
 
In order to meet its operational and defense responsibilities, the 
United States has the right to use specified land and water areas and 
facilities in Panama necessary for the operation, maintenance and 
defense of the Canal until December 31, 1999.  United States rights to 
operate the Canal, station military forces, and maintain military bases 
terminate with the Canal treaty at the end of the century.  U.S. 
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 U.S. 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, and 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 Government of 
Panama (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 million in 1990; 
--  A payment of up to $10 million in the event that revenues exceed PCC 
expenditures in a given year. 
 
Under U.S. implementing legislation (the Panama Canal Act), the PCC must 
be self-sustaining; its costs may not exceed its revenues, nor may U.S. 
taxpayer funds be used for Canal operations or payments to Panama. 
 
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 1993, a tripartite international organization, 
the Canal Alternatives Study Commission, established by the United 
States, Panama, and Japan, completed a study concerning possible 
modifications and alternatives to the existing system; it concluded 
there was no immediate need for major changes.  Completion of this study 
fulfilled the Treaty obligation under Article XII.   
 
 
Travel Information 
 
The U.S. Department of State's Consular Information Program provides 
Travel Warnings and Consular Information Sheets.  They can be obtained 
by telephone at (202) 647-5225 or by fax at (202) 647-3000; to access 
the Consular Affairs Bulletin Board by computer modem, dial (202) 647-
9225.  Travel Warnings are issued when the Department recommends that 
Americans avoid travel to a certain country.  Consular Information 
Sheets exist for all countries and include information on immigration 
practices, currency regulations, health conditions, areas of 
instability, crime and security information, political disturbances, and 
the addresses of the U.S. embassies and consulates in the subject 
country. 
 
Travelers can check the latest information on health requirements and 
conditions with the U.S. Centers for Disease Control and Prevention in 
Atlanta, Georgia.  A hotline at (404) 332-4559 provides telephonic or 
fax information on the most recent health advisories, immunization 
recommendations or requirements, and advice on food and drinking water 
safety for regions and countries.  A booklet entitled Health Information 
for International Travel (HHS publication number CDC-94-8280, price 
$7.00) is available from the Superintendent of Documents, U.S. 
Government Printing Office, Washington, DC 20402, tel. (202) 512-1800. 
 
Information on travel also may be obtained from this country's embassy 
and/or consulates in the U.S. (see "Principal Government Officials").  

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Published by the United States Department of State--Bureau of Public 
Affairs--Office of Public Communication--Washington, DC 
 
Department of State Publication 8022 
Background Notes Series--This material is in the public domain and may 
be reprinted without permission; citation of this source is appreciated. 
 
For sale by the Superintendent of Documents 
U.S. Government Printing Office, Washington, DC  20402. 
 
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