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Panama Introduction
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Figure 1. Administrative Divisions of Panama, 1987
PANAMA'S HISTORY, as well as its present-day social, economic,
and political life, has been dominated by the country's significant
geographic position. Encompassing the lowest and narrowest portion
of the isthmus connecting North America and South America, Panama
has for centuries served as a land bridge and transit zone between
continents and oceans.
The narrowness of the isthmus inspired various attempts to
facilitate passage between the Atlantic and Pacific oceans.
Following their arrival in Panama in 1501, the Spanish turned
Panama into a principal crossroads and marketplace of the great
Spanish Empire
(see The Conquest;
The Spanish Colony,
ch. 1). They built the Camino Real, or royal road, to link
settlements on the Pacific and Atlantic coasts and used the road to
transport treasures from the west coast of South America--
especially Peruvian gold and silver--to Spanish galleons waiting on
the Atlantic coast for the trip to Spain.
As early as 1520, however, frustrated by the slowness and
hazards of the Camino Real, the Spanish undertook surveys to
determine the feasibility of constructing a canal across the
isthmus. The United States, seeking a quicker passage to its west
coast because of the discovery of gold in California in 1848,
promoted the construction of a trans-isthmian railroad, which was
completed in the 1850s. But it was the French who first undertook
what the Spanish ultimately had abandoned as impractical--and
undesirable because it would be an attractive target for other
world powers. Under the direction of Ferdinand de Lesseps, the
builder of the Suez Canal, the French in 1879 attempted to
construct a canal across the isthmus. The project was abandoned in
1889 because of the combined effects of disease, faulty design,
and, finally, bankruptcy. The United States soon took on the
project, building on what the French had done, and the first ship
passed through the Panama Canal on August 15, 1914
(see
Building the Canal, ch. 1).
Since that time, the Panama Canal has been the single greatest
factor influencing Panama's society, economy, political life, and
foreign relations. Panamanian society in the 1980s continued to
reflect Panama's unusual position as a transit zone and the home of
the canal, factors that subjected Panama to a variety of outside
influences and gave the country an ethnic diversity not commonly
associated with Latin America
(see
Ethnic Groups, ch. 2).
Like other former Spanish colonies, Panama's population was
overwhelmingly Spanish-speaking and Roman Catholic; most
inhabitants were regarded as mestizos--a term that originally
referred to those of mixed Spanish and Indian heritage, but
increasingly had come to mean any racial mixture in individuals
conforming to the norms of Hispanic culture. In addition to
mestizos and tribal Indians, Panama contained a significant
minority of Antillean blacks (8 percent of the population)--
Protestant, English-speaking descendants of Caribbean laborers who
built the canal. There also were significant numbers of Chinese,
Jews, Arabs, Greeks, East Asians, South Asians, Lebanese,
Europeans, and North Americans--both immigrants and expatriate
residents--who came to Panama to take advantage of commercial
opportunities associated with the canal.
The Panama Canal has also shaped Panama's economic development.
First, the canal has been a major source of wealth for Panama
because of revenue generated by canal traffic, the influx of
workers who built and later maintained the canal, and the large
United States civilian and military presence associated with the
canal. Until the Latin American economic slump in the mid-1980s,
Panama was generally regarded as wealthy in the regional context,
although the distribution of income remained skewed. Reflecting
this relative wealth, Panama registered one of the highest levels
of per capita income in the developing world (US$2,100) in 1985.
Second, because of the canal and other transport and service
activities deriving from the country's location, Panama's economy
always has been service-oriented rather than productive. Services
accounted for 73 percent of the gross domestic product
(GDP--see Glossary)
in 1985, the highest level in the world.
The Panama Canal was the primary activity in the nation's service
sector, but that sector was expanded through increased government
services and initiatives such as the Colón Free Zone
(CFZ--see Glossary),
a trans-isthmian pipeline, and the
International Financial Center, which promoted offshore banking and
foreign investment in Panama
(see
Panama Canal;
Services, ch. 3).
A third characteristic of Panama's economy was the country's
use of the United States dollar as its paper currency. The local
currency, the
balboa (see Glossary),
was available only in
coins. Reliance on the United States dollar meant that the country
could neither print nor devalue currency as a means of establishing
and implementing monetary policies. Finally, Panama's development
in terms of both location and economic activity and concentration
of population followed an axis across the isthmus between Colón at
the Atlantic terminus of the Panama Canal and Panama City on the
Pacific coast. Over half of the population and most nonagricultural
economic activity were located there.
In addition to its major influence on social and economic life
in Panama, the canal also bound Panama inexorably to the United
States--and therein lies the Canal's dominance of Panamanian
politics and foreign policy. In essence, the canal itself spurred
the creation of the modern-day nation of Panama. In order to obtain
the rights to construct a canal, the United States fostered
separatist sentiment in Panama, then a department of Colombia, and
engineered Panama's independence from Colombia in 1903. Panama
became a virtual protectorate of the United States, and the pattern
of United States intervention set at independence was to be
repeated numerous times throughout the first half of the twentieth
century
(see
The United States Protectorate, ch. 1).
This close relationship was from the start, however, colored by
resentment and bitterness. The Hay-Bunau-Varilla Treaty of 1903, by
which the United States acquired the right to construct a canal,
was the primary source of this discontent--at least initially--for
several reasons. First, Panama was not even a party to the treaty,
which was signed by the United States and a French-born
entrepreneur. Second, and more important, the treaty gave the
United States "in perpetuity" a sixteen-kilometer-wide strip of
territory known as the Canal Zone that split the nation into two
unconnected pieces. (In return, Panama was to receive an annuity.)
Sovereignty or jurisdiction over the Canal Zone, profits from canal
operations, frustration over the continued highly visible presence
and domination of the United States in Panama, and other related
issues became and remained the primary focus of both internal
politics and foreign relations for Panama. Nationalism,
consistently a powerful force in Panama in the twentieth century,
was directed primarily against the United States presence. National
leaders of all political persuasions both cultivated and
capitalized on public discontent with the United States. Indeed,
these leaders kept popular resentment narrowly focused on the
United States lest it turn on the Panamanian elite, commonly known
as the oligarchy, which traditionally controlled Panama's
political, economic, and social life
(see
Urban Society, ch. 2).
The quest for a more equitable treaty governing the Panama
Canal has dominated Panamanian-United States relations throughout
the twentieth century. The Hay-Bunau-Varilla Treaty was modified
several times. But Panama's hopes for a completely new treaty were
not realized until 1977, when the two countries brought to fruition
negotiations that had been initiated as early as 1971
(see
The Treaty Negotiations, ch. 1).
Panama and the United States
actually signed two treaties on September 7, 1977. The first, the
Panama Canal Treaty, abrogated all previous treaties with respect
to the canal and transferred legal jurisdiction over the Canal Zone
to Panama. The treaty created a United States agency, the Panama
Canal Commission, to operate, manage, and maintain the canal until
noon, December 31, 1999, at which time Panama will secure
unfettered ownership and management of the canal. The commission
consists of five United States citizens and four Panamanians
working under an American administrator and a Panamanian deputy
until 1990; thereafter the commission will work under a Panamanian
administrator appointed by the winner of the 1989 presidential
elections in Panama, but approved by the United States president
with the advice and consent of the United States Senate. In other
words, the canal will remain under the effective control of the
United States government throughout the treaty period
(see
The 1977 Treaties and Associated Agreements, ch. 1;
for texts of the treaties,
see Appendix B).
The second treaty, the Treaty Concerning the Permanent
Neutrality and Operation of the Panama Canal, popularly known as
the Neutrality Treaty, was vigorously resisted by the Panamanian
negotiators and remains particularly galling to the government and
the public. It provides for joint Panamanian and United States
responsibility for the protection of the canal, but because it has
no termination date, it smacks of the detested "in perpetuity"
phrase of the original 1903 treaty. Panamanian concern over
possible United States intervention in Panamanian affairs based on
this treaty was sharpened by various unilateral interpretations and
conditions that were attached to the treaties by the United States
Senate during its ratification proceedings. One condition attached
to the Neutrality Treaty in effect stipulated that even after
December 31, 1999, the United States could use military forces in
Panama "to reopen the Canal or restore the operations of the
Canal." Although the Panamanian government and public were incensed
over this attachment, Panama continued with the ratification. It
did, however, append the following statement to the two documents:
"The Republic of Panama will reject, in unity and with decisiveness
and firmness, any attempt by any country to intervene in its
internal or external affairs."
Thus, despite the high hopes of all concerned, the negotiation
of new treaties failed to resolve Panamanian discontent. Issues
related to the canal continued to muddy the waters of United
States-Panamanian relations in 1988
(see
Relations with the United States: The Panama Canal;
Other Aspects of Panamanian-United States Relations, ch. 4).
United States-Panamanian relations also were strained by
growing United States dissatisfaction with Panama's military-
dominated political system. Panama's failure to establish a
democratic form of government was an especially sore point for the
United States government because "democratization" in Panama was an
American condition for support of the Panama Canal treaties.
Panama's political system dates back to the year 1968--a
watershed in Panamanian history. In that year the National Guard
staged a coup--not for the first time--and established an enduring
pattern of direct and then indirect military control of the
government. Despite the subsequent construction of a democratic
facade in the late 1970s, de facto control of the nation's politics
in 1988 remained firmly in the hands of the commander of the
National Guard's successor organization, the Panama Defense Forces
(Fuerzas de Defensa de Panamá--FDP).
The 1968 coup also represents a major turning point in
Panamanian history because it brought to power Brigadier General
Omar Torrijos Herrera, a charismatic leader whose populist legacy--
known as "Torrijismo"--radically altered Panamanian politics. Prior
to the advent of Torrijos, Panamanian politics were dominated
almost exclusively by a small number of aristocratic families. This
oligarchy, largely urban, tended to be white or light-skinned and
valued its purported racial purity; aristocrats intermarried and
held tightly to their elite status. But Torrijos built a popular
base from the ranks of the National Guard, which was composed
mostly of provincial black and lower- or middle-class mestizos like
Torrijos himself, as well as an assortment of campesinos and urban
workers
(see
The Government of Torrijos and the National Guard, ch. 1;
Nationalism, Populism, and Militarism: The Legacy of Omar Torrijos, ch. 4).
Torrijos fostered public works
and agrarian reform and put the National Guard to work on programs
to improve conditions in rural areas and to bring the poorer
classes to power.
Initially at least, Panama enjoyed an economic boom under
Torrijos. After the passage of strict secrecy laws, Panama became
an international banking center, and the CFZ became the world's
second largest free-trade zone (after Hong Kong). But Panama's
foreign debt also soared because of the extensive borrowing from
abroad used to finance the expansion in public services, and Panama
eventually registered one of the highest per capita debt levels in
the world
(see
Growth and Structure of the Economy;
External Debt, ch. 3). Panama's high growth rate through
1982 fell off sharply as the world economy went into a recession.
Unemployment, rural poverty, and a low rate of private investment
also plagued the country.
In the late 1970s, Torrijos's populist alliance already showed
signs of eroding, primarily because of the severe economic downturn
that had forced Torrijos to retract many of the progressive
measures previously enacted to benefit labor and land reform. But
the unpopularity of the canal treaties and the "democratization"
process that Torrijos had initiated to win United States support
for the treaties also were prime factors. Torrijos, for example,
had permitted political parties, previously banned, to resume
activity. In 1978 elections were held for a new legislature, and
Torrijos formally stepped down as head of the government in favor
of Aristides Royo, a government technocrat who was chosen by the
legislature to serve a six-year term as president. Torrijos
nevertheless remained commander of the National Guard and, as such,
the holder of real power in Panama.
Torrijos's sudden death in a July 1981 airplane crash gave rise
to a power struggle in Panama that was filled by a succession of
figurehead presidents controlled by a series of National Guard and
FDP commanders, who engaged in fierce internal maneuvering. The
newly erected democratic facade remained in place and on paper was
strengthened by the promulgation of constitutional amendments in
1983, which, among other things, permitted the direct election of
a president
(see
The Constitutional Framework, ch. 4).
Elections were duly held in 1984, but widespread allegations of
fraud, increasingly supported by credible evidence, undercut the
importance of the event as a demonstration of Panama's return to
democracy. The FDP's handpicked candidate was elected, and the FDP
commander remained the true source of political power in Panama.
General Manuel Antonio Noriega Morena, the ambitious former
head of military intelligence in Panama, assumed control of the
National Guard in 1983 and launched a successful effort to
consolidate his power. He oversaw the transformation of the
National Guard from a small paramilitary organization into the much
larger and more capable FDP, ostensibly capable of defending the
expanded national territory (now including the former Canal Zone)
and of joining the United States in defending the Panama Canal (see
Missions and Organization of the Defense Forces, ch. 5).
Because of the strong United States vested interest in the security
of the canal, this transformation was accomplished with extensive
United States training, equipment, and financial assistance.
Ironically, however, the growing size and strength of the FDP,
which were fostered in accordance with perceived United States
strategic interests, led to a situation that the United States
increasingly regarded as inimical to its own interests as well as
those of the Panamanian people. The FDP, which traditionally has
exhibited strong institutional cohesiveness and loyalty to its
commander, increasingly has become a formidable power base for
enhancing and institutionalizing political control by the FDP
commander.
Despite Noriega's firm hold on power in Panama, a series of
events in the mid-1980s tarnished his already unsavory
international reputation and threatened his regime. The first
occurrence was the violent death in September 1985 of Dr. Hugo
Spadafora, a vociferous Noriega critic. Spadafora, who purported to
have hard evidence of Noriega's involvement in drug trafficking,
was brutally murdered, and there were credible reports of FDP
involvement in the death
(see
Political Developments in the Post-Torrijos Era, ch. 4).
Panamanians were shocked, but the
threat to Noriega came not from popular discontent, but rather from
the decision of then-president Nicolás Ardito Barletta Vallarino to
investigate the murder. To prevent such an action, Noriega forced
Ardito Barletta to resign in favor of his vice president, Eric
Arturo Delvalle Henríquez. Noriega successfully weathered this
initial storm, but at the cost of an overt demonstration of the
extent of military control over an ostensibly civilian regime.
The second and more serious threat to Noriega and, by
extension, to the FDP, came in June 1987, when Colonel Roberto Díaz
Herrera, chief of staff of the FDP, was forced to retire and then
publicly denounced Noriega and other FDP officers for a variety of
corrupt practices, including engineering the 1984 election fraud,
ordering the murder of Spadafora, and causing the death of
Torrijos. Díaz Herrera later also spoke of Noriega's involvement in
drug trafficking. Díaz Herrera's revelations were shocking, not so
much because of what they said about Noriega and the FDP--
Panamanians had long suspected these things--but because Díaz
Herrera was the first high-ranking FDP officer to break the FDP
code of silence. He had spoken apparently out of pique at Noriega's
failure to live up to an earlier agreement among FDP leaders to
rotate the position of commander. Revenge for this forced
retirement also motivated Díaz Herrera's denunciation of Noriega.
One result of the revelations was an internal political crisis
in Panama that as of a year later remained unresolved. In June
1987, a coalition of civic, business, and professional groups
formed the National Civic Crusade (Crusada Civilista Nacional--
CCN), and thousands of Panamanians participated in marches and
street demonstrations to demand Noriega's resignation. Noriega and
the FDP responded harshly, and there were credible reports of
widespread police brutality. Noriega also attempted--mostly
unsuccessfully--to portray the conflict as a class and racial
struggle (i.e., white elite opposition to the black and mestizo
masses and FDP) as well as a
Yankee (see Glossary)
conspiracy to retain United States control of the canal.
The chain of events in June 1987 also led to the direct
involvement of the United States in the crisis. On June 26, 1987,
the United States Senate passed a resolution calling for a
transition to genuine democracy in Panama. The Panamanian
government responded by organizing a demonstration against the
United States embassy and arresting United States diplomatic and
military personnel. As a consequence, on July 1, 1987, the United
States suspended all military and economic assistance to Panama. It
also halted repairs to Panamanian military equipment and supplies
of tear gas and spare parts. For the rest of the year and into the
new year, the United States government continued to consider ways
of escalating the economic pressures on Panama and periodically
took additional steps in that direction. In December, for example,
the United States Congress suspended Panama's sugar quota for
exports to the United States, cut off all nonhumanitarian aid,
prohibited joint military exercises, and mandated United States
opposition to any international development bank loan for Panama
until Noriega handed over power to a democratically elected
civilian government.
By the end of 1987, the United States government apparently had
decided that Noriega was expendable and that serious efforts should
be made to force him from power. United States assistant secretary
of defense Richard Armitage headed an end-of-the-year effort to
draw up a plan for Noriega's departure from Panama. But Noriega,
who had been aware of the negotiations, denounced the plan in
January 1988.
The already volatile situation flared up further in February
1988, when grand juries in Miami and Tampa, Florida, indicted
Noriega on numerous counts of racketeering, drug trafficking, and
money laundering. The indictments accused him of using his country
as a vast clearinghouse for drugs and money tied to the Colombian
cocaine trade. Suspicions and growing evidence of such activities
by Noriega (as well as arms trafficking and intelligence
activities) had long abounded, but the United States government
previously had not acted on the evidence, purportedly because
Noriega was considered by successive administrations as an
important ally. Some United States government elements apparently
had regarded him as vital for the protection of United States
strategic interests in Panama; others, as an important source of
intelligence information on Cuba. Moreover, Noriega had reportedly
assisted United States efforts to oppose the Sandinista regime in
Nicaragua. But support for Noriega died out after the events of
June 1987 and the indictments.
The evolving crisis took another unexpected turn later in
February 1988, when Panamanian president Delvalle attempted to fire
Noriega, who then, with the solid backing of FDP officers, convened
the legislature, which voted to oust Delvalle and replace him with
education minister Manuel Solís Palma. Delvalle went into hiding in
Panama, and, ironically, this aristocrat, formerly branded as
"Noriega's man," became the unlikely leader of the opposition to
Noriega. Washington refused to recognize Solís Palma and initiated
an additional economic squeeze designed to bring Noriega down. In
March 1988, the United States government froze Panamanian assets
(about US$50 million) in United States banks, withheld its monthly
payment for the use of the canal, and suspended trade preferences
on imports from Panama. (All payments due to the Panamanian
government were placed in escrow, payable only to the "legitimate"
government of Delvalle.) The United States also decertified Panama
as an ally in the drug-fighting war, which, according to a 1986
law, would mandate an aid cut-off and justify other discretionary
sanctions, which were not imposed at that time. This measure was
largely symbolic, however, because aid had already been terminated
in December 1987.
Because Panama was dependent on the United States dollar, these
economic measures meant that Panama had no cash with which to pay
its employees--or to meet its interest payments on loans from
international lending institutions or private banks. Panama's banks
closed in early March 1988, and by mid-March half of the estimated
US$23 billion in foreign deposits had left the country. Indeed,
capital flight had proceeded steadily ever since the June 1987
crisis. Even before the capital flight, the economy was stagnating
and suffering from high unemployment and low or negative growth in
GDP. In short, the Panamanian economy was near collapse. Although
the economic measures adopted by the United States were intended to
dry up the Noriega regime's cash and thereby force him out without
permanently damaging the economy, analysts began to fear that the
long-term effects of the crisis on the Panamanian economy would be
devastating and that the once-prosperous banking sector would be
irrevocably damaged.
The CCN reacted to the economic crisis in Panama by calling a
general strike that brought Panama's economy to a virtual
standstill for the month of March. Widely regarded as largely
upper-class, white, and elite, the CCN had not engendered
widespread popular or labor support up to that point, but in March
1988 its followers appeared to be growing. The populace engaged in
a series of protests and strikes over the government's failure to
pay public-sector employees and pensioners.
Several parties and the hierarchy of the Roman Catholic Church
(traditionally conservative and previously impartial) voiced
support for the crusade. Noriega did not appear to have much
support outside the FDP and the official government party that had
been created by Torrijos--the Democratic Revolutionary Party
(Partido Revolucionario Democrático--PRD).
After the exertion of economic pressure by the United States--
combined with growing internal opposition to the Noriega regime--
many observers expected Noriega to be forced to step aside in the
near future. But such was not the case. Noriega showed remarkable
durability and ingenuity in adopting countermeasures that permitted
his regime to survive. In an important move aimed at cutting off
the flow of information among opposition forces, Noriega
periodically closed down independent and opposition radio and
television stations and newspapers. Faced with CCN strikes and
demonstrations and spontaneous acts of protest by various groups
(e.g., teachers, telephone workers, mill workers, and hospital
workers), Noriega responded with violence. Troops teargassed
demonstrating teachers, stormed Panama's largest hospital when
hospital workers staged a protest, occupied flour mills, forcefully
reopened the port of Balboa after dock workers went on strike,
stormed a luxury hotel to arrest opposition figures, intimidated
shops and supermarkets into reopening, forced banks to reopen for
limited operations, and purged (forcibly retired or imprisoned) FDP
officers implicated in a mid-March 1988 coup attempt or suspected
of disloyalty. Acting under a declared state of urgency, Noriega
increasingly moved to take over all key economic sectors and public
services so that he could survive a prolonged economic battle.
In addition to instituting measures designed to quell popular
protests, Noriega showed great resourcefulness in his quest for
cash dollars. By the end of March, he had amassed enough cash to
meet some of the government's payrolls. His sources of cash
included cash salary payments to Panamanians working for United
States military forces in Panama, the Panama Canal Commission, and
various foreign banks; the conversion of Panamanian assets of the
Latin American Export Bank into hard currency in Europe; and taxes
paid by United States companies with branches in Panama. The United
States government later tried to close off the latter flow of
dollars, but regulations prohibiting payments to the government of
Panama were so general that they were difficult to enforce. Another
factor in Noriega's ability to weather the cash crisis was the
introduction of an alternative currency system that used government
checks, issued in small denominations. These "Panadollars" could
not be cashed at banks, but were widely exchanged in lieu of cash.
Noriega's successful containment of the violence in Panama,
defeat of the attempted coup, and acquisition of cash apparently
reinforced his determination to stay in power. In March 1988,
Noriega began to toy with both opposition and United States
government attempts to negotiate his departure. But he ultimately
rejected all proposed deals, even though between March and May the
United States increasingly backed down on its initial requirements
and met virtually all demands put forth by Noriega, including his
insistence that the indictments be dropped.
Thus, in June 1988, the situation had reached an impasse. The
opposition in Panama remained committed to ousting Noriega and
restoring democracy to the country, but its protest activities were
sporadic and its leaders disheartened. In fact, most CCN leaders
had left the country. There was some discussion of opposition
negotiations with Noriega, but few observers expected any such
attempts to prove fruitful. The United States government maintained
all economic sanctions previously imposed against Panama, and on
June 6 announced its intention of more rigidly enforcing
regulations prohibiting payments to the government of Panama.
United States government officials also made vague threats about
other future actions against Panama, but they publicly ruled out
any military intervention in the absence of a direct threat to the
Panama Canal, and most observers noted the lack of other viable
United States options. The prospect of Latin American mediation to
achieve a negotiated settlement offered some hope of an end to the
crisis, but there was no apparent progress in this direction as of
July 1988. Meanwhile, the Panamanian economy, although outwardly
functioning more normally, continued its steady deterioration, as
evidenced by continued layoffs, bankruptcies, a sharp decline in
the GDP, and defaults on payments of the foreign debt.
The acknowledged failure of the combined efforts of the United
States government and the Panamanian opposition to force out
Noriega resulted from several factors that observers discussed at
great length in the media and on which they generally agreed.
First, the Panamanian opposition did not develop into a "people's
power" movement such as those that had successfully toppled
dictators in the Philippines and Haiti earlier in the 1980s. The
Panamanian opposition was widespread, but it remained fragmented,
lacked a charismatic leader, failed to foster allies within the FDP
(a tactic used successfully elsewhere), and never engendered
widespread support among labor or the masses. In its attempt to
develop support, the opposition was hindered somewhat by a
perceived class distinction between the elite upper- and middle-
class, business-dominated CCN and the masses, who had traditionally
supported and benefited from FDP rule. Noriega played on this mass
susceptibility to class animosity. By June 1988, there was growing
evidence that the populace regarded the FDP under Noriega as
corrupt and self-serving and found his personal corruption
distasteful, but fear and perceived class interests continued to
override any desire for social change. Moreover, observers noted
that the Panamanian opposition, as well as the general populace,
remained steadfastly cautious and nonviolent and was easily
intimidated by the FDP.
The second major reason for Noriega's retention of power was
the strength and cohesiveness of the FDP--attributes that had been
largely underestimated by the United States government and others.
The FDP, out of both fear and entrenched self-interest, remained
loyal to Noriega. Although his position was undermined somewhat by
the defection of close associates, Noriega still was able to put
down the March 1988 coup attempt quite easily. Subsequently, he
managed to purge suspected dissidents and surrounded himself with
loyal supporters and cronies. In May 1988, Noriega created a
twenty-member Strategic Military Council headed by a colonel and
composed of three lieutenant colonels, ten majors, and six
captains. Observers believed that this lower-ranking group
increasingly bypassed the more senior general staff. Noriega also
tripled the size of his personal security force, staffing it
largely with Cubans and other non-Panamanians, and he reportedly
also brought in Cuban military advisers and weapons. In short,
Noriega moved both to consolidate his hold over the FDP and to
tighten the FDP's grip on the country.
Finally, and perhaps most basically, Noriega survived the
crisis because the economic sanctions imposed by the United States
government did not have the anticipated quick and catastrophic
effect envisioned by policy makers. Despite the dependence of
Panama on dollars, the Panamanian economy proved to be surprisingly
resilient. In addition, the sanctions were ineffective because they
did not directly affect Noriega, who managed to weather his
liquidity crisis because of a continuous influx of both legal and
illegal cash. The sanctions hit hardest on the middle class and
private sector and created hardships for the masses. In the long
run, however, the economy was seriously damaged, perhaps
irreparably. Moreover, some observers noted that the economic
sanctions may unintentionally have destroyed the private sector,
which is the base for moderate, democratic forces in Panama. In
related events, observers noted the ruling PRD's apparent move to
the left with the appointment of new cabinet members in late April
1988 and the increasingly pro-Cuban and pro-leftist leanings of the
FDP.
The focus of United States and international attention on
Noriega--first attempting to remove him from power and then
analyzing where such attempts went wrong--tended to obscure more
enduring problems affecting Panama's future. In mid-1988 analysts
uniformly agreed that, even without Noriega, who was not likely to
leave soon, restoring order, rebuilding the damaged economy, and
revamping the political system were formidable tasks. Noriega's
departure would ease but not solve Panama's political problems. The
opposition remained divided and political parties factionalized.
Indeed, in February 1988, two parties reportedly formed their own
opposition movement--the Popular Civic Movement (Movimiento
Civilista Popular--MCP)--separate from the CCN. Moreover, the lack
of a clear national leader as an alternative to Noriega or another
FDP officer was a serious impediment to opposition success.
Delvalle was tainted by his former association with Noriega;
veteran politician Arnulfo Arias Madrid died in August 1988; and
other party leaders reportedly lacked charisma.
Finally, and most important, the extensive, institutionalized
control of national life by the FDP and the endemic corruption
within the FDP (including widespread involvement in drug
trafficking and money laundering) stood in the way of any rapid or
easy transition to democracy in Panama. In June 1988 some observers
reported that certain FDP elements were discontent with Noriega.
They predicted that Panamanian military officers would eventually
remove Noriega from power. Prospects for an end to corruption and
a return to democratic civilian rule in Panama, however, would not
necessarily be improved by a military coup that ousted Noriega
alone.
The FDP's reputation for corruption also fueled United States
fears about the future of the Panama Canal. The prospects for an
efficient, professional, and nonpartisan administration of the
canal and related activities under Panamanian leadership were not
good based on the evidence of Panama's corrupt, politicized
management of the trans-isthmian railroad, ports, and other former
Canal Zone property turned over to it in 1979. Indeed, some
analysts believed that even before the crisis ignited in June 1987,
maladministration, political patronage, and corruption had become
so pronounced and extensive that they jeopardized the future of
Panama's economy.
Panama's future thus remained clouded in mid-1988. Although
life had in some senses returned to normal following the turmoil
that had flared up in June 1987, the political system remained
unrepresentative and potentially unstable, the economy chaotic, and
relations with the United States severely strained.
August 15, 1988
Sandra W. Meditz
* * *
As of late March 1989, there had been no major changes in the
situation in Panama since research and writing of this book were
completed. But observers agreed that the United States attempt to
oust Noriega had failed. Despite his increasing international
isolation and lack of popular support, Noriega had survived, and,
against all odds, the battered economy had not collapsed.
In the spring of 1989, political activity in Panama focused on
preparations for the presidential election set for May 7, 1989.
Progovernment parties--the PRD, Labor and Agrarian Party (Partido
Laborista Agrario--PALA), Republican Party (Partido
Republicano--PR), National Liberal Party (Partido Liberal
Nacional--PLN), and several other small parties--had formed a new
electoral coalition, the National Liberation Coalition (Coalición
de Liberación Nacional--COLINA). COLINA's slate of candidates,
announced in early February 1989, included Carlos Alberto Duque
Jaén of the PRD for president, Ramon Sieiro Murgas of PALA for
first vice president; and Aquilino Boyd, the government's
ambassador to the Organization of American States, for second vice
president. All three were widely regarded as staunch Noriega
supporters: Duque, a business partner of Noriega; Sieiro, Noriega's
brother-in law; and Boyd, a Noriega regime loyalist. Opposing the
government coalition were three major opposition parties--the
Christian Democratic Party (Partido Demócrato Cristiano--PDC),
National Liberal Republican Movement (Movimiento Liberal
Republicano Nacional--MOLIRENA), and Authentic Liberal Party
(Partido Liberal Auténtico--PLA), which had banded together in a
coalition known as the Civic Democratic Opposition Alliance
(Alianza Democrática de Oposición Cívica--Civic ADO or ADOC). Civic
ADO also had the support of the crusade (CCN), the small Popular
Action Party (Partido de Acción Popular--PAPA), and a dissident
faction of the Authentic Panameñista Party (Partido Panameñista
Auténtico--PPA), which had split after the death of Arias Madrid in
August 1988. When the Electoral Tribunal gave official recognition
and control of the party to a small faction headed by Hildebrando
Nicosia Pérez, who had broken with Arias Madrid in the mid-1980s,
the majority faction, led by Guillermo Endara, left the PPA and
formed the Arnulfist Party. The Arnulfist Party threw its
considerable weight behind Civic ADO, and its leader, Guillermo
Endara, was put forward as Civic ADO's presidential candidate. In
addition to Endara, Civic ADO's electoral slate included Ricardo
Arias Calderón of the PDC for first vice president and Guillermo
Ford of MOLIRENA for second vice president. The official PPA
refused to join either coalition, preferring to run its own slate
of candidates headed by Nicosia for president.
Observers predicted that the government-sponsored candidates
would prevail. The Noriega regime was widely expected to ensure the
victory of its candidates through a combination of electoral fraud
and pre-electoral tactics designed to intimidate and divide the
opposition. Indeed, the opposition claimed that thousands of names
of opposition party supporters had already disappeared from the
lists of eligible voters. Moreover, in the period leading up to the
election, the Noriega regime was reportedly using its control of
the three-member Electoral Tribunal to capitalize on internal
divisions in legitimate opposition parties. In disputes over party
leadership, the tribunal had consistently ruled in favor of
minority factions presumed more loyal to Noriega, most notably in
the case of the PPA. Analysts regarded such rulings as attempts to
"steal" these opposition parties and undercut their electoral
strength. Some observers even postulated that Nicosia had purposely
split the PPA in order to create a rift in the opposition, reduce
support for Civic ADO, and enhance the electoral prospects of
COLINA.
The pre-electoral period in Panama was a tense one not only
with respect to internal Panamanian politics but also with respect
to relations between Panama and the United States. In addition to
its political machinations, the Noriega regime's continued
harassment of Americans in Panama, incursions onto United States
military facilities, hostile propaganda, and charges of violations
of the Panama Canal treaties exacerbated the already poor relations
between the two countries. Observers believed that the future tone
and direction of the relationship would be determined to a large
extent by the outcome of the May 1989 election. The United States
would face difficult policy decisions over how to react to the
expected electoral fraud; what to do about the economic sanctions,
which were unpopular and ineffective but still officially in place;
and how to handle the turn-over of directorship of the Panama Canal
Commission to a Panamanian in 1990, given the high probability of
an undemocratic and hostile regime in Panama.
Panama itself faced an uncertain future. Although victory for
pro-Noriega forces seemed assured in the short term, in the longer
term they were expected to confront increasing regional and
international isolation, continued United States opposition, and,
most seriously, bleak economic prospects because of the dramatic
drop in GDP and government income and the equally drastic rise in
capital flight and unemployment. The once vital Panamanian economy
was a shambles, and its future looked grim, indeed.
March 27, 1989
Sandra W. Meditz
Data as of December 1987
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